Russia (Sanctions) (EU Exit) (Amendment) (No.16) Regulations 2022

Hilary Benn Excerpts

Monday 21st November 2022 General Committees

[The Minister of State, Foreign, Commonwealth and Development Office (Mr Andrew Mitchell)]

I beg to move,

That the Committee has considered the Russia (Sanctions) (EU Exit) (Amendment) (No. 16) Regulations 2022 (SI 2022, No. 1122).

It is a pleasure to serve under your wise chairmanship, Ms Harris. The statutory instrument was laid before Parliament on 2 November. It was brought forward under powers provided by the Sanctions and Anti-Money Laundering Act 2018, and amends the Russia (Sanctions) (EU Exit) Regulations 2019.

I will start with the oil price cap. Through the amendments made by these regulations, the UK and our international partners will continue to put immense pressure on Putin and Russia. This is part of the largest and most severe economic sanctions package that Russia has ever faced. Working with our partners across the world, the UK continues to impose a range of sanctions on Russia. This legislation is a further important step undermining Putin’s ability to fund his illegal war in Ukraine.

We are now further targeting one of Putin’s most significant sources of funding, oil. The regulations build on existing bans on the import of oil to the UK. Oil is a key sector for the Russian economy, and plays a vital role in funding Russia’s war effort in Ukraine. Crude oil and oil products are Russia’s most lucrative export, accounting for 10% of GDP in 2021. About 75% of those products were transported by sea. The new powers allow the UK to move in lockstep with our allies to limit the revenues that Russia can derive from the sale of oil transported by sea.

It is important, however, to protect vulnerable countries for which energy security is critical, so while this measure targets Russia, it also aims to maintain the flow of oil at a stable price in order to manage the inflated global energy prices that are the direct result of Putin’s actions. The regulations implement a core part of the policy that will prevent countries from using the UK’s services to transport seaborne Russian oil and refined oil products unless it is purchased at or below the oil price cap set and agreed by the price cap coalition, consisting of the G7, the European Union and Australia.

Importantly, the UK and our coalition partners will not be purchasing Russian oil. We and our partners have introduced our own domestic import bans on Russian oil from 5 December. Instead, this measure is about ensuring that UK, European and G7 services cannot be used to facilitate the trade in Russian oil.

The legislation’s ban on services, including insurance, brokerage and shipping, will be coupled with a general licence providing the basis for an oil price cap exception. That will allow third countries to continue accessing services only if they purchase Russian oil at or below the cap. The measure will therefore restrict Putin’s ability to fund his illegal war in Ukraine, while allowing oil to flow in a tight market, which will enable all countries—lower-income countries in particular—to purchase affordable oil.

A key element of the regulations is the UK’s world-class insurance sector. It provides important services that enable the movement of oil by sea—in particular, protection and indemnity insurance. There, our reach is significant: the UK is a global leader in the provision of third-party liability insurance, writing no less than 60% of global cover. Together with our G7 partners, the 13 protection and indemnity clubs collectively write about 90% of such cover.

The potential impact of the measure, and the central role of the UK, cannot be overstated. The ban on providing services for Russian seaborne oil will come into force on 5 December. A further ban on providing services for Russian seaborne refined oil products comes into force on 5 February—a date that ensures alignment with our international partners.

[Hilary Benn (Leeds Central) (Lab)]

I strongly support the measure. On a point of clarification, I looked at the two commodity codes: 2709 and 2710. Do they extend to products such as lubricating oils, which enable ship engines to operate?

[Mr Mitchell]

That is an extremely good question. The answer is yes, and I will elaborate on that when I wind up the debate.

This important measure will be enforced by the office of financial sanctions implementation, based in the Treasury; the office will work closely with industry. That robust enforcement regime will be backed up by prosecutions if necessary. Together with actions taken by our partners in the G7, the EU and Australia, the measure represents one of the single biggest sanctions placed on Russia, targeting its largest source of revenue. The regulations demonstrate our determination to target those who participate in or facilitate Putin’s illegal war of choice, and we will continue to introduce further sanctions, hopefully with the approval and support of Opposition parties, which have so far been absolutely steadfast in giving such support. I thank those on the Opposition Front Bench for that, and commend the regulations to the Committee.