Senate Foreign Affairs, Defence and Trade Legislation Committee, , 5:47:50 to 6:13:53
DFAT officials provide updates on industry consultations and the status of approximately $100 million in frozen Russian financial assets.
Topics: DFAT, National security
Speakers: Dr Christian Hirst, Julie Heckscher, Hon Sarah Henderson, Michael Googan, Unknown Speaker, Speaker 22, Vaibhav Raghunandan
>> I'd now like to welcome representatives from the Department of Foreign Affairs and Trade and the Department of Defense. The Senate has resolved that an officer of a department of of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and should be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted. If a witness objects to answering a question, they should state the ground upon which the objection is made and the committee will determine whether it will insist on an answer having regard to the grounds which are claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Commonwealth officers appearing today are also reminded of the Senate order specifying the process by which a claim of public interest immunity should be raised. A copy of the order is available from the secretariat. I understand that information on parliamentary privilege and the protection of witnesses giving evidence to Senate committees has been provided to you. For the handsome record, would you please each state your full name and the capacity in which you appear today?
>> Thank you. Christian Hirst, first assistant secretary, Europe division, >> Lloyd Brick, assistant secretary, Eastern and Southeast Europe branch, >> Julia Hexer, first assistant secretary, Regulatory and Legal Policy Division, DEFAT. Michael Gugan, acting assistant secretary, Australian sanctions office,
>> Uh, thank you very much for all appearing remotely and in the room. We
>> Brigadier Mark Baldock, director general fuel capability department of defense.
>> Thanks, Brigadier.
>> And Emily Hall, acting first assistant
>> Thank you. And do either the Department of Foreign Affairs and Trade or the Department of Defense have an opening statement? Oh, sorry. Um, yeah, an opening statement that you wish to make.
>> Yes. Thank Thank you, Chair. One from the Department of Foreign Affairs and Trade. Um, so I just want to thank you for the opportunity to appear before this inquiry. Um,
>> and that's Mr. Hirst. Sorry, Dr. Hirst.
>> Dr. Hirst. Yes, Christian Hirst. just to
help just to help
division and have responsibility for our Russia and Ukraine policy settings. And of course, my colleagues online uh from our regulatory and legal division have responsibility for our sanctions policy settings. Um Australia's support for Ukraine has been absolutely steadfast. Uh and we are uh committing committed to itself against Russia's illegal and driven by a variety of policy tools. Um on the one hand, we've continued to provide material support to Ukraine in the form of military assistance, uh humanitarian assistance and energy assistance. And on the other hand, we have continued to apply pressure on Russia to ensure it bears costs for this illegal invasion. Australia currently has over 1,900 targeted sanctions in place that relate to Russia. Um the most of any country that we sanction. Over 1,600 of these are in direct response to Russia's illegal war. Uh we've imposed trade measures to prevent Russia from acquiring key technologies and to restrict revenues that Russia derives from its natural resources. These are most wide ranging and multifaceted sanctioned measures uh reflecting the scale and seriousness of Russia's breaches of international law, including the UN charter. Australia's sanctions against Russia are developed and implemented in close coordination with our international partners, particularly the UK, Canada, New Zealand, the US, and the European Union. Um, working with partners really is an essential feature of the way we are um applying pressure on Russia through our sanctions regime and it's been effective in uh limiting Russia's ability to wage this war. Uh the UK government estimates that global sanctions have deprived the the Russian state of at least $450 billion since February 2022. Russia's economy is showing signs of strain. In 2025, growth slowed to 1% and last month, January 2026, the IMF downgraded Russia's GDP growth forecast for 2026 to 0.8%. Data from Russia's own Ministry of Finance indicates that oil and gas revenues fell by 19.4% in the year to November 2025. Oil and gas revenues in January 2026 were the lowest since July 2020 and less than half of what they were in January 2025. But as we are all painfully aware, Russia continues to wage this war. While there is little doubt that global the global sanctions regime has been effective in uh constraining and limiting Russia's war machine, it's also clear that Russia puts enormous effort into evading sanctions. Russia's expansion of its shadow fleet vessels is the most clear example of this. Uh and it allows Russia to continue to transport Russian oil um as a direct response to sanctions pressure. Australia has now sanctioned 200 sanction uh shadow Russian shadow fleet vessels in response to this. While Australia banned the direct import of Russian oil in 2022, taking the value of imports from $80 million in 2021 to zero. We are of course aware that some Russian oil makes its way into refined petroleum products in Australian supply chains. Strobe, which we've been focused on today. The interconnectedness of global supply chains, Russia's large share of the global oil supply, and the mingling of oil products makes eliminating the revenue Russia gains from these sales a complex challenge. As the foreign minister has noted repeatedly, Australian consumers expect businesses to know their supply chains and ensure they're not importing Russian oil uh refined products. Since 2025, DEFAT has engaged uh closely with industry representatives including uh the Australian Institute for Petroleum who you just uh had as a witness to discuss options to eliminate stroke from Australian supply chains. Uh our officials at our posts in India have also been engaging closely with Reliance Industries about the possibility of Russian oil being present in refined products imported to Australia from India. And we did welcome the announcement from Reliance that it would cease Russian oil imports into its dedicated Jamnagar special economic zone refinery and would export strofree refined products from the 1st of the December 2025. Uh and we were pleased that a reliance commissioned audit by Lloyd's register in 2025 December 2025 confirmed that the bifocation segregation of Jamagar's domestic and export oriented refineries. We also acknowledge the EU and the UK's announcement of bans on the importation of oil products refined in third countries from Russian crude oil. Uh the EU ban took effect on the 21st of January. The UK has not yet announced uh when it will implement its measure. We are uh engaging very closely with the EU and the UK to learn more about uh how they're implementing their plans and developing their plans to make these uh measures have effect. So, we'll continue to work closely with partners to assess options to put further pressure on Russian energy revenues to ensure that our sanctions continue to weaken Russia's capability and resolve. Thank
>> Uh thank you so much for that statement. We'll now go to questions and I will start with a number of questions. Firstly for DEFASH and I'll begin with the point that you've just raised about the ban of importation of Russian crude oil from third countries by the EU and the UK and that is of very serious concern that the Australian government has not acted in that respect. Why are you still assessing this rather than acting so that Australians, including the Ukrainian community, can be assured that they will not be consuming Russian oil in this country and supporting Russia's war effort and breach of international
>> Thank you for the question. Um we are as I said working very closely with uh Australian industry and with the EU and the UK to understand uh what the EU has is doing what the UK plans to do and to make sure anything we would design in Australia didn't have any unintended consequences particularly for fuel security for pricing and would have the effect that we would want to have. Uh we're consulting widely across government to make sure the op options we develop are the most effective options.
>> So this is a live option that you are considering
>> there there are options being considered. Yes.
>> Being this option in particular the ban the ban on importation of Russian crude oil from third countries.
>> We we would we're wanting to learn as much as we can from the EU in particular to see how their ban is working. um that's the most recent and the only ban in fact. So that's the one we're looking most closely at and then looking at a range of other potential options that would suit our unique circumstances noting our supply chains are uh different from uh the EUs. Um so we'd want to make sure it was uh fit for purpose for Australian circumstances.
And so what's the nature of your consultations with whom are you consulting and have you prepared any any briefs or other consultation papers to
uh our consultation's been going on for a number of months now uh with the uh AIP and other industry players um on how they are seeing the EU process, how they understand what the UK are doing and to understand potential impacts on Australian supply chains. Uh we have uh an ongoing whole of government process uh which is led in my division to consult with uh the affected government departments who would uh play a role in this process to to get their input into uh potentially designing options to respond to this problem.
>> And so is this a case that you don't know how to implement the ban or are you trying to understand the impacts of such a ban in Australia? What what is your hesitation given the EU has acted and of course also now the the UK?
>> The EU ban has only been in effect for for a few weeks. The UK hasn't yet put their ban into effect. They've announced an intention to do so but are still designing it. um and each EU member state is taking a slightly different approach and we're trying to understand of the 27 member states and in fact some of the EU's member states continue to directly import Russian energy products. So it's a it's a it's a mixed picture in Europe. So, we're trying to get a really clear understanding of what would work, what is working in the EU context, talking to the UK closely about how they're proposing to implement their ban to make sure anything we design here has the effect we intend and that we're able to uh design it to suit our circumstances.
>> Because Dr. Hirst, we've heard some alarming evidence today from the Australian Federation of Ukrainian Organizations making it very clear that currently more money is going to Russia than Ukraine from Australia by way of um the imports coming into this country have generated revenue by way of direct tax revenue to the Kremlin of some $2.45 45 billion dollars in Australian dollars. So, can I put it to you that this is an urgent situation and that Australia does need to act to stop the flow of money to Russia?
We're we're we're very um aware of the position of the Ukrainian community and we're working very closely with uh as you'd expect talking closely to the Ukrainian government about how we can continue to support Ukraine and put pressure on Russia. Um, as as I said in my opening statement, uh, the sanctions we have in place and the sanctions the international community have in place has has deprived and the UK government estimate has deprived the Russian state of over $450 billion worth of revenue. Uh, the Russian economy is under strain. Uh, so that what what we are doing at the moment is having a real effect in depriving Russia of revenue. Um, and we we will continue to explore options to do even more.
Well, that's not the evidence we've received, though. The evidence we've received very clearly is that there's more money going from Australia to Russia than there is to Ukraine. We're talking about billions of dollars by way of direct tax revenue as a result of the import of Russian crude oil.
>> I'm aware of the data that the um Korea and others and the Ukrainian community have put forward on this. As I said, the impact of our work with the international community on the sanctions regime has been to significantly impact the Russian economy and to deprive it of a significant amount of revenue. Uh so I think that that is worth acknowledging and we will as I said we'll continue to look for opportunities to put further pressure on Russia.
>> I'll be as quick as I can because I know other senators have questions. Your submission notes that since April 2022, Australia has a total prohibition on crude oil and petroleum products from Russia. Uh how do you assess the effectiveness of this prohibition? Um given of course that it's not
Uh I maybe I can talk to maybe my sanctions colleagues can talk to how how the operation of the prohibition but it's the effect has been to zero out all Russian energy import. We have zero Russian uh energy imports into Australia since 2022.
>> Do you concede though that Russian products are still coming into Australia
>> through through third parties? Sorry.
>> Um, yeah, happy to just jump in there and clarify the the current scope of the
if you could just state your >> Sorry, if you could just state your name for particularly will really help. Hansard. Thank you.
>> Yeah, Michael Gugan from um the Australian sanctions office. So just to clarify um the sanctions that we have in place in relation to Russian energy products does ban the direct importation of Russian crude and other Russian energy products from Russia into Australia. Um and as um first assistant secretary uh Dr. Hirst uh mentioned um that has resulted in the reduction of um um energy imports from Russia to Australia. I don't have the exact figures in front of me, but I think it was about $80 million at the point of uh the start of the conflict to zero today. So, we definitely have seen an impact of uh the sanction ban that we've put in place for direct imports of Russian energy products. Um nevertheless, you know, as we've seen in the testimony today, including from Korea and the Australian Institute of Petroleum, you know, um uh and as Dr. Hirst mentioned we are thinking further about the the this other issue which is where um uh Russian energy products are sent to third countries then refined and sent to Australia. So that's that's the issue that um uh Australia is looking closely at how the EU and UK are grappling with that problem.
>> So just to go back to the prohibition, it's not legislated. Is there any reason why it hasn't been legislated?
Sorry. To clarify, the prohibition on the direct import of Russian energy is legislated. Um the the next issue that we're now looking at is the one that Dr. Hirst referred to which is
>> So So the direct imports is there is a direct legislative prohibition on direct imports. Um what is that effective? How effective is this proving to be? Um we've heard evidence that Russian products are still coming into
>> Um so as I mentioned earlier, yeah, we've our assessment is that the direct import of Russian energy, our sanctions have been effective in in stopping that trade.
>> Yeah.
Senator, perhaps I can just jump in. This is this is uh part of the sanctions legislation. So the sanctions legislation, it's one of the commercial the trade bans that's implemented through the Russian sanctions legislation. It's specifically limited to direct imports of Russian crude. I think some of the things that you've heard uh this morning don't relate to direct imports. I I didn't hear anything this morning that uh that contradicted the uh assessment that direct imports from Russia had stopped. It's the indirect imports or substantially transformed
products. So are you suggesting that there are no Russian products coming into this country directly now in contravention of the um sanctions ban the sanctions framework?
>> That's the information that we have. Obviously it comes from ABF etc who monitor what's coming in but this is the direct from Russia imports.
>> Yes. and and can you please advise our committee what's the approximate value of Russian assets frozen and seized by the Australian government?
>> Uh I can uh answer that and I I think it's probably just because I've heard a lot of comparisons with Europe. It might be useful just to give a little bit of context as well, Senator, if you'll first of all when Russia invaded Ukraine the Australian relationship with Russia was already uh pretty minimal. Uh trade volumes were already pretty low. Uh so there was not really that much coming into Australia. So I think important just to compare that to the situation in Europe which obviously deeply inshed with Russia at the time. So that's number one. Number two, under sanctions legislation, important to understand what the obligations are to notify because that actually reflects on what information we have. Under the sanctions legislation, the holder of an asset owned or controlled by a sanctioned individual or entity has to be frozen under Australian sanctions law. So, uh, the individual who holds or controls an asset that's owned or controlled by a sanctioned individual or entity is obliged to notify the AFP. Um and in addition since we particularly since we got our budget measure which gave us some more resources for monitoring and compliance activity to supplement that obligation to both freeze and to notify. We undertake outreach to in particular the financial sector to just reinforce that obligation and to check on uh the amount of assets that are frozen based on the notifications that have been made. The information provided to us, the outreach that we've done to the financial sector, the information we have suggests under $100 million of Russian uh financial estim uh financial assets held in Australia.
>> Could we please uh or can you break that down? So, how is that $und00 million in assets broken down into what sort of
>> Uh financial assets. No. >> Uh, financial instrument securities held in Australia.
>> Could you just break the hundred million dollars down so we can understand?
>> I'm afraid I can't I don't have that information with me, Senator. Um, so I can't actually break it down any further. Some of that would be Russian sovereign, but some of it would be Russian private assets as well.
>> And so what is Australia if we could have that list on notice to so we can understand the nature of those? I'll
take the question I'll take the question on notice because we may not have all of that detailed information.
>> If you could take the question on notice and and could you please provide the committee with the detail that you do have. So could any um could these assets be liquidated? What's Australia doing with these assets? And I guess >> sorry and and I'm also asking is it possible to move those assets to the people of Ukraine for for instance?
The answer to the second uh is no. Currently uh you can't we can't move them to the people of Ukraine. But I'll get back to the first is uh under Australian sanctions law there is no power to do anything with those assets other than to have them frozen. >> In fact under Australian law the only legislation really that enables the seizure of assets is something like the proceeds of crime legislation. There are all sorts of complexities constitutional and other with seizing any assets. The obligation under sanctions legislation is to freeze the assets. I think there is uh a fair amount of confusion including in the media about exactly what has been happening internationally and I will um emphasize senator that we stay in really close contact uh contact with like-mindeds around the world. This is an issue that I think uh earlier speakers have noted has been discussed, debated, uh worked on at length by a lot of countries, EU, UK, US. Uh we've been involved in a lot of those discussions as well for for a period of time. To date, as far as we know, no one, no country has been able to seize any Russian sovereign assets. Um there's very little legislation in relation to this space and even when there is legislation it has not been used because the issue raises all sorts of complexities including things like sovereign immunity issues because the kind of assets that are being talked about belong to the Russian state. So you can imagine there's a whole pile of international law complexities. I'm not an international lawyer so I can't go into all of the details but what the Europeans and the G7 have actually done is and going back to the earlier comment I made about the the volume of Australian trade with Russia compared to Europe including the UK also Japan and when Russia invaded Ukraine and all of us all of our countries implemented sanctions measures freezing the assets that were then in our countries, Europe, UK, to a lesser extinct US, to a lesser extent, Japan, some Canada had huge volumes of assets. In particular, Europe had volumes of assets that were held in in clearing houses. Russian central bank assets that were that were frozen. I don't know the exact volume, but it's kind of in the 200 billion euro kind of area. All of that money is frozen. uh and interest is being earned on that money. And what the Europeans have managed to do because they have not been able to overcome this complexity of seizing assets and passing them to Ukraine is that they are basically made loans to Ukraine which are secured and repaid out of the interest earned on frozen Russian central bank assets being held in those jurisdictions. So the assets themselves have not been seized. Interest being earned on those assets is being used to provide loans to Ukraine. Now quite recently uh late last year into early this year Europe was trying to come up with uh an arrangement legislation and implementation that would have enabled them to seize assets and to actually give those assets to Ukraine under quite a complex arrangement that would have uh relied upon Russia being ordered to make reparations to Ukraine and no repayment until that point. Europe didn't get that uh proposed arrangement over the line at all because they couldn't reach agreement on whether or not they could seize assets. So what they've done instead is again made another loan which is again being repaid essentially out of the interest being earned on frozen assets. So I know that sounds very complex but no one so far, no country, no like-minded country has managed to actually seize and pass Ukraine frozen assets.
>> All right. Well, look, I I'll leave
>> including us.
>> Thank Thank you so much. I will leave my questions there for the time being and and now hand over to Senator Shoebridge.