Republic of Belarus and the Russian Federation: Sanctions and Tariffs

Hywel Williams Excerpts

Wednesday 8th March 2023 Westminster Hall

[Siobhain McDonagh]

I agree with the hon. Member. The sanctions regime is integral to Britain’s role in supporting Ukraine and holding Putin’s regime accountable for the acts of violence that it continues to perpetrate against civilians across Ukraine.

[Hywel Williams (Arfon) (PC)]

I am grateful to be able to add my voice, and that of my party, to the hon. Lady’s comments. Our concern is that the sanctions regime is not being extended far enough and specifically to countries in the developing world that are being seduced by Russia to trade with it.

[Siobhain McDonagh]

I agree with the hon. Member entirely.

This winter, the people of Ukraine carried on through the difficult war that they face, and we need to back their bravery by being brave and bold with sanctions and tariffs. However, the joint sentiments are worthless if things do not happen in practice, and sadly this is the case for a business group in my constituency. I recently met SGG Manufacturing Ltd, JDUK Ltd and Alunet Systems Ltd—a small group of wholly UK-owned businesses that I am glad to see represented here today. They are based in a number of MPs’ constituencies—particularly that of the hon. Member for Dewsbury (Mark Eastwood), who apologises that he is unable to attend, but he is absolutely on board with the case that I am about to raise.

Prior to the war, the businesses were, in part, the sole and exclusive distributors of a Belarusian manufacturer. They imported and distributed aluminium extrusions and products from Belarus. For example, they supplied components for roller garage doors—not the most glamorous of products, I agree, but over 10 years these British businesses had grown their revenue to £30 million per annum. Over 10 years, they had managed to supply 30% to 50% of roller garage doors in the UK using their components.

Then, the war in Ukraine happened. In response, the businesses did the right thing. They decided to abandon their exclusive contract with the Belarusian manufacturer and sourced their components from elsewhere in Europe—a decision that was expensive, risky and lengthy but nevertheless the right thing to do. The Government then introduced additional tariffs of 35% on Belarusian and Russian goods, which made it clear that the decision by those businesses was not just the moral thing to do but the right thing to do from a business perspective—that is, if the sanctions and tariffs were implemented effectively. Unfortunately, they were not.

The original Belarusian supplier is now managing to circumvent the sanctions and is continuing to import banned products. It is also able to pay the relatively low additional tariff of 35% with ease, so it can operate very competitively in the market. The British group, based in my constituency, has played by the rules and has had to find a more expensive manufacturer elsewhere in Europe.

--- Later in debate ---

[David Rutley]

I thank the hon. Member for that contribution, and I recognise that it is sometimes difficult to arrive bang on time for the start of a debate. I am not familiar with that particular case. Where people seek to circumvent our sanctions regime, we will review that in two ways: first, by continually reviewing and updating our sanctions lists; and, secondly, through HMRC’s serious enforcement action, which I will come to in a minute.

The latest package of internationally co-ordinated sanctions and trade measures announced on 24 February includes export bans on every item that Russia has been found to be using on the battlefield to date. These are important sanctions. Our sanctions toolkit extends far beyond the designations of individuals or entities.

In the year since Russia’s full-scale invasion of Ukraine, the UK has introduced an array of measures targeting the trade, finance, military and industrial sectors. These measures target industries that support the war and prohibit all new investments in Russia via third countries. They are constraining Putin’s ability to maintain the occupation of Ukraine, and they are weakening and isolating the Russian economy.

Our trade measures alone reduced Russian goods imports to the UK by 99% between September and November last year, compared with the same period in 2021. UK goods exports to Russia fell by nearly 80% over the same period. More than £20 billion of UK-Russia trade in goods is now under full or partial sanction. By anybody’s metrics, these are substantive measures. But Putin has not acted alone. Lukashenko’s regime in Belarus has actively supported Russia’s illegal and unprovoked actions. That is why UK sanctions also apply to Belarusian individuals, entities and organisations who have aided and abetted this reckless aggression.

In July 2022, we introduced legislation imposing further sanctions on Belarus in response to its support for Russia’s war. These sanctions included giving the UK the power to detain and de-register Belarusian aircraft, and measures prohibiting Belarusian ships from entering UK ports. We also expanded existing financial sanctions measures, banning more Belarusian companies from issuing debt and securities in London or obtaining loans from UK banks, among other measures. The legislation introduced trade measures against Belarus, including bans on the export of critical industry goods and technologies, as well as luxury goods, and a ban on the import of iron and steel.

Since before Russia’s invasion of Ukraine, Lukashenko’s regime in Belarus has shown continued disregard for international law and has committed ongoing violations of the fundamental freedoms and human rights of the Belarusian people. The regime initiated a brutal crackdown in 2020, which continues today, in response to protests which followed the flawed 2020 elections.

The UK previously introduced sanctions against Belarusian individuals, entities and organisations who have supported and facilitated the Lukashenko regime’s human rights violations. These sanctions signal our discontent and are intended to coerce the Belarusian regime to change their behaviour. In total, with the addition of our designations since Russia’s illegal invasion of Ukraine, the UK has targeted more than 120 Belarusian individuals and entities.

Tariff measures are adding further weight to our response, tightening the screws on Putin and his supporters. Between March last year and January this year, we introduced four batches of 35% tariff increases on a wide range of goods from Russia and Belarus worth over £2.4 billion, from vodka and caviar to certain metals, chemicals and plastics. Tariff increases on Belarus have been made in line with the evolving sanctions positions as part of our co-ordinated response.

[Hywel Williams]

Before the Minister moves on, is he in a position to comment on how Russia is evading some of the sanctions broadly imposed by the west by trading with countries that are developing or emerging markets? Russia is evading our sanctions, however well we impose them.

[David Rutley]

I will come on to what we are doing to tackle circumvention in a little more detail. The Russians are doing everything they can to try to avoid these sanctions, because they are biting on their economy. We continually need to refresh our sanctions approach to respond to that, and we are.

The hon. Member for Mitcham and Morden will be aware that a letter to the Foreign Secretary in January was passed to HMRC, as the lead enforcement authority for trade sanctions, for further review. As I am sure she will understand, HMRC cannot and does not comment on specific cases. However, I can assure her that the Government and HMRC take this and all reported alleged sanctions violations very seriously indeed.

I will take this opportunity to acknowledge the important role that businesses can and do play in providing us with information and intelligence about suspected sanctions breaches, such as by self-reporting. That is an important part of our sanctions enforcement architecture, and it is vital to help to inform the action that is taken.

The hon. Lady asked about steel and aluminium products. That issue relates to differences in the scope of the UK’s Russia and Belarus sanctions regimes, as has been highlighted by a number of colleagues. Different regimes serve different foreign policy objectives. Although there are links between Russia and Belarus sanctions, they are distinct. We keep our sanctions under review. Given Russia’s ongoing and outrageous actions in Ukraine, we have continued to bring forward new measures since the invasion last year.