Russia (Sanctions) (EU Exit) (Amendment) Regulations 2023

Lord Collins of Highbury Excerpts

Tuesday 16th May 2023 Grand Committee

[Baroness Northover (LD)]

My Lords, I thank the Minister for introducing these regulations. As was reiterated again yesterday at Oral Questions, and as the Minister has acknowledged, there is support across the House for the Government’s stance in opposing the Russian invasion of Ukraine and recognising the threat not only to Ukraine but to the whole of Europe. We have supported sanctions on those individuals who have clearly gained by their support of President Putin and are complicit in the actions that he has taken. We have seen, too, how President Putin has used global trade to put pressure on countries that oppose him and to seek to deter other countries from opposing him. Energy prices, food crises and so on all hurt the poorest most, and Putin knows that. The sanctions we are considering today seek to put pressure on Putin’s military resources as well as the Russian economy. The Government argue that this is

“the largest and most severe package of economic sanctions that Russia has ever faced”.

Can the Minister give us a breakdown of the pre- and post-invasion proportion of trade affected by these sanctions?

The Government also say:

“As with all our sanctions, the latest package has been developed in co-ordination with our international partners”.—[Official Report, Commons, Delegated Legislation Committee, 15/7/23; cols. 1-4.]


We agree—we have discussed it many times—that sanctions are most effective when they are brought in by a number of countries, particularly the economic might of the EU and the United States. Can the Minister tell us whether we are completely in lockstep over these or whether there are any variations and, if so, in what areas?

The Delegated Powers Committee wonders why these measures were not brought in before, stating:

“We were particularly perturbed to read in the Explanatory Memorandum that UK goods are still being used by Russia on the battlefield. This prompted us to question how effective the 17 sanctions instruments we have already seen have been”.


It also asked why any trade is still being permitted and speculated that goods found on the battlefield may have been supplied by third countries. I have seen the FCDO response to these questions and concerns, but will the Minister put it on record? Perhaps he could add details of what types of products have been circumventing the sanctions that were already in place and how this was happening.

The committee also asked why the restrictions on iron and steel do not come in until September 2023. The FCDO noted that UK businesses in the sector needed time to prepare for such a ban, and that this aligned with the EU. Why was it concluded that this sector needed time to prepare while others were judged not to need it? How will these sanctions be monitored and enforced, and what happens with contracts already agreed or in the pipeline? I also note that the regulations bring in scope providing financial services to source these materials or brokering them. Are law firms also included? What assessment has been made of the effect on global supply chains of, for example, the inclusion of fertilisers? Are the EU and US also involved in this? Given the effect on developing countries of lack of fertilisers, might this depress prices and increase supplies to them, or will it have a negative effect as the West seeks other sources of supply? Have we looked at the indirect impacts and how these might be mitigated?

I am concerned about the Minister’s second announcement on large bank balances held in the UK. I hear what he says, but this seems like a potential loophole. I look forward to hearing his reply, and meanwhile I welcome in general these sanctions and certainly their intent.

[Lord Collins of Highbury (Lab)]

My Lords, I know the Minister is fully aware of His Majesty’s Official Opposition’s position in fully supporting the Government in the action they are taking to back Ukraine in its defence against Russian aggression, including providing military, economic and diplomatic support. We fully recognise that this is a fight to maintain the international rules-based order, and such aggression cannot and should not be tolerated. As my noble friend Lord Coaker said yesterday, is not one of the greatest misjudgments that Putin made that Europe would not stand together shoulder to shoulder with Ukraine and would not support Ukraine against his illegal attack, and, even if we did, that support would be limited and short-term? It is therefore extremely welcome to see the solidarity across Europe that President Zelensky received, particularly this weekend in Italy and France. It was especially good to see the German Defence Minister commit to and promise an additional €2.7 million in military aid.

Turning to the regulations, I wish to raise the issue of £50,000 cap, which was a government commitment. I have just been looking at Hansard for yesterday’s debate in the Commons. My honourable friend Catherine West interjected to ask whether there would be an opportunity for the decision not to proceed with this to be properly debated. According to the Minister and the Chair, it was agreed that there would be an opportunity to debate that. I just want to place on record the Opposition’s view that there should be measures such as the cap. If there is a decision not to proceed, what alternative measures are we taking to restrict the flow of finance, particularly when it is so easy to circumvent the £50,000 cap with the use of family members and others? There may be good reasons for not proceeding, but there should be a full debate.

As the noble Baroness, Lady Northover, said, the regulations come into force on 21 April and on 30 September for the iron and steel bans. The Minister mentioned that 30 September was to coincide with the EU equivalent ban, but why is there that time lag? There have been plenty of occasions when we have moved faster on certain sanction measures. It is very important that we act in concert, but we have understood why other countries may move faster than us and so on. We need a better explanation of why all the measures cannot be introduced straightaway.

In his introduction, the Minister mentioned the nature of certain items in these regulations. He particularly identified items found on the battlefield in Ukraine, such as electronic equipment, vehicles, 3D-printing machinery and biotechnology. Given that the sanctions seem to cover mostly electronic items found on the battlefield, has the department or the appropriate authorities in it explored ways to restrict the use of relevant firmware in the area—for example, by blocking the digital export of the firmware necessary for running 3D-printing machines? It would be good to hear how we may be working with our allies to look at ways of dealing with that. Of course, many of the items listed are quite small and easily hidden. What sort of advice and support would be given to the appropriate officials to ensure that they can be properly identified to prevent them reaching Russia?

I turn to the 190 goods, including iron and steel products processed in third countries. I welcome the extremely helpful briefing that I received from the department. It states that they are largely in line with the action taken by our European and US partners. What does “largely” mean? What are the differences? Where have we not been able to replicate fully the measures of our allies, particularly all our NATO allies?

The provision of services was a key part of trade before the Russian invasion. The December 2022 regulations banned the export of advertising, architectural, auditing, engineering, IT consultancy and design services to Russia. That is quite a comprehensive list of banned services. What assessment has been made on the extent of that service ban and its impact? I understand from the briefing that the department may be looking at the provision of legal services and how they may be brought into the scope of those sanctions. Can the Minister give us an update on them?

The briefing also touches on the exceptions for goods that are essential for humanitarian assistance activity. I fully support the need for that, but how are we actively monitoring those exceptions, and how can we be confident that the goods are going for the purpose intended? Obviously, pharmaceuticals and pharma products are important for humanitarian purposes, but they can be used in other ways.

The G7 summit is coming up later this month, and the briefing covers how it will be an opportunity to collaborate with all our allies to increase economic pressure. Will the Minister tell us how we are working towards a much more comprehensive agenda at that meeting?

It is one thing having regulations and laws on sanctions, but another is how we ensure compliance. That is a major issue. I hope that the Minister can tell us how Whitehall departments are working together to ensure compliance. I was thinking about the iron and steel trade and the reasons for the delay in implementation. Has the department looked at how we can incentivise faster implementation of sanctions, not simply giving time for firms to adjust, but considering other options to ensure speedy implementation?

What steps are we taking to raise awareness of the sanctions that we are imposing, so that they become an effective deterrent to those who may be tempted to circumvent them? Whenever sanctions are introduced, people look at every possible way to avoid and circumvent them, particularly with flows going into other countries.

What capacity do we have across Whitehall departments to ensure compliance and to police these sanctions? It would be good to know whether there has been an increase in the relevant staff. There have been stories in the media recently about countries— I mention Cyprus in particular—that have brought in sanctions but then ignore violations for one reason or another; it could be a capacity issue. I hope the Minister can give us an update on those issues and on how we provide support to ensure that our allies fully implement these sanctions.

--- Later in debate ---

[Lord Collins of Highbury (Lab)]

Before the noble Lord sits down, I just want to be clear. In yesterday’s debate on the Commons, it appears that the Minister was suggesting that there would be an opportunity to debate and vote upon the decision not to proceed with the cap. There may be good reasons for that, but can the noble Lord clarify what that means?

[Lord Ahmad of Wimbledon (Con)]

I think I sought to clarify part of that. A vote would come on something that is there already: a statutory instrument was never introduced in that respect and of course the Government, when various announcements were made by the previous Prime Minister and Foreign Secretary, were alluding to a raft of different measures that we would look to evaluate. I know the noble Lord appreciates that, consistent with our approach, we would talk to industry and look to consult effectively to ensure that these are practical measures. As I said in my opening and concluding remarks, the view of the Government, after consulting across government and with industry, is that the most effective way is to target through our sanctions the specific individuals and organisations who directly support Mr Putin.

Just to be clear, although announcements were made on a range of measures, the key votes—I am thankful, again, that we have not had to take any votes on sanctions introduced—are on those measures that have been introduced through statutory instruments. I hope that clarifies the position.