UK MPs call for tougher sanctions on Russian state

LONDON: UK Members of Parliament have called on the UK government to act with its international counterparts and toughen the financial measures taken against Russia's President Vladimir Putin and his associates, including preventing the Russian state and state-linked agencies from issuing bonds.

In early April, initial sanctions were imposed by the US and European Union on selected individuals connected with the Putin regime but many Russian entities, including the state itself, were not caught by these measures.

The sanctions came partly as a reaction to the poisoning of Sergei Skripal and his daughter Yulia in Salisbury on March 3. That led to the expulsion of 23 Russian diplomats from the UK and 127 from the US and EU. However, that did not deter Russian entities from raising money.

The sovereign issued an international bond deal shortly after the expulsions. And state energy producer Gazprom sold a euro-denominated bond two days before the sovereign. The latter is also considering selling bonds internationally in the coming months.

The House of Commons' Foreign Affairs Select Committee urged the government to "close the gaps in the sanctions regime that have seen companies use London markets but be sanctioned in other jurisdictions" and "close the loopholes that allow debt issuance be used to go around sanctions.

"Russia's ability to issue new sovereign debt on global markets with the assistance of sanctioned banks undermines the global sanctions regime and supports the aggressive behaviour of the Russian state," the committee's report published this morning said.

"Any action taken to limit or prohibit the issuance of Russian debt on global markets, however, must be taken jointly by the EU, US and other international partners in order for it to be effective."

The report also said sanctions should be extended "to target more individuals who are closely linked to President Putin's regime" by adding powers to the Sanctions and Anti-Money Laundering Bill that is going through parliament.

The committee also wants to see further transparency measures taken to show the ownership behind companies and so "crack down harder on illegal money-laundering".

"The UK must be clear that the corruption stemming from the Kremlin is no longer welcome in our markets and we will act," said Tom Tugendhat, chair of the committee.

As well as issuing debt via London, Russia is also using London courts to try and force neighbour Ukraine to repay $3bn it believes is owed. The money stems from a two-year bond issued by Ukraine directly to Russia in December 2013 months before Russia annexed Crimea.

Ukraine subsequently carried out a debt restructuring, which they said these bonds should also be subject to. Russia said it should be paid in full as a sovereign creditor. The High Court in London initially found in favour of Russia but Ukraine appealed earlier this year with the judgment expected shortly.

The MPs also called on the UK government to "work with the EU, and with the US, to prohibit the purchase of bonds in which a sanctioned entity has acted as bookrunner. It should also seek EU agreement to bar the European clearing houses from making available Russian sovereign debt."