Sanctions

Kevin Hollinrake Excerpts

Tuesday 22nd February 2022 Commons Chamber

[James Cleverly]

I will make progress.

In response to President Putin’s decision last night to recognise sovereign regions of Ukraine as what he claimed—but we do not agree—to be independent states and to order troops into those areas, my right hon. Friend the Prime Minister today announced the initial set of sanctions that with immediate effect will freeze the assets of five Russian banks. Four of those banks are involved in bankrolling the Russian occupation. They include Bank Rossiya, which is particularly close to the Kremlin, the Black Sea bank for development and reconstruction, IS Bank and Genbank.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I am very grateful to the Minister for giving way; he is being very generous. I am interested to know the criteria we have applied in choosing those five banks, which are relatively small. He talked earlier about sanctions on entities of economic significance. The big banks in Russia are Sberbank and VTB. Why have we chosen five small banks, rather than the two largest ones?

[James Cleverly]

I would make the point that the sanctions regime set out today is the initial range of sanctions. We reserve the right to extend the individuals and entities that come under this sanctions package. I will make the point shortly that we do intend to extend the measures available to us.

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[Tom Tugendhat (Tonbridge and Malling) (Con)]

I welcome the Government’s plans for sanctions and increased action to try to clean up the mess in which we find ourselves here in the UK. This is certainly a welcome step in the right direction, and my right hon. Friend the Minister will remember that the Foreign Affairs Committee set out various options for how we should begin to think about this in May 2018, when we published our “Moscow’s Gold” report.

I welcome the direction we are taking but, along with many others on both sides of the House, I am afraid that I find myself asking, “Why not more? Why not further?” In many ways, we are using the actions of a hostile state in eastern Ukraine to justify something we should have done years ago. The UK, sadly, has for too long been an avenue for money laundering by despots and criminals around the world. For too long and on too many occasions, we have seen our institutions, our City and our service sector used to hide the gains from corrupt practices and criminality abroad.

This has now come to a head because those criminals, those thieves, who raped and murdered the Russian people for 20 years, who did not replace the oligarchs that rose up in Yeltsin’s day but merely nationalised them, have been using those same vehicles and avenues to hide the profits of their crimes—most tragically the theft of an entire country.

That act of naked brutality, that act of violence against an entire nation, an entire culture and an entire people, has sadly been allowed to profit a small number of individuals. That is an absolute tragedy. It is a tragedy for the people of Russia, who have lost so much, but it is also a tragedy for her neighbours, who are now under such pressure and such threat. It is not just Ukraine but the people of Belarus, the people of Estonia, Latvia and Lithuania and the people of Poland. It is a tragedy for those who are being weaponised in the human trafficking that we are seeing from the middle east, through Belarus and into the forests of eastern Europe. It is also, sadly, a tragedy for the people of these wonderful islands, the people of Great Britain and Northern Ireland—the people of the United Kingdom.

It is a tragedy for us because this marks what my right hon. Friend the Member for Maidenhead (Mrs May) mentioned only a few hours ago in this Chamber. We are seeing not just the aggression against Donetsk and Luhansk—not just a raid, an invasion, an opening salvo of a war that President Putin is trying to bring to Europe, in many ways for the first time in 80 years, although of course there was an exception in 2014 when he invaded Crimea and another in 2008 when he invaded Georgia; what he is doing to us, to the people of these islands, is unpicking the values and principles that our grandparents fought for 80 years ago.

President Putin is unpicking the principle that we embedded into the constitutions of the United Nations and the Council of Europe. He is unpicking the principle that the rule of law, that the debate among sovereign peoples, should be the way disputes are settled in this world. He is replacing the rule of law with the rule of force. Sadly, he is demonstrating that it works not only on the ground, but in the wallet; he is demonstrating that a leader can profit politically and personally from the abuses he conducts against his own people and his neighbours. That is why when I asked my right hon. and gallant Friend the Minister, who served with distinction in the Royal Artillery, about the classic gunner phrase “clout, don’t dribble”, what I was actually asking about—and he recognises it—is why do we not say immediately and clearly that what we are seeing today is wrong.

It is wrong for the people of the UK to have corrupt money flowing through our systems. It is wrong to have the profit of crime being laundered through our City and through jurisdictions overseas that depend on us. It is wrong to see the wages of war—quite literally—profiting a small cabal of thieves in Moscow. It is wrong because it undermines our security, it makes us more vulnerable and, sadly, it exposes the people we are privileged to represent to the dangers that we have, thank God, kept at bay for 80 years. It is wrong because it threatens the people of the United Kingdom.

We have set out ways to address that. We have spoken at various points about a foreign agents registration Act and about the exposure of beneficial ownership, not just in our own estates, but in the jurisdictions around the world. We have spoken about cleaning up the Companies House register and giving powers to the enforcement agencies, which could actually start to take action on this. We have spoken about all those things for many, many years, yet still we see names such as Mickey Mouse and Adolf Hitler in the list of directors in Companies House. Still we see the toleration, sadly, of fraud in too many of our institutions. Sadly, we still do not see the resources going into the policing of these different institutions.

[Kevin Hollinrake]

My hon. Friend is making a superb speech. One thing that often gets missed in this debate about how we crack economic crime is the role of whistleblowers. They are the most likely people to identify wrongdoing in the banks he mentions and bring it to light and to the enforcement agencies. Does he agree that whistleblower protection, and potentially remuneration, should be included in this context?

[Tom Tugendhat]

I absolutely agree with my hon. Friend on that. He is completely right, as usual, in highlighting that the protection of whistleblowers is an essential part of the exposure to justice of those who have committed crimes. We need to think again about crime. We need to look again at the institutions, law enforcement bodies and agencies that are charged with protecting us and think really hard about their budgets. They are not simply ways of stopping the taxman from getting his hands on a little bit more loot; they are fundamental to our national security and to the protection of our people. We need to think of them as agents of the state in the same way as we think of the armed forces or the intelligence services. We need to think of them on the frontline of the protection of the people we are lucky to represent. Frankly, we need to put the money where so often our mouths have been when we have passed Acts in this House that have not had the resources to make them not just law but actionable law.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is clear that Putin is not afraid to weaponise his foreign policy through his armed forces, and through oil and gas supplies. It is therefore only right that we look to weaponise our foreign policy in this regard using the City of London. It may well be that, as the Minister said, we will go further quickly, but so far we have not gone far enough. Of course it might not be in our financial interests to do this. Some financial interests—some of our domestic financial organisations—might suffer, but their financial interests cannot supersede the national interest.

When we have looked at sanctions on Russia before, not least in 2015, following the invasion of Crimea, we did not go anywhere near far enough. We did not sanction Russia’s oil and gas supplies, which make up 70% of its exports. We sanctioned things such as exports of milk—clearly, that is never going to go far enough. While Russia has been reducing its dependency on our capital markets, because it saw something like this happening in the future, countries in the EU, in particular, have not being doing the same with their dependency on Russian oil and gas exports.

Lots of people have talked today about Nord Stream 2. Obviously, I welcome the fact that there will be a sanction on that, in terms of preventing it from ever—at this point in time—pumping gas. However, we should not forget that no gas is travelling down Nord Stream 2 now and that all the gas comes into Germany on Nord Stream 1. Again, those oil and gas exports will continue into Germany and other nations. Clearly, there is a huge economic need for that gas going into Germany, but it is incumbent on us and on every nation across Europe—every peace-loving nation—to reduce our dependency on Russia in every economic area.

Russia is not a large economy—its economy is smaller than that of Italy—so there are many things we can do to put further pressure on Russia through sanctions. These are things we have not done today—we have not discussed the potential for them today at all. People have talked about the SWIFT payment system. Clearly, Russia has other opportunities and can use other communications systems, but none the less addressing this would help. Preventing Russia from trading in sovereign debt has been mentioned, but what has not been mentioned is access to clearing banks. It would be catastrophic for Russia if we prevented its access to our clearing banks. Instead, we have sanctioned five very small banks. There may be good reason for that; there may be more provisions we need to put in place before we can apply further sanctions to the larger banks, and clearly there is interdependency between Russian banks and banks around the rest of the world.

The banks that we should be looking at are: VEB, which is the Russian development bank; the Russian Direct Investment Fund, which is the sovereign wealth fund; and, as a few Members have mentioned, Russia’s retail banks. SberBank has roughly 36% of SME—small and medium-sized enterprise—lending in Russia, with VTB having 20% of consumer loans. Clearly, we have to do this carefully and it may well be that we act in concert with other parties, not least the US, the EU and others. If we simply put sanctions on today, that could mean that Russian banks avoid having to settle debts to UK banks and banks in different parts of the world. Although we do not want to do anything that would cause systemic risk to UK financial markets, we are talking in the billions of dollars here rather than in the trillions, and there are other ways of shoring up our system to prevent that happening. However, what is important now is that there is no doubt that we need to go much, much further than we have done already.

[Bob Stewart]

Mr Putin may well have won, because we have not reacted hard enough. Small banks have been sanctioned, but we have not put in place real sanctions. So he will be sitting in Moscow tonight thinking, “I’ve just got to sit this one out and I will be able to play up the gains we have got extremely well to the Russian people.” We are really on dangerous ground by our weakness.

[Kevin Hollinrake]

That is certainly how it looks to me at this point in time, so it is important that we now move very quickly to take the further measures we have discussed today on the Floor of the House.

There is, of course, a wider context around this debate. Many Members on the Government and Opposition Benches have been calling for an economic crime Bill and talking about the failure to prevent economic crime. It is vital to make sure that measures such as sanctions are not subverted—that our banks follow the rules, basically. That would apply a lot of pressure on banks to make sure that sanctions are properly imposed. I have previously mentioned whistleblowers, the proper resourcing of our crime agencies, and the need to change the rules on unexplained wealth orders so that we can take wealth very quickly from people we identify.

I have outlined some more long-term measures that it will take some time to implement, but we could move very quickly with a register of overseas entities. We have previously had draft legislation—Members have mentioned being on the scrutiny Committees—so we could move really quickly. As has been mentioned, £1.5 billion-worth of property in the UK is owned by Russians who are connected to crime and corruption. Some 50% of that is registered in overseas territories and Crown dependencies, the public registers of which are not supposed to go live until 2023. The reform of Companies House would serve as a check and balance, and the move from register to regulator would mean we could properly establish the identities of directors and shareholders.

All those things I have mentioned could and should be done very quickly. That would have a meaningful effect on people connected to the Russian state. We need to act very quickly—we need action this day.