Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2022

Motion to Approve

Moved by

That the Regulations laid before the House on 28 February be approved.

My Lords, these two statutory instruments were laid before the House on Monday 28 February 2022 under the powers provided by the Sanctions and Anti-Money Laundering Act 2018, also known as the sanctions Act, and came into effect on 1 March.

We have announced the largest and most severe package of economic sanctions ever in response to Putin’s premeditated and barbaric invasion. Working with our allies, we will continue to ratchet up the pressure. We have already imposed sanctions on President Putin, Foreign Minister Lavrov, five Russian banks, 120 businesses and a long list of oligarchs. Taken together, they target assets worth hundreds of billions of pounds. Importantly, we have also worked with our allies on this issue, agreeing to remove selected Russian banks from SWIFT and to target the Russian central bank, but we will go further.

We continue to stand with the Ukrainian people in their heroic efforts to face up to unbridled aggression. As I have said on a number of occasions, and as has been said by my right honourable friend the Foreign Secretary, nothing is off the table.

To update noble Lords on where we have got to on sanctions, overnight on 28 February we laid two new pieces of legislation on financial and trade measures. The first included a ban on Russian sovereign debt, a prohibition to limit access to sterling and a ban on any Russian company issuing securities or raising finance in the UK. These significantly strengthen our arsenal of sanctions against Russia. This is alongside increased trade measures, including a prohibition on sensitive dual-use items that could be used by the military and banning a further range of critical-industry goods, from high-tech to aircraft.

Sanctions announced by the United Kingdom and our allies are already having an important impact. Central bank interest rates have more than doubled, international businesses are quickly divesting, and the rouble is now trading at roughly a quarter of what it was when Mr Putin took power. That will impact the institutions that prop up Mr Putin and his cronies. We will continue to work with our allies to bring forward further sanctions and press for collective action to reduce western reliance on Russian energy. We will also continue to use every lever at our disposal to support the legitimate Government of Ukraine and, importantly, the Ukrainian people.

My Lords, I congratulate the Government on what they have done so far, but does the Minister agree that this package has already been overtaken? It is already inadequate against the developing need. For example, the Germans have been able to impound the yacht belonging to Mr Usmanov in Hamburg, yet he still has access to his stately home in Guildford. How can that be?

My Lords, I congratulate my noble friend on all his efforts and those of Ministers in his and in other departments in both places. However, there is a concern in the country that the inevitable delay in passing the legislation which came into effect on 1 March has perhaps meant that a number of assets have been able to be moved. Are the Government concerned about this?

Looking at SI No.194—I hope I have identified it correctly—I understand that provision will be made for medicines and humanitarian aid to reach Ukraine. I want to press my noble friend as to what routes will be used. There are reports that pharmacies in Ukraine are already facing a shortage of medicines. There will need to safe routes in.

We can only imagine the level of injuries and casualties that are having to be dealt with at this time. Is there any way in which some of the casualties can be evacuated to neighbouring countries? Is it the Government’s desire to send teams of medically qualified people out from the United Kingdom to assist with this humanitarian effort?

My Lords, I congratulate the Government on having gone further and faster than they had originally planned once the gravity of the situation became clear. Although this may be the largest ever package of sanctions from the UK, can the Minister explain to the House why there are so few individuals on our sanctions list compared with the EU’s? Why, in a particular spirit of generosity, are we allowing 18 months from when the legislation comes into effect for those who wish to sell their houses and get the proceeds out of the country to do so?

My Lords, I agree with the noble Baroness’s last remark. I was on the Joint Committee on the Draft Registration of Overseas Entities Bill, which sat in 2019. Clearly, 18 months is far too long if Clause 3 of the Economic Crime (Transparency and Enforcement) Bill is to have any immediate effect.

Is there any possibility of having a look at the enemy aliens Act of 1914? Of course, this is not an exact parallel, but there may be suitable provisions within that old legislation, which was renewed in 1919 after the end of the First World War. Could my noble friend’s officials perhaps look at this legislation to see if there are any useful provisions which could be modernised and brought forward to be of value nowadays—accepting that the United Kingdom is not “at war” with Russia?

While the measures which my noble friend has just announced are hugely valuable, there are three groups of people on whom we need to apply pressure, given that the Ukrainians are actuarily unlikely to win a fighting war, brave as they are and incredible as their resistance has been so far.

First, when the ordinary Russian public are queuing for bread in Moscow because the Russian economy has collapsed, they will begin to wonder why and they will begin to ask why Russian state television and other state-controlled media operations have been less than candid about why the Russian army has gone into Ukraine, its level of success and the number of their children who have been killed. I understand that the Russian army moves, when it can, not just with armoured vehicles, artillery and infantry but with mobile crematoriums, so that the soldiers who are killed are immediately disposed of and the Russian public do not get to know about the huge numbers who have been killed.

Secondly, these measures are partly directed towards the oligarchs and the banking system. I understand that the current sanctions have so far caused about $630 billion in foreign currency reserves and about 80% of the Russian banking sector to be disconnected from the United States financial system. I dare say that there will be similar, if not quite so large, consequences for Russians holding money in this jurisdiction. That is good, but there must be plenty more that we could do. Indeed, the European Union has a longer list of targets than we do, and I urge the Government to increase the number of our targets at least to the level of the EU’s. The rouble is in freefall but, despite all these sanctions, we must remember that North Korea, Iran and Syria, despite being sanctioned at various times, still seem to be operating, even if not happily, under their respective and utterly unattractive Governments.

The third group upon which we need to apply pressure, whether directly or indirectly, is the inner and outer circles within the Kremlin. Once they lose faith in Putin—they have plenty of reasons to do so, and these reasons will grow—his position as the modern dictator of Russia will become even weaker than it currently is.

So, there are three groups that I ask the Government to think about, some of whom can be attacked through sanctions, and some through a media and information war; and some can be influenced by the collapse of the Russian economy. As I said, the Ukrainians will not win a fighting war, despite their very best efforts—and I salute everything they are doing to save their country—but we can help them extra-militarily through applying acute and constant pressure on the three groups I have outlined.

My Lords, I congratulate the Minister and the Government on the tough regime of sanctions that has been introduced this week, and I agree with every word of the previous speech.

This is an extraordinary time. Civilians are being bombed and war crimes are being committed, and extraordinary times require special and extraordinary responses. Ministers are completely right to say that one of the ways to isolate a weakened Putin and to put him under pressure is to target him and his supporters and the money they have stolen from the impoverished people of Russia. As the Foreign Secretary has said, we should sanction Russian government Ministers, senior officials, Putin’s inner circle, the oligarchs who look after his funds, members of the parliament and senior members of the security services and armed forces.

We in this country have a particular responsibility, because so much of the money looted from the people of Russia has been spent and invested here in London. The way to identify the funds, the properties that such people have bought and the businesses they have invested in is to target those who enable them to spend and invest these funds. Just as accountants are required to report clients they suspect of tax evasion, so other businesses and professionals should be required to report people they suspect of benefiting from Putin’s regime. We should make it a legal requirement for lawyers, accountants, company formation agencies, financial services firms, investment companies and estate agents to report on the structures and holdings set up to allow sanctioned individuals to hold assets in this country. Surely, this would make the whole sanctions process swifter, simpler and more straightforward. Will the Minister look at including measures such as this in the sanctions Bill being brought forward in the next few days?

Secondly, is it true, as Politico reported this morning, that during the rollover of EU sanctions rules into British law during the Brexit process, the UK sanctions regime became significantly more procedurally complex because the new laws were amended to ensure procedural fairness for those being sanctioned, to strengthen measures those sanctions could take in response, and to ensure that sanctions were imposed in what was described at the time as a “proportionate manner”? If it is the case that these changes made the imposition of sanctions more complicated and difficult here in the UK than in the EU or the US, should we not use the legislation that the Minister is bringing forward to unravel these changes so that we can speed these processes up?

My Lords, I raise again with the Government the issue of cryptocurrencies. Effectively, Russians cannot now transfer roubles into dollars, euros and pounds sterling but they can transfer into cryptocurrency. The Minister will know that the Ukrainian Minister of Finance on Monday called on all the decentralised finance—the DeFi exchanges—to remove Russia from their schemes. Some, such as Coinbase, have done so, but others—Binance is the big one that comes to mind—have decided to sanction only the 100 names on the sanctions list and otherwise to allow free translation of roubles into cryptocurrency. We have heard from the Ukrainian Government that this is a serious mechanism for evading sanctions. Binance, which I mentioned, is registered in the Cayman Islands and therefore falls into the UK financial family. What more will the Minister do to prevent what may have looked like a loophole from becoming what is now growing into—a major escape hole?

My Lords, these are dark days. I am delighted to follow and identify with the initial remarks of the noble and learned Lord, Lord Garnier, and the noble Lord, Lord Austin. Our hearts are with the brave people of Ukraine. The Russian people will suffer long-term hardship but nothing compared to that befalling the extraordinary people of Ukraine.

It is no fault of the Russian people that they have no understanding of the reality of why they are being fully penalised. It is quite astounding that, from my calls to Russia, their perception of what is going on in Ukraine borders, frankly, on the fanciful. Disinformation is rife. These measures are very necessary and the UK Government are doing exactly what they have to do. They have my full support.

My Lords, I fully support these sanctions and I congratulate the Government on the packages brought forward. I look forward with interest to the replies to be given to several of the detailed points raised about exactly how firmly they will be enforced.

I will look forward a little. The medium to long-term reality is that we are applying these sanctions against Russia, but Russia is almost certain in the end to achieve some degree of military success. A new reality will dawn, probably with a puppet Government in Ukraine, and the whole issue will start fading from international debate, from the media and so on. What are the Government’s plans for the medium term and, if necessary, the longer-term future in sustaining these sanctions and this level of pressure on the Russian regime?

In reality, there will be quite rapidly a tendency to put pressure on the Government to allow people to return to a new normality: to allow Russian companies to have access to the City of London again and to ease sanctions causing financial losses to lawyers, accountants and firms here. Is the Minister able to assure me that, as far as the British Government are concerned, we intend to retain this degree of sanctions until some satisfactory solution to the political problem is achieved, with a genuine agreement with a respectable Ukrainian Government who have proper regard to international law and national sovereignty? Will the British Government remain one of the more robust in the western lands? There will be considerable pressure to stop doing so much once we have, as it were, done our best to protect the Ukrainian regime during the conflict.

The sooner we start addressing that problem, the sooner we will start facing up to realistic problems that we must plan for. The Russians will undoubtedly, for example, try to ensure that the sanctions do quite a bit of damage to western economies, and will start trying to use their influence on the oil and energy markets to demonstrate that they can cause us some continuing loss unless we begin to lose interest—shall we say?—in the crisis that has so shocked the world. Are we determined to be one of those western countries that will seek to maintain the fullest force of sanctions we can unless and until a satisfactory solution is reached with the Russian regime?

My Lords, it is a pleasure to follow the noble and learned Lord, who has just given the Government some wise advice which I hope the Minister will carry back to his colleagues.

We welcome the sanctions and look forward to the arrival of the economic crime Bill when it comes from the Commons the week after next. That has flushed out quite a lot of advice and some very strong comments from people who have been looking at the area of economic crime and kleptocracy in this country. One of the threads coming through, which goes back to the issue of what we can do now to stem that flight of capital, is that we are not fully using the anti-money laundering laws that we already have on statute in order to do that now. Will the Minister agree that more can be done with current legislation, which can be used to help stem the flow of money stolen from the people of Russia? Does he undertake to redouble efforts with all the bodies that have the power to use these anti-money laundering laws to get on and do it?

My Lords, I welcome these measures on behalf of these Benches and I thank the Minister for maintaining contact and giving advance notice.

These are both the culmination of weeks of lobbying from Parliament to have sight of further measures but also, as noted in this short debate—including by the Minister—the start of a process. They are of a differing character, as the noble and learned Lord, Lord Clarke, indicated. Perhaps these are now of a more strategic nature which will be medium and long term, and perhaps they will have a different characteristic from the sanctions regime that we have put in place, which is different from what the EU scheme envisaged.

The noble Lord, Lord Austin of Dudley, rightly raised a number of weeks ago with the noble Baroness, Lady Williams, in the Home Office, why, as my noble friend Lord Fox indicated, we had not been using existing legislation. It has been highlighted for a number of months that the weak point in the global efforts against money laundering and kleptocracy is in fact the UK. Therefore, questions such as that of the noble Lord, Lord McDonald, are quite right. There is a niggling fear that the UK is still behind the US and the EU in making sure that there is, as the Foreign Secretary said a number of weeks ago, no place to hide for kleptocrats. However, as we have seen, because the Government have now, due to persuasion from Parliament, brought forward the first of the economic crime Bills, there have been, regrettably, plenty of places to hide.