Ministers consider harder US-style regime, with City commercial interests at stake
The UK government has said a potential battery of tougher sanctions against Russia could be introduced once Britain has left the EU next March, raising the prospect that it will join the US in preventing Russian sovereign debt from being issued in its markets.
The security minister, Ben Wallace, said: There are winner and losers in Brexit. One of the winners in this case will be that the UK when it comes to foreign policy such as the sanctions regime will be able to behave in a way that we think will have more of an effect.
The UK recognises it will struggle to win the required unanimous EU support for further sanctions against Russia. The strongest chance for further EU action will come if the UNs Organisation for the Prohibition of Chemical Weapons rules Russia has failed to declare its full chemical weapons programme, and specifically access to the nerve agent novichok.
That may not happen for many months, if at all. The EU commission said on Thursday it was for member states to decide whether further sanctions should be imposed
UK ministers say it is an open question as to how far the UK will evolve after Brexit from shadowing the EU sanctions regime to adopting the far more aggressive US measures. They know the City of London has seen its commercial interests protected until now by the need for most measures to be supported by the EU as a whole.
Evidence to the US Senate banking committee published on Thursday showed that no fewer than 58 different sets of sanctions are in force against Russia, imposed under both the Obama and Trump administrations.
The sanctions relate to transnational and organised crime, human rights violations, the illegal annexation of Crimea, interference in the 2016 US presidential elections, support for the Syrian regime, violation of North Korean sanctions and, finally, the use of chemical weapons. The scale of the US sanctions against Russia are sometimes obscured by Donald Trumps personal determination to maintain close relations with Vladimir Putin.
The US Congress has made the introduction of a ban on the issuance of Russian debt the likely flagship measure in the Defending American Security from Kremlin Aggression Act passed this year.
Daniel Friend, the official responsible for sanctions policy in the Obama administration, told the Senate committee that fresh sanctions could include prohibition of new debt financing for Russian state-owned companies and imposition of full blocking measures against selected state-run financial institutions.
Friend conceded that the effectiveness of US sanctions against Russia was up for debate and he cautioned against outsized expectations. He said: Sanctions alone seldom cause their target to surrender or admit that it is beaten. Sanctions usually work at a pace slower than you want (or have promised to your boss or to Congress). Still, if maintained and enforced, they can have a cumulative impact over time, especially when accompanied by other forms of pressure.
Russia said its growth rates were not affected by sanctions, and the greatest risk came from disruption in emerging markets.
The UK Foreign Office on Thursday formally admitted that loopholes in the EU sanction regime meant that in March the Russian VTB bank was excluded from EU sanctions even though it was the only bank involved in issuing eurobonds worth $4bn to finance Russian sovereign debt.
VTB Capital was an English-based subsidiary and as such was not designated under EU sanctions and so able to act as book runners for the sale of Russian state bonds.
Other measures being considered by the UK include:
Publication of the names of anyone sanctioned under the Magnitsky legislation, which is aimed at those responsible for gross human rights violations.
A draft bill to be published in the next few months setting up a register of ownership for overseas companies that own property in the UK.
An order in council by the end of 2020 requiring overseas territories such as the British Virgin Islands to set up public registers of beneficial share ownership in their jurisdiction.
A requirement that a public register be set up in UK crown dependencies such as Jersey and the Isle of Man, once such registers are accepted worldwide and not before 2023.
The rolling out of a considerable number of unexplained wealth orders allowing for the seizure of assets if the public authorities have suspicion the assets were gained unlawfully.
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