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

Debate between Richard Graham and Stephen Doughty

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.

Commonwealth Development Corporation Bill (First sitting)

Debate between Richard Graham and Stephen Doughty

Committee Debate: 1st sitting: House of Commons
Tuesday 6th December 2016 Public Bill Committees

[Richard Graham]

Q Sixty-three countries at the moment. What about Palestine, for example?

Rory Stewart: This very interesting discussion has gone back and forth. As you are aware, the International Development Committee asked CDC to look strongly at investment to deal with the crisis around Syria and at what we can do to help bring stability to the middle east, for example. At the same time, other members of the IDC tabled amendments to the Bill that would not only take us out of middle-income countries in the middle east but would restrict investment to the countries with which DFID has bilateral programmes. My gut instinct is that that is an issue not for primary legislation but for Departments to address through their strategy in response to a changing world.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

Q I apologise for my late arrival. I was hosting a general from the British Army. Minister, I want to ask a very specific question about where these figures come from. I want to probe you further on them. You answered a written question from me yesterday—for Hansard, it is 55702—and said that the only capital requests that you received from CDC were for the £735 million. You said that you have not had any others. Can you be clear about whether CDC has requested capital increases to you beyond the £735 million?

Rory Stewart: The process is threefold. We will seek permission from Parliament to be able to recapitalise CDC. We want to know whether you are prepared to allow us to give any more money to CDC—£1, £10, £1 billion or £6 billion. We are looking for the option to give it more money. Then we will produce the five-year forward strategy for CDC, which will come together at the end of the year. Then we will produce a business case in the summer to lay out what we believe, in consultation with CDC, its likely requirements are in order to prepare our promissory notes. The final stage is that CDC will make a request on the basis of the projects it has. That is exactly what we have done with the £735 million.

We have discussed the ceiling that we are proposing to you in detail with Graham and Diana. At this early stage, they believe it is a reasonable maximum limit for the amount that they could conceivably need between 2016 and 2021.

Commonwealth Development Corporation Bill (Second sitting)

Debate between Richard Graham and Stephen Doughty

Committee Debate: 2nd sitting: House of Commons
Tuesday 6th December 2016 Public Bill Committees

[Stephen Doughty]

Absolutely, and that gets to the nub of the issue. The Minister has been a veteran of many debates in this House and in Committee, so he knows full well the format in which debate takes place on amendments. Amendments are tabled to discuss the fundamental issues and the matters around them. Therefore, given the faux outrage at me for suggesting £3 billion versus £6 billion, he needs to explain—he has not done yet—his rationale for £6 billion and £12 billion, which I have yet to hear.

[Richard Graham (Gloucester) (Con)]

I am curious, partly because the hon. Gentleman’s amendment proposes an absolute sum of money, but more because everything he has said so far suggests that he is almost as close to the lady from War on Want in disapproving strongly about the activities of the CDC and the ability of Government to allow it to access more capital if it makes the right case for doing so. Therefore, I suggest the emphasis is slightly on him to try to demonstrate to members of the Committee why he has decided that £3 billion is the appropriate figure. I imagine that he was influenced this morning by hearing Sir Paul say that we need to get on with investing more in business in order to provide the jobs that Africa in particular so badly needs. I leave it to him to point out that that is what he thinks.

[Stephen Doughty]

The hon. Gentleman clearly did not listen to what I said either on Second Reading or in Committee this morning. He knows full well that I do not support the views of War on Want on the role of business and private capital in supporting developments, jobs and job creation. I made it clear that I did not support that part of its views. What I did support was the suggestion that the CDC is being given a different set of rules to play by from other development finance institutions and indeed other routes on which we can put our valuable aid money, for which we should demand the highest levels of scrutiny, transparency and effectiveness, and coherence with the rest of our programme.

I do not want to stray too far from the terms of the amendment, but in the new clauses we will discuss some of those issues of coherence. Without additional safeguards and caveats on where that money is spent, the transparency arrangements, the business case that should be presented and so on, whatever number we put in, whether it is £1 million less that the hon. Member for Rochford and Southend East suggests, the £3 billion less that I suggest or indeed any other figure, or a proportion as suggested by SNP Members, we could see multiple distortive effects. For example, the value of investments currently going into middle-income countries is still significantly higher than into lower-income countries. The value of investments going into Africa has gone down and the value of investments going into south Asia—mostly to India, a country to which we were supposed to end giving aid—has in fact gone up. The reality is, if we boost the CDC’s budget further without any change in that overall strategy, we will see a multiplication of that effect.

--- Later in debate ---

[Stephen Doughty]

The new clauses are all probing and designed to get further into this issue of the CDC’s disjoint from DFID’s overall focus, whether that is the disjoint from the Department’s bilateral programme, from its focus on individual countries, or from its focus on income and countries considered to be least developed or low income. Again, I mention the Minister’s interesting comments about India; I would be interested to know if he would consider looking at the broader issue.

The three new clauses look separately at the respective issues. The first one would amend the Bill to require that the CDC’s new money was only invested in countries where DFID has a bilateral programme. New clause 4 would set out a very specific list as to where CDC was able to invest. I know that it already has a list, but I think that it should be shorter and I have suggested some countries that could be removed from it. I am sure we can have a debate about that.

New clause 5 suggests that any new disbursements should be focused on those countries defined as least developed or low income, rather than on middle-income countries where the significant proportion of the CDC spending does appear to be going.

The disjoint is very clear on the bilateral front. DFID currently invests in 35 countries. We are not sure where that is going because we do not have any detail on the bilateral aid review—perhaps the Minister could enlighten us as to whether that list is likely to increase, decrease or change in some way—but the CDC is in 63 countries. When we look at where other aid is being spent through other Government Departments, that number gets even higher. This is a worrying trend.

Library briefings for this Bill go into quite a bit of detail, particularly with regard to new clause 5, on relative investment by income group between 2010 and 2013. I am referring to page 5 of the Commons briefing for those who have it with them. It reflects that there has been an improvement in the situation, and it says that there is

“an increased emphasis on the poorest countries brought about by the new investment policy between 2010 and 2013. The share of new investments in the very poorest least developed countries (LDCs) increased from 4% to 12%, and from less than 1% to 4% in other low income countries (LICs). The share decreased in both lower middle income (LMICs) and upper middle income countries (UMICs).”

I did try to get the data on the two most recent years but I understand that the OECD has not given its full analysis of which countries fall into those categories and, conscious of some of the points made earlier, that information would be very helpful. I hope for, and would expect that there has been, a further trend in the direction highlighted. Again, it would be helpful for the Minister and the Department’s statisticians to set this out for us. However, there is still a huge distortive effect. The share of new investments even just up to 12% in the least developed countries—12% of the CDC’s investments by income group—is not a lot. I am not saying that investments in the middle-income countries are not going to the poorest people, because in some of those cases they clearly are, but when we delve into the detail, as we have done in the case of India, the picture is not clear and the majority of the investments, as of today, still go to the richer states rather than the poorest.

South Africa is another concerning example. The situation with South Africa and whether the CDC is allowed to invest is a complex one, but I asked the Minister in a written question whether or not there was an analysis of investment by state and I was told that the CDC does not assess its South African investments by state. We are not even able to understand whether the CDC’s investments are going into poorer or richer parts of South Africa. We get an answer by portfolios and by sectors, but that is concerning to me.

[Richard Graham]

It looks as if new clauses 3, 4 and 5 offer three different options on the way in which the CDC could spend money geographically. They do so first by limiting its list of eligible countries to those where bilateral aid is already happening; secondly, by limiting that list to a new schedule to the Bill in new clause 4—schedule 2A—that the hon. Gentleman has tabled, which looks to be of about 43 countries and gives no particular explanation as to how those were chosen or why they differ; and thirdly new clause 5 uses other multilateral definitions. Which option is the hon. Gentleman advocating? All three contradict each other to some extent.

[Stephen Doughty]

Indeed, but—the hon. Gentleman will be familiar with the flow of debate in Committee—the tabling of probing amendments to discuss and debate different suggestions is very much the way in which we scrutinise, suggest alternatives and allow debate in the House. Personally, I think the latter option in new clause 5—some sort of measure based around ensuring that the CDC more closely focuses on the LDCs and LICs—would allow the CDC to have a little bit more flexibility than by restricting it to the bilateral programme.

That option would recognise some legacy investments—for example, those that have been mentioned in which money being spent in one country might actually benefit another. Perhaps some of the partnerships between India and Africa, which are very interesting, are such examples. I do not want to completely rule those out; there are some legitimate reasons for them. I want to see a much tighter focus on the poorest countries than appears to be the case at the moment. It is difficult to see where things are without the data for the last year, but we can see where they were a couple of years ago.

If we look at the trend in the last few years, in terms of new investments by region, another briefing helpfully provided by the House of Commons Library shows that the share of the total percentage of investments going to Africa has actually declined since 2012, while the share going to south Asia—which I would imagine, were we to delve into the detail, is going to India—has gone up. That concerns me, not least given what Professor Collier said, and what other Members who I know support the CDC getting more money have said. Those are the facts and statistics provided by the neutral House of Commons Library; they are there. It will be much more helpful to see where those trends are going and where the focus is, and then to be assured that Ministers were going to bear down in terms of setting caveats for the CDC—whether those are over specific countries where DFID has synergies with its bilateral programme, or, indeed, an overall focus on poverty eradication.

I am intrigued to hear that the CDC plans to expand its network of offices. At a time when we are talking about one UN and bringing UN agencies together in one office, and about an enhanced in-country co-operation between DFID and the Foreign Office, it seems slightly odd that the CDC could open new offices in locations where we do not maintain a bilateral programme and where there are not necessarily those synergies. I think that Ministers ought to look much more carefully at that, to ensure that there is coherence between what the CDC is doing and what the rest of Government are doing.

I will leave to one side comments on the detail of some of the sectoral arrangements in some of the locations. I conclude by appealing to the Minister to give us a bit more detail and a bit more assurance on what sort of caveats and guidance will be given—not micromanagement but clear guidance about what kind of shift Ministers expect in return for a new investment, particularly if it is a large one. For example, would they expect the CDC to stop investing completely in middle-income countries over the next three or four years? That seems to be incongruous with what the Department itself has said; the Government have made a big deal of ending aid to India, China, South Africa and other locations, yet we see aid to those locations increasing through this CDC route. That seems to be a difficult argument to make.

We all struggle with making the argument for international development to our constituents. At the moment, there is a good degree of cross-party consensus in the House about the importance of international development and aid, but I have difficulty explaining why we should be supporting some of the poorest people in the world to my constituents; I have real difficulty explaining why aid money should be used to fund a private hospital in India. We all need to take care to ensure that we are robustly focusing our aid, our effort and our limited taxpayer funding on the poorest and on the countries that align most closely with our existing development programmes, where we have an added advantage.