UK Sanctions Regime: Russia and Belarus

Stephen Doughty Excerpts

Thursday 9th November 2023 Commons Chamber

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

(Urgent Question): To ask the Secretary of State for Foreign, Commonwealth and Development Affairs if he will make a statement on the effectiveness of the implementation of the UK sanctions regime against Russia and Belarus.

[The Minister of State, Foreign, Commonwealth and Development Office (Mr Andrew Mitchell)]

The sanctions regime is dealt with by the Minister of State, Foreign, Commonwealth and Development Office, my right hon. Friend the Member for Berwick-upon-Tweed (Anne-Marie Trevelyan), but I shall do my best to answer this most important question posed by the hon. Member for Cardiff South and Penarth (Stephen Doughty).

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—

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[Mr Speaker]

For the record, I want to say that we had a bit of drift over earlier. We are back in a new Session. The rules are quite clear: the time limit is three minutes for the Minister, and for those who have tabled the question, it is two minutes. Please adhere to it. Do not take advantage of the Chair, because you are taking advantage of the people I represent: they are called Back Benchers.

[Stephen Doughty]

I thank the Minister for his response. He will know that there is unity across the House in standing with Ukraine, but there are serious concerns about the effectiveness of our sanctions regime. Almost two years have passed since Putin began this phase of his illegal and barbaric invasion of Ukraine, but on Monday, it was revealed by The Times that a British company has allegedly continued to ship semiconductors to Russia since Putin’s war began and that these have been identified within at least one Russian tank deployed in the conflict against Ukraine. It also reported that the company only stopped shipping to its Russian distributor after the bank refused to process payments for these exports. There are clearly serious deficiencies in the implementation of our regime that must be addressed. I had these raised with me on my recent visit to Kyiv, and I draw attention to my declaration of interests.

I would like clarity from the Minister on a number of key points. Can he confirm whether there are loopholes within our regime that continue to allow for materials to be exported to Russia and Belarus that could be used in the production of military items? Why do those omissions still exist, and what steps are being taken to deal with them?

Secondly, can he set out what assessment has been made by the Foreign, Commonwealth and Development Office and the Treasury of the existence of alleged loopholes that allow indirect imports into UK markets of Russian or Belarusian origin steel, or indeed Russian origin crude oil that has been refined in third countries? These are very serious allegations.

Thirdly, City AM revealed this week that nearly 130 UK companies have admitted breaching Russia-related sanctions as a result of a freedom of information request by the law firm Pinsent Masons. It is good that those companies have come forward voluntarily, but it shows the scale of the problem.

Finally, according to the Office of Financial Sanctions Implementation, only one financial penalty has been issued regarding a sanctions breach within the Russia and Belarus sanctions regimes since February 2022, and only three penalties have been published across all UK sanctions regimes since June 2021. That compares very unfavourably with the United States and other allies, which have been issuing fines and dealing with this issue. Labour stands unshakeably with our allies in providing military, economic, diplomatic and humanitarian assistance to Ukraine in the face of Putin’s illegal invasion, but that must include a robust sanctions regime.

[Mr Mitchell]

I thank the hon. Gentleman very much for his comments—I know the revelations in the British media to which he referred at the beginning of his remarks. I will write to him today on some of the technical points he has raised, giving him a very specific answer. On the general point he has made, I can tell him that Britain has prohibited the export to Russia of thousands of products, including semiconductors, and our trade with Russia is down over 96% from pre-invasion levels. We are also providing advice to UK businesses on how to identify methods of circumvention and have shared a list of products of particular concern that could end up on the battlefield.