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Ukraine: Reconstruction

Volume 835: debated on Thursday 25 January 2024


Asked by

To ask His Majesty’s Government what legal options, if any, they are exploring to seize any Russian central bank assets that are frozen in the United Kingdom’s financial system and using such assets to fund the reconstruction of Ukraine.

My Lords, the United Kingdom, alongside the G7, has underscored that Russia’s international law obligations are clear. Russia must pay for the damage it has caused to Ukraine. G7 partners are urgently discussing this; we are exploring all avenues to aid Ukraine in obtaining compensation from Russia, consistent with our respective legal systems and under international law. I assure the noble Lord that I will keep the House updated on significant developments, as I have done before, and update the Front Benches, where we can, on the actions we plan to take.

I thank the Minister for his Answer; I hope he does not mind if I probe a little bit. There have been widespread reports that the US specifically is leading discussions about seizing up to £300 billion of Russian government assets. During the Economic Crime and Corporate Transparency Bill, responding to amendments that I tabled, the Minister, the noble Lord, Lord Sharpe, was very clear that the Government would not countenance seizing assets. So can the Minister say that the Government are now countenancing the option of seizing assets?

My Lords, of course we are working very closely, as I said in my original Answer, with G7 members, particularly the United States. On seizing assets, we will ensure that any action we take is legally robust. All elements, including asset seizure, are considered. In December last year, leaders at the G7 confirmed that, consistent with our respective legal systems, Russian sovereign assets in our jurisdictions will remain immobilised until Russia pays for the damage. I assure the noble Lord that we are working closely with the US in that respect.

My Lords, on the last point, when we dealt with the Russia sanctions, we specifically raised those sovereign funds and the accrued interest. I welcome the Foreign Secretary’s commitment and that of allies to investigate strongly to ensure that the Russians pay for the damage they have caused. Can the Minister update us on the interest issue that has been raised? Also, what has happened to the funds that were promised arising out of Chelsea Football Club?

On the noble Lord’s second point, that is something that we are working through. I cannot go into further detail, but we are working closely with our colleagues in His Majesty’s Treasury on this very objective. We want to ensure that the structures and legal obligations are fully fulfilled. I assure the noble Lord that I will update him on the specifics as soon as I can. On his first question, if the Russian sovereign assets that are held are earning interest, that should be part of the mix to ensure the compensation which is rightly due to Ukraine for the destruction Russia has caused and that Russia is held fully accountable.

My Lords, I draw attention to my interests in the register. Does the Minister agree that in doing such an action, notwithstanding the critical issues in front of us with regard to the aggression, there is a need to think about the unintended consequences of seizing assets without the proper law?

I believe I have addressed that. I agree with the noble Lord, and that is what I have said. Any action, whatever that may be, must be legally underpinned and legally robust. That is why sometimes we are slightly constrained in what we say from the Dispatch Box.

Did the Minister see the article in this week’s Financial Times by Bob Zoellick, distinguished former Secretary of State, USTR and president of the World Bank, in which he argued that frozen funds should be used now for the benefit of Ukraine and suggested the best way of doing that? How did the Minister react to Bob Zoellick’s suggestion?

I think that it is based on his insight and experience. It is helpful that the US is exploring various options, as the noble Lord, Lord Fox, also pointed out. I cannot go further at this time than saying that we are working very closely with the US on the steps it is taking or seeking to take to see how they can best be transposed and reflected in our structures. Coming back to the key point, they must be underpinned to ensure that they are legally robust.

Before we become overzealous over the seizure of assets, have we considered the prospect of reciprocal action by Russia against UK assets in Russia? How can we on the one hand confiscate assets held by Russia, which is a power normally exercised in wartime, while on the other hand insist that we are not at war with Russia? Is it not more realistic to claim on income streams from frozen assets, as has already been suggested, rather than on the principal capital involved?

My Lords, I disagree on several points here. What is very clear, and I think the majority of your Lordships will agree with me, is that Russia is accountable. The freezing of these assets has had a net benefit. The majority of your Lordships and those in the other place fully support the Government in their position, which is to ensure that we immobilise Russia’s ability to finance its war effort. We have taken action to ensure that assets worth more than $400 billion cannot be mobilised. Not taking the steps we have taken would have allowed that $400 billion to be used differently. We need to ensure that we focus our actions. As I said before, everything we are doing, which is why we are being very careful in this, is in association with our G7 partners. We are working with other countries on the circumvention of the sanctions we have imposed and are ensuring that the actions we take are legally underpinned.

My Lords, we now have £21.6 billion of frozen assets in the UK. Across Europe as a whole there are over £300 billion. On Monday, the European Union decided to institute a windfall tax on those frozen assets, which will accrue €2.3 billion for the Ukrainian people. Why are we not putting in place a windfall tax on frozen assets in the UK so that we can contribute to the Ukrainian people from that?

I am aware of the steps that other jurisdictions are taking. I am not going to make policy on the hoof here and suggest that we are now going to impose windfall taxes, et cetera. There could be a general political point I could make towards the Lib Dems on windfall taxes generally and domestically, but I will refrain because of the seriousness of the subject. It is important that actions are co-ordinated and that as other jurisdictions, the US and the EU, take steps we reflect on what they are and see how they can best be reflected in our systems and structures.

My Lords, is the Minister aware that one of the messages coming out of this is that this is not a safe place to put money and that countries such as Switzerland and Singapore are probably rubbing their hands with glee? Has he looked at the excellent publication, The Economic Consequences of the Peace, and seen the terrible mess that the Allies got themselves into throughout the 1920s by chasing Germany and the consequences that eventually followed?

My Lords, on my noble friend’s second question, financial systems and capital markets have developed very differently and progressively since the era he talks of. On the first question, I disagree with him profoundly. The message, which is clear from this House and this Government, is shared by many in this House and beyond. It is that Russia is conducting an illegal war and that for those who conduct illegal wars there will be consequences, including financial sanctions.

My Lords, does the Minister recognise that when the Foreign Secretary appeared before the European Affairs Committee before Christmas, he said he was convinced that there was a legal way of sequestrating the capital as well as the interest? Does the Minister not think it is a little dilatory to be coming before the House now, a month later? The Foreign Secretary did not say what that route was and nor is the Minister saying what it is now. Could he perhaps spill a bean or two?

One thing I have learned as a Minister is that you never spill the beans unless it is necessary. The noble Lord will know from his experience of being a leading diplomat that of course there are avenues and routes that we are exploring and that we need to ensure that when we announce policies, they can be implemented effectively. In this case my noble friend the Foreign Secretary has indicated the Government’s intent and, as we can, we will update the House.