Senate Foreign Affairs, Defence and Trade Legislation Committee, , 0:00 to 27:17
Dr. Anton Moiseienko argues that Australian sanctions against Russia lack vigor and recommends increasing the enforcement capacity of the Australian Sanctions Office.
Topics: International law, National security
Speakers: Anton Moiseienko, Hon Sarah Henderson, Jessica Collins, Unknown Speaker, Interjection
I declare open this hearing of the Senate Foreign Affairs Defense and Trade References Committee's inquiry into the effectiveness of sanctions against the Russian Federation. The committee will be conducting today's hearing both in person and via video conference. I am Senator Henderson, chair of the committee and I'm joined online by Senator Ciccone, Senator Whiteaker, Senator Shoebridge, Senator McLolin, Senator Najima Price, and Senator Collins. These are public proceedings being video streamed live via the parliament's website and a handside script transcript is being made. I'll remind all witnesses that in giving evidence to the committee, they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence. Witnesses also have a right to request to be heard in camera. I remind committee members and witnesses who are appearing via video conference and who are not speaking to please mute uh your microphones. I'd now like to welcome Dr. Anton Muzenko. I understand that information on parliamentary privilege and the protection of witnesses giving evidence to Senate committees has been provided to you. For the hands record, could you please state your full name and the capacity in which you appear here today?
Good morning. My name is Anton Moyesenko. I'm an associate professor of law at the Australian National University and I appear here today in my
>> Uh thank you so much. I would now like to invite you to make a short opening statement and at the conclusion of any remarks I'll invite members of the committee to ask questions.
>> Thank you very much. I'm grateful for the opportunity to testify in front of this important inquiry. In my written submission, I described Australian sanctions against Russia as lacking in vigor and ambition. This might be a surprising statement to make given the no doubt strong bipartisan support for Ukraine that Australia has exhibited and the expansion in the Australian sanctions regime against Russia over the past four years. There are however three areas that I would respectfully draw the attention of this committee to that to my mind demonstrate gaps that continue to persist in the Australian sanctions regime against Russia. First of all, there is the ongoing issue of the purchases of refined petroleum stemming from Russian crude oil that continue unabated in Australia. I understand that later today you will hear from the center for research on energy and clean air who have demonstrated in their analysis that billions of dollars every year flow from Australia to Russia as a result of those purchases of refined petroleum that is refined in India, China and other jurisdictions but ultimately stems from Russian crude oil. Very importantly, unlike the European Union and the United Kingdom, Australia has not yet legislated to put a stop to this practice. What makes this all the more extraordinary is that, as we all know, the EU and the UK traditionally were in a position of dependence on Russian energy supplies. Australia, fortunately, has never been in that place. And it is therefore all the more remarkable that research demonstrates that Australia has emerged as one of the major global markets for Russian oil products. And this is one indication of renewed energy and focus that needs to be invested into the Australian sanctions regime to ensure that it has practical relevance and not only symbolic one. There is sometimes the misapprehension that Australia is too far away and its economic links to Russia are too tenuous for Australian sanctions to matter. This is one example that proves that this is not more than a misapprehension. Another area that also speaks to this point is the potential position visav the frozen Russian assets in Australia. In their testimony to a previous inquiry conducted into Australia's sanctions regime by this committee, the Australian government stated that the total amount of frozen Russian assets in Australia, both public, that's to say stateowned and private, is no more than 100 million Australian dollars. At the same time, Euro Clear, which is a Belgian clearing house that holds Russian state-owned property for the Russian Seltrum Bank, stated repeatedly that 2% of their Russian asset holdings are denominated in Australian dollars. 2% of what they hold for the Russian Selum Bank amounts to approximately 6.7 billion Australian dollars. We do not quite know what this refers to, but one possible explanation is that there might be bank accounts in Australia that are maintained for the benefit of the Central Bank of Russia, but are owned formally by Euroclair, which is why those assets would not be identified in Australia as belonging to the Russian Central Bank and therefore not frozen on that basis. It is however paramount that the Australian public knows the precise amount of Russian sovereign wealth that is held in Australia directly or indirectly. And therefore I would hope that the committee has an opportunity to inquire of the Australian sanctions office what efforts have been taken to account for that figure in eurocle reporting and identify any indirect holdings of Russian state wealth in Australia. Finally, the third area that I would briefly raise is the allimportant question of implementation and enforcement. No doubt today you will hear a lot about the extent of Australian sanctions against Russia. Thousands of individuals and companies sanctioned, hundreds of vessels designated, various categories of services being prohibited. But we need to be absolutely clear that unless this is backed up by a strong enforcement capability, all these measures amount no more than to a press release. And over the past four years, we have not seen any examples of enforcement action in Australia in connection with Russia sanctions unlike for example in the EU, the UK, the United States or Canada. By way of a brief comparator, we know again from a previous inquiry undertaken by this committee that there are 23 people employed in the Australian sanctions office with limited investigatory powers. In the United Kingdom, there are 135 people working for one of the two sanctions agencies that the country has, the office of financial sanctions implementation, and there is a separate agency focused on the implementation of trade sanctions. Now any international comparison is always imperfect. Those are different countries with different kinds of economies and connections to Russia. But the question remains, is the expansion in Australian sanctions backed up by a strong and uh wellresourced enforcement capability? Has it been built out over the past couple of years? Thank you very much for the opportunity to make these opening remarks. I will stop here and I very much look forward to your questions. Thanks again for convening this important inquiry.
>> Dr. Moenko, thank you so much for your opening remarks. I hear loud and clear your concerns about the current regime of sanctions. So I guess to cut to the chase, what would you like to see the government do quick do differently?
First of all, I would conduct a stock take of the enforcement capacity and part of that is resourcing. So, how many people are there in the Australian sanctions office? Is it still 23 people? Uh, very importantly, how many people work full-time on sanctions investigations in the Australian Federal Police, which is the lead agency for sanctions investigations? Because if the answer is you can count them on the fingers of one hand, that is clearly problematic given the scale of the regime. That's one important area. I would also ask the Australian sanctions office, what more do they need in order to support sanctions investigations carried out by the AFP. In connection with the oil trade that as I've outlined continues, Australia should legislate to follow the example of the UK and the EU to ban the import of refined petroleum into Australia that comes from Russian crude oil. There are various ways of doing this. There are blanket bans that can be imposed on a national level. imports from countries where significant amounts of Russian crude oil are being refined or it can be done at a refinery level. And there are people in Australia, some of which uh you'll hear from later today, who have been doing this analysis and identifying specific refineries that refine Russian petroleum and then sell it on to Australia. in connection with Russian frozen assets. To some extent, the um practical acuteness of a crisis that might otherwise unfold is mitigated by the fact that there are EU uh freezing measures in place uh in Belgium where Eurolear sits. But again, if there are Russian sovereign assets held through URL in Australia, it is important to understand what those are, what the amounts are, whether they need to be for example segregated into accounts where this wealth is not comingled with other property that's held by euro clear in Australia. So there are questions that I would recommend be asked of the Australian sanctions office to identify what they have done and what more needs to be done to know the true scale of Russian sovereign wealth held in this country u so that those freezing measures can be maintained for as long as necessary.
So in other submissions that we have received and you would be aware of this, we've been told very clearly that tracking Russian crude oil is very difficult. So what are the sorts of things that Australia could do to better understand the source of crude oil entering into the Australian supply
>> I realize that there are a number of witnesses that you will hear from who are more expert in the actual tracking and have been doing this. Again, I would refer to the work of Kria in Finland and Mark Corrian here in Australia. I understand that they have been capable to a large extent of tracking this crude oil. I think also that the reality is the EU um again we're talking about 27 member states coming together in concert and the United Kingdom would not have legislated for these measures if they thought there was no practical capacity. it was not realistic to enforce those measures. So a couple of practical steps that need to be taken is a consult with the EU and the UK on how they approach enforcement. consult with expertise available overseas like Korea or within Australia in terms of how to identify refineries and countries that are particularly problematic and then do the best that one can in order to stem the flow of these goods. I think it's very important not to let the perfect be the enemy of the good in all domains of sanctions. You can never fully stop the flow of sanctioned goods, but you can put a very significant dent into that flow. And I think it's very likely that if those measures were put in place, Australia might still be importing some uh Russian crude refined in other countries, but it would not be worth billions of dollars per year, I would imagine. I
>> mean, you've been very critical about the enforcement regime and the capacity of the Australian sanctions office. Uh what specifically would you like to see them do in terms of their investigatory powers? Is it just a matter of people power in the office or do they need uh a lot more armory uh to do their job?
>> I would ask this of them. I think one also has to be somewhat sympathetic to the Australian sanctions office and what I'm saying today is not intended as a criticism of the people who work there. But we need to bear in mind that they were set up I think around 2021. A couple of years into their operation, they had to contend with the explosive expansion in the Russian sanctions regime. And a great proportion of their efforts, as far as I understand, have rightly been focused on outreach and education of the various sectors around Australia. They have also made referrals to the Australian Federal Police and we saw that in the context of Iran sanctions in particular. My concern is that based on what I'm seeing from the outside, the overall enforcement architecture, which is 23 people in the ASO, or however many that might be, plus an unknown number of people specializing in sanctions in the Australian Federal Police, is just not enough in order to support enforcement across this vast and sprawling regime. Again, it might be the case that there are no sanctions evasion actions that need to be taken in Australia, but that is simply in contrast to the experience of other comparative countries and therefore I think it's very important to ask of the ASO and AFP whether they genuinely have the resources they need to carry out their work and in particular just understanding the sanctions enforcement capability across those two agencies. Do they have uh a proper resource to investigate potential sanctions evasion? Again, from the outside, it looks as though uh the answer might well be no at
>> Uh I'm just you've raised um and drawn attention to the amount of Russian assets held in Australian dollars. Do you think it's feasible for Australia to seize those assets and for instance to transfer them to Ukraine? Is that is that uh something that you believe is a
>> There is a complex international discussion unfolding there and it is important to coordinate any such steps with international partners which Australia has been very careful to do. The current state of the debate is this. There is an EU proposal that was discussed in December last year for a Ukraine reparations loan which would not involve any seizure of those Russian assets but a loan of them to Ukraine. Russia would be effectively repaid for that by bonds issued by the EU, but the EU bonds issued to Russia would only become due and payable upon Russia's compliance with its obligation to pay reparations to Ukraine. So it is a fairly complicated scheme that is aimed to deal with some of the concerns that various commentators have raised around the international law aspects of an outright transfer. The Australian position to my mind should be this. First identify how much there is actually in Australia whether held directly by the central bank of Russia or indirectly through Euro Clear. ensure that that keeps frozen regardless of the developments in the EU. Uh which for now don't give any particular cause for concern on that front but but it is important to know what is in Australia and then engage with this global conversation and raise Australia's voice as to whether or not the EU's scheme is something that is worth pursuing. It's understandable that Australia would not be able to move unilaterally. It's not in the position of Belgium that actually holds 200 billion in those assets. But Australia is an important contributor or should be an important contributor to global debates as to whether the approach that the EU proposes is the right one. I think it is. And so it would be useful for Australia to make its position clear and say we're aware of this proposal to make use of Russian assets for the benefit of Ukraine. We think it is a sound approach. we support it. Uh that I think would be an important statement for Australia to
>> Do do you know whether Australian officials have been involved in these discussions about reparations? I understand that this is a proposal only and uh um I also wanted to ask you about if there was going to be further legislative response, could you perhaps expand on what you would like to see by way of changes to legislation or new to deal to deal with um to sorry to deal with the uh the challenges that we face
>> I don't know whether Australian officials have been involved in these discussions. It is a matter of public knowledge that Australia has been involved for example in discussions around creating a special tribunal for the crime of aggression against Ukraine. So clearly the broader spectrum of accountability related questions Australia is constructively involved with. I don't know to what extent that has extended to issues around the disposal of frozen Russian assets and to my mind this is an area that's worth pursuing and understanding what the Australian involvement has been so far in terms of legislative changes I think that for now the more important question is just understanding are there those assets in Australia that are held indirectly have they been identified what steps have been taken to to do so Um if not then again what does Australia make of those statements by euro clear in relation to there being Australian dollar denominated assets? Uh because under Australian law any property controlled by the central bank of Russia already is subject to freezing automatically by operation of the law. Therefore, the question in my mind is how good are we? How good is Australia as a country in identifying that property that's actually controlled by the central bank of Russia? Um and and then once that is identified, one can talk about for example whether that property needs to be segregated into separate accounts that are just accounts directly related to the Russian central bank or not. But the first step is is enforcement and understanding what is
Do you have any insights as to how much property uh in this country has been identified and frozen?
>> The only figure that I'm aware of is the figure that was voiced in a previous hearing before this committee which is $100 million in total. So that's across stateowned property and private property. It would I think be useful to understand what the breakdown is because that would give a better sense of how much stateowned property there is there, how much private property and are those figures credible and um that that would be a useful stepping stone for further discussions. For now it's just one figure that we know and nothing more.
>> Uh Dr. Mosenko, thank you. I'm now going to go to other senators for questions. And just to explain, I'm here in CRA. All other senators are appearing remotely. And I understand Senator Collins has some questions. Senator
>> Thank you very much, chair, and uh uh thank you so much for your submission today and your evidence. I have to say your uh written submission is absolutely crystal clear, and I appreciate that. Uh it's an excellent submission. I just wanted to follow on from that line of questioning about uh the extent of the government's knowledge of uh Russian assets in Australia. uh do I mean given the the extent of the difference between Eurocar's positioning and and the government's positioning do you think that the government doesn't understand it properly enough or uh they're severely underestimating it or they're trying to obiscate the the um the actual extent of Russian assets in Australia on in um Australian dollar denominated
I think that the reality is the way in which Russian assets have been held or at least the nature of these assets has changed over time. So uh my understanding of the way that Eurolear ordinarily operates is it basically invests the wealth of the central bank of Russia into governmentissued securities around the world and that would have included at some point Australian governmentisssued securities. Then they matured into cash in time and so it is quite possible that they would have matured into cash in Australian bank accounts that are held by euroclear and that I think is the core of the challenge there. Are there those Australian bank accounts held by Euroclair? And if so, has the government been able to identify the proportion of of those euro clear accounts in Australia that are traceable back to the wealth invested on behalf of the central bank of Russia. That is um an important uh compliance uh question. I understand why it might perhaps uh have not been the focus of of the government uh amidst all the other competing priorities in connection with sanctions against Russia. But now it's been four years since sanctions were put in place. And it's I think long overdue that we hear a full explanation of what the government's understanding the position is. Again, I think it is possible that there is another explanation that I'm not aware of. It's just that for now all that we have is this figure put out by the government 100 million. We also have a dramatically different figure found in Eurocle report and it would be useful to understand how these two correlate. So I would not perhaps go beyond that for now in terms of drawing any inferences as to why there is this discrepancy beyond uh saying that I would like to hear much more context around that from the Australian government if if at all possible.
>> Okay. And if uh for example the government had identified that all those securities had matured into cash and were in Australian bank accounts uh under the current settings should they be uh freezing those bank accounts or is there another step that has to be taken by this government to be able to do
that? Yes, they have to be freezing those accounts by operation of Australian law because property controlled by any sanctioned entity including the central bank of Russia has to be frozen in Australia. For now, the reason why the practical importance of this has been somewhat attenuated is simply because there's also a European freeze in place that freezes all assets at the eurolear level in Belgium. So, Euroclair can't, for example, withhold anything uh withdraw rather anything that they own for the Russian central bank in Australia and make that available to the central bank of Russia. If at some point in future European sanctions were to be lifted or lapsed, then it is important that there is a separate freezing regime in place in Australia in relation to these assets. And um in general I think there is uh an important aspect of the credibility of the Australian sanctions regime that is at stake here. Australia needs to know how much is held in its jurisdiction on behalf of a sanctioned entity including one as systemically important as the central bank of Russia.
And and just so I can clarify, your understanding is that that work to better understand it is underway or the government's not doing it.
>> I don't know.
>> You don't know? Okay. Hopefully we can find out more on that today. Uh just a final question from me, chair. uh the on the um crude oil supply chains. Uh uh given our dependence on the current supply chains now, what other options are available uh to um the Australian market if we were to change from those
The only answer that I would be able to give to this is that the experience of the EU and the UK again is instructive because they would have faced all the same challenges but tenfold given their geographic proximity to Russia and historical dependencies. There are no doubt other witnesses today who have far more in-depth subject matter expertise on supply chains and economics to be able to help you with understanding the details. But my sense as a mere lawyer looking at this from the outside is that again there are other countries that have considered those issues in uh a situation of far greater dependency on Russia and decided that they are able to forgo those particular sources of crude oil in their supply chain.
>> Thank you very much Dr. Moenko and thank
>> Thank you. Uh, thank you very much, Senator Collins. Uh, there being no other questions from senators, Dr. Musenko, thank you very much for your evidence today, we we sincerely appreciate that. Uh, and we would also appreciate uh if any responses to questions on notice are provided by Friday the 27th of February. Again, thank you so much.