Russian Assets: Seizure

Stephen Doughty Excerpts

Tuesday 14th March 2023 Commons Chamber

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

I thank the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith) for his role in securing the debate, and I thank Members on both sides of the House for their expert and powerful contributions. I refer not least to the expertise and campaigning of Members on our own side, including my hon. Friend the Member for Rhondda (Sir Chris Bryant)—whose Bill I welcome—my right hon. Friends the Members for Birmingham, Hodge Hill (Liam Byrne) and for Barking (Dame Margaret Hodge), and my hon. Friend the Member for St Helens South and Whiston (Ms Rimmer).

Let me also welcome our friends from the Rada of Ukraine. We are delighted that they are here with us today, and I hope they have observed that while there is much political division across the House on many other issues, one issue on which the House and indeed the country are absolutely united is the need for us to stand four-square behind Ukraine and ensure that Putin loses this war. Indeed, there has been a great deal of unity on the matters discussed today. I, like others, saw with my own eyes the damage to infrastructure outside Kyiv last September—here I draw attention to my declaration in the Register of Members’ Financial Interests. I saw the bridges that had been destroyed, and the devastation of residential buildings and key economic infrastructure. It was absolutely shocking, and it is clear that a huge amount needs to be done.

We in the Opposition have been consistent in our support for the Government in relation to expansion of the UK’s sanctions regime, and we have worked constructively with the Government and with Committees to ensure that it is as strong as possible. That said, we have serious concerns about the pace at which the Government continue to act, the glaring gaps in designations and enforcement, and the apparent reluctance on repurposing frozen Russian state assets. We have heard very clearly about the huge economic needs. The Kyiv School of Economics, working in conjunction with the National Bank of Ukraine, estimates that as of December the damage to residential and non-residential infrastructure amounted to $137.8 billion, while the vice-president of the World Bank suggested that the total reconstruction cost would be between $525 billion and $630 billion. In this year alone, Ukraine’s national budget has a $38 billion gap.

Moreover, before reconstruction can begin it will be necessary to clear the huge number of mines and unexploded ordnance that have been scattered across much of the country, including agricultural land. The other day I spoke to a representative of the HALO Trust, who told me that it would take more than a month for every day of fighting in Ukraine to clear the ground of unexploded ordnance and munitions. That means that if the war stopped today, it would take more than 30 years and billions of dollars to make many areas safe for habitation and economic activity to begin again.

We welcome what the Government have said about the reconstruction conference, and we will work across the House to ensure that it is a success. We also fully support the establishment of a legal process to provide for the seizure of Russian state assets and their repurposing to support the recovery and long-term reconstruction of Ukraine. As we have heard, at least £26 billion worth of Russian bank reserves are currently frozen In the UK. Imagine the good that that money could do if it were reappropriated for reconstruction.

We—indeed, many Members on both sides of the House —have been pressing the Government on this matter for the last year. I have been through a list of Government responses. In July last year, they told us that they were

“considering all options on assets that have been seized and whether they can contribute towards the reconstruction of Ukraine.”

In October, they told us that they were

“considering all options on the seizure of Russian-linked assets”.

In December, they told us that they were

“looking at legally robust mechanisms to seize assets to fund reconstruction.”

In February they signed the UK-Ukraine declaration of unity, which included the phrase

“We will pursue all lawful routes to ensure that Russian assets are made available in support of Ukraine’s reconstruction, in line with international law.”

We heard today in oral questions that the House should be assured that the Government were taking this seriously. I very much like the Minister of State, Foreign, Commonwealth and Development Office, the right hon. Member for Berwick-upon-Tweed (Anne-Marie Trevelyan), but the fact is that there has been no commensurate plan, no announcement and no clear action taken to move this forward over the last year. I hope that she can give us some reassurance today that there will be movement on this issue. She has heard the views of the House. As we have heard, the EU, the USA, Canada and other states are all moving in the right direction, so why aren’t we?

We have heard many different suggestions today, but I was confused to hear the Foreign Secretary say that there was no precedent for seizing assets. Of course, there is the precedent of the first Gulf war in Iraq, as the hon. Member for Isle of Wight (Bob Seely) said earlier. The UN Compensation Commission was established and took in $52.4 billion-worth of Iraqi oil revenues, after 1.5 million claims from Kuwait, to pay for reconstruction and reparations in relation to Kuwait. There is much legal advice out there about the potential to have temporary counter-measures, which would perhaps deal with some of the legal objections. There is a lot of scholarly thought out there about that. There is also the question of whether we could temporarily manage assets to provide resources for reconstruction. We also support the establishment of a special tribunal on the crime of aggression, and that could lead to further institutions and processes to allow for the seizure and repurposing of assets.

The UN General Assembly has already voted on this, adopting a resolution during the emergency special session on Ukraine in November 2022 that called for Russia to pay reparations for its action against Ukraine. We have heard what many countries are doing, including the United States. The US Administration presented six proposals in April last year that would allow for

“the forfeiture of property linked to Russian kleptocracy, allow the government to use the proceeds to support Ukraine, and further strengthen related law enforcement tools”.

We have heard about what the European Union is doing, with the directive on asset recovery and confiscation and the suggestion to add the violation of EU sanctions to the list of EU-wide crimes. We have heard about the debate going on in the European Parliament today. We have also heard much about Canada, whose Budget Implementation Act—Bill C-19—contained numerous provisions. Part 5 of that Act made amendments to the Special Economic Measures Act, the Justice for Victims of Corrupt Foreign Officials Act—the Magnitsky law there—and the Seized Property Management Act. So the United States, the European Union, Canada and others are moving forward, yet this Government have yet to set out a clear plan here.

It has also been pointed out today that our regime is failing and fraying in other ways. I have mentioned the UK-Ukraine declaration of unity, which states:

“We will also ensure, consistent with our legal systems, that Russia has no access to the assets we have frozen or immobilised until it ends, once and for all, its violation of Ukraine’s sovereignty and territorial integrity”.

But, given the very real concerns about the granting of licences that my right hon. Friend the Member for Birmingham, Hodge Hill has raised on a number of occasions, I want to ask the Minister whether that is still the case. If we are issuing general licences, with minimal ministerial oversight, that can allow assets to be quietly siphoned off with virtually no transparency on why they are being granted, is that consistent with the statement that the UK Government signed up to?

I have asked a series of questions on these issues as well, but scant information has been provided in response. What did become clear was that the FCDO appears to be playing no role in this. I shall quote the answer to one of the questions I had an answer to. It stated:

“While the FCDO works closely with other departments across government on sanctions, under sanctions regulations, the FCDO has no formal role in the issue of licences by the UK Government for (A) Russia and (B) Belarus. The FCDO does not maintain a central record of contacts from other departments on those issues.”

That is quite extraordinary. This is a serious issue that the Government need to look at urgently. Where is the oversight? Where is the enforcement? We would introduce proper ministerial oversight of issuing these licences and a joined-up approach across Government to ensure that every Department was working in lockstep on these issues to prevent those who seek to skirt our sanctions regime from doing so.

The question of enforcement has been raised a number of times. Across the UK’s full sanctions regime, which covers thousands of individuals and relates to countries including Iran, Belarus and Syria, only eight fines have been issued in the last four years, according to the publicly available figures from the Office of Financial Sanctions Implementation. Despite the fact that 1,471 Russian individuals and 169 entities are subject to UK sanctions under the Russia regime, no monetary penalties have been issued against any individual or company for sanctions breaches under that regime since the start of the war in Ukraine. Indeed, since 24 February 2022, only two monetary penalties have been issued for breaches, neither of which was under the Russia regime.

We must contrast that with the United States, which has issued 17 penalties since the start of the war, with a value exceeding $43 million. Four of those penalties were specifically linked to the regime relating to Ukraine, with a value of over $25 million. As my hon. Friend the Member for Rhondda said, people will clearly be abusing the regimes. How is it that the United States is finding people and we are not?

There are clearly areas on which we agree with the Government—we all want to see the most robust regime, and we stand united with them in support of Ukraine—but we must seize, not just freeze, these assets, we must close the loopholes in our regime, and we must ensure the tightest enforcement against all those who would seek to aid and abet Putin’s illegal and barbarous war in Ukraine.

--- Later in debate ---

[Anne-Marie Trevelyan]

I thank my hon. Friend for setting out one of the important issues that we are making sure we work on as effectively as possible. We are working very closely with our allies on the handling of seized Russian assets, and we will continue to do so. Let us be clear: our international partners face the same challenge. No country has yet found a legally tested solution. The right hon. Member for Barking (Dame Margaret Hodge) highlighted that Canada is testing the first seizure proposals and we are watching closely. I reassure the House that as progress is made by individual international partners, we will be right alongside them in considering how the UK can find solutions here too. Of course, as has been set out by colleagues, many proposals need UN leadership, and we will keep on driving that coalition.

In the meantime, we have made it clear that, consistent with our legal systems, Russia will have no access to the assets we have frozen or immobilised until it ends, once and for all, its violation of Ukraine’s sovereignty and territorial integrity. Russia will not get a single euro, dollar or pound back until that is realised.

Colleagues have raised questions about the Economic Crime and Corporate Transparency Bill. It will sit alongside the National Security Bill, the Online Safety Bill and the forthcoming economic crime and fraud strategy. It will bear down on criminals who abuse our open economy by reforming Companies House to prevent abuses of limited partnerships; there will also be reforms to target more effectively information sharing to tackle money laundering. The right hon. Member for Barking is right about the effectiveness of section 11 of the Sanctions and Anti-Money Laundering Act 2018, and it is used regularly.

I know that right hon. and hon. Members will be disappointed that I cannot speak more fully about sanctions enforcement and OFSI, as these are matters for His Majesty’s Treasury, but I know they will continue to raise their concerns directly and I have heard them today.

[Stephen Doughty]

I have to press the Minister on this point. Will she and the Treasury together publish a list of the people who have been granted licences and exemptions under the sanctions regime, how many enforcement actions have been taken, and what those actions have delivered in terms of monetary value?

[Anne-Marie Trevelyan]

I will take note of that request and make sure that Treasury officials get back to the hon. Gentleman.

I draw the House’s attention to the economic deterrence initiative, which was set out yesterday in the integrated review refresh. Funded with £50 million over two years, it will improve our sanctions implementation and enforcement. That will ensure that we can maximise the impact of all our sanctions, including by cracking down on sanctions evasion.

My right hon. Friend the Member for Maldon (Sir John Whittingdale) highlighted the oil price cap, which was brought in at the start of the year at $60. We know it is already having an effect, but the Price Cap Coalition is committed to reviewing shortly whether it is both diminishing Russian revenues and supporting energy market stability as effectively as it can.

The package of sanctions we have co-ordinated with our allies has inflicted a severe cost on Putin for his aggressive ambition and serves as a warning to all would-be aggressors. During President Zelensky’s recent visit to the UK, he and the Prime Minister made it clear that Ukraine and the UK remain the closest of friends. They committed to uphold Ukraine’s sovereignty and territorial integrity, to defeat Russia’s illegal and unprovoked invasion, and to pursue all lawful routes to ensure that Russian assets are made available to support Ukraine’s reconstruction, and that is what we will do.