UK-Ukraine Credit Support Agreement

The second reason for bringing this credit support agreement to the attention of the House is fairly obvious: the current stand-off, which we hope remains just a stand-off, between Russia and Ukraine. This potential conflict—within Europe, within the land fought over during the last war, over territory freed from Soviet domination 30 years ago—has ramifications affecting 44 million inhabitants of Ukraine but also beyond its borders for the security of others. Russia’s worries about Ukraine forging closer links with the EU and the West provide no excuse for any deployment of troops on the border, nor for unreasonable demands aimed at NATO. This is no way to do business when diplomatic means are available.

I welcome the phone calls that President Biden has had with President Putin. Such dialogue must continue, but it should not be seen as a reward for or an outcome of a display of military force. This week’s joint statement from the leaders of the five nuclear weapons states is an important reminder of the value of talking, in addition to its precise wording that

“a nuclear war … must never be fought … We intend to continue seeking bilateral and multilateral diplomatic approaches to avoid military confrontations … and … increase mutual understanding … We are resolved to pursue constructive dialogue with mutual respect and acknowledgment of each other’s security interests and concerns.”

Those must be sentiments that we all share.

Although the International Agreements Committee had no substantive comments to make on the particulars of this credit facility, it emphasised that the provision of loans to purchase British weapons and jointly build warships represents an important shift in policy and so should be debated in your Lordships’ House.

Furthermore, given the current risk of conflict, the agreement provides an opportunity for the Government to set out their approach, working with their allies in the EU and beyond, to countering threats to Ukraine’s territory and sovereignty. We therefore welcome the Minister’s presence here today and look forward to his contribution, which will, we hope, detail the Government’s objectives and discussions with both our allies and Moscow. Although the significance of what he will say clearly goes well beyond the remit of the International Agreements Committee, it is right and proper that Parliament hears from our Government on this pressing and present situation.

Solutions can come from different directions and take different forms. Understanding the psychology of the Russian leadership—its ambitions and fears and the risks it is prepared to take—in addition to having an experienced and well-represented negotiating team, will be necessary. However, the UK can make a significant contribution in the context of a wider response from the West to help render an invasion of a stronger and well-supported Ukraine a more complicated and troublesome proposition for Russia.

Britain and Ukraine have enjoyed a close relationship since the latter achieved independence in 1991. We are now an important trading partner. In advance of celebrating the 30th anniversary of independence, the two countries signed the UK-Ukraine strategic partnership agreement in the autumn of 2020, underscoring these years of economic ties and shared defence interests. Credit support, which is to be provided pursuant to the framework agreement on the table for consideration, is a way of ensuring that the benefits reaped by this partnership are not wasted but continue to help Ukraine maintain its right to sovereignty and territorial integrity.

Ukraine is a country rich in history and culture, but it has suffered immeasurably from its past enslavement to communism. Notwithstanding independence, nearly a decade of simmering tensions following the illegal annexation of Crimea, economic hardship and, more recently, Covid have made conditions challenging for the population. We must not fall for Putin’s false assertions of feeling threatened by Kiev’s long-held ambition to be part of NATO and the EU.

Much has been achieved through Operation Orbital, which, since 2015, has enabled us to provide non-lethal training to more than 20,000 members of the Ukrainian armed forces. This has come at the same time as the national implementation of necessary defence reforms covering strategic communications and procurement. Recently, the UK has provided personal protective equipment, winter fuel, medical kits and winter clothing for the Ukrainian troops.

The international Crimea Platform keeps us focused on the ugly reality of human rights violations against a background of forced occupation. Containing the military threat in the Azov-Black Sea region is one critical area of interest for the United Kingdom. The framework credit support agreement will offer the UK and Ukraine an opportunity to combine technical and engineering know-how to develop and enhance Ukraine’s naval defence capabilities—something that will be of benefit to both countries on the R&D and economic fronts, in addition to security.

Ukraine’s Ministry of Strategic Industries, recently set up to oversee and update the country’s defence and aerospace sector, aims to create an environment where joint ventures with foreign companies are the norm. This will increase the potential for mutually beneficial innovative projects and the sharing of critical technologies such as automated control systems, rocket and space technology, unmanned platforms and systems to defend the country from cyberattacks. Additionally, the framework credit support agreement contains commitments from both Governments to tackle corruption in international commercial transactions. A sweeping review of anti-corruption methods will do much to encourage investment in Ukraine, a country rich in talent and resources.

Already, the Ukraine Government have worked to implement a number of reforms to make the climate more appealing to international investors, including the deregulation and privatisation of state-owned enterprises, together with land and capital markets initiatives. The UK is already a significant investor in Ukraine.

Talks are set to take place in Geneva, Brussels and Vienna in the coming weeks. Let us hope that all things will be considered, and nothing and no one will be left out of the negotiations, to de-escalate the current situation and provide a way forward for longer-term co-operation and peace.

This is immediately urgent. As the noble Lord, Lord Astor, said, President Putin and President Biden spoke last week, and further talks to try to de-escalate the confrontation are scheduled for Geneva on 9 and 10 January, so this is a matter of great urgency.

However, we must accept that any military retaliation by NATO could lead to a disaster of global proportions and consequences too horrific to contemplate. The US, as the noble Lord, Lord Astor, said, and particularly the European Union and the United Kingdom, together must make it clear that there will be an unprecedented level of sanctions against Russia if it proceeds to invade. I am glad to see that the European Union foreign affairs representative is at the border at the moment.

The UK Government need to make it unequivocally and abundantly clear that we support such a move. I regret that there are, understandably, some continuing doubts about that. I fear that we have soft-pedalled on sanctions so far, perhaps because of the level of Russian assets and investments in the United Kingdom, and—I regret having to say this, but it needs to be said—because of Russian donations to the Conservative Party. That kind of thing compromises you and puts you in a difficult position. The Germans may also be somewhat hobbled in their actions because of their dependence on the gas pipeline Nord Stream 2, as the noble Lord, Lord Astor, said. So it is up to us—the US, the UK, other EU countries and the EU Commission—to take the lead.

Here in the United Kingdom, we have seen the ruthlessness of Putin in Salisbury and, most recently, as my noble friend Lady Hayter said, in his disbanding of Memorial at home. We know that he hankers after a recreation of the spheres of influence of the former Soviet Union. Most recently, in his 2021 state of the nation address, he announced his intention to seek a reunified Russo-Ukrainian state. If he is allowed to continue to use the spurious pretence of the defence of Russian speakers in Ukraine as an excuse for invasion, other countries will be in real danger too. Fear has already spread across the Baltic countries where there are Russian speaking minorities—a legacy of Soviet imperialism, which sent Russians in to keep an eye on local people. Other parts of the old Soviet empire, such as Georgia and Moldova, are now being targeted. Those of us who represent this Parliament on the Parliamentary Assembly of the Council of Europe already see the fear etched on the faces of the delegates from those countries. There is a determination and a strength, but we must not be in any doubt that there is also great fear.

If we do not stand firm now, there will be no stopping a new wave of Russian imperialism. However, military intervention in Ukraine is only one danger we face from Russia. The cyber threat is growing and could be even more devastating, including within our borders, with vital services at risk which could cripple our infrastructure and destroy our economy. Russia also seeks to destabilise the European Union as well as NATO, which is why it did all it could to help ensure a vote for Brexit in the European Union referendum and why, closer to home, it now seeks to help break up the United Kingdom so that our position as a permanent member on the UN Security Council would be open to challenge, as would other key roles that the United Kingdom plays.

The real and present problems we have endured over the past two years because of Covid, which we all know only too well, and even the threat of climate change could be relatively mild compared to this threat that we now face. We all need to wake up to this quickly, but I fear that the present Government may have become too compromised to do so effectively. I fervently, passionately hope that I am wrong; perhaps in his reply the Minister will say something to reassure me.

It is not simply a commercial transaction, important as the potential business opportunities in the United Kingdom are, at Rosyth and elsewhere; it is even more important politically, diplomatically and geopolitically. It is not only important but welcome—I do not have any dispute with it; it is a very helpful step in the process of giving Ukraine access to all its sovereign rights, including enhancement of its naval capabilities, as the programme is intended to do. Frankly, we are not the only ones doing this—the United States is enabling it to buy US patrol boats, and Turkey is apparently building a corvette—and it is important to recognise that this naval component is an essential part of what Ukraine lacks in terms of its inherent right to self-defence. For example, there is a significant risk that without this kind of enhancement of its capability, it will lose effective access to the Sea of Azov and some of its coastal territory. That is not an acceptable position for it to be placed in as a sovereign country. It is therefore very important that we do it.

The noble Lord, Lord Foulkes, was correct to suggest that the essence of what President Putin in Russia is aiming to do is reassert a sphere of influence. That does necessarily mean that he wants further acquisition of territory, although we should never forget that there is not a status quo here; there is an illegal annexation of Crimea and separatist control of parts of the Donbass. That is not acceptable. We are in a position where de-escalation, valuable as it is, does not mean that we are able easily to move to what one would regard as an acceptable long-term situation; there is a question mark over what de-escalation really means. There is not a “normal” here, because the territorial integrity of Ukraine has been not only threatened but already fundamentally abridged.

We need to be clear that de-escalation does not mean backing down; it does not mean giving concessions to Russia as a process of trying to return to some kind of status quo. Far from it—what de-escalation means is requiring the de-escalation of Russian threats, because there would be no issue if no further Russian threats were being made. It is interesting in that context that Russia seems to think that the response to this is to make exaggerated demands. They will back down. There are good reasons to think that Russia will not invade Ukraine. The costs and consequences, including domestically inside Russia itself, would be dramatic and unacceptably damaging for President Putin. He may well not want to do it, but he may well want to demonstrate that he has secured concessions and victories as a consequence of it, but we should not give him any of that.

NATO has been very clear about its position. Ukraine has been an enhanced opportunities partner since 2020. The summit in June last year reiterated the Bucharest declaration about the long-term possibility that Ukraine will join NATO. I do not think there is a timetable or prospect of that, but we absolutely should not forgo Ukraine’s rights, or the position that NATO has already taken, in response to threats from Russia. It is very important for us to have a continuing account from Ministers of the Government’s approach, which this debate affords, and that there is no moment, I hope, when we say, “Oh well, Russia has backed down and the troops have moved off. It’s all right then”, because it is not all right: Ukraine does not have access to its own territory and does not have the possibility of asserting its sovereign rights throughout its territory. We should be alongside Ukraine in maintaining pressure to secure that, and this agreement enables us to be a partner to Ukraine in a significant area of its defence capability. I therefore welcome the agreement.

The agreement that we are discussing today will not alleviate that immediate problem with Russian aggression, but it will help in the future, giving Ukraine the benefits of world-class vessels and training, as the noble Lord, Lord Lansley, has pointed out. Our own Government have gone on record with the view that threatening and destabilising behaviour is unacceptable and will have costs.

Giving Ukraine the capability to manage more effectively through a UK-trained naval service is a welcome development. I live in the middle of shipbuilding land in Scotland. I live on the banks of the River Clyde and I see military vessels going up and down it regularly. I therefore have a grasp of the extent to which we, not just in Scotland but in other parts of the UK, are a world-leading country, and we want to pass that knowledge on.

The enabling of Ukraine to purchase two minesweepers and retrofit UK weapons systems to existing weapons, and of specified UK contractors to work with Ukraine to build eight missile ships and a frigate, is also a welcome recognition of our capabilities in shipbuilding. It fills the gap in our access to the Black Sea which the noble Lord, Lord Lansley, talked about and it is a way of mitigating future aggression by Russia. As the noble Lord, Lord Astor, pointed out, this initiative builds on Operation Orbital, which is non-lethal training, as the noble Baroness, Lady Hayter, pointed out, and capacity building. That, as we learned in November 2019, has been extended to 2023. In August 2020, the Secretary of State also announced that the UK would lead a maritime training initiative to help the Ukrainian navy to work more closely with international partners.

We look forward to continuing to negotiate the position with Ukraine to agree the specific financial arrangements around the agreement. I say to the Minister that it would have been of use to have had information in the Explanatory Memorandum on the other countries that have similar agreements. Perhaps the Minister can rectify that, either by a letter if it is confidential or perhaps in his response today. I support the noble Lord, Lord Lansley, in his request for knowledge of the policy context that backs the agreement. It makes sense to have a get-out clause in relation to corruption in international transactions. Not all people around are good; you can get bad people around as well.

The new arrangement with Ukraine is a step change away from the decision not to make lethal weapons systems available, but it is a direct consequence of the escalation prompted by Russian activity. In the recent integrated review of security, defence, development and foreign policy, the Government made clear that they consider Russia to be

“the most acute threat to our security”

at every level, from the mobilisation of troops to cyber activity, as the noble Lord, Lord Foulkes, has mentioned.

The upcoming meeting between NATO Ministers to discuss the Ukraine situation is very important. Perhaps the most important part of it is to underline again and again that the territorial integrity of Ukraine and the belligerence that has been shown make it imperative that there is unity within both NATO and the EU in relation to Ukraine.

In preparation for next week’s meeting between President Putin and President Biden, the Russians outlined their demands, as the noble Lord, Lord Lansley, pointed out: a ban on NATO expansion, and no offensive weapons near the Russian border. Can President Putin not see that the aggression shown to the now independent countries of northern Europe caused 14 central and eastern European countries to join NATO between 1999 and 2020? They look to Article 5 of the NATO agreement to give them protection. I also worry slightly that part of President Putin’s plan is to wrong-foot President Biden, and it is very important that we keep a weather eye on that.

However, other areas and countries nearby are in some difficulty. Finland and Sweden have had additional cause for concern for 30 years. These fiercely independent countries have come closer and closer to NATO. They, too, fear the limitations on democratic and independent states. At the moment, it does not look likely that Ukraine, or even Finland or Sweden, will join NATO, but who knows what the outcome will be if Russian expansionism continues? In 2016, Sweden and the Finns signed host nation support agreements with NATO, which offer alliance forces access to Swedish and Finnish territory in the event of a military emergency.

The noble Baroness, Lady Hayter, alluded to the disbanding of International Memorial, which was a way of putting right some of Joseph Stalin’s atrocities. What are we playing at here? Are we trying to go back to the Russia that was the land of Joseph Stalin?

I was in Russia at the time of the fall of communism. I had only ever seen tanks in museums; I had not seen them go down shopping streets. It was an eye-opener for me. The shops’ counters were empty. The only way of totting up how much you had bought was with an abacus—and this was only 20 years ago. I was there for a defence symposium organised by the University of Edinburgh. I was doubly shocked that there was no food. All people had to eat were tomatoes and cucumbers. I have not eaten a cucumber since then because a week of eating cucumber was a bit too much, frankly.

I was outside the Russian White House when Boris Yeltsin addressed the Soviet Union and the world. I was excited to be at the heart of something like that; it was a world-breaking opportunity. However, when I looked around, the assembled crowds seemed less than impressed. There was an air of cynicism and “So what?”. I asked the interpreter who was with me about it. He shrugged and said, “They are all the same. We are just pawns in their power games.” That is what is happening here. I have thought about that a lot over the past week.

We need to see Russia play a much more positive role in the modern world, and not just in a world that glorifies Stalin and the suffering of the Russian and Soviet people. Putin seeks to rebuild an empire. Why can he not concentrate on improving the prospects of the people in his own country? Let us hope that common sense and humanity are in the minds of the negotiators on all sides in the next few days. Our assistance in helping Ukraine to develop a world-class navy will come too late for the putative conflict, but let us hope that it will give security to protect the Ukrainian people in future. They deserve a break; let us see if we can give it to them.

This echoes the concerns raised by the noble Lord, Lord Foulkes, who I consider a noble friend, about the growing number of cyberattacks on our key infrastructure in this country. I pay tribute to my noble friends Lord Grimstone and Lady Vere for the interest they took then; however, I am sad to report that, in spite of the issues that I and a number of others raised, a company that I will not name—but one well known for its transport links in North Yorkshire—and, I imagine, a number of other transport firms that were also subject to this cyberattack had all their systems closed down for six days. It could have effectively shut down those businesses for ever.

I was appalled that we do not have a fast response to such cyberattacks in this country. I am told that the relevant authority, the National Crime Agency, was informed and I read subsequently that my right honourable friend the Secretary of State for Defence is minded to create such a response in Lancashire, in the next two years, to respond to these attacks. But it is evident where the money is raised. I think £140,000 in ransom was raised from this one attack. Perhaps a better-known one is FatFace, as it is common knowledge that the clothing company paid a ransom of millions.

It is unacceptable that companies in this country are effectively funding hostilities by the Russian state, whereby it can pay 100,000 troops to line the Ukrainian border to threaten Ukraine and, possibly, to proceed through Ukraine to the European Union, were they to penetrate further and fulfil the threats they pose.

In welcoming the agreement today, I take the opportunity to pose two specific questions to the Minister. I echo the comments from the noble Lord, Lord Foulkes: the Government and the EU need to set out today what our response would be were Russian troops to cross the border into Ukraine. Obviously, we receive millions of pounds from Russian businesses and individuals into UK business banks. The source of that money then has to be checked to ensure that there is no money laundering. We receive that because we are a very open economy. However, we need to express today what our response would be. So my first question is: what would our response be and when are we going to make our response known?

Secondly, could the Minister explain why we are allowing the cyberattacks to which the noble Lord, Lord Foulkes, and I have referred? I have first-hand experience of the grief and distress caused to one particular company that I am aware of, and others are now in the public domain; I have mentioned FatFace, which suffered two years ago. It is unacceptable in this day and age that we are wilfully exposing our companies to this sort of cyberattack and this form of ransom. To me, it was unacceptable for the Foreign Office simply to say, “It is best that the ransom is not paid”, without giving them any assistance over how the cyberattack could be shut down to save the business. It is interesting to note that insurance is available for such a cyberattack, but if you do not have the insurance before an attack then you will certainly not get it after an attack has happened.

Therefore, I ask my noble friend Lord Grimstone what our sanctions would be against an invasion of Ukraine but, more importantly, domestically, what rebuttal will we have against these increasingly hostile cyberattacks, which go to fund the Russian state at this time.

Providing financial assistance to the Ukrainian navy will, as per this agreement, help Ukraine rebuild and bolster its naval capacity and deter further Russian aggression. The new naval bases, the training of Ukrainian naval personnel and the Sandown-class mine-counter- measure vessels will make Ukraine more confident. We are, in effect, empowering a regional partner in the spirit of our integrated review, which is committed to an open international order. NATO has responded, but I hope that we build on and enlarge the existing Three Seas initiative, if we take the logic of this agreement forward, and develop a Black Sea forum, building on our international Crimea platform. There are two specific reasons for this: to send a clear signal to Moscow and to help create a collectively agreed environment for the development of the huge energy resources in the Black Sea, especially when Russia uses energy for political purposes. I should add that Turkey is the key to this. I hope we can use our good relationship to take this forward. I can say categorically that our role in pursuing these themes has been clearly acknowledged and appreciated by the Ukrainian Government.

I also note the role of UK Export Finance in this. Its scope and financing have been massively increased, even to the extent of being able to access funding for the purchasing of British goods and services by foreign Governments or businesses. My noble friend Lady Meyer is the Prime Minister’s trade envoy to Ukraine, which is a very welcome step. Kiev has become a hugely successful technological hub.

President Putin’s obsession with NATO spreading eastwards reflects a total failure of Russian diplomacy. In the past, interest in Ukraine in joining NATO was minimal. His aggression has caused a surge in support for NATO membership. He has, bizarrely, written comprehensively about Ukraine and Russia being joined at the hip, but that hip is now irredeemably broken, so this is the time to be robust, as this agreement makes clear. However, in Kiev there is a sense among many that the EU has been insufficiently supportive this far. Nord Stream 2 has had very negative consequences for Ukraine. The position of the United States, a major military supplier, has now hardened in the light of a possible invasion by Russia. As has been mentioned several times, we look forward greatly to the discussions that will take place, which I hope will break this logjam and move away from the aggression hovering over Ukraine at this time.

I end on this note: the fruits of the bilateral policy we are examining have been assisted by the key role of our ambassador in Kiev. I have seen for myself the role that she has played. At a time when two major powers on the world stage do not share our values, the role of the FCDO in key post-Brexit activity is essential. As one of the Prime Minister’s trade envoys, I have observed with admiration the role of our embassies and what they do with very limited resources. I look forward to my noble friend outlining further how we and like-minded allies can work together to show our rejection of the aggressive undermining of the territorial integrity of a democratic European country.

As the noble Lord, Lord Foulkes, indicated, there is a competing historical narrative and, in many respects, it is hard to see a way through it. On one visit to Kiev, it was made very clear to me that we have to understand Putin’s approach: he sees Kiev as the mother of all Russian cities. He does not believe that there is a Ukraine; he believes that Kiev and Ukraine are part of Russia and that Ukrainians are Russian. That is a sweep that he takes but, as the noble Lord, Lord Foulkes, indicated, since independence, Ukraine is an internationally recognised sovereign state with borders that we agree with, and we will help to support those areas of the boundary. However, as the noble Lord, Lord Lansley, has indicated, it is not easy to see how this can be reconciled as long at Putin has this narrative approach.

As the noble Baroness, Lady Liddell, indicated, we have 13,000-plus casualties in an area where there is not peace. This is not a case of maintaining peace within the region. As Jeremy Quin, the Defence Minister, indicated at the international Crimea Platform, which the noble Lord, Lord Astor highlighted, it is a case of restoring peace: the de-occupation of Crimea and its peaceful return to Ukraine as part of the Crimea Platform. It was very welcome that a UK Minister was at the inaugural Crimea Platform.

Part of the ambition is also to prevent further human rights violations. On a visit that I made to Kiev as part of Parliamentarians for Global Action, we raised the difficulty for Ukrainians to seek recourse for human rights abuses as part of the conflict. Russia has been blocking the proper reporting of human rights violations that have taken place and continue to take place within that area.

Therefore, it would be helpful if the Government could indicate, as has been asked, what the UK’s overall approach is. We know that three sets of discussions are taking place. There is the French and German initiative, with Jens Plötner, the envoy of Olaf Scholz, and his French counterpart Emmanuel Bonne travelling there at the moment. There will be NATO discussions, and Josep Borrell is also seeking a role for the European Union. However, I do not think any of us is so naive as to think there is any unanimity among certain members of the European Union.

How does the UK see the approach that the EU is seeking under the French presidency? The French presidency is seeking strategic autonomy for the EU, acting increasingly independently of NATO. Are we approaching the discussions regarding Ukraine purely through NATO or do we have a bilateral strand on diplomacy? I commend our embassy in Kiev, but it would be helpful to know what the strategic approach is. The integrated review highlighted the concerns for us at home in the UK, but it was very light on how we will drive forward or work. Do we see ourselves working with France and Germany, in particular, in this approach? Has the Prime Minister spoken to Olaf Scholz since Christmas? I know that he spoke to the Ukrainian president before Christmas, but it would be helpful to know.

On the situation at home, over the break I reviewed the annual report of the Intelligence and Security Committee of Parliament, which it published just before Christmas. Of the Russia report, the committee stated:

“The Report questioned whether the Government took its eye off the ball with regard to Russia, because of its focus on counter-terrorism. The previous Committee found that until recently the Government had badly underestimated the response required to the Russian threat and is still playing catch up … in particular in response to the call for new legislation to provide the intelligence Agencies with the tools they need to tackle the intelligence challenges posed by Russia.”

That highlights the very point made by the noble Baroness, Lady McIntosh, with regard to our capability here at home, while we are also debating the capability of Ukraine itself to defend its own integrity and borders.

So the agreement that we are discussing is part of an overall approach. As has been highlighted, the United States is providing 10 mark VI vessels at its own expense. Another four boats will be paid for through a foreign assistance programme and there are others that can be purchased. What is the Government’s assessment of this agreement, as far as the overall Ukrainian requirements and capabilities are concerned? I do not know, because no contextual element is set out as to whether it is a significant proportion of what Ukraine considers to be its naval defences or whether it is simply a future add-on. While the explanatory memorandum sets the deadline for granting credits under the agreement to be no later than 31 December 2024, when do the Government estimate some of the capability under this agreement being on stream? It is clearly not an agreement that will meet the current needs of Ukraine; it is obviously longer term, so when do the Government estimate some of the procurement being completed? We debated in response to a Statement just before Christmas some of the horrific delays in military procurement, so this is not new. What is the Government’s current estimate?

Moving to some aspects of the export finance agreement itself, the latest UKEF annual report said that defence represents 10% of its liabilities, which currently stand at £1.24 billion. This is likely to more than double the defence proportion of all UK Export Finance liabilities. There is a question about whether arms manufacturers require public insurance, rather than bringing out insurance for themselves. I tend to think that arms manufacturers, compared to others that wish to export to Ukraine, may have a greater capability to seek market insurance for any of their contracts rather than to seek that credit from the taxpayer. Before carrying out this agreement, did the Government assess the taxpayer insuring arms companies and whether there was a market failure for arms companies obtaining that insurance themselves?

The noble Baroness, Lady Liddell, highlighted the good point that there is a lack of wider context about the scale of export finance. That annual report says that the £1.24 billion is made up of an agreement with Qatar for £1 billion and an agreement with Indonesia, so this is now likely to be the biggest export finance agreement for the defence industry. If the businesses operating under it are going to be in partnership with Ukrainian businesses, can the Government estimate the likely breakdown in the proportion of manufacturing? The press statement on the agreement suggested that it would all be UK-manufactured. The explanatory memorandum in the agreement highlights that it simply requires

“at least 50% UK content.”

That could be just 50% plus one, as far as this is concerned so, again, the UK taxpayer will be subsidising insurance for Ukrainian manufacturing. I am not necessarily against that in principle, but a business case would have helped to indicate why it is important.

My final question on export finance is that, if the Government now believe that defence taking a much greater share of export finance guarantees will be a major strand of their policies going forward, it would help to know what kind of financing clarity is in place. As the committee highlighted, there was a lack of certainty on the specific contracting in the finance arrangements that are likely to be put in place. Of course they will be negotiated but, as it stands, when we ratify this agreement, the borrower will be the Government of Ukraine, who will enter into credit agreements with UK Export Finance and

“a bank or consortium of banks guaranteed by”

UK Export Finance, but what is the Government’s preferred route? This could set some considerable precedents. As I said, I am not opposed to this in principle, although I have question marks over why our defence industry should have special treatment.

This is my final point. Given the agreement that was announced in October 2020, the Government had already agreed export finance to Ukraine of £2.5 billion. Is this over and above that or part of the export finance for Ukraine that was already announced? As was indicated, the export finance for Ukraine that was previously announced included defence, but also agriculture, infrastructure, energy and healthcare. If this £1.7 billion is part of that £2.5 billion, there is not much left for some of these other critical areas. Can the Minister say whether this has now increased the total UK export finance to Ukraine to £4.2 billion or if it is still £2.5 billion?

I hope, as others have indicated, that tension in the area will not escalate. The international Crimea Platform is a good basis for further work. I hope we will see the talks make progress, because the vulnerable people of Ukraine deserve stability and peace.