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

Lord McDonald of Salford Excerpts

Thursday 3rd March 2022 Lords Chamber

[The Minister of State, Foreign, Commonwealth and Development Office (Lord Ahmad of Wimbledon) (Con)]

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.

This legislation follows the “made affirmative” procedure set out in Section 55(3) of the Sanctions and Anti-Money Laundering Act 2018. These statutory instruments amend the Russia (Sanctions) (EU Exit) Regulations 2019. The powers in them will prevent Russian banks accessing sterling, which is a significant and new measure for the UK. Russian banks clear £146 billion of sterling payments through the UK financial system each year. Without the ability to make these payments in sterling, designated banks will not be able to pay for trade in sterling, invest in the United Kingdom or access UK financial markets. This matches the power the United States already has to prohibit access to the dollar, showing our joint resolve to remove Russia from the global financial and trade system. Around half of Russian trade is denominated in dollars and sterling. We have already used this power to designate Sberbank, the largest Russian bank.

The same statutory instrument prevents the Russian state raising debt here and isolates all Russian companies—of which there are over 3 million—from accessing UK capital markets. This measure goes further than those of our allies, banning all Russian companies from lucrative UK funding. Russian businesses listed in London have a combined market capitalisation of over £450 billion. This includes some of Russia’s largest state-owned enterprises, and the Kremlin is hugely reliant on their tax revenues. Banning them from raising debt in London will further increase the burden on the Russian state. Global giants such as Gazprom will no longer be able to issue debt or equity in London. In the last seven years, Russian companies have raised over $8 billion on the UK markets. We have put a stop to this.

The Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2022 ban exports to Russia across a range of items, including the dual-use list and other goods and technology critical to Russia’s military-industrial complex and its maritime and aviation sectors. The SI also bans a range of technical and financial services related to such items. With this legislation, enacted in alignment with the United States, the European Union and other partners, we will collectively cut off Russia’s high-tech imports. This includes critical, high-end technological equipment such as microelectronics, telecoms, sensors and marine and navigation equipment. It will blunt Russia’s military-industrial and technological capabilities, gradually degrade Russia’s commercial air fleet, and act as a drag on Russia’s economy for years to come. The Department for International Trade and the Treasury will offer advice and guidance to UK businesses that are affected.

In conclusion, Russia’s invasion of Ukraine is part of a long-term strategy. If we were to give ground now, Mr Putin’s strategy of aggression would never end. Instead, he would be emboldened, and his focus would simply move on to the next target. The United Kingdom has been at the forefront of this response. Importantly, we are acting in concert with our allies; collectively, our measures will deliver a devastating blow to Russia’s economy and military for years to come. The importance of co-ordinating with our partners will allow our sanctions to reverberate through Mr Putin’s regime.

We must remain firm and resolute in our response. We must rise to this moment and, importantly, continue to stand with Ukraine and its people. I am determined that we will continue to support them in that choice. I beg to move.

[Lord McDonald of Salford (CB)]

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?

[Baroness McIntosh of Pickering (Con)]

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?