Sanctions

Stephen Doughty Excerpts

Tuesday 1st March 2022 Commons Chamber

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

I thank Ministers and Foreign, Commonwealth and Development Office officials for the pre-briefings they provided on these measures. I understand that in response to our request for briefings for Members across the House—because the Minister will have seen the great deal of interest that there is in the detail—the FCDO will now be providing those on a daily basis. I hope that the Minister can confirm that.

Russia’s unjustifiable and unprovoked attack on Ukraine is a heinous crime of aggression, and we stand united in this House in our utter condemnation of President Putin’s invasion and in complete solidarity with the people of Ukraine, who are showing extraordinary courage, resilience and sacrifice in resisting this onslaught. The desire for tough action on these matters is robust and united across this House and across this kingdom. In that regard, I do not want to detain the House for too long, but we do have a number of questions to ask the Minister. We are pledged to work with the Government to work at speed to ensure that the House can pass the necessary legislative measures. I think we first got these just before midnight last night and we are obviously debating them now. We will work with the Government on that, but we do have questions to ask and it is important to go through the proper procedures.

We urge the Government to go even faster and further, not least as we see the scenes today with Russian forces encountering courageous Ukrainian defences but the fighting getting bloodier and increasingly indiscriminate. The horrific reports from Kharkiv overnight, the alleged use of cluster munitions and the deaths and injury of civilians are deeply, deeply shocking. I am sure that colleagues will join me in welcoming the decision by the International Criminal Court prosecutor to open urgent investigations into some of the matters we have seen that have shocked the world. Russia must comply with the laws of armed conflict—the very basic principles that attempt to ensure at least some dignity, proportionality and discrimination to protect civilians and others amid the horrors of war. Those responsible must be held to account.

As we debate these regulations in the Chamber today, let us not forget why we are doing so: the dark spectre of a miles-long column of Russian armour that approaches Kyiv, a city of more than 2.5 million people. In recent hours we have heard shocking warnings from the Russians to civilians to avoid certain areas of Kyiv. The risks are huge. We heard in the statement earlier of the hundreds of thousands of refugees who have already fled the country. We must continue to do everything we can to support the humanitarian effort to offer sanctuary in the UK and to assist the situation at Ukraine’s borders, including ensuring the full application of all refugee laws and ensuring that there is no discrimination when it comes to human beings seeking to flee to safety. As the humanitarian situation worsens, that is a stark reminder of the urgency of the need to do everything we can to step up the pressure on Putin to end this bloody campaign.

As the Minister pointed out, we have seen the effects that financial sanctions have already begun to have, with the rouble crashing by over 40%, the main borrowing rates up to 20%, and inflation skyrocketing. The Opposition recognise, as I am sure Members across the House do, the brave and difficult decisions that many of our allies and partners have taken to make these measures as effective as possible, including cutting Russia out from SWIFT, as we have long called for. I am acutely conscious that the sanctions will inevitably have difficult consequences for ordinary Russians, who did not choose this illegal war pursued by Putin.

In the past few days, we have seen brave acts of protest and criticism. It takes true courage to protest in Russia, as I am sure the Minister agrees. We pay tribute to all the Russians speaking up against the invasion. We must be clear that it is the Russian Government, not the Russian people, whose actions we condemn; it is Putin who is responsible for the economic consequences of these measures.

We will also see economic impacts here in the UK, as the explanatory memorandums to the regulations make clear, but that is no reason not to act robustly, broadly and swiftly. The unity of the UK and our allies is crucial in that endeavour. We welcome the efforts to co-ordinate with our EU, US and European allies and partners, both NATO and non-NATO, and with many countries around the world. We must build the widest possible coalition to oppose this war, but as many hon. Members have pointed out we cannot be the weak link in designation, implementation and enforcement.

The Opposition welcome the fact that the Government are bringing forward these measures. We will approach them in a constructive spirit, but I want to ask some detailed questions. First, as the Minister pointed out, certain measures relate to financial matters and others relate to dual-use materials, military supplies and other critical industry goods such as those for use in aerospace and communications. I hope that the Minister will provide more clarity on the question of immediacy. My hon. Friend the Member for Rhondda (Chris Bryant) made an incredibly important point about the 30 days; we need to be absolutely clear that there will not be an opportunity for people to move assets or finances out or seek to circumvent the measures in some way.

[Sammy Wilson (East Antrim) (DUP)]

The Government have to go through a legislative process and so on, but does the shadow Minister share my concerns, first, about warning certain individuals that they are on the target list, and secondly about the delay? I am not too sure how we are to make a distinction between British businesses that need to get their money out and those we are actually targeting. While we are getting a headline today, we are also giving a heads-up to the very people we are targeting.

[Stephen Doughty]

I am sure that the Minister will say that we are not naming individuals to give them advance warning, but the right hon. Member for East Antrim (Sammy Wilson) is absolutely right to bring up the fear of asset flight, as several hon. Members have done. We have already heard rumours today that a number of people are trying to dispose of assets and move money. I hope that the Government will name and shame the law firms and accountants who are facilitating that; they are the same enablers who have facilitated the illicit finance network and propped up the Putin regime for far too long in this country. Quite frankly, those law and accountancy firms and others involved should be ashamed of themselves.

[Dame Angela Eagle]

Does my hon. Friend share my worry and frustration that there has been such a big gap between the Government’s rhetoric about economic crime, sanctions and kleptocracy, and what they actually do? Before we can fully support the sanctions suggested, we need reassurance that there is now no gap and that enforcement will be effective. The sanctions have to be effective, or they might as well not exist.

[Stephen Doughty]

I completely agree about the need for effectiveness. A point has been made today about the slow pace of the designation of some individuals and entities. The Government have rightly talked about moving in lockstep with our allies, particularly in the EU, yet we still seem to be off pace in naming individuals—we seem to be moving more slowly. Some of the individuals that we have mentioned have already been sanctioned by the US and others for years or do not have significant assets in the UK. We need to ensure that our measures are meaningful, immediate, effective, deep and robust, and that individuals are not now sweeping their money and assets out of the UK.

[Layla Moran (Oxford West and Abingdon) (LD)]

What I found a bit disappointing about the Minister’s speech was its tone. We are all on the same side and trying to help, but there is still a question: why are we lagging behind? Is it that the legislation needs strengthening—I hope the Minister can see that across the House we are willing to work weekends to do that with the Government—or is it something else? He has not adequately explained why we still have not sanctioned individuals who are named by other jurisdictions.

[Stephen Doughty]

The hon. Lady makes an important point. The Minister can be assured of our co-operation in getting these measures through quickly. He has already heard some suggestions for ways in which we might name individuals more quickly; I hope we will hear back from him about them.

We believe that we need to go further to widen financial and banking sectoral measures beyond Sberbank. My second question is about whether the Minister can explain why measures on corresponding banks have not been applied to all Russian financial institutions today, rather than just to Sberbank. Indeed, we understand that the measures have been expanded to include sovereign debt. The Opposition have called for that to apply to UK subsidiaries of entities as well. Will the Minister confirm the position?

[Mr Davis]

I am going to pose a question for which I seek an actual answer—an unusual thing in this House. The Minister spoke about the problem of speed and co-ordination, and indeed the question of which banks were excluded from this process, which strikes me as a key issue.

These financial measures are like a hand grenade—a weapon that can kill or do damage to both sides: they will undoubtedly do damage to Germany, they will do some damage to us, and so on. We must seek financial weapons that do much more harm to the other side than to us because we may keep this up for years, and if we are to maintain support behind it we need to design it in that way. The Minister did not answer in those terms when I asked him the question, so I am interested to know whether the Opposition spokesman can.

[Stephen Doughty]

It will clearly be necessary for us to propose and potentially impose measures for quite some time—for a number of years, according to the explanatory notes—and we have agreed to work with the Government on that. Obviously, as I have said, we hope that they are acting robustly, deeply and broadly now. It is crucial to send a very strong signal, not least given what we have seen. I certainly hope that Russia turns around and ends this illegal invasion, but at the moment we have to send that very strong signal.

Thirdly, there are some exemptions in the legislation, and it is not clear on the surface why they apply. For example, there is an exemption for correspondent clearing services relating to aviation assets. Can the Minister explain the reasoning behind that? There are other exemptions that clearly make sense, relating to humanitarian affairs and extraordinary circumstances, and I can understand why they are there, but can the Minister provide a fuller explanation?

Fourthly, the Government have previously referred to an intention to limit the deposits that can be made by Russian nationals. Do they still intend to introduce such a measure, which is not part of the package that we are discussing today?

Fifthly, we think that there are additional things that the Government could do. For example, the US immediately introduced a ban on all imports from Donbas regions controlled by Russia. Have the Government considered that? We have also proposed a ban on the export of luxury goods, comparable with what has been in place against Syria. If that were undertaken with our partners and allies, it could have a major effect in putting

the squeeze on those around Putin who enjoy their luxury lifestyles.

[Bob Seely]

Does the hon. Gentleman accept, in the context of a wider set of points, that there is a significant argument for doing more in the legal field? Should we do more about protection against the abuse of libel law, abuse relating to the Data Protection Act, and the need for a foreign lobbying Act? The economic crime Bill and this statutory instrument are not the end of a process; they should be the beginning of a process to clean up our society. It is shocking that we have got ourselves into this mess.

[Stephen Doughty]

I completely agree with the hon. Gentleman, especially in connection with the measures relating to SLAPP suits that we debated recently in the House. This is a crucial point. There is a whole infrastructure here, a whole systemic problem. What saddens me is that many of these measures were set out so clearly by, for instance, the Foreign Affairs Committee and in the Russia report, but were not introduced. I hope that the Government will now bring forward measures in all these areas. The measures do not, of course, apply only to Russia; they apply to other regimes that are doing heinous things.

Sixthly, we support wider sectoral measures, to cover insurance and reinsurance, for example, preventing UK firms from underwriting transactions with Russian entities or activity in Russia. I understand that the sanctions we are discussing today will apply to insurance and reinsurance as it applies to the specific transactions covered by these sanctions, but will the Minister tell us whether the Government are considering a wider prohibition on the provision of insurance and reinsurance services more generally to Russia and those engaging with the regime, not least given the key role that the UK plays in the international insurance market?

Seventhly, we have heard the point rightly made by one of the Minister’s own colleagues, the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie), about Scottish limited partnerships. May we have some urgent answers on that?

My right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne) raised a point about the use of assets. My understanding is that these sanctions would, for example, prevent service companies from servicing a large mansion somewhere in London in respect of, say, cleaning or facilities. Of course, the individual would still be able to make use of the asset.

[Liam Byrne]

My hon. Friend is right. There is a secondary question that the Minister needs to clear up: if a Russian oligarch has a mortgage on a mansion, is the bank that holds the mortgage legally entitled to take debt repayments or not?

[Stephen Doughty]

My right hon. Friend makes a crucial point. My understanding, which the Minister can clarify if necessary, is that it does apply to financial transactions including mortgages and remortgaging, but we need to understand this because we need to truly freeze the use of these assets and not allow loopholes.

As always, I must ask how these measures will apply to the British overseas territories and Crown dependencies. Will they be effective immediately in those territories or will we, or they, have to pass additional measures? We do not want a lag effect of days in those jurisdictions. I also want to ask about resourcing. I pay tribute to the officials in the FCDO sanctions unit, who are working on these matters at speed, but can I get an assurance from the Minister that their resourcing is being rapidly scaled up so that we can move swiftly, robustly and in a legally sound way? What consideration is being given to alternative routes for naming some of the individuals?

These are highly complex sanctions measures, especially in relation to the dual use of goods, and a major Government effort will be vital to ensure that there is detailed understanding across the private sector so that we can support their implementation, not least given the severe penalties outlined in the instrument and our desire for the measures to be implemented immediately and effectively. Will the Office of Financial Sanctions Implementation issue urgent and clear new guidance on these measures? Similarly, will additional resources be provided to the export control joint unit to support compliance and enforcement? If we want the toughest measures, we will also need the toughest enforcement, but unfortunately many of the agencies have been lagging behind the US. They do excellent work, but they have not had the resources they need.

There are multiple reports today that troops from Belarus might have been entering Ukraine. They are unconfirmed at this stage, but we know that attacks have been conducted from the territory of Belarus. We have all previously called for wider sanctions against Belarus, and indeed the EU has laid out such sanctions. Will these measures be effective against Belarusian entities and individuals? As has been said, sanctions are important but they alone will not deal with the wider problems of illicit finance and the UK’s role as a hub for corrupt, Russia-linked money. This is a matter not just of individuals but of fixing a broken system in which poor governance, weak enforcement and a lack of transparency have allowed the UK to be a haven for ill-gotten gains. We have to take action across the board.

There is a range of additional measures, and the Minister has hinted that we might see measures relating to shipping. Again, we want to understand that these will apply globally, in the light of our overseas territories and Crown dependencies. Can he tell us when he expects additional SIs and designations to be laid? We want to work with him in co-operation, but we need to have that information in order to understand when these things are coming.

Finally, today is St David’s day, the national day of my home—Wales. I have previously spoken in this place of the strong historic ties between Ukraine and not only my home city of Cardiff but the whole of Wales. I am hugely proud of the demonstrations of support and solidarity that we have seen across Wales, including in Cardiff, as well as across the UK, and I am delighted to report that the Welsh First Minister has in the last hour announced direct support from Wales of £4 million for humanitarian and medical needs. Wales stands ready to welcome Ukrainians fleeing the conflict, just as we have done for Afghans and so many other people across the globe throughout history. I hope that a strong message goes out from this House and from across the United Kingdom that we will unite to impose the strongest measures and provide the strongest support we can to the Ukrainian people in these dark days.