The following Answer to an Urgent Question was given in the House
of Commons on Thursday 9 November.
“Sanctions are an important tool that we use to weaken Putin’s
war effort and to underline our unyielding support for Ukraine.
Britain alone has sanctioned more than 1,800 individuals and
entities under the Russia sanctions regime, more than 1,600 of
which have been sanctioned since Putin’s full-scale invasion.
Although I cannot comment on individual cases, we are pleased
that the High Court has in recent weeks recognised the Foreign
Office’s expertise on deciding which persons should be sanctioned
to ensure maximum effect.
We have frozen over £18 billion-worth of Russian assets through
designations and over 60% of Russia’s central bank foreign
reserves—assets that can no longer be funnelled back to Russia to
fund its war machine. Rather than the surplus that the Russian
Government predicted for 2022, Russia suffered an annual deficit
of £47 billion—the second highest of the post-Soviet era. Its
budget remains in deficit in 2023, despite tax increases. We have
also targeted those who have enabled sanctioned persons to hide
their assets in obscure and complex financial networks, and we
are working to crack down on phoenix companies, which continue to
operate after sanctions are imposed or which are developing
fronts to avoid sanctions.
Just yesterday, we imposed 29 further sanctions targeting
individuals and entities operating in and supporting Russia’s
gold, oil and strategic sectors—critical sources of revenue for
the Russian war machine. Those sanctions include Russia’s largest
gold refiner, as well as international networks propping up
Russia’s gold, oil and finance industries.
Our co-ordinated sanctions, working in line with our G7 partners,
are having an impact. Without our sanctions and those of our
partners, we estimate that Russia would have over $400 billion
more to fund its war machine. We are starving Putin of the
resources he needs to fund his illegal war on Ukraine. Sanctions
are thwarting Russian access to western components and
technology. Russia’s budget remains in deficit. Our oil price cap
has contributed to a fall of 25% in Russian oil revenues between
January and September 2023, compared with the same period in
2022, and our export bans have starved Russia of thousands of
products needed for the battlefield.
His Majesty’s Government are fully aware, as Members will be,
that sanctions are not static. We are constantly monitoring to
see where and if they are being circumvented. Alongside our
international partners, we are closing loopholes and tackling
sanctions evasion, as Putin desperately scrambles to restructure
the Russian economy and smuggle goods in through back channels.
We will continue to isolate Russia’s financial system and support
businesses that are seeking to divest from their links with
Russia. We will bring forward further legislation in the coming
weeks to deliver on our G7 commitments and further deprive Russia
of lucrative remaining revenue sources, including banning imports
of Russian diamonds and ending all imports of Russian copper,
aluminium and nickel. Finally, we will continue to combat
circumvention and seek to degrade Russia’s military capabilities
by coming down hard on sanctions evaders and closing
loopholes.”
3.17pm
(Lab)
My Lords, I start by saying how pleased I am to see the Minister
in his place. I also repeat what I have said many times before:
the Opposition are at one with the Government in supporting
Ukraine and sanctioning those responsible for starting this
horrendous war.
However, there are serious concerns about the effectiveness of
our sanctions regime, nearly two years after the invasion. It is
unacceptable that 130 UK companies have admitted breaching
Russia-related sanctions. I welcome the Statement of the Minister
in the other place, that the Government are closing loopholes,
but can the Minister set out what assessment has been made of the
alleged existence of specific loopholes to allow indirect imports
of Russian- and Belarusian-origin steel, or indeed Russian-origin
crude oil that has been refined in third countries? This is a
really serious issue in terms of the loopholes that have been
identified.
The Minister of State, Foreign, Commonwealth and Development
Office () (Con)
My Lords, first, I thank the noble Lord for his kind remarks.
Your Lordships’ House will be pleased to know that we will be
having two FCDO Ministers here, which underlines the strong
commitment of the FCDO and, indeed, His Majesty’s Government to
your Lordships’ House.
(Lab)
It should have been you!
(Con)
I shall carry on with the Answer. The noble Lord is totally
right, and I appreciate him confirming again the importance of
standing in solidarity against Russia’s continued invasion of
Ukraine. As an aside, I have literally just come over from a
Ukrainian survivor event that we were hosting at the Foreign
Office—some of them very young survivors who have been through
the most horrendous ordeals. It is important we send a message of
unity.
On the specifics, I followed last week’s reports from City
A.M.about 130 companies. There is a positive here, because this
was voluntarily admitted, although there is of course inadvertent
non-compliance. I assure noble Lords that we are working with our
colleagues across government, particularly in the Treasury as
well as other departments. The Office of Financial Sanctions
Implementation is looking specifically at how we can further
tighten some of the procedures. While we have fined companies
that have acted inappropriately, and called others out, other
methods are being put in place, including warning letters and
mitigations. We are working particularly closely with the
Treasury team to ensure, as I have always said, that loopholes
are identified. Other loopholes identified as the sanctions are
applied will also be closed.
The noble Lord rightly asked about some of the other specific
industries and the sanctions we have imposed recently, including
on areas such as oil and other contraventions. I assure noble
Lords that, as we apply further sanctions, we will continue to
identify such areas and loopholes. Only last week, on 8 November,
we announced a further targeting of 29 individuals and entities
operating in and supporting Russia’s gold, oil and strategic
sectors, which are critical sources of revenue.
(LD)
My Lords, I too admire the Minister’s reshuffle resilience and
welcome him to the continuation of his post. I commend the
Government on the latest sanctions on gold. The Minister knows
that I have been warning about the UAE gold trade in Africa for a
number of months now, and the measures in Zimbabwe are extremely
welcome. Can he ensure that this will now be expanded to Sudan
and other areas where that trade is so pernicious?
On implementation, I looked at the updates on enforcement on the
Office of Financial Sanctions Implementation website just before
coming into the Chamber. The Minister referred to enforcement.
The OFSI has said that, since 2019, there has been £21 million of
enforcement against UK businesses. But, since the Russian
invasion in 2022, there has been only £45,000-worth of
enforcement against UK companies. Is the Minister satisfied that
there is nearly 100% adherence to sanctions, or could we be doing
more on enforcement actions against those who are circumventing
them?
(Con)
My Lords, I record my thanks to the noble Lord for his kind
remarks. I recognise, as he has, that this is about cross-party
working and identifying what further steps we can take. I would
not be bold enough to suggest that we have 100% compliance or
that we are closing every loophole that has been identified; as I
said, there will be further action in these areas. I also take on
board some of the countries he mentioned where we can do further
work. I will work with colleagues across government to ensure
that, when we identify particular areas, I will notify the Front
Benches in the usual way about action we are considering
taking.
(Lab)
My Lords, what system do the Government have for monitoring these
sanctions? It seems strange that the media seem to have been
better informed than the Government. What measures will the
Government put in place to make sure that they do this
effectively?
(Con)
My Lords, part and parcel of our work with the Treasury and, in
particular, the Office of Financial Sanctions Implementation is,
first, to ensure that we identify the actual structures being
used and abused in this way to override sanctions and, then, to
work directly with companies and inform them of mitigation
methods that can be taken. This is ever-evolving, so, with the
more sanctions we impose and the more sectors we look at, there
is a lag time before they become effective. As I have already
alluded to, we have identified that there will be a time lag
while actions are implemented for particular sectors. I also
accept that some companies act inadvertently and that we should
not penalise them financially straight away; we should also look
at other methods, including those we are deploying directly.
(CB)
My Lords, would the Minister widen a little the response he has
given so far and say what systems we have for working with the
European Union so that our sanctions and their sanctions, which
are very similar, are implemented in a properly concerted way and
that we help each other to chase up over implementation?
(Con)
My Lords, the noble Lord draws important attention to the key
issue of co-operation with key partners. Not only are we working
very closely with the European Union on the sanctions policy
across the piece, but, particularly in light of Russia’s illegal
war on Ukraine, we are working hand in glove with the European
Union, as well as US partners and others, to ensure the
consistency of application, so that all jurisdictions reflect the
same types of sanctions applied to close those loopholes. As I
have said before, if an individual or organisation is sanctioned
either in the EU or in the UK and not in the other jurisdiction,
there is a direct loophole that needs to be closed.
