Russia (Sanctions) (EU Exit) (Amendment) (No. 7) Regulations 2022 Russia (Sanctions) (EU Exit) (Amendment) (No. 8) Regulations 2022

Richard Graham Excerpts

Monday 25th April 2022 General Committees

[Stephen Doughty]

I wholeheartedly agree with the hon. Gentleman’s comments, and I will come to specific points about that matter in due course. The issue is not just resourcing in the FCDO, which is drafting these measures; crucially, it is about enforcement and about the investigation. That is a much wider question, as the hon. Gentleman says, but it does relate specifically to the measures that we are debating today if they are to have effect, particularly given that some of them are designed to target some of the richest oligarchs and those who are propping up the Putin regime.

As I said, I hope that the Minister can answer the question about proxies, but another loophole that the Opposition have repeatedly expressed concerns about relates to companies owned by sanctioned individuals. The Minister can correct me if I am wrong, but I understand that at present a company that is 49% owned by one sanctioned individual and 49% owned by another sanctioned individual would avoid sanctions, despite being almost entirely controlled by sanctioned individuals. That is not only completely illogical; it leaves us out of step with the US and the EU, which decide whether to sanction a company by assessing the aggregate ownership of companies by sanctioned individuals. I hope that the Minister can clarify that point, because it is crucial that we do not allow people to slip through the gaps in any way at all. As I said, I am happy to be corrected if that is a wrong interpretation, but it is certainly our understanding. If it is a loophole, I hope that the Minister will commit to closing it as urgently as possible.

I have previously raised issues relating to the overseas territories and Crown dependencies. I am pleased to see that many of them are implementing the measures, often immediately, but they all have different processes, so I hope that the Minister can clarify what is happening there.

To come to the point that was raised a few moments ago, I have asked the Minister before about the resourcing of the Office of Financial Sanctions Implementation. Written answers that we received from the Treasury revealed that, apparently, fewer than 40 full-time officials were working in OFSI last year. In comparison, the US has 259 full-time equivalent staff members at the US Office of Foreign Assets Control, which is the US equivalent. Obviously, I appreciate that the US is a larger economy and has substantially more citizens, but that does raise the question of whether we have enough people in OFSI and whether we are acting robustly enough. For example, in the US in 2022, Congress has supported funding levels of $5.5 million for the Treasury, State and Justice Departments just to implement the global Magnitsky sanctions programme and other related programmes. Therefore, I think that we need to start having some clarity from Ministers here about what resources are being put in.

We know that there have been cuts across Government. We know that there have been cuts in the FCDO and we know that, of course, there have been cuts to the aid budget, but we must not be under-resourcing at such a critical time. Of course, this relates not just to the current crisis that we are seeing in Ukraine and the sanctions that we are implementing on Russia; it applies to the implementation of many of the other sanctions regimes that we have debated regularly in Committees here. It is crucial, because when it comes to enforcement, OFSI has quite a low enforcement rate for breaches of sanctions and, when fines have been imposed, they have generally been low. I think that between 2018-19 and the present, OFSI has issued only seven monetary penalties to six entities. That strikes me as remarkably low, given the number of different sanctions regimes and measures that we are bringing forward. Therefore, I hope that the Minister can perhaps provide some correction; I hope that the number is far more if we look at the recent figures, but we do need to understand how these sanctions are having an impact, both financially and on individuals.

[Richard Graham (Gloucester) (Con)]

I am curious as to why the hon. Gentleman is making the comparison with the US, which is obviously not very appropriate in terms of size of nation, resources and so on. It would be more interesting if he had figures for comparison with other leading European nations. Then we could see whether the accusation that we are under-resourcing holds true. Some people in the FCDO would argue that we have been putting huge additional resource into the whole business of sanctions on Russia, and moving much faster than some of our European partners.

The hon. Gentleman said earlier that we seem to be constantly playing catch-up. There is a specific reason for that: part of these instruments is specifically about extending the definition of non-Government controlled areas, which of course moved from just being the Crimea to including areas of Donetsk and Luhansk. It is important to realise that in that situation we are playing catch-up with an ever-changing situation on the ground. Surely the hon. Gentleman would agree with that.

[Stephen Doughty]

The point that I would put back to the hon. Gentleman, of course, is that we were one of the ones warning that this was going to happen. We were the ones leading the world in terms of our intelligence, and arguing that others should take seriously the threat of a Russian invasion on this scale.

Therefore I do have to question why it took the FCDO so long to get the regime in place and to get the emergency measures that had to be brought in into the economic crime Act. I am glad that they were brought in, and we supported them, but why did it take so long to get that infrastructure in place when we had been arguing on these issues for many, many years? Committees of this House had argued that action needed to be taken against oligarchs, illicit assets and everything else—we had multiple reports from multiple Committees. I am glad we are getting closer to equality with our allies, and I hope that that continues and that we maintain that crucial unity across the board. At the same time, questions have to be asked about why we did not move quickly enough.

There is a crucial point about the confiscation and repurposing of sanctioned assets. The Minister will be aware that there have been requests from across the House for assets frozen under sanctions to be confiscated and repurposed to support the victims of this conflict. The Foreign Secretary said on 28 February that she would look into that, following a question from the Chair of the Foreign Affairs Committee, and others have made similar proposals. Under the current system, it is quite difficult to confiscate and repurpose assets frozen under sanctions. That means that billions of pounds of assets belonging to corrupt actors, human rights abusers and those facilitating them remain frozen and unable to be used, rather than being used to compensate victims or to support some of the measures we all want to see put in place for those suffering the brunt of this conflict. Could the Minister say a little about how we could use assets that have been confiscated?

The points made about the steel and iron industries are crucial. The Minister will know my interest in the steel industry—I declare an interest as a member of the all-party parliamentary on steel and metal related industries, and I have a steel plant on my own patch. I am sure the Minister will agree that we need to procure more steel and sovereign steel production capability here in the UK, and it was welcome to see the support for the UK steel charter in Parliament last week.

On shipping, will the Minister clarify whether the sanctions will forbid crewing companies working with Russian crews? Will they also forbid freight exchanges from working with Russian cargo and prohibit ship engine producers from supplying parts to Russian companies, which could in principle be used for warships? It looks like that is the case, from the detail of the regulations, but it would be helpful to have clarification on that. Crucially, are all state shipping companies now sanctioned, as well as all Russian flagged vessels, those owned by Russian individuals and those operating in Russian ports?

One of the Minister’s last points was about the importance of bringing onboard other allies and countries to support this global sanctions effort and response to Putin’s illegal and murderous war in Ukraine. Can the Minister tell us whether the Prime Minister specifically raised the question of joining the sanctions regime with Modi on his visit to India? As I understand it, India and a number of other countries with whom we have strong trading and historical relationships are refusing to take part in the global sanctions regime.

It is crucial that we support those countries that have been harder hit than us. There is a real risk that Putin will seek to undermine some of those countries, because of the impact on their economy. What are we doing for some of our European allies and partners who will be hard hit? I am thinking not just of the Germanys of this world, which have had extensive discussion about their energy issues, but about some of the smaller countries, particularly in the Balkans, south-east Europe and elsewhere, who are in Putin’s crosshairs, and to whom he has issued threats. Can the Minister explain what we are doing to support them? I would also like an answer to my question about whether the issue was raised during the Prime Minister’s visit to India.

We support the regulations. We want to act in the toughest way against Putin’s regime. I hope that the Minister can answer some of my questions about the gaps and potential loopholes and that he can reassure me that they are either not there or are being dealt with.