Russia (Sanctions) (EU Exit) (Amendment) (No. 17) Regulations 2022

Lord Addington Excerpts

Monday 23rd January 2023 Grand Committee

[The Minister of State, Foreign, Commonwealth and Development Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, the instrument before us was laid on 15 December 2022 under powers provided by the Sanctions and Anti-Money Laundering Act 2018. It makes amendments to the Russia (Sanctions) (EU Exit) Regulations 2019. The instrument has been considered and not reported by the Joint Committee on Statutory Instruments.

Our unprecedented package of sanctions makes it clear to Mr Putin and the wider international community that Russia’s territorial expansionism is unacceptable and will be met with a serious and escalating response. With these amendments, the UK, with our international partners, continues to put immense pressure on Mr Putin and Russia. The measure forms another part of the largest and most severe package of economic sanctions that Russia has ever faced.

I begin by outlining the main measures introduced through this latest piece of legislation. First, this instrument tightens existing regulations on investments, loans, securities and money market instruments to further close off indirect finance and further constrain the availability of international capital to Russia. It also prohibits new investments in Russia via third countries.

Secondly, this legislation introduces new restrictions on the provision of trust services to persons connected with Russia. This will particularly affect high net worth Russians who use trust services to manage their assets. The SI also suspends the Bank of England’s duty to recognise resolution action in respect of persons designated under the Russia regulations—the process by which the failure of financial institutions is managed—stemming a potential income stream for Mr Putin’s war machine.

Thirdly, the regulations prohibit the export of further specific goods across a range of sectors, including oil production and mining equipment, electronics and chemicals, as well as advanced materials and camouflage gear.

Fourthly and finally, this instrument also introduces further prohibitions on the provision of professional services to persons connected with Russia. This encompasses advertising, architecture, audit, engineering, IT consultancy and design services. These are areas where Russia is highly reliant on the UK and our allies for expertise. These prohibitions will severely debilitate the future growth of key Russian industries. Prohibitions on services imposed by the UK, the United States and the European Union account for between 75% and 83% of Russia’s imports in these sectors. For example, it is estimated that 77% of Russian architecture and engineering imports are from G7 economies. Taken as a whole, the No. 17 regulations cover more than £200 million worth of exports to Russia.

As with all our sanctions, the latest package has been developed in co-ordination with the UK’s international partners—a point that I know all noble Lords are very focused on and agree on. I assure noble Lords that we have worked with the European Union and the United States. Of course, we will continue to work with our allies to identify any further potential gaps or loopholes in our sanctions, and to address them.

To conclude, these new amendments demonstrate our determination to target those who participate in or facilitate Mr Putin’s illegal war of choice in Ukraine, and we continue to send a clear message about the cost of such a flagrant assault on sovereignty, democracy and equality. Since Mr Putin’s abhorrent invasion of Ukraine, the UK has now sanctioned more than 1,200 individuals and more than 120 entities, including 20 banks with global assets worth £940 billion and more than 130 oligarchs with a combined net worth of over £140 billion.

We continue to witness the impact that sanctions are having on Russia. The International Monetary Fund forecasts that Russia’s GDP will be 11% smaller in 2026 compared with pre-invasion forecasts and will not return to its pre-invasion level until 2027 at the earliest. Russian imports have plummeted by more than half, highlighting that even non-sanctioning countries are now limiting what they export to Russia.

I assure noble Lords that the United Kingdom will keep going with our sanctions until Russia ends its brutal invasion of Ukraine. I continue to welcome the cross-party support for this effort and beg to move.

[Lord Addington (LD)]

My Lords, I thank the Minister for that thorough introduction to this SI. I do not think many of us will have any objection to the direction of this. What the Government are doing here is right. The fact that we can support them on this would make a pleasant change if it were not in such tragic circumstances.

The only real questions I can think of to add to that thorough introduction is: how are we reviewing the effect of sanctions? What is the input of our allies, which may have other intelligence resources, et cetera, to go on with this?

Nobody enjoys doing this. We are doing it because we have to, because Russia has decided to behave in a manner that may have been acceptable in the 1700s but is not acceptable any more. When a nation has determined that it does not want to be a part of another, it should not be forced to at gunpoint. Can the Minister give us some indication of how we are monitoring the effect and making sure that Russia totally understands what it can do to get rid of this, which is to leave Ukraine?

[Lord Collins of Highbury (Lab)]

My Lords, I thank the Minister for his introduction. I repeat that the Opposition are totally at one with the Government and their actions to ensure that the illegal and immoral invasion of Ukraine is halted and that we take all possible steps against Russia for its breach of international law.

I have just a few questions about this additional SI on sanctions. The Minister mentioned that we are working with our allies, in particular the EU and other G7 partners. Can he tell us exactly how much these measures are aligned with the actions of the EU? Is there complete alignment now? On credit and securities, reference was made to closing loopholes. Are these loopholes that we have collectively discovered and want to stop or is this something that we focus on particularly because of the situation with London?

On that subject, according to the impact assessment, London still seems to trade significantly with Russia and imports more than other regions. Can the Minister say a little more about what more we need to do in terms of cleaning up London and the role of money laundering in particular?

We repeatedly pass legislation on sanctions. We have good law, if you like. But, of course, none of these laws is necessarily effective unless we also focus on enforcement. Can the Minister tell us a bit more about the capacity in the department and across Whitehall to ensure that all these sanctions that we are approving are effectively enforced? I suppose that it relates to the question the noble Lord asked about what assessment we make of effectiveness. Enforcement is really important.

Finally, on the penalties that arise—and we have covered this point before with regard to the Act and the statutory instruments that have come out of it—these new measures carry a maximum sentence of 10 years or a fine. Are there circumstances in which the Minister believes that the violations are so serious that they may lead to custodial sentences rather than fines? This relates to how much we focus on enforcement and what we can do to provide a deterrent to others breaching these regulations.

With those few questions and comments, I support the SI.