Andrew Mitchell, Minister of State at the Foreign, Commonwealth and Development Office, makes a statement to the House of Commons 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—
Mr Speaker
Order. I have tried coughing; I have tried different ways of indicating that the Minister is almost a minute over. We need to get speeches better timed in future to three minutes. I am sure he is coming to the end immediately.
Mr Mitchell
Thank you, Mr Speaker.
Finally, we will continue to combat circumvention and seek to degrade Russia’s military capabilities by coming down hard on sanctions evaders and closing loopholes.
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.
Bob Blackman (Harrow East) (Con)
I thank my right hon. Friend for the update, but he will probably be aware that there are backdoor routes that are leading to technology ending up in Russia. The most prevalent of those is British universities supplying technology to Iran that ends up on drones, which are then used by Russia to attack the brave Ukrainians. Will he undertake to investigate this practice and put a stop to it, and to apply appropriate sanctions accordingly?
Mr Mitchell
My hon. Friend accurately identifies dangers to the sanctions regimes that can cause them to be circumvented. We are, I think, good at identifying and closing down such dangers, but I should make it clear to him that UK sanctions prohibit a range of activities related to the movement of prohibited items to and from Russia, both directly and indirectly. In that context, I will consider carefully the point that my hon. Friend has made.
Mr Speaker
I call the SNP spokesperson.
Peter Grant (Glenrothes) (SNP)
I thank the Minister for his answer. The SNP welcomes the extension of sanctions against the Russian regime, but we still think more needs to be done. For example, are there any plans to extend the sanctions that are currently in place against Hamas and other terrorist organisations operating in the middle east, which we know are forging closer and closer links with Putin and his criminal terrorist networks? In particular, the United States has already sanctioned a number of Hamas representatives and people close to Hamas operating in different countries in the middle east. Do the Minister and the Government have any plans to follow suit and sanction those same individuals?
The Foreign Affairs Committee recently described the UK Government’s efforts to sanction individuals and organisations linked to Russia’s Wagner terrorist group as “underwhelming in the extreme”. What action do the Government intend to take in response to that report, so that organisations such as Wagner and those who run them are effectively sanctioned? We know that Ukraine has imposed sanctions on the former KGB intelligence officer Alexander Lebedev. Do the UK Government have any plans to follow suit?
Mr Mitchell
I thank the hon. Gentleman very much for his comments. We do not give routine updates or a running commentary on sanctions, but he may rest assured that we are looking at Hamas in every respect. He drew attention to the Foreign Affairs Select Committee’s report; as he will know, we recently announced sanctions—both direct and indirect—against Wagner. While we are careful not to discuss specific cases, we take all potential breaches very seriously, and all businesses that are registered in the UK are bound by law to comply with the Russia sanctions regime.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
The Minister has given us a very informative statement. I am very interested in this business of intellectual knowledge getting to Russia via third parties. Can I take it that His Majesty’s Government have contacted and spoken with the vice-chancellors and principals of our academic institutions the length and breadth of the UK to advise them how this must be stopped?
Mr Mitchell
I thank the hon. Member for his comments about my informative—but overlong, Mr Speaker—answer to this urgent question, and I can assure him that we deal with all relevant areas. The point he makes about academic areas is a very good one, and we will make sure that that is fully taken into account.