Russian Assets: Seizure

Liam Byrne Excerpts

Tuesday 14th March 2023 Commons Chamber

[Sir Iain Duncan Smith]

Of course, I completely agree with the hon. Gentleman on that. Interestingly, if we manage to criminalise the failure to disclose sanctioned assets, we are halfway there on his point, because they cannot then escape. If we prove that sanctions evasion is taking place, this can be the basis for asset recovery in due course; we would then have a reason why we should be doing this, not just because of the criminal purpose, but for the fact that we would actually be able to gain funds.

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

The right hon. Gentleman is making an excellent speech. Is he as worried as I am about this new trick that the Treasury is performing called “general licences”? There are now whole categories of spending where the Treasury is basically issuing carte blanche to oligarchs to spend what they like and, worse, it is refusing to reveal that framework to us here in this House.

[Sir Iain Duncan Smith]

I agree with the right hon. Gentleman; this is beginning to sound like one of those “golden visas”. It was golden in description, but dirty and leaden in reality, and I think this is where we are again. We are going to find us all in agreement—

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[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

I welcome the speech by the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), which I thought was excellent. I will supply three further thoughts and set the context for the scale of the task of Ukrainian reconstruction. I am glad the Government have offered to host the June conference for reconstruction finance, following on from a member of conferences in Lugano.

It is worth setting out for the House the sheer scale of the finance we need to mobilise, which is why the right hon. Gentleman is correct to say that we must start by seizing Russian assets now. Frankly, we will need to provide an enormous amount of money to our Ukrainian colleagues. Ukrainian GDP has been hit by about 45%; the World Bank thinks its budget deficit this year will be something like $38 billion. As many who have been there know, Ukraine has very high inflation and therefore very high interest rates; perhaps one third of businesses have stopped operations, 14 million people have left their homes, 6 million have gone abroad, there has been huge educational disruption for the next generation of Ukrainians and about half the energy infrastructure has been knocked out.

This has been a moment where the Bretton Woods institutions have really stepped up. Between the International Monetary Fund and the World Bank, something like $27 billion has been supplied this year. Those Bretton Woods institutions offer us one of the most efficient and effective routes for providing what could be, on current estimates, a $750 billion bill to rebuild the great country of Ukraine. As chair of the parliamentary network on the World Bank and International Monetary Fund, I am delighted that we have just launched the Ukraine chapter of the network. I am also delighted that at our global parliamentary forum, at the beginning of the spring meetings in Washington in April, we will have a special session focused on reconstruction finance for Ukraine.

However, $750 billion is a big number. Capitalising those kinds of loans could take $150 billion-worth of equity. That is why seizing, let us say, $300 billion of Russian bank reserves frozen abroad will be incredibly important in helping to supply that money.

[Alex Sobel]

With the reconstruction conference taking place in London on 21 and 22 June, does my right hon. Friend not think it is important for us to involve the IMF and World Bank in that conference and ensure that we have a rounded package for Ukraine, rather than working in silos or isolation?

[Liam Byrne]

It is crucial that we do that, and the spring meetings in Washington should provide a springboard, but the most efficient way of surging the necessary money into Ukraine is through the Bretton Woods institutions that we set up in 1944 to finance post-war reconstruction. We did it before—let us try it again.

My second point, having set the stage and set out some of the numbers, follows on from the right hon. Member for Chingford and Woodford Green. We now have to identify the legal strategy for turning this idea into a reality. All of us in this House are frustrated that the Government—and, indeed, Governments around the world—are, we feel, dragging their feet when it comes to putting in place the necessary laws to move from freezing to seizing. There are probably three components that we need to shift into place: there needs to be action at the United Nations; there needs to be action to set up the tribunal to prosecute Russia for the crime of aggression; and then we need to implement the ten-minute rule Bill of my hon. Friend the Member for Rhondda (Sir Chris Bryant), which would create the legal framework for action.

[Bob Seely]

rose—

[Liam Byrne]

I will say a word about each of those things after I have given way to the hon. Gentleman.

[Bob Seely]

Does the right hon. Gentleman have a preferred option? Although it will be legally possible to seize Russian state assets—that has arguably been done before, so there is precedent—is he concerned about the seizure of private assets? I am tempted to say that those are legal. They are seized assets from a dirty period of Russian history, so I think one could say that they are not illegal, but how legal they are is another matter. If we are seizing oligarchs’ assets, how can we do so legally without setting a more tricky precedent?

[Liam Byrne]

I will come to that now. There are three things that we will need to do. It is not just about private wealth; it is about public wealth—the assets of the Russian central bank. We know that $300 billion was held abroad. We know where about $30 billion of it is, and that money has been frozen. To seize that money, we will need to do a couple of things.

First, we will need to bring the world together at the United Nations to pass a resolution that revokes the doctrine of immunity for central banks when there has been a clear violation of the United Nations charter. I am under no illusions; we will not get 100%, but by getting a significant number of nations to sign up to that resolution, we begin to change the parameters of international law. That means that domestic law, when we move it, will be in a much safer legal space. Indeed, many international lawyers would say that seizing those assets is a legitimate countermeasure, but if there is a UN resolution, we have begun to change the concept of what is protected by immunity—such as central bank assets—and what is not.

Secondly, we then have to ensure that we do not fall foul of the European convention on human rights, particularly the first protocol, which enshrines the right to the enjoyment of assets. We have to ensure that there is no way that the Russian Government can be considered a victim. The safest way we can do that is to move quickly, as President Zelensky has proposed, to begin prosecuting Russia for the crime of aggression. If we have a UN resolution that has begun to revoke the concept of immunity in the case of aggression, and a tribunal that is prosecuting Russia for the crime of aggression, we will have begun to change fundamentally the context of international law.

[Bob Seely]

I know that the right hon. Gentleman is about the most expert person here when it comes to the workings of the international financial institutions and so on. Does he expect or think that we will be able to seize oligarch assets as part of that process? If so, do we have any idea how we will proceed down that route, or are we looking only at Russian state assets? At some point, all the oligarchs close to Putin will get their billions back.

[Liam Byrne]

I think that we can use the same tactics to seize private and public assets, but I am conscious that we have to change the context and parameters of international law first. That is how we maximise the safety of domestic legislation, which has to be the third step. We in this House are lucky that my hon. Friend the Member for Rhondda has set out precisely how to do that in his ten-minute rule Bill.

Crucially, we need to ensure that the State Immunity Act 1978, which gives immunity to central banks, is revoked or at least conditioned in a way that allow laws to be presented here so that we in Parliament can order the seizure, forfeiture and repurposing of assets.

My final point is a little more short term, meaning now. If we are to maximise the assets that we seize and repurpose for the reconstruction of Ukraine, we have to get serious about sanctions enforcement. Right now, frankly, we are not. There will be a lot more money available if we stop the nonsense that is going on in the dark at the moment. The truth is that sanctions enforcement in this country today is the proverbial riddle wrapped in a mystery inside an enigma.

As the right hon. Member for Chingford and Woodford Green said, we have been told that as of October 2022, £18.4 billion-worth of Russian assets have been frozen in this country. We then learned from the scandal exposed by openDemocracy that the Treasury has been issuing licences like confetti, even to warlords such as Prigozhin, the head of the Wagner Group—in his case, to fly English lawyers to St Petersburg to prosecute an English journalist in an English court in order to silence him because he was writing the stories that triggered the sanctions against Prigozhin in the first place. What a nonsense!

As I began to dig into this, much worse was revealed. In the last Office of Financial Sanctions Implementation report, it was revealed that the Treasury is no longer issuing licences to individuals one by one to authorise specific expenditure; it is now issuing general licences that authorise an entire category of spending. In fact, 33 general licences were issued last year, so I naturally asked what the value of those general licences totalled. I was told on 15 February in a parliamentary answer:

“The Office of Financial Sanctions Implementation (OFSI) does not disclose data from specific licences it has granted under UK sanctions regimes.”

When the Exchequer Secretary to the Treasury came to the House on 25 January, we asked him whether, if he cannot tell us what the total value of the licences is, he could at least tell us what the licences were issued for. He said he could not tell us that because

“there is a delegated framework”

and that these decisions

“are routinely taken by senior civil servants.”—[Official Report, 25 January 2023; Vol. 726, c. 1014.]

I then asked what this delegated framework was and whether we in this House might have a look at it. I first tried a parliamentary question. The answer came back on 8 February:

“There are currently no plans to publish the delegation framework.”

I then had to try a freedom of information request, and I have it here in my hand. It came back to me on 9 March, and it says:

“we can confirm that HM Treasury does hold information within the scope of your request.

The information we have identified…we believe may engage the exemption provided for by section 35(1)(a)—formulation or development of Government policy.”

We now have a situation where Ministers are saying that it is the civil servants’ job, and the civil servants are saying that it is advice to Ministers. For that reason, we cannot get to what this delegated framework looks like.

I then asked whether they could at least tell us how many people we have busted for sanctions evasion. The Office of Financial Sanctions Implementation confessed that there were 147 reports of a breach last year, but when I asked the Minister for Security how many criminal investigations had resulted from that, he said that he could not answer

“For reasons of operational security”.

I went back to the Office of Financial Sanctions Implementation report to double-check, and of 147 reports of a breach, there have been a grand total of two monetary fines, both to fintech companies.

So there we have it: £18 billion frozen and licences issued like confetti in a secret regime that Ministers say is down to civil servants and civil servants say is actually advice to Ministers. Despite this flagrant abuse—and we know the scale of it, because the Financial Times told us that $250 million has been laundered by the Wagner Group—we have just two fines that total £86,000. Well, £86,000 in fines is not going to do much to help us rebuild Ukraine. I ask the Minister on the Front Bench to explain to us how she is going to do an awful lot better than that.

Sanctions enforcement in this country stinks to high heaven, and what concerns me most is the culture of secrecy around it. Many of us in this House have been around long enough to know that such a culture is never a recipe for good public policy. We in this House have to be realistic about the scale of finance that is needed; maximise the use of our Bretton Woods institutions; and move internationally and domestically, together with our allies, to change the parameters of international law and maximise the safety and security of domestic legislation that we pass here. But let us move now to send a clear signal from the UK—the home of the rule of law—that this is not going to be a safe haven for sanctions evasion. We are going to send that clear message by getting tough, and getting tough now.

[Mr Deputy Speaker (Sir Roger Gale)]

If we are going to get everybody in, we are going to have to have a self-denying ordinance of about six minutes.

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[Sir Chris Bryant (Rhondda) (Lab)]

It is a great delight to take part in this debate. I feel as if I spend more time than I ever thought I would with the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) these days, and I have friends who are bit disturbed by it. But he probably has friends who are a bit disturbed by it as well. The important point is that, if the Russian ambassador, or for that matter the Ukrainian ambassador, were to look at this debate, they might think that there are not that many people in this Chamber, but that is not because of a lack of resolution by the whole membership of this House, which is determined to ensure that we will do everything in our power—we will make sure that the Government of this country and the whole of this country will do everything in their power—to ensure that Putin does not win this illegal, criminal war that he is engaged in and has been engaged, to my mind, since 2014, not just since last year.

I am going to talk about three things: sanctions, seizing assets and who pays. On sanctions, it is often said by Ministers—I am going to be nice to Ministers because I like this Minister, and because I want them to do something and sometimes being rude about them does not work—that we are doing more sanctioning than we have ever done before. I just gently say that that is not true. We had a more comprehensive sanctions regime over Iran—not at the moment, but formerly—than we presently do over Russia. So we have to consider further sanctioning, which has to happen. It is true we did not sanction any individuals in relation to Iran and we are doing more individuals in relation to Russia, but it is the whole Russian economy that we need to debilitate so it cannot win the war.

The Minister knows that I worry we are not sanctioning enough individuals. Sometimes it feels as if the Government feel that job is done. It is not. As several hon. Members, including my right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne), have said, there is an issue about sanctions busting. I am certain, although I do not have proof, that sanctions busting is going on in the UK every single day of every week and has been ever since we started this process. For a start, we gave plenty of warning. People have referred to Roman Abramovich. I recall the then Prime Minister saying at Prime Minister’s questions that he had been sanctioned, but it turned out that he had not. That was a pretty good signal that he was about to be sanctioned. A couple of weeks later, because of stuff I was able to reveal about what the Home Office had been saying about Abramovich for several years, he was then sanctioned. By that time, however, yet more money had been siphoned off to another part of the world. It is true that the proceeds of the £2.3 billion sale of Chelsea football club, which happened in May last year, will eventually go Ukraine, but it has taken a very long time to put that in place. I know Mr Penrose is engaged in that and is eager to make that happen as fast as possible—incidentally, it will dwarf the contribution the UK has already made— but that contribution was not forced on Abramovich by law. In the end, he decided to agree to it. So that does not really quite count.

Treasury licences have been referred to. They are giving carte blanche to many individuals to circumvent the sanctions regime. There are undoubtedly enablers in the City of London, the same enablers we have known for years, who have enabled the dirty money to swirl around in the UK economy. There are the lawyers, the very posh law firms with very thick carpets and very thick marble walls that are doubtless refurbished every two years on the back of money that was stolen from the Russian people by people who should have been sanctioned. There are estate agents, banks and countless individuals who, without any thought to the morality of the situation, are still happy to enable sanctions busting. My worry is that there is hardly anybody in Government tracking down whether that is happening or not. Has anybody turned up to any estate agent office in Mayfair and said, “Are you checking whether any of these individuals you are buying and selling from are sanctioned individuals?” Has anybody done any investigations? I very much doubt it.

[Liam Byrne]

As ever, my hon. Friend is making a brilliant speech. I was shocked to hear that suspicious activity reports are not triggering enforcement actions for sanctions busting either. Is that not an argument for broadening the suspicious activity report regime, so that it does include people like estate agents? Surely, we should be using that as evidence to trigger prosecutions.

[Sir Chris Bryant]

Absolutely. I do not know whether my right hon. Friend has ever tried to open a bank account in the last few years, but it is almost impossible for a British Member of Parliament. I suspect it is much easier for a Russian oligarch to do so than it would be for anybody else. I really hope the Minister will take away the view of the whole House that we have to get serious about cracking down on sanctions busting in the UK.

I like a Magnum when I go to the cinema. It still upsets me that Unilever thinks that Magnums are essential in Russia, which is why it is still doing business there. Unilever should be pulling out completely from Russia. The Russians should forgo their Magnums—or is it Magna? I do not know what the plural is. For that matter, Infosys should not be operating in Russia, either.

I worry that some of our allied countries are providing a very safe haven for sanctions busting, including the United Arab Emirates. In the last year, it has become a complete paradise for dirty Russian oligarch money. If countries such as the UAE want to remain allies with us, they need to think very carefully. They may say, “Oh, but it’s only money. We are only doing what you did for years.” I hope that we in the UK are now learning the lesson of what happens when we give out golden visas to people just because they have lots of money, and do not ask any questions. It ends up biting you on the backside.

On seizing assets, I am sick and tired of the pearl-clutchers. People say, “Oh, I know. It’s really, really important. We really have to do something, but you know, Mr Bryant, you don’t understand. It’s terribly, terribly hard.” I am sorry, but where there is a will, there is a way. People want to wave sovereign immunity around all over the place, but what about the sovereign immunity of Ukraine? That was guaranteed by Putin personally, and the UK and other countries when we all signed up to the Budapest accord. Several years later, it turned out that we did not mean it quite as categorically as we stated on that piece of paper. There must surely come a time when sovereign immunity has to be waived because otherwise there is complete impunity when one country invades another. In the end, that is simply inviting countries to invade other countries.

I understand that the seizure of oligarchs’ assets is not easy. Prigozhin’s mother has just managed to win an appeal, as I understand it. But it would be much easier if there were an amendment to the Economic Crime and Corporate Transparency Bill, as several Members have mentioned already in this debate, to make it an offence for a sanctioned individual not to reveal all their assets. That would certainly make it easier for us to do that.

On state assets, I do not believe that sovereign immunity can be absolute. It is preposterous that we are sitting here, watching Canada and wondering how it will go there. When was it ever the British attitude to watch what is happening across the other side of the ocean? As my right hon. Friend the Member for Birmingham, Hodge Hill, said, it would be much easier for us to take legal action if, first, we had a United Nations resolution and, secondly, we set up a special war crimes tribunal to consider the matter of a war of aggression. Unfortunately, although the British delegation at the Nuremberg war trials said that a war of aggression was the ultimate war crime, that has not thus far been so determined. It would certainly assist us if we were able to get that. It would also assist us if we were to amend the State Immunity Act 1978.

I come to the fundamental point: everyone knows that Ukraine will have to be reconstructed. Cathedrals; schools; libraries; hospitals; people’s homes; hundreds and hundreds of apartment buildings have been completely destroyed; roads turned into craters; bridges destroyed—sometimes by the Ukrainians to prevent the Russians further invading; electricity pylons. The whole system is completely in need of reconstruction.

In the end, there are only three options for who will pay for that. The people of Ukraine cannot afford it, and it is immoral to say that they should pay. There are Ukraine’s allies, or rather their taxpayers around the world. I am absolutely certain that, as individuals, many people in the UK—including in my constituency—will want to make a personal contribution. The British taxpayer has already made contributions through the British Government. But in the end, we are talking about $1 trillion-worth of reconstruction costs already. To be honest, the £23 billion-worth of Russian state assets sitting in British banks at the moment will only touch the sides. However, if we add the €350 billion-worth sitting in European banks, along with the amounts in Canada, Australia, the USA and all the other countries in the world, we might just be able to make a dent.

Anybody from Ukraine who is watching this debate will know that we all stand four-square behind them. We want to do so not only in our words, but in our deeds. I beg, I implore the Government: you do not have to use my Bill. My Bill is completely irrelevant; it is just a way of teasing you along to do the right thing. I know you want to do the right thing—I mean the Government, not you, Mr Deputy Speaker, although you probably want to do the right thing as well. Whenever the Government are prepared to table the legislation, we all stand ready to vote it through as swiftly as we can.

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[The Minister of State, Foreign, Commonwealth and Development Office (Anne-Marie Trevelyan)]

I thank my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) for securing this important debate. I am grateful to him and other hon. Members for the points they have raised, which I will do my best to address this evening. As ever, I will make sure that we write to Members if I am not able to pick up any specific points.

As we move into the second year of Putin’s illegal and brutal war, I am grateful for the ongoing unity shown by hon. Members on both sides of the House and for the shared determination to support President Zelensky and all Ukrainians until they prevail. It is an honour to have some of our Ukrainian friends in the Gallery today.

Before addressing the seizure of Russian assets, I underline the magnitude of the UK’s response to Putin’s invasion. Although I hear the challenge of the hon. Member for Rhondda (Sir Chris Bryant) on the quantum of sanctions to date, I will set out what we have done so far. The UK alone has sanctioned more than 1,500 individuals and entities with a net worth of $145 billion, and we have frozen more than £18 billion-worth of Russian assets—assets that Putin now cannot use to fund his war machine. We have also introduced an unprecedented number of trade measures, which have led to a 99% reduction in imports of goods from Russia and a 77% reduction in exports of UK goods to Russia. All those measures have been determined to restrict Putin’s ability to fund and sustain his illegal war. The measures represent the most severe sanctions ever imposed on Russia. The package of sanctions to date includes asset freezes on 23 major Russian banks, with global assets worth $960 billion—that is 80% of Russia’s banking sector—the prohibition of Sberbank from clearing and the removal of 10 banks from SWIFT.

I remind the House that we have sanctioned the Wagner Group in its entirety, and its leader, Prigozhin. My right hon. Friend the Member for Chelmsford (Vicky Ford) will know that, although I cannot comment on whether an organisation is or is not under consideration for proscription, her comments have been noted.

[Liam Byrne]

The Financial Times has revealed that the Wagner Group has channelled $250 million into its organisation through sanctions evasion. Is that not evidence that the sanctions implemented against the Wagner Group are not working? What information can the Minister supply to persuade the House that the enforcement regime is actually effective?

[Anne-Marie Trevelyan]

I will come back to that in a moment.

The right hon. Gentleman also set out, with his usual articulateness, a very clear pathway through which the UN and the international community might work together to seize Russian state assets. I hope I can reassure him that we will continue to work at the UN with all like-minded countries to address the asset seizure challenge.

The latest package of internationally co-ordinated sanctions and trade sanctions was introduced to mark the anniversary of the invasion on 24 February, and it includes export bans on every known item Russia has used on the battlefield. This combined package of sanctions has been carefully constructed with our allies to cripple Putin’s supply chains, to limit his ability to finance his war and to target those who are propping up his regime. It serves as a stark reminder to Russia and any other would-be hostile actors of the cost of flagrantly assaulting the democracy, sovereignty and territorial integrity of another nation.

As Members have highlighted in the debate, the reconstruction of Ukraine is absolutely at the top of the international agenda, while we continue to support Ukraine to defend its country. In September, the World Bank estimated a cost of $349 billion to rebuild Ukraine—a figure that has been rising every day since. Indeed, colleagues have highlighted recent assessments with figures of about $750 billion. Those are monumental sums to consider in respect of the reparations that will be needed.

The UK Government will continue to take a leading role in determining how to assist in this long-term reconstruction challenge. In June, we will be co-hosting the 2023 Ukraine recovery conference in London, alongside the Ukrainian Government. Together, we will mobilise public and private funds to ensure that Ukraine gets the reconstruction investment it needs.

We also remain committed to continuing our direct support for Ukraine. To date, we have helped more than 13 million Ukrainians affected by the war, providing them with £220 million of vital humanitarian assistance, delivered through the United Nations, the Red Cross and other non-governmental organisations. We will continue to work alongside our Ukrainian friends in support of their military defence for as long as they need us to do so.

The key issue of seizing Russian assets to fund Ukrainian reconstruction is one that the Government are extremely focused on, and we are in close discussions with friends and allies. The Government remain clear that Russia must be made to pay for the harm it has caused in its illegal war in Ukraine, in line with international law. The Prime Minister made that clear in the London declaration he signed with President Zelensky during his recent visit to the UK and in the G7 leaders’ statement on 24 February. We have been 100% clear: Putin must pay. We are working in the FCDO, in consultation with other Whitehall Departments and our G7 partners, to review all lawful options to make frozen Russian assets available for rebuilding Ukraine.