Repurposing Russian Assets to Rebuild Ukraine

Leo Docherty Excerpts

Tuesday 27th June 2023 Commons Chamber

[The Parliamentary Under-Secretary of State for Foreign, Commonwealth and Development Affairs (Leo Docherty)]

Let me start by thanking the right hon. Member for Tottenham (Mr Lammy) for the tone and substance of the debate, and indeed other colleagues who have participated. We are united in our outright condemnation of Putin’s brutal invasion of Ukraine, which is a fundamental violation of Ukraine’s territorial sovereignty. He drew a moving counterpoint between the terror and destruction of Bucha, and the remarkable appetite and spirit of rebuilding and reconstruction that is a motif of the Ukrainian people. That spirit of courage and determination was on magnificent display last week at our very successful Ukraine recovery conference.

The right hon. Gentleman also mentioned the capacity of Ukrainians’ innovation and their ability to make running repairs on all of their national infrastructure, including, most importantly, their electrical grid. That spirit of innovation and ingenuity will surely see them have a bright future, as and when Ukraine begins the rebuilding effort. That should not wait for the end of any conflict, but should be concurrent with the conflict. That was one of the main messages last week.

The right hon. Gentleman referred to the fact that unity is our greatest strength. The Government agree with that, and thank him and his colleagues very much for the consistent support they have outlined for our common efforts. We are right behind the efforts of the Ukrainians to rebuild their country now. The World Bank has estimated that rebuilding will cost £400 billion. Last week, there was a galvanising effort, where more than $60 billion towards Ukraine’s effort was outlined. It was a remarkable conference in terms of its convening power and the contributions from President Zelensky. As the Prime Minister said:

“Russia must pay for the destruction that they’ve inflicted. So we’re working with allies to explore lawful routes to use Russian assets.”

Those assets will pay for the damage Russia’s invasion has so recklessly caused.

That is also why, on Monday 19 June, we published new legislation to allow us to keep sanctions in place until Russia pays up. We are keeping up the pressure through our sanctions regime, with an unprecedented package targeting over 1,600 individuals, 130 of whom have more than £18 billion frozen. We believe in transparency and in keeping colleagues informed, so I will place an update in the House of Commons Library, showing the total value of assets frozen, to ensure that colleagues have the latest figure.

[Dame Margaret Hodge]

I do not think anybody can quarrel with the words the Minister has expressed, but I would like to urge him into action. Today, Lord Alton of Liverpool is moving an amendment in the House of Lords that would ensure that when somebody is sanctioned, there is a duty on them to disclose all their assets. If they fail to fulfil that duty, the agency could pursue them, as a criminal offence would have been committed, and seize the assets. That is a tiny window that we are opening, which would start to create the reality of seizing rather than freezing assets. Will the Government support that amendment? There will probably be a vote on it within the hour.

[Leo Docherty]

I am grateful to the right hon. Lady for drawing my attention to that amendment. I cannot make a pronouncement on the Government position on it, as I have not read the amendment, but we will observe it and take note.

[Liam Byrne]

Will the Minister clarify the press release issued by the Foreign, Commonwealth and Development Office on 19 May? It said that

“consistent with our laws, Russia’s sovereign assets in our jurisdictions will remain immobilised until Russia agrees to pay for the damage it has caused to Ukraine.”

Will the Minister confirm whether it is now, in effect, the Government’s strategy to use frozen Russian assets to rebuild Ukraine?

[Leo Docherty]

That legislation, which is a statutory instrument made using the affirmative procedure, gives us options in the future to extend sanctions, up until the point where Russia has paid. It gives us tremendous leverage into the future and has great utility.

We have maximised the impact of our sanctions by co-ordinating with our key international partners, at huge economic cost to Putin’s war machine. Russia’s economy posted a deficit of nearly $50 billion in 2022, the second highest in the post-Soviet era, and with our partners we are choking off Putin’s access to the key technologies he needs on the battlefield.

As I have mentioned, we are the first member of the sanctions coalition to lay legislation, which we did on 19 June, explicitly enabling us to keep sanctions in place until Russia pays for the damage it has caused. That builds on the commitment made by the Prime Minister and G7 leaders that sovereign assets will remain immobilised until Russia pays up. It also goes further, giving us maximum flexibility to act as the situation requires.

Our commitment does not stop there. As criticism of the war grows within Russia, we are introducing a new route for those under sanction to request that their frozen funds be used for Ukrainian reconstruction. Let me clear: there is no negotiation, no quid pro quo and no access for those individuals to their assets while they remain under sanction. However, if they wish to do the right thing and use those funds to help right the wrongs caused by Putin’s invasion, there will be an approved route for them to do so.

[Sir Chris Bryant]

One sanctioned individuals who said, before he was sanctioned, that his assets could be given to the reconstruction of Ukraine was Roman Abramovich. The sale of Chelsea football club happened last May and I understand there is £2.3 billion sitting in a bank account. I am mystified as to why that money has not yet been handed over to the foundation. I have exchanged texts with the person who set it up. He said he is ready and he does not understand why he is not getting the money—he has not even been told why he is not getting the money.

[Leo Docherty]

That is a non-governmental body. There are ongoing discussions with regard to the focus and the use of those funds—whether it be in Ukraine or outside Ukraine to benefit Ukrainians—which has drawn out the process, but we are seeking to expedite the matter at pace.

[Sir Chris Bryant]

I am grateful to the Minister for giving way again, but discussions between whom? If Government Ministers are party to those discussions, what is the concern that people still have?

[Leo Docherty]

It is not a Government discussion; it is a discussion within the new organisation that will disburse and utilise those funds. We will keep colleagues updated as and when that situation is resolved.

[Sir Chris Bryant]

As I understand it, the Minister is saying that the members of the foundation itself are rowing with each other about to how to proceed, but surely that would not prevent the money being handed over by the Government.

[Leo Docherty]

The hon. Member should not put words in my mouth. Details remain outstanding. A discussion is under way within the institution with regard to the focus and the utility of these funds. As and when that is clarified, I am sure that we will be able to keep colleagues updated. I remain grateful to him for his interest.

[Dame Margaret Hodge]

I am extremely grateful to the Minister for giving way again. Before that exchange, he was speaking about the ability of sanctioned individuals to voluntarily give some of their money to the Ukrainians. Can he reassure me, first, that this will not become a mechanism whereby sanctioned individuals can get themselves out of sanctions and continue to launder their money into the UK, and, secondly, that this is not a mechanism that will, in effect, buy them immunity from prosecution should they have committed an offence here in the UK?

[Leo Docherty]

I am very happy to give the right hon. Lady an absolute assurance that it is not a mechanism for circumvention or for granting immunity. It is to ensure that those funds, if volunteered, can benefit Ukrainians.

We are tightening the net on those who are hiding assets in the UK. Under powers to be introduced by the Treasury, individuals and entities designated under our sanctions regime will be legally required to disclose assets they hold in this country. Failure to do so could result in financial penalties or the confiscation of assets.

We will legislate to require those holding assets in the UK on behalf of the Central Bank of the Russian Federation, the Russian Ministry of Finance or the Russian national wealth fund to disclose them to the Treasury. Our action will increase transparency on where those assets are held and limit opportunities for sanctions evasion. Taken together, these new measures mark a further strengthening in the UK sanctions approach against Russia, as Putin and his cronies continue their illegal war and as Ukraine embarks on its counter-offensive. This marks important progress, but I assure Members that our efforts will not stop there.

Many hon. Members will be aware of the active debate with our international partners on the use of sanctioned assets. As the Foreign Secretary and other Ministers have made clear to this House repeatedly, no country has yet found a legally tested solution to turn this commitment into reality at scale, despite various pieces of legislation having been laid or passed by our international partners.

We are at the forefront of a united effort, with our international partners, to see frozen assets repurposed for Ukrainian reconstruction. Nothing is off the table, and a cross-Government taskforce is considering all proposals carefully, including those that our partners may bring forward.

[Liam Byrne]

I thank the Minister for giving way; he is being characteristically generous. We might as well cut to the nub of the debate. Is it his ambition to bring forward to this House a Bill that fulfils the ambition of the Opposition’s motion?

[Leo Docherty]

It is our ambition to find a legally workable route to repurpose Russian assets. As yet, no country has found one. We are working with partners to do so. As the House will appreciate, we must assure ourselves of the safety, robustness and legality of any proposal in this regard. If there is no legality, there can be no utility. That is why we continue to engage with every available option. The process will require creativity and innovation. I assure hon. Members across the House that we will continue to consider every lawful option to use sanctioned Russian assets to rebuild Ukraine.

[Dame Margaret Hodge]

I am extremely grateful to the Minister for his generosity. Can he perhaps explain what the Canadians are doing? It is my understanding that the Canadians have seized the assets. Would he consider being a kleptocratic state or perhaps being an aggressor state, as has been suggested, as concepts that could bring seizing state assets within the rule of law? There are two issues there.

[Leo Docherty]

Our Canadian friends have legislated, but they have not yet found a legally watertight route to seizing those assets. The right hon. Lady speaks about other concepts that are of interest, and we will certainly consider them as we move forward.

[Sir Chris Bryant]

Will the Minister give way again?

[Leo Docherty]

Well, it is a debate, so I am very happy to give way.

[Sir Chris Bryant]

I am very grateful to the Minister. I am sorry, but what is the legal impediment, to his mind?

[Leo Docherty]

The hon. Gentleman knows a great deal about international law, so he will know that ideas such as these will be tested internationally and that if they are not watertight, they have no utility. It is not legally straightforward; this is entirely new ground and therefore it requires a robust legal framework. I think he would probably admit that it is unclear that one exists as yet. However, as ideas come forward, we are interested in testing them.

We are steadfast in our commitment to ensuring Ukrainian economic stability. We have committed to providing approximately £4.2 billion of fiscal support to Ukraine and, along with our G7 partners, we are committed to helping it to emerge from the war with a modernised economy that should be entirely resilient to Russian threats.

Let me conclude by saying that the recovery conference last week, which I referred to at the start, marked a further milestone in support for Ukraine and in ensuring that Russia pays for its actions. With our partners, we will keep up the pressure, while standing by Ukraine’s side until it wins and rebuilds.

--- Later in debate ---

[Leo Docherty]

Thank you, Mr Deputy Speaker. The Minister of State, Foreign, Commonwealth and Development Office, my right hon. Friend the Member for Berwick-upon-Tweed (Anne-Marie Trevelyan) has had to go away to deal with an urgent welfare issue. So, with the leave of the House, let me begin by thanking all right hon. and hon. Members from across the House for the constructive tone of this debate and for their continued support for Ukraine in the face of Putin’s deplorable and illegal invasion. We have heard many thoughtful and considered speeches and interventions. First and foremost, I would like to reiterate our absolute determination to ensure that, fundamentally, Russia pays for the damage it has caused in Ukraine.

I was grateful for the contribution of the hon. Member for Cardiff South and Penarth (Stephen Doughty), and I will try to cover some of the points he raised. It was welcome that he reiterated the fact that Putin is to blame. We work on the basis that the perpetrator must pay, which is exactly what the Prime Minister outlined last week during the very successful Ukrainian recovery conference.

[Sir Geoffrey Clifton-Brown]

The Russian economy is worth about $1.8 trillion, ranking it 11th in the world. Does my hon. Friend agree that the UK has a strong legal base and that we need to work with our international partners so that we can send out a strong message to the Ukrainians today that there is a hope that one day their country will be rebuilt?

[Leo Docherty]

I am grateful for that intervention, as I entirely agree with it. If we look at the work that has been carried out by G7 allies, European nations and other states around the world in constraining the export of Russian hydrocarbons and finding alternative supplies, we see that the European energy picture has changed radically overnight. That was a consequence of allied will and effort. If we bring that same determination to the issues we have discussed today, we can have a very significant impact.

The perpetrator must pay and we are very clear about that. I will come on to what consideration we have given to the various options that have been laid out today, but I should say—

[Vicky Ford (Chelmsford) (Con)]

Will the Minister give way?

[Mr Deputy Speaker]

Order. I am nothing if not even-handed. I said to the hon. Member for Leeds North West (Alex Sobel) that it is not appropriate to come into the Chamber at the end of a debate and then intervene, and that applies to the right hon. Lady as well.

[Leo Docherty]

I am grateful to the hon. Member for Cardiff South and Penarth for laying out the various options. He asked what consideration we have given, give and will continue to give to them. First and foremost, we are working at pace. Our officials were in Brussels earlier this week, liaising with EU officials and looking at various models, so the work is continuing at pace. Clearly, if that were easy we would have done it already, but that does not mean that significant institutional effort and energy is not being put into the matter.

[Mr Djanogly]

The Minister is speaking about the EU. Is the issue not that at the start of the conflict the UK was leading the pace, particularly in financial services and other areas, but as the war has progressed, we seem to have been waiting for the EU, as he mentioned, and the US to lead the way? Is it not now time for the UK to regain the initiative once again?

[Leo Docherty]

I respectfully disagree with my hon. Friend’s characterisation. We are all looking at these issues. Clearly, the EU has some ideas about the potential use of interest payments on seized assets. That is an idea, not a legally tested, viable route. As the EU is considering that, so are we, which is why our officials were in Brussels earlier this week.

[Mr Djanogly]

To follow that theme, let us take the question of interest as an issue. That idea has not come out of the EU in the past two months; it has been spoken about for at least six months, but the EU has decided to look at it in the past two months. Has my right hon. Friend not considered that that is something we should have done by now?

[Leo Docherty]

It is certainly under consideration, but it will depend upon legality. If there is no legality, there is no utility.

[Stephen Doughty]

I thank the Minister for giving way; he is being generous. It is welcome that he is having those discussions with our allies in the EU, and I hope he is speaking to the United States and Canada about it as well. Will he give us an idea of the timetable? The motion is very reasonable and specifies 90 days, as we recognise these are complex issues. The EU has committed to coming forward with proposals before the summer break. Will he do the same?

[Leo Docherty]

I will not commit right now, but I can give an assurance to the hon. Gentleman and the House that we are working at pace, as we recognise that this is an urgent issue. Urgent is what we will be and do, in terms of pushing the business forward.

On a similar theme, the hon. Member for Cardiff South and Penarth made some interesting comments about the United Nations General Assembly resolution ES-11/1. We note that resolution and recognise that there are interesting parallels that might be considered with regards to the situation post-war, vis-à-vis Iraq and Kuwait. Of course we will consider that, as we do all other options.

The hon. Gentleman mentioned the Canadian model. For the clarification of the House, the Canadians use the term “seizure” for freezing. Like the UK, Canada is not yet able to test the lawfulness of any potential seizing fully, as we understand it, through their court system. They have the legislative start, but it has not yet been legally tested. We will keep in touch with our Canadian colleagues as they move forward. He asked what role the Attorney General, my right hon. and learned Friend the Member for Banbury (Victoria Prentis), might have. He will know that she is much vested in this matter. She has visited Kyiv to look at accountability issues and she will keep colleagues updated as she reviews those issues.

[Robbie Moore]

In my speech, I mentioned that the Prime Minister had attended the Ukraine recovery conference last week. Does the Minister agree that that demonstrates that the Prime Minister and the Government are taking world leadership on the issue, by bringing together countries from across the world, including EU member states and G7 states, to commit at least £2.5 billion as part of the recovery package for Ukraine, once the war has finished?

[Leo Docherty]

I entirely agree with my hon. Friend. Last week was a remarkable show of the convening power of the UK, the tremendous resolve of our Ukrainian friends and the remarkable scale of global support, not just in military hard power but in global capital. When that global capital is mobilised to help Ukraine resurrect itself, that will, in tandem with the military effort, lead to a Ukraine that is sovereign and able to resist all potential future threats. Last week was a great success, but there is more work to do.

Finally, let me say to the hon. Member for Cardiff South and Penarth that I am grateful for his reflections on his visit to Ukraine. His insights into the scale of the destruction are very welcome. I am grateful also that he mentioned the HALO Trust, which does heroic work to expedite de-mining. It is 30 years of work, and we are proud to be putting some of our investment into that. It is money extremely well spent. It also speaks to the horrendous scale of environmental damage that has been wreaked right across the country. I am very grateful overall for the hon. Member’s constructive tones.

I should reassure the House that our sanctions have inflicted a severe cost up until this point on Putin for his outrageous imperialist ambitions. In collaboration with key partners, we have now sanctioned more than 1,600 individuals, including 130 oligarchs. We have frozen more than £18 billion-worth of assets in the UK and sanctioned more than £20 billion-worth of UK-Russia goods trade. We will stand with Ukraine for as long as it takes in that regard.

[Catherine McKinnell]

The Minister has set out the significant recovery of assets through sanctions, which rather brings us back to the point that the Government have not really been clear about: what is the delay on deciding how and whether those assets can be repurposed for reconstruction in Ukraine? Am I right in thinking that the Government responded to a parliamentary question back in July 2022—so almost a year ago—saying that they were considering all options on assets that have been seized, including whether they can contribute towards the reconstruction of Ukraine? Why is it taking so long? It does create the fear that the Government have considered it, but have not yet come up with the answer.

[Leo Docherty]

It is taking a long time because it is very complex. There is no straightforward legal route. No other nation has yet come up with a tested legal proposition despite legislative activity. We are therefore moving in tandem with our allies to expedite and find a route, but if it were very simple, we would have done it already.

Through the G7 leaders’ statements, we have been very clear that the perpetrator should pay. We have underlined our continued commitment to that objective by introducing new legislation to enable us to keep sanctions in place until Russia compensates Ukraine. Nothing is off the table, as I have already said today, and we continue to work with our international partners on the options for using sanctions for reconstruction purposes. However, of course, if it is not legal, it is not viable and therefore not useful.

[Robbie Moore]

I thank my hon. Friend for giving way. Of course, the whole purpose of imposing sanctions is to stifle the economic drive that Russia is undoubtedly using to fund its aggression against Ukraine. Can my hon. Friend confirm that he and the Government are using their ability to encourage other allies to keep their sanctions in place and to take their lead from us?

[Leo Docherty]

That is a very relevant and good point. We have made the point to colleagues around the world that all allies must stand together to prevent circumvention, because economies more connected and more proximate to Russia face severe economic impact. We do work with allies to ensure compliance and also to prevent circumvention.

As we saw last week, the new measures that were announced during the Ukraine recovery conference marked a significant step forward to driving Ukraine’s reconstruction through a number of different ways. Both the Prime Minister and the Foreign Secretary emphasised the UK’s continued commitment to ensuring that Russia pays for the reconstruction of Ukraine. The Foreign Secretary announced fresh action to increase the pressure on Putin and his supporters through a series of key measures: first, the new legislation, which I have referred to, enabling us to maintain the sanctions on Russia until Moscow pays compensation to Ukraine; secondly, the development of a route to allow sanctioned individuals to volunteer their money to go to Ukraine to help reconstruction; and, thirdly, under the sanctions regime, delivering a new requirement for sanctioned individuals and entities to disclose assets they hold in the UK.



That, in the round, will ensure that we drive forward, that the perpetrator pays and that we can help our Ukrainian friends to rebuild their magnificent country.

Question put and agreed to.

Resolved,

That this House condemns Russia’s illegal invasion of Ukraine; stands in solidarity with Ukrainians in their resistance to Russia’s invasion of their sovereign state; recognises the enormous damage that Russia’s invasion has caused to Ukraine’s infrastructure, economy and institutions; commends the recent commitments made by the Government to support Ukraine’s recovery during the Ukraine Recovery Conference 2023; and calls on the Government to present a Bill before this House within 90 days to allow frozen Russian state assets held in the UK to be repurposed for Ukraine’s recovery.