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Russia: Sanctions

Volume 832: debated on Monday 11 September 2023


Asked by

To ask His Majesty’s Government what assessment they have made of the impact of sanctions against Russia in the wake of its invasion of Ukraine.

My Lords, sanctions by the United Kingdom and its international partners have starved Russia of key western goods and technology, degrading Russia’s military and restricting its capacity to fight a 21st-century war. UK exports of machinery and transport equipment have decreased by 98%. Sanctions also limit Russia’s financial resources. The UK has sanctioned 29 Russian banks, accounting for over 90% of the Russian banking sector. We have also frozen over £18 billion-worth of Russian assets in the UK. Without sanctions, we estimate that Russia would have over $400 billion more to fund its war machine.

My Lords, I thank the Minister for his answer. The stated aim of sanctions is to

“encourage Russia to cease its destabilising actions in Ukraine”.

It seems to me that there is no evidence that sanctions have had any such impact. Russian GDP has dropped by a mere 2% and the country is skilled in circumventing sanctioned goods through third countries. Despite being subject to 13,000 different sanctions, which I think is more than any other country before, they have made no appreciable difference to Russia’s behaviour—we think of its links with North Korea, China, Iran and so on. Are the Government therefore prepared to move to more precisely targeted smart sanctions, the aims of which are clearly defined and the impact of which more measurable?

My Lords, the right reverend Prelate talked about the impact of sanctions. I can share with him that sanctions are having a direct impact. On revenues alone, they have left Russia’s budget in deficit, rather than the surplus that the Russian Government themselves predicted for 2022. Russia has suffered an annual deficit of £47 billion, the second highest of the post-Soviet era. Russia’s energy revenues fell 47% in the first half of this year. At the same time, global oil prices are lower. Less immediately visible, but more importantly in the long-term, more than 1,000 foreign businesses have left Russia, along with thousands of high-skilled workers. More continues to be done, as we co-ordinate and work with other countries. Particularly notable recently is that Armenia, Turkey and Kazakhstan have taken action on the issue of supply chains, which the right reverend Prelate raised. That kind of co-ordination is important if we are going to make these sanctions work across the piece.

My Lords, we will let my noble friend ask his question and then we will go over to the noble Lord, Lord Sahota.

My Lords, on targeted sanctions, the oligarchs who make up the inner circle around Putin, and the huge number of people who have property here, have almost invariably made their money by nefarious means—they must have done, because 30 years ago there was no private capital in Russia. Could my noble friend the Minister give us an update on how many oligarchs are having their property—and whatever else—put into suspension so that we can confiscate and use it to rebuild Ukraine?

I agree with my noble friend that we all want—I think I speak for the whole House—to get Russia to pay for its war on Ukraine. At the time of the invasion, the UK sanctioned 129 oligarchs who have a combined net worth of around £145 billion. As I said earlier, we have frozen £18 billion-worth of Russian assets under the regime. The UK has also set up specialist agencies in the NCA and, as I said earlier, we are working with key partners. Legal hurdles need to be addressed, but we are not doing that alone—other partner countries are also looking to allow those assets, now that they are frozen, to be moved across. Ultimately, when the war ends, we can use the money from those assets in the reconstruction of Ukraine.

My Lords, the Prime Minister signed a joint declaration at G20 which did not condemn the invasion of Ukraine by Russia. Is the Government going soft on Russia now?

I am sorry to say that I cannot disagree more with the noble Lord. We have not gone soft on Russia; this House has not gone soft on Russia; this country not gone soft on Russia. At meetings such as the G7 and the G20, there are a broad number of countries and alliances. I assure the noble Lord that I have sat in many meetings where we have had to agree a statement; the fact that Ukraine was mentioned in that statement, with Russia present in the room, indicates a way forward. We also have to address these issues with partners who still do not have the same view as us, and we do that through effective diplomacy and specific action, as we are taking with our key partners.

My Lords, the Minister knows that Russia’s export in goods is now at pre-war levels, and the very friends the Minister referred to—in India and the Gulf—are offering financial services directly to Moscow. We are currently negotiating trade agreements with those areas, offering them preferential UK market access. Does the Minister share my concern that we are actively encouraging financial instruments who are supporting the Russian war machine to have preferential UK market access? Surely that cannot be right.

My Lords, many of those countries, including India specifically, have had historic and legacy relationships with Russia. As the noble Lord is aware, India has relied on Russian defence support for a long time over history. It is right that we talk directly, and raise those concerns, with key partners such as the UAE and India, while, at the same time, working constructively to ensure that there are alternatives. I assure the noble Lord that we are seized of that; it is why we are making progress in our discussions on the issue of circumvention with key countries such as the UAE. Turkey recently initiated certain procedures domestically to assist in this respect. Let us be very clear that, while Kazakhstan has a strong reliance on Russia, it is looking at its domestic legislation to see how it can curb the issue of circumvention.

My Lords, could the Minister explain to the House why we have a memorandum of understanding with the United States on co-operation over sanctions against Russia but we do not have one with the European Union? Could he also explain why the Foreign Secretary fended off the recommendation by the European Affairs Committee of this House that we need a properly structured framework for co-operation with the EU on sanctions so that, together, we could make them more effective?

My right honourable friend the Foreign Secretary has been very much leading on direct engagement with our partners in the European Union, not just on the issue of sanctions specific to this Question but on a broad range of issues. I know that we will shortly be looking in the Moses Room at various committee reports. I assure the noble Lord that we are working very much hand in glove with our key partners—that is, Canada, the United States, the European Union and others—to ensure that sanctions are co-ordinated. I look to the noble Lord, Lord Collins, specifically—this may have been his question—and say that we are working hand in glove with those partners, and the impact on Russia is beginning to tell.

Let me ask that question, as the Minister provokes me into it. Last week, I asked him specifically about Ursula von der Leyen’s statement about freezing €200 billion-worth of assets. The EU has announced that publicly. He said last Thursday that we support this initiative. Let us have a clear statement from the Government today that we will act in concert with the EU and announce our intention to freeze assets so that they can be repurposed for rebuilding Ukraine.

I assure the noble Lord that, in many years across the Dispatch Box with him I have sought not to provoke him, and if I have done so, I have failed miserably on this occasion. However, I can give him that assurance. I totally agree with President von der Leyen’s statement, and we are working with our key partners on ensuring that the assets that have been frozen stay there. The important thing is the legal impact, and no country, including the various jurisdictions of the EU, has yet designed the system and structure to allow for those assets to be deployed for the reconstruction of Ukraine. We are working with the key countries, and, as the noble Lord knows from the Ukrainian Recovery Conference, with the private sector, on reconstruction.

Given the assertion in the Washington Post last month that 6,000 drones have been supplied by Iran to Russia, will the Foreign Office reconsider its position on Iran, and in particular the IRGC?

My Lords, as my noble friend knows, we have taken a very firm line on Iran and sanctions. As the Minister responsible for Iran within the FCDO, I can say that we have taken a forward-leaning position on ensuring that Iran is held accountable for its actions. I agree with my noble friend that it is appalling that drones have been supplied directly by Iran. It is also interesting to note that Russia is now looking to the likes of Iran and the DPRK, both countries themselves subject to sanctions. I hear what the noble Lord, Lord Coaker, is saying from the Front Bench about the IRGC—that is why God has given us two ears: one for the questioner and one for the Labour Front Bench. Of course, I cannot speculate on future proscription, but I assure noble Lords that we keep all tools under review.

Did our Prime Minister raise with Mr Modi the fact that India is still importing a large amount of Russian oil that is then being mixed with other oils, and so it is difficult to identify, and resold on the international markets? This is dangerous in a number of ways. First, it supports Russia, but, secondly, we are getting a plethora of very dangerous tankers—I got ships in—around the oceans of the world, which is a real problem.

Tankers—as I know from the definition at school—count as ships, so, again, awards must go to the noble Lord. The Prime Minister had wide-ranging discussions with all G20 partners and during his bilateral with Prime Minister Modi. As the noble Lord will be aware, Russia and its illegal war on Ukraine were among a number of points that the Prime Minister raised directly with Prime Minister Modi.