Oral evidence: Global Britain: The future of UK sanctions policy, HC 1703[i]

Oral evidence, 27 February 2019.

Witnesses

Lord Barker of Battle and William McGlone.

Chair

Welcome, Lord Barker and Mr McGlone, to this afternoon’s session of the Foreign Affairs Committee. Quite a lot of these questions are purely factual, so I would be very grateful if the answers could be extremely brief and not discursive. Other elements, you will see, are rather different. Can we start very quickly: in what year did you first start working in Russia, Lord Barker?

Lord Barker

I worked in Russia in 1998, through to 2000, before coming into politics.

Chair

What was your role then?

Lord Barker

I was then head of investor relations and, number two, head of corporate finance at Sibneft, the Russian oil company.

Chair

That period was of course a period of quite intense violence at various points. Were you aware of the aluminium wars, as they were then known?

Lord Barker

No, I wasn’t; I was aware of them as I left. I think that particular period, so far as I recall, was starting as I was leaving, in the spring of 2000, but I was very focused on the oil industry at that particular time. I did not have a remit that went beyond that.

Chair

When did you first meet Mr Deripaska?

Lord Barker

That would have been, I think, in November 2017.

Chair

Not before?

Lord Barker

Not before, no

Chair

Did you ever met him with Roman Abramovich while you were either an MP or specifically while you were a Minister?

Lord Barker

Never. As I said, I met him for the first time in November 2017.

Chair

Indeed. So did you ever meet him or have him as a guest in House of Lords?

Lord Barker

No.

Chair

And have you ever worked for other Russian businesses or individuals, other than Sibneft, which you have already mentioned?

Lord Barker

No.

Chair

What was the nature of your relationship with Mr Deripaska before you joined the board of En+?

Lord Barker

I didn’t have one. I’d never met him.

Chair

Never met him? No relationship at all?

Lord Barker

No.

Chair

Through no subsidiary companies?

Lord Barker

No.

Chair

No connected entities?

Lord Barker

No connected entities of any type whatsoever.

Chair

So why did he choose you?

Lord Barker

I think, if I’m honest, he didn’t choose me. As they came close to an IPO, the investment banks requested an independent chairman and they began a search. I was not the only candidate, but the very important part of En+’s business proposition—perhaps our unique proposition, and the thing that really was sufficient to overcome my own reservations about returning to Russian business, which had not been my plan when I left politics in 2015—was the extraordinary green credentials of this business. It is the world’s largest producer of aluminium outside of China, but it is also amongst the lowest-carbon producers, as well as being the lowest-cost. To put that into some sort of context, it takes 22 tonnes of carbon to—

Chair

I think perhaps we will—

Lord Barker

If I may, this is critical to why I joined the company and why they wanted me. It takes 22 tonnes of aluminium to create a tonne of Chinese aluminium; the global average is about 12. It takes En+ 3.7 tonnes of carbon to produce a tonne of aluminium, and that is the world’s largest producer, and they have a very clear mission to drive that further. It is both their commercial and—

Chair

Lord Barker, I think we get it: you were motivated by them.

Lord Barker

Yes.

Chair

The strategic direction or advice you offered Mr Deripaska when he appointed you—what was it?

Lord Barker

I didn’t offer him strategic direction or advice; my role was to become, initially, the independent, non-executive chairman of the board. My role was primarily to represent the interests of the independent shareholders, who came into the company at the flotation, although as chairman, I also had a role to be responsible for the board. But the commercial strategy of the company was well set out in the IPO prospectus, which I did not sign off—it was prepared before I came into the company, but I was very happy to take on board.

Mr Seely

I just want to check that we have got the dates. What dates are we talking about for the flotation and the publication of the prospectus?

Lord Barker

November 2017.

Mr Seely

November 2017. So Mr Deripaska was a sanctioned individual by that time.

Lord Barker

No, that’s incorrect.

Mr Seely

When was he sanctioned?

Lord Barker

April 2018.

Mr Seely

So he was sanctioned after the IPO documentation was produced?

Lord Barker

Correct.

Mr Seely

Fantastic, thank you.

Chair

Did you get any sense of Mr Deripaska’s priorities at this time? He was, of course, at the time the 70% shareholder.

Lord Barker

Yes, I obviously met him and spoke to him at the time of considering the appointment. I have had limited interaction with him, and it has all been within a business context, but I have found him very serious, very focused, very professional and certainly very genuine about the low-carbon mission of the building. He is a scientist by background, I believe, and he clearly understood, in many ways more than I did, the science behind the proposition that we have in the company to be the greenest and lowest-carbon group in the world. He is a scientist by background, I believe, and he clearly understood—in many ways, more than I did—the science behind the company’s proposition that it be the greenest and lowest-carbon group in the world.

Mike Gapes

You referred to the financial institutions having a role in your appointment. Did Roman Abramovich recommend you to Mr Deripaska?

Lord Barker

I don’t believe so. Whether they took up references that went that far back, I don’t know, but not that I’m aware of.

Mike Gapes

What specifically was your role in preparing the flotation?

Lord Barker

It wasn’t—I joined at IPO. I didn’t have a role in preparing or signing off the memorandum; I joined at IPO.

Chair

You said you weren’t sure whether they had asked for references that went that far back. Did you have Mr Abramovich down as a referee?

Lord Barker

No.

Chris Bryant

Who did you have?

Lord Barker

They didn’t ask for references. I think that if you use a senior process like that, they will take informal references, but—

Chris Bryant

Who did you have as your referees?

Lord Barker

I didn’t have formal referees.

Mike Gapes

Were you involved—

Lord Barker

But they may well have done, and I’m sure if they had spoken to Roman Abramovich, or somebody who worked with him, or who worked more directly with me back 20 years ago, they would have got positive feedback.

Mr Seely

The fact that you had Russia experience, and experience of dealing with significant and serious Russian business, must have been an attraction for them.

Lord Barker

Absolutely.

Mr Seely

One assumes that that was an attraction, rather than it being a case of, “Let’s just get some random person who may or may not know the stock market extremely well.”

Lord Barker

Yes. If you look at the climate leadership element, which is important to them internationally—also, I was head of investor relations at Sibneft in the late ’90s, and while I don’t speak Russian, I understand the Russian business culture and the challenges of that, and what needs to be done to drive best practice. So yes, there is a pretty small cohort of people who have those qualifications.

Mike Gapes

As regards the flotation process and the preparations for it, who controlled the flotation process within En+?

Lord Barker

That would have been the president, Mr Maxim Sokov.

Mike Gapes

And what role did you have?

Lord Barker

As I say, I was not involved directly in the presentation—in the IPO. I didn’t meet with investors prior to flotation; I came in at a relatively late stage.

Mike Gapes

So you had no role whatsoever?

Lord Barker

That’s what I said, yes: no formal role in the IPO.

Mike Gapes

You have used the word “formal”. Did you have an informal role?

Lord Barker

Informal, in that I was aware that it was going on and it’s possible that they could have used my name in— well, my name appeared in the listing documents immediately prior to impact day, but I didn’t have a role in the marketing, the roadshow or meeting presentations or in hiring the banks, hiring the lawyers or scrutinising the documents.

Mike Gapes

But you could have had an informal role in the preparation?

Lord Barker

No, I wasn’t involved in the preparation of the documents; I wasn’t involved in briefing or running the lawyers. As I say, I joined very close to the actual IPO—after the intention to float had been announced. And I was able to look at the IPO prospectus and rely on that in terms of my own due diligence on the business. That was very helpful.

Mike Gapes

What information was required by the Financial Conduct Authority in order to comply with its due diligence processes?

Lord Barker

The standard information that will be required for any flotation.

Mike Gapes

So you are not aware that it made any particular investigation of primary shareholders or corporate governance structure?

Lord Barker

No, but they would have had to comply with the UK code—the listing code. They would have needed to pass all the tests of the UK Listing Authority, the FCA and the LSE, and they were sponsored by Bank of America, Merrill Lynch, Citigroup, Credit Suisse, J.P. Morgan, BMO Capital Markets, SocGen and UBS Limited, so this was a very major IPO. It was the largest foreign IPO of the year. It was the largest of that type, I think, for three years, and was a great success for the many City institutions that were involved in it.

Mike Gapes

Did you have any interaction with the Office of Financial Sanctions Implementation?

Lord Barker

No, the company was not under sanctions then. Had there been a suspicion that it was likely to be under sanctions, the company would never have been able to achieve its IPO.

Mike Gapes

And after the sanctions arrived—did you have any interaction with them then?

Lord Barker

I think I had one meeting at the suggestion of the UKLA, shortly after sanctions were imposed.

Mike Gapes

Do you remember when that was?

Lord Barker

I would have to check, but I believe that was in April, fairly shortly after sanctions came on.

Chair

2018?

Lord Barker

Yes. When sanctions were imposed, it was a big shock for everybody. It was a big shock for the market, because although it was not a shock that sanctions could be imposed on Deripaska—his name had been suggested, although it was not thought likely—it was a shock for the market that the group was sanctioned.

Chris Bryant

A quick question. You said they might have used your name. Either they did or they didn’t. Did they?

Lord Barker

My name would appear in the listing documents. One of the things that would happen in a listing is that any investing institution would want to look at the board and would clearly want to know the name of the chairman before taking a final decision.

Chris Bryant

Yes, and you would have thought that the person’s name being used would have done quite a bit of due diligence. But you are saying that you weren’t involved at all, up until this moment.

Lord Barker

I think you have misunderstood the question that was asked. I was asked whether I was involved in the preparation and marketing of the IPO, and I said no. I did not say that I had not done any due diligence, which is quite separate. I relied on this extremely extensive and very comprehensive prospectus, which I am sure you are familiar with. That in itself, and the names of the people who stand behind it, gave me a significant degree of confidence in the process and in the company.

Chris Bryant

Forgive me, I find it quite difficult to believe that you would be happy for your name to be used—it obviously would, because you are going to be the chairman and your name is part of the marketing; the fact that you are Lord Barker is undoubtedly part of the marketing—yet you have not been involved in any way in developing the marketing.

Lord Barker

That is understandable. I don’t think there is anyone here who has actually been the director of a public company. I don’t think any of you have actually been involved directly in an IPO. I can understand why you might not understand it, because it is a very particular process.

Chair

Sorry, if we need patronising, we’ll ask separately. It is very kind of you to offer.

Lord Barker

No, it is a question that begs an answer. An IPO is a very long process. The marketing starts some months before a deal—before I was even involved. By the time that I became involved, the book would have been built by the major sponsors. They would have had their shortlist—their final list—and in order to get those over the line, they would be doing their final due diligence, such as who are going to be the independent directors and who is the chairman of the board. That would be the final thing they would need to see before it goes over, but the actual marketing process takes months. Long before I was even aware of the company—

Chris Bryant

You said that you played no role whatever in the marketing.

Lord Barker

That’s correct.

Chris Bryant

And yet your name is part of the marketing. That just doesn’t stand to reason.

Lord Barker

Well, I think we are slightly splitting hairs there. Did I play an active role or have any meetings? My name was attached to the prospectus shortly before impact day. Was I involved in the marketing? No, I wasn’t. Did I attend meetings? No. Was I involved with the bankers? Did I hire the lawyers? Did I sign off the prospectus? No, I did not, but my name was in the prospectus. To that extent, I was involved.

Chair

Just checking: you were appointed before the IPO?

Lord Barker

Yes, but very shortly before I formally joined.

Chair

So you were the independent chairman and responsible for the IPO?

Lord Barker

I didn’t sign them. In the process, the IPO documents are signed off prior to impact day. I joined after.

Chair

So you inherited that signature, as it were.

Lord Barker

Exactly. It would have been inappropriate for me to sign off a document that people had been doing the due diligence on, and that directors took responsibility for, having only just joined the board.

Chair

So you inherited a signature that already had your name on it.

Lord Barker

No, I didn’t inherit a signature.

Chair

Well, you inherited responsibility for somebody else’s preparation of an IPO document. That is what I mean by a signature.

Lord Barker

I joined—directors join businesses all the time.

Chair

No, I am just trying to understand the timing; that’s all.

Lord Barker

I came in at the end of the process. In an ideal world, I would have come in sooner, but I didn’t.

Mr Seely

But your name came in earlier than you did. That is what you are saying. Your name was part of this before you actually took responsibility.

Lord Barker

No. We are talking a matter of days here. We are not talking weeks or months, because I did not agree until shortly before the IPO. As I say, the inclusion of my name was the last piece of the jigsaw puzzle that made up this—

Chair

Okay, that’s great.

Mike Gapes

Can I ask you about the sale of aluminium powder to the Russian military by RUSAL? Were concerns raised at any point regarding that?

Lord Barker

I was concerned when I read that allegation in the newspaper, and I was concerned when I read that allegation in your report, “Moscow’s Gold”. However, the fact of the matter is that RUSAL, the business that is actually the manufacturer of aluminium, does not sell to the Russian defence sector. It is quite true that historically—

Chair

We got the allegation, you see, from RUSAL’s website.

Lord Barker

Yes, that’s interesting, because it is not actually included in your report. Your report mentions it, but I have not found it. I would love to see it, if that is the case.

Chair

We are very happy to supply that.

Lord Barker

Have you got it?

Chair

Not on me, but I would be very happy—

Lord Barker

Because it is not in your report. You mention it in the report, but there is no citation.

Chair

Yes, because it came off RUSAL’s website. RUSAL removed it from the website, but it was initially there.

Lord Barker

Do you know when it was there? I asked our IT people to do a thorough check of the RUSAL website, and they could not find it. As I say, historically, there have been sales to the Russian defence industry, but since sanctions began in 2014, RUSAL has put in place a comprehensive system, on which I am very happy to go into in more detail, to ensure that sales are not made to any sanctioned entity, individual or company.

Mike Gapes

Since 2014? When since 2014? Could you be specific?

Lord Barker

I couldn’t give you the date off the top of my head. I don’t know whether you can, William.

William McGlone

Thank you. I am with Latham & Watkins; it is an honour to be here before you today. To help clarify, in 2014—I believe as early as March—the European Union and the UK, as well as the US, started to impose layered, targeted sanctions on different Russian—

Mike Gapes

Following the annexation of Crimea.

William McGlone

That’s right—pursuant to that. Over the months following March 2014, additional layers of sanctions were imposed. I am not sure exactly which sanction would have led to a change in the company’s policy, but all that predates significantly the 6 April 2018 designation of the En+ Group by the US.

Mike Gapes

On the point about the sale of aluminium powder to the Russian military, I would be interested to know whether you have any confirmation that that did not occur after the imposition of sanctions.

Lord Barker

As I say, we have a comprehensive compliance system, linked to a number of databases, such as the Thomson Reuters database, which contains a list of companies and individuals who are subject to the various sanctions and restrictions, both EU and US. Any and all documents and contracts concluded by the company must be uploaded into the system in order to be executed.

Mike Gapes

That’s not my question. I am asking whether, as far as you are aware, they sold aluminium powder to the Russian military after the sanctions were imposed in 2014.

Lord Barker

I thought I just said that we do not sell to the Russian Military or to any sanctioned individual.

Mike Gapes

You may not now. I am looking at—

Lord Barker

Historically—you are quite right—there have been sales from the business—

Mike Gapes

Have there been any after the impositions of sanctions in 2014, following the—

Lord Barker

No.

Chair

So you’re saying that, before 2014, there were sales of aluminium powder to the Russian military, and since 2014 there have not been?

Lord Barker

Exactly.

Chair

So it is true to say that RUSAL does—or at least did—supply it?

Lord Barker

Historically, that was absolutely the case. It is not the case now.

Chair

Just so we’re clear, they did.

Lord Barker

Just two points to help your understanding. First, the Russian state carries significant supplies and reserves of its own. Secondly, I believe that there are other suppliers that still supply the Russian defence sector.

Mike Gapes

That’s fine. Why do you think the listing of En+ was blocked in the United States?

Lord Barker

I’m not aware that it was blocked in the United States. Why do you say that?

Mike Gapes

I understood that the reason that the listing was done in London was because the situation was more flexible than it might have been in the United States.

Lord Barker

That’s not what you said. You said that the flotation was blocked in the United States. We never applied— Where did you get that information from?

Mike Gapes

So why didn’t you apply in the United States?

Lord Barker

Why did you say that the listing was blocked?

Chair

Sorry, Lord Barker, you are here to answer the questions, not to ask them.

Mike Gapes

Why didn’t you apply in the United States? Why did you choose to do so in London?

Lord Barker

Because London is the natural home of, and the largest centre for, international commodity groups. The world’s largest commodity companies are listed in London. It makes perfect sense for—

Mike Gapes

Nothing to do with an easier way to list than it would have been in the United States?

Lord Barker

I don’t think so; I am not particularly familiar with the United States— Do you have an example in mind?

Mike Gapes

I’m asking the questions.

Lord Barker

No, I am just saying that I am not familiar—

Mike Gapes

Just a minute. I am asking the questions. Can you tell me why you chose to come to London?

Lord Barker

I’ve just told you that it was because London is the centre of the global commodities market.

Mike Gapes

And that was the only reason?

Lord Barker

The primary reason. As I say, I was not involved in the choice of market. As I understand it—

Mike Gapes

Can you think of any other reason why you might have done the listing in London and not the United States?

Lord Barker

You are aware that London is the largest global centre of international capital. It is bigger than the United States.

Mike Gapes

Can you think of any other reasons why London might have been chosen?

Lord Barker

There are numerous reasons. The universe of investors in our particular company is bigger here. There are more analysts here. There are better precedent and benchmarks here compared with the United States. It is closer to the markets that we serve. We do not actually sell a huge amount of aluminium into the US; the US counts for about less than 10% of our global turnover, so we are not a US company. In terms of the universe of investors— Until that point, we were a company registered in Jersey. It made a huge amount of sense to list in Europe, certainly, and I think the bourses under consideration would have naturally been London, Frankfurt or, possibly, Paris.

Mike Gapes

And not the United States at all?

Lord Barker

No.

William McGlone

If I may elaborate, I am just a sanctions lawyer, but I can confirm to the Committee that, as of November 2017, there would have been no US sanctions law or policy that would have precluded the listing in the US. Indeed, a number of the banks and financial institutions involved in the offering were US-based.

Chair

Not until 6 April 2018, of course.

William McGlone

Exactly; as of November 2017, the time of the IPO.

Mr Seely

Just to clarify, I understand why London would be an attractive place for an IPO, and I understand that a lot of Russians like to do business in London, although whether that will still be the case in the future I do not know. However, I am just looking at a New York Times article that makes multiple references to Mr Deripaska’s difficulty in traveling around the United States, because of travel sanctions on him, and to Deripaska’s firm—thanks to an intensive lobbying effort that you may or may not have been part of—winning multiple postponements from the Treasury Department of the sanctions on the oligarch’s holding company, En+, and the giant aluminium company, RUSAL, that it controls. Do you deny that there have been problems dealing with the US authorities over Mr Deripaska’s role at En+? That is sort of my understanding of why you are here to discuss this with us.

Lord Barker

You raise two very different points. As I understand it, Mr Deripaska has not had a visa for the USA. That is a matter of public record. To go back to Mr Gapes’s point, that might be a reason, but I do not think it is a substantive reason. The substantive reason is that the investment case for a firm like ours for any international destination would be on the advice of a substantial number of international banks and brokers that supported us. It would be that London is the primary, most attractive destination to come to for that particular sector.

Mr Seely

But he’s had problems in the US, hasn’t he?

Lord Barker

You’re confusing Mr Deripaska with the company.

Mr Seely

No, I’m not. I’m saying that he’s had problems, and according to that New York Times piece there have been multiple attempts—or there have been significant threats of sanctions over En+, because it was owned by a sanctioned individual close to President Putin.

Lord Barker

That is why I’m here.

Mr Seely

Yes, it sort of is.

Lord Barker

No, that is why I offered to come in the first place.

Mr Seely

We’re grateful to have you here eventually.

Lord Barker

Thank you; I am very glad to be here. The reason I came was to share with the Committee the efforts that I was taking to remove the control of Mr Deripaska from the group, to bring in a sweeping number of changes to both the ownership and the corporate governance of the committee, and to talk about the very close co-operation and negotiation that I had over a number of months with the US Treasury, from April 2018 right the way through to January this year, in order to remove sanctions. The licence extensions that you referred to did not relate to Mr Deripaska, and he had no role in that. All of my efforts, and all of the reasoning for those licence extensions, which meant that sanctions were never actually fully imposed on the group, were to allow me to separate the company to Mr Deripaska, not to—

Mr Seely

And you have clearly done an incredibly good job of that. You are clearly worth every penny of whatever your remuneration is, because you have done a very successful job. One of the reasons why you are here is for us to understand how you have done that job, but also whether it is in the public interest, and whether it is credible for someone of Mr Deripaska’s standing and possibly background to have considered, by owning 40% of something and chunks of other companies that owned parts of En+, that— to understand whether what you have achieved is credible, and if it is in the public good. That is why we are asking questions that, to you, may seem a little bit basic. We are trying to elicit information about what is in the public good, and whether it is in the public good for a Member of Parliament to be working so closely.

Chair

Can I just ask a quick question? Where is the largest commodity market in the world?

Lord Barker

Where is the largest commodity stock market?

Chair

Yes, the largest commodity exchange.

Lord Barker

London.

Chair

I thought it was Chicago.

Lord Barker

That is a commodity exchange. I’m talking about equities, not derivatives.

Chair

So the New York exchange—

Lord Barker

I think you’ll find that there are very few commodity companies traded in Chicago.

Chair

The world’s largest commodity exchange is Chicago, and the exchange that has the most commodity companies traded on it is, I believe, New York.

Lord Barker

I am talking about the trading of shares, not the trading of commodities.

Chair

I understand, sorry. I do understand the difference between equities and commodities; I have done a little bit of work in this area.

Lord Barker

There are very few in Chicago.

Chair

I am just coming on to equities. Is that not New York?

Lord Barker

No, it is London. The world’s largest company, the Swiss-based Glencore, with a market cap of over £100 billion, is listed in London. Rio Tinto is listed in London, and then if you look at the whole minerals and mining sector, it is London that really—and it is a great British success story that we attract so many companies. The thing that is unique about London, and why I think we should be proud of the financial services sector here, is the fact that it does not simply represent British companies. The FTSE 100 and many other companies that are quoted or traded in London are from around the world. Here in London, we are a global marketplace, unlike the other stock exchanges around the world, which tend to be more regional.

Ian Murray

Just for the record, I have been a director of a former plc, and Lord Barker will know that former plc’s are still covered by a lot of the plc regulations for a number of years afterwards. I wonder if you could tell me whether En+ has ever chosen to not comply with any aspects of the UK corporate governance code.

Lord Barker

It fully complies with the governance code that is set out for companies that have a listing of their GDRs.

Ian Murray

Who decides which part of the UK corporate governance code applies to En+ and the En+ Group?

Lord Barker

The UK Listing Authority.

Ian Murray

Does the company now comply with the recommendations of the code that the board comprises a majority of independent directors?

Lord Barker

Yes, it does. I am very proud of that fact because, as part of the sweeping changes that I brought in, eight of the 12 directors are now independent. If you look at the top 20 Russian companies that are publicly listed—many of which are listed in the UK—as a result of those measures, we are the only one, by a long chalk, that has a majority-independent board; that has a chairman who is independent of the larger shareholder; where the founding shareholder no longer has management control; and that has a full set of governance ticks. I have brought along for the use of the Committee a graphic that will demonstrate—

Chair

I think we have seen the graphic.

Lord Barker

You have seen it? Okay. It demonstrates the measures before and after, and shows, both at a share register level and at a board level, that Mr Deripaska is now in a minority position.

Ian Murray

When did the change from a minority to a majority of independent directors happen?

Lord Barker

That happened on the removal of sanctions, or before, contiguously with the removal of sanctions. Once the US Treasury had agreed the plan, submitted it to Congress and we passed through the approval process at the final stage, there was then the execution, whereby Mr Deripaska had to give up a significant amount of his equity or give it over to independent trustees to be voted on, his relations and associates had to give up voting rights on their shares, and the new board was formed. At the company’s EGM in Paris in December, I received the shareholders’ approval to put that in place. The board resigned prior to the lifting of sanctions and I then appointed the seven new independent directors who ensure that it is independently controlled. Those directors went through a very rigorous selection process, which was run by Russell Reynolds, the international headhunter. Each one was vetted and approved by OFAC—the Office of Foreign Asset Control in the US Treasury.

Mr Seely

Thank you again for coming, Lord Barker. I just want to ask you a couple of questions. If we have gone over some of this territory, we will move on, because I do not want us to repeat ourselves. I am fascinated by what you say, because we have been looking at sanctions and your judgment on the role of oligarchs close to President Putin and the less healthy role of Russian influence—especially in the West—related to all the political conflict between the two countries at the moment. Are you aware that the US Treasury placed Mr Deripaska on the US sanctions list because, in its words, he “has been investigated for money laundering and accused of threatening the lives of business rivals, illegally wiretapping a government official and taking part in extortion and racketeering”? It continues: “There are also allegations”—only that—“that Mr. Deripaska bribed a government official, ordered the murder of a businessman and had links to a Russian organized crime group.” Have you seen that statement from the US Treasury?

Lord Barker

Of course.

Mr Seely

You are comfortable working with Mr Deripaska?

Lord Barker

I no longer work with Mr Deripaska—he is not involved in the management of the business. I have spent the last nine months removing Mr Deripaska from the business of En+ and RUSAL. That is an unprecedented move on behalf of minority shareholders and is a real triumph for good corporate governance in London. I do not think that we would have been able to do that if the company had not been listed in London or subject to the UK code. If I had not had the support of the other independent directors, I do not think we would have ever got the process going.

Mr Seely

What is Mr Deripaska’s block of shares as a percentage? Is it 40%?

Lord Barker

It is on the infographic that I can share with you. It is 44.95%.

Mr Seely

So he is no longer a controlling influence on the company with 44.95% of the company.

Lord Barker

No, because there is an additional 10% that is required to go into trust, so he actually can vote on 35% only.

Mr Seely

So he has only got 35% of the vote?

William McGlone

I am happy to provide some additional details that would be useful to the Committee. The very same office in the Treasury Department that issued the statement at the time that Mr Deripaska was sanctioned on 6 April last year—the Office of Foreign Assets Control—decided to remove sanctions on the En+ Group, based on the governance changes, the changes in ownership and control, and the extensive oversight that will be ongoing by the Treasury Department with respect to the company. The separation of the company from Mr Deripaska’s majority ownership and control was the basis for the determination that led to the lifting of sanctions. The same office in the Treasury Department felt comfortable with that process.

Mr Seely

You are saying that you do not work for Mr Deripaska, but Mr Deripaska has voting rights for 35% of the company.

Lord Barker

Correct.

Mr Seely

I know I’m a simpleton, but if you own a third of a big company, and everyone else is a smaller minority shareholder, aren’t you still the dominant person?

Lord Barker

Not in the view of the US Treasury.

Mr Seely

Not legally, is what you are saying.

Lord Barker

No, not legally. I am saying not in the view of the US Treasury and not in the view of most sanctions policy experts in the United States. It is not just the current Administration. The architect of the current sanctions law, Mr Dan Fried, from the Obama Administration, who is widely seen as a Putin hawk, has gone on the record to say that this is exactly how sanctions should operate.

Mike Gapes

Mr Deripaska has got 44%. Is that correct?

William McGlone

44.95%.

Lord Barker

Down from 70%.

Mike Gapes

What it is down from is not the question. The question is, what has he got today? Who is the next largest shareholder, and what percentage do they have?

Lord Barker

Again, this is in the infographic that I supplied.

Mike Gapes

Who is the next largest?

Lord Barker

The next single largest shareholder is Glencore.

Mike Gapes

Which is how many per cent?

Lord Barker

Which is 10.5%. I beg your pardon—it is VTB. I got the wrong one. VTB owns 21%. However, the next largest voting shareholder is actually the independent trustee of the VTB stake.

William McGlone

That is right. Of the 21%-plus currently held VTB bank, 14%-plus is voted independently by an independent American voting trustee, as per OFAC requirements.

Mr Seely

Absolutely, but VTB is still sanctioned, isn’t it?

Lord Barker

No. This is a misunderstanding, I think, in the report as well. VTB is subject to sectoral sanctions that were placed on the finance sector. It is not sanctioned in the same way that it was proposed that En+ and RUSAL would be. Sectoral sanctions are limitations on what any company in that sector can do; they are not specifically aimed at VTB.

William McGlone

If I may, those sectoral sanctions were imposed by the EU and the UK, as well as the US, in 2014. They prohibit the extension of new debt and credit to VTB, as well as certain other designated banks, but they do not in any way prohibit even US persons, as well as UK and EU persons, from dealing with them otherwise. That is one of the principal reasons why OFAC in the end, after being fully briefed on this entire structure in great detail, was as comfortable with VTB as it ended up being.

Mr Seely

Do you see why we are curious and interested in this? You are putting a very eloquent and convincing case, but from our point of view it looks like very rich, very smart Western facilitators have been helping people to get around sanctions. Effectively, it is a legal form of sanctions-busting. I know you do not see it like that, but there is a question of whether you can do this. Clearly, you have done it very well, and there is a question of whether you really should be doing this and whether it is in the public interest, especially because you are a parliamentarian. I cannot put it any more simply than that.

Lord Barker

Well, I am afraid that you are in a minority in holding that view. Certainly, those who are more informed on the subject are, by and large, strongly in favour. The architect of US sanctions policy, Mr Brian O’Toole—the former senior adviser to President Obama and director of OFAC in the US Treasury—said: “sanctions targeting RUSAL’s founder and now indirect minority shareholder, Oleg Deripaska, worked exactly the way they are supposed to and that Deripaska’s fate should frighten other Russian oligarchs who cooperate with Russian President Vladimir Putin’s misadventures abroad or are part of his corrupt circle…This is a good policy outcome, since the target…has felt significant impact from the sanctions, but disruption to the US and global economies has been minimized.” John Smith, another former director of OFAC, said: “This is absolutely a winning strategy…It sends the message that if you are targeted by the U.S. government, you ultimately may have to give up ownership and control of your most powerful and profitable assets.” Dan Fried, the expert, said: “It may surprise you to hear this, given my reputation as a Putin hawk, but I think that Treasury made the right call”. What I am trying to say is that you make a very serious—

Chair

Sorry, Lord Barker, can you please allow Mr Seely to ask a question?

Mr Seely

“You make a very serious”—

Lord Barker

You make a very serious point. You have a very clear view on this. In response to that very serious point, all I am saying is that there is large body of opinion held by people who are by no means allies of Russia or allies of the Kremlin, who take a very different view. They are people who have a very informed view—indeed they are the people who actually put the sanctions in place. They are not commentators or grandstanding, but the people who actually put the sanctions policy in place.

Mr Seely

So by asking you these questions, you think we are grandstanding?

Lord Barker

No, I did not say that.

Mr Seely

You used the words “grandstanding” and “commentators”. Clearly, one also tries to be informed and although you come across as a little bit rude and condescending, I will not do you the same discourtesy.

Lord Barker

I apologise if that is the case.

Mr Seely

That’s quite all right. Do you not understand the point of view that I am putting? I am not necessarily arguing it. I am playing devil’s advocate over this. You are seen to be someone who is negotiating oligarchs’ way around sanctions, and therefore you are undermining our ability to deal with the oligarchs, through whom President Putin operates in the west and uses some of that malign influence.

Lord Barker

I think that would be a gross misreading of what has happened and, as I said, it would fail to take into account the informed opinions of people who looked at it. I will point to other people who have supported this measure, who are well known Russia hawks, such as Senator Lindsey Graham—

Chair

Sorry, before you keep reading this into the record, the point that Mr Seely is making is that there are still links between En+ and the former Deripaska arrangement, as you would expect for a large company. There are hold-over appointments, if you wish. One of those hold-over appointments is a gentleman by the name of Mr Boyarkin, of whom I am sure you, being the chairman of the company, are aware. His former work as a senior member of the GRU is a matter of record. Indeed, he was sanctioned in December 2018 by the US Treasury for his interference in the Montenegrin elections on behalf of the Russian state, yet he remains an employee of En+. One does seem to see overlaps.

Lord Barker

Well, you are half right. He was sanctioned by the US Treasury. You are completely wrong and misinformed—and it is not for the first time—that he is an employee of En+. Mr Boyarkin left the group in 2016. He is not an employee. He certainly predates my time in the company. That is very clear. This is another example of misreporting of facts. I would be very grateful if you could correct that into the record. He is not an employee of the company and has not been for some time.

Chair

If you say it is so, then I am sure you are correct.

Lord Barker

I am very concerned that that is thought to be the case.

Chris Bryant

Can I go back a moment—

Lord Barker

Sorry, I beg your pardon Mr Bryant, but one important thing—don’t just take my opinion. Clearly, I have a commercial interest in this and I understand why you might be sceptical. The most important testimony on all of this has been the director of the CIA, Gina Haspel, who appeared under oath before the United States Senate Select Committee on Intelligence in January to be quizzed on exactly this issue. She was asked have the US intelligence agencies looked at the group, have they undertaken due diligence?[1] She said yes, and that they raised no concerns.

Chris Bryant

Can I go back to the point earlier? Mr Seely read out the reasons why the US decided to sanction Mr Deripaska. None of that—none of those lines about what he was accused of doing—was news. I presume they were not news to you?

Lord Barker

I wasn’t aware of them in quite that compendium, but I was aware that if you go back far enough he had been a controversial figure in Russia. I was aware that he disputes the lion’s share of that.

Chris Bryant

As somebody arriving in a job, or when you first met him, you must have done some reading up on him or some diligence, and made some assessment of whether there was any risk that he might be sanctioned.

Lord Barker

Of course. On both points, of course I thought very carefully. Initially my response was no. I had made a decision when I left politics not to go back into Russia, or to seek to do anything in the Russian sector, because geopolitically it is so difficult.

Chair

But you went back very quickly, and right to the top.

Lord Barker

Not really. It was three years later, after leaving the—

Chair

Some would consider that quite quick.

Chris Bryant

It was as soon as you were legally allowed to, in fact.

Lord Barker

No, absolutely not. Why do you say that?

Chris Bryant

It is not for you to ask questions.

Lord Barker

It is for me to correct the record when you make a statement that is absolutely untrue.

Chris Bryant

You said earlier that you think that this has been a perfect example of how sanctions should work. So you believe that Mr Deripaska should have been sanctioned. You now welcome that.

Lord Barker

I did not say that Mr Deripaska should have been sanctioned. What I have said is that many people who are experts in this field, and have followed this for far longer than I have, have said that this is a textbook example of how sanctions policy should be executed.

Chris Bryant

Indeed, you did, so do you now think that it was right for the US to sanction Mr Deripaska?

Lord Barker

I have been very clear in not making speeches or declarations on Russian politics and US-Russian, UK-Russian and European-Russian relations in this building, mindful of my commercial interest, and mindful, up until now, of my membership of the House of Lords.

Chris Bryant

Yes, but I am asking you now.

Chair

Sorry—you are not appearing here as a parliamentarian; you are appearing as the independent chairman of EN+, so it is a bit different.

Lord Barker

Absolutely, and as a businessman I am not getting into politics, and as a politician I clearly have a conflict, so I am not going to answer political questions today.

Chris Bryant

So you don’t think that he should have been sanctioned.

Lord Barker

That is not what I said. I said I am not going to answer political questions.

Chris Bryant

You don’t have a view on whether he should have been sanctioned.

Lord Barker

I have a view, but—

Chris Bryant

Well what is it?

Lord Barker

As I said, I have come here to talk about, and to explain in as much detail as you care to go into, the unprecedented steps that I have taken to put in place the removal of Mr Deripaska. I am not getting into the whys and wherefores of the politics around that, I am afraid.

Chris Bryant

I am asking you a direct question: do you think Mr Deripaska should have been sanctioned by the United States of America or not?

Lord Barker

I can quite understand and appreciate all the circumstances around it, but I am not getting into individual cases like that. It would be very unhelpful.

Chris Bryant

Okay, so when he was sanctioned, what conversations did you have with him?

Lord Barker

I was chairman of the business that had just been sanctioned. He was the controlling shareholder. It was initially to ascertain what we thought would be the right response for me as independent chairman. I will be very honest: there was a degree of panic and alarm in the business. I certainly considered my own position. My immediate course of action, before I spoke to him, was to take legal counsel.

Chris Bryant

What did he say to you that you should do?

Lord Barker

I took legal counsel from Latham & Watkins. I also spoke to senior people in the City—

Chris Bryant

I am not asking you about that. I am asking you what conversations you had with Mr Deripaska.

Lord Barker

I did not speak to him for a number of days.

Chris Bryant

How many days?

Lord Barker

I do not know. I did not meet him, I believe, for about a fortnight afterwards. It might have even been more than that. It might have been three weeks.

Chris Bryant

Did you speak to him on the phone? Did you have any communication with him?

Lord Barker

I would have spoken to him, but in short conversations. I was more concerned about the company’s management and the other board—

Chris Bryant

What did he say, and what did you say?

Lord Barker

Clearly everybody was very concerned. In the first instance, it looked very black for the company, because in an international business like ours—we operate in 14 countries on five continents—the consequences of US sanctions would be catastrophic.

Chris Bryant

I do not want to put words into your mouth, but I am presuming that the nature of that conversation would be, “How can we get round this?”

Lord Barker

It was not, “How can we get round this?” It was, “What is the responsible reaction to that?” I did not know what the responsible reaction was, which is why I took legal advice and financial advice. It soon became very clear that the only way around this— remember that my job was not to represent or advise Mr Deripaska; my job was to represent the interests of the minority shareholders who had come in at the IPO, and to try to ascertain what would be in the best interests of the minority shareholders—

Chris Bryant

Okay, so did you hire Mercury Public Affairs at that point?

Lord Barker

Yes, I did.

Chris Bryant

Before speaking to Mr Deripaska, or after?

Lord Barker

Before speaking, actually; I did not speak to him about hiring Mercury.

Chris Bryant

And what did you hire them to do?

Lord Barker

To represent me in Washington once it had become apparent that there might be grounds for a useful dialogue. I reached out to the US Embassy here and they immediately asked if I would meet officials from the State Department and the US Treasury to begin a dialogue, and I did—

Mr Seely

Did you ask for a dialogue, or did they say, “We’d like a dialogue”?

Chris Bryant

To lobby?

Lord Barker

No, not to lobby. In the first instance, I did not have any representation; the company was sanctioned, we were in a slight state of confusion, we have no office in Washington and I needed somebody on the ground to advise me on what—

Chris Bryant

You said it was to represent you. To represent you to whom?

Lord Barker

To represent me in a meeting that I had been requested to go to but was unable to get to because I was in London and they were in the State Department and they wanted a lot more officials.

Chris Bryant

To represent you to US Government officials?

Lord Barker

Yes, and to brief me.

William McGlone

If I may, there is a very formal regulatory process that OFAC maintains for sanctions delisting initiatives, which is what Lord Barker and the company have pursued here. If it would be helpful to the Committee, I would be happy to elaborate on that process, which is quite substantive, transparent and well documented—and, by the way, very rigorous. OFAC is notoriously aggressive and expansive in enforcing sanctions. I do not know—

Chris Bryant

I’m sorry, that is not the area I am asking about, I’m afraid.