Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2023

Lord Collins of Highbury Excerpts

Tuesday 23rd January 2024 Grand Committee

[Lord Purvis of Tweed (LD)]

My Lords, I thank the Minister for outlining the instruments. My party supports them. I am grateful to the Minister for outlining them in clear terms. I understand that it is a long-held practice that, if Ministers write to inform about new things, they write to both Front Benches. I do not think I received the letter to the noble Lord, Lord Collins, that the Minister referred to.

I have just two points to raise. One is to welcome the diamonds element that was announced at the G7. I know there have been questions about how long it took, but nevertheless we are grateful that it is there. I have often raised Russia benefiting from the continuing gold trade, which is illegitimate and channelled through the Gulf. I would be grateful if this could be raised. On Friday, we will have a full-day debate on Ukraine, in which we will raise wider issues.

I have a question about the figures for the impact of the sanctions so far, to which the Minister referred. I read his colleague Leo Docherty MP citing the same statistics about UK imports from Russia falling by 94% but our exports to Russia falling by 74%. I have not been able to find a breakdown of the sectors, and I would be grateful if the Minister could provide one in writing because I am curious about why there is a differential, and why sanctions have been more impactful for the UK importing goods from Russia than for exports, which is what we should be trying to target. As the Government say, if sanctions are working, we need to be able see that.

My second question is about the ability to effectively buy frozen assets, which the Minister raised. This will require further consideration and debate because there could well be some complexities with regard to it, especially in the context of the decision made by the EU yesterday to approve a windfall tax on frozen assets. I believe the UK should be moving ahead on this. I would be grateful if the Minister could outline His Majesty’s Government’s policy on this because it could be significant. The Minister referred to sums of £20 billion. As I understand it, the EU has estimated that it would be able to utilise €2.3 billion in interest and taxes on the assets alone. Given that €125 billion-worth went through Euroclear Belgium and €300 million is immobilised across Europe as a whole, the decision to have a windfall tax on that means it could be used to benefit Ukraine. I hope that allowing entities to buy frozen assets would not mean that, if the UK were to decide to recover the interest on the assets by having a windfall tax on them, that would effectively mean that those assets would be frozen not just from the Russians whom we are sanctioning but effectively from the Ukrainian people, who should be able to benefit from taking interest or a windfall tax or recovering them. I hope the Minister can provide clarity on those points.

[Lord Collins of Highbury (Lab)]

My Lords, I very much welcome these additional amendments on further sanctions. I certainly welcome the fact that we are focusing on trying to weaken the war machine that this illegal invasion of Ukraine is supporting. I certainty welcome Regulation 5, on luxury goods, too.

In the previous debate, the Minister mentioned the Office of Trade Sanctions Implementation, which aims to crack down on sanctions evasion. I very much welcome that because, as I mentioned, we have seen before evidence of companies circumventing the sanctions. He also mentioned the toolkit, which will, I hope, enable us to avoid repeating some mistakes made in the past. It would be good to better engage on how we will support this new office.

One thing that the noble Lord, Lord Purvis, has raised previously is this: how do we ensure that Britain’s offshore financial centres are properly able to implement the sanctions? Of course, we have been extremely concerned about transparency and the need to introduce public beneficial ownership registers speedily. Without them, we will not be able to see exactly what UK firms or individuals are up to. With opaque entities, sanctions will sometimes be evaded, though perhaps not deliberately. We need to address this properly.

The Government recently updated Parliament with another timeline for the expected delivery of public registers. However, I note that the British Virgin Islands will not have its appropriate frameworks in place as late as 2025. I hope that the Minister will express the same opinion as me: that this is too late and we really need to speed things up.

The noble Lord, Lord Purvis—I nearly called him Lord Putin then—mentioned frozen assets. We will certainly address them in our debate on Friday. Since we also raised this issue in Oral Questions, I note that the Foreign Secretary—the noble Lord, Lord Cameron—mentioned his belief at Davos that frozen assets are an issue that need international co-operation. Can the Minister give us a bit more detail on that?

The noble Lord, Lord Purvis, also referred to the stats that were mentioned by the Minister. I have here a letter dated 19 January from Anne-Marie Trevelyan. It repeats those figures but she says that we have

“sanctioned more than £20 billion of UK-Russia goods trade, contributing to a 99% drop in UK goods imports from Russia and a 82% drop in UK goods exports to Russia”.

I do not know why there is a difference there, especially as it is so recently put. I welcome that letter because it gives a lot of detailed information. One thing that Minister Trevelyan says, in referring to metals, diamonds, oil and stuff, is what we have addressed before: the leakage that seems to happen, particularly with luxury goods. Her letter says:

“The UK, EU and US have sent joint delegations to the UAE, Kazakhstan … Uzbekistan, Georgia, and Armenia, and we have delivered senior bilateral engagement with Turkey and Serbia, yielding positive results”.


I am not sure from the letter whether we have received positive results from all of these visits.

I was in Tbilisi late last year, and I noted that there was a big increase in the import of luxury cars into Georgia. It was also reported that, since the war, trade going from Georgia into Russia has increased, despite its public position. I welcome the fact that we have sent delegations and that the Minister is saying that there are positive results, but can he tell us exactly what they are? Even from my observations, it certainly looks as though there is an ability to evade sanctions.

With those brief comments, I reiterate the Opposition’s position: we are absolutely at one with the Government in supporting Ukraine and ensuring effective sanctions against Russia’s illegal invasion. We welcome these amendments to the sanctions regulations.

[Lord Benyon (Con)]

I again thank both noble Lords for their interest and support for these measures. I will seek to answer all the questions raised. I will ensure that future letters go to both Front Benches; I apologise to the noble Lord for missing him out in that exchange.

Gold is a sanctionable trade. Sometimes it is harder to detect, but it is certainly an element of trade that is within the sanctions regime.

I cannot give the noble Lord a breakdown of the sectors that create the 74%. I do not know why there is a discrepancy with the letter he received from my colleague Anne-Marie Trevelyan, but I will look into it. My understanding is that there has been a 96% reduction in trade from Russia and a 74% reduction in trade in the other direction. That will have caused hardship to some legitimate businesses, and we respect that, but this is an international incident which requires the strongest possible response, and our sanctions regime has had to take this decision.

I will write to both noble Lords about the buying of frozen assets and what impact that could have if those assets were then released, say, to Ukraine, to help pay for the war. We want to make sure that we are not diminishing the amount that that country should get to pay for the damage that has been done to it.

The G7 has repeatedly underscored that Russia’s obligations under international law are clear: it must pay for the damage it has caused to Ukraine. How we ensure that Russia does so is the subject of active and urgent discussions with G7 partners. Leaders have tasked the relevant G7 Ministers to report back on progress by the two-year mark of Russia’s invasion at the end of February. The UK remains fully committed to working with allies to pursue all lawful routes through which Russian assets can be used to support Ukraine.

While these G7 discussions continue, we have taken a number of steps domestically. We were the first to introduce legislation explicitly enabling us to keep sanctions in place until Russia pays for the damage it has caused; we have announced a route by which sanctioned individuals who want to do the right thing can donate frozen funds for Ukraine’s reconstruction; we introduced new powers to compel sanctioned individuals and entities to disclose assets they hold in the UK; and we are stepping up efforts to use funds from the sale of Chelsea Football Club to support humanitarian causes in Ukraine.

The noble Lord referred to the EU’s proposal to use the profits being incurred by funds trapped in Euroclear to support Ukraine. We are looking closely at that, but this situation is unique to the EU’s institutions. We and other G7 partners fully support the EU’s efforts but we do not believe that we can replicate them within our system. However, we are looking at any opportunities to increase the pressure. As I say, the EU’s proposal is unique to its institutions and we want to ensure that we use our frozen assets regime as effectively as possible.

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In terms of other countries’ trade with Russia—not just its neighbours—we monitor that and use our status in various diplomatic organisations, not least the UN, to ensure that we are putting pressure, with our allies, on other countries not to liberalise their trade with that country. In doing so, we show our support for the Russian people but our condemnation of the Russian regime, which is stealing money from its people and putting them in danger, not least on the front line in Ukraine and through its horrendous human rights abuses.

[Lord Collins of Highbury (Lab)]

Can I just interrupt the Minister on this point? It is something that I picked up from Anne-Marie Trevelyan’s letter of 19 January, where she talks about these joint delegations “yielding positive results”. I agree with the Minister that this is not about attacking the Russian people but is about luxury goods, which are certainly leaking in. I wondered what the Minister meant in her letter about yielding positive results. Do we have figures on that? Has there been an impact on the trade, which seems to be leaking?

[Lord Benyon (Con)]

I am sure that we do have figures, although I do not have them here. I will write to the noble Lord setting out what successes we are having in those negotiations and bilateral discussions.

These measures are the latest addition to our package of sanctions, which is having a damaging effect on Putin’s war machine and regime. The UK Government are committed to using sanctions to keep up the pressure until Putin ends his brutal and senseless war. We in this Committee stand resolute with the people of Ukraine and will continue to support them until they prevail.