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Debate on the Address

My Lords, it is a great pleasure to follow the noble Lord, Lord St John, who, as he said, was a member of the delegation of the Middle East Association which travelled to northern Iraq week—and a valued member, he was, too. My previous speech in a foreign affairs debate was about the Kurdistan region of Iraq, shortly after I had visited it in 2004. I was pleased to see during our delegation’s visit last week how much progress has been made in that two-year period. It is an enormous amount of progress. Earlier this year, a new combined administration, in which the PUK and the KDP are co-operating extremely effectively, came to office. There is a strong element of minority parties, too. The Kurds are playing a strong part in the federal Government, which did not exist two years ago. President Jalal Talibani and others are determined to make the new federal constitution work, and many other senior Kurdish Ministers are in the Government. As the noble Lord, Lord St John, mentioned, security is even better than it was two years. The region has gone forward while the rest of Iraq has gone backwards. A new investment law has been passed and an investment board set up. The noble Lord alluded to the draft regional petroleum law, which specifically provides for the sharing of revenues from new deposits exploited in the north with the rest of Iraq. The region has played a strong part in formulating the equivalent federal petroleum law, which provides for sharing of revenues from other deposits in the rest of Iraq. The existing airport now provides regular international flights, and a new airport is due to open shortly. There will be direct flights from Europe. Austrian Airlines will start twice-weekly flights from Vienna to Erbil on 11 December. Companies from many countries are investing—predominantly Turkey but also China, South Korea, Germany and the Czech Republic. The list goes on. Starwood is building a new Sheraton in Erbil and a new Hyatt is planned; 300 companies attended the recent Sulaymaniya trade fair—but there was not a single British company at that fair. There is great investment in the offing from Lebanese interests, as well as from the UAE and Kuwait. In the middle of those positive signs there are some major challenges—with revenue, for example, and the fact that under the CPA and the elected federal Government Kurdistan does not receive its fair share of federal revenue, as the noble Lord mentioned. That region gave up its customs duties from Iranian and Turkish border controls, but has received only half the amount of revenue that it should have done and as a result has been starved of investment for public infrastructure projects. That is noticeable; there is a big difference from two years ago: there is a major shortage of petrol, a lack of sufficient electricity generation and a very high rate of inflation. One of the major issues alluded to by the noble Lord is Kurkuk, but the KRG are very hopeful that with the agreement on revenue sharing put forward by the two petroleum Bills, the outcome of the referendum next year will be seen as not threatening to Iraq’s neighbours or Sunni leaders in Iraq. The noble Lord mentioned, too, the fact that banking in Kurdistan is still in its infancy; trade and investment banking is reasonably sophisticated, in fact, but retailing banking is in its infancy and no credit card is issued for use in Kurdistan. Above all, there is the issue of relations with neighbours, especially Turkey—and I shall come on to that in a few moments. But the key issue for our delegation was, ““Where is the British business presence in Kurdistan?””. I think that we concluded that it was hardly surprising that no British company was present in Kurdistan in the light of the FCO advice. I have a very high regard for those FCO personnel who serve in Iraq, especially those who work in areas such as Baghdad; but one has only to look at the travel advice from the FCO to see that British business is bound to be deterred from working and doing business in Kurdistan. The travel advice says: "““We strongly advise against all travel to Baghdad and the surrounding area””." That is absolutely correct. But the advice continues: "““We advise against all but essential travel to the rest of Iraq””." That is a complete blanket; it is as if Kurdistan did not have a completely different security situation to the rest of Iraq. The advice goes on: "““The security situation in Iraq remains highly dangerous with a continuing high threat of terrorism and violence targeting foreign nationals, including individuals of non-western appearance””." Again, no distinction is made whatever. It continues: "““The threat of kidnap of foreign nationals across Iraq remains high. There have been many kidnappings, some of which have resulted in the murder of hostages””." There again, absolutely no distinction is made. It goes on: "““You should consider whether your presence in Iraq is essential””." If a British businessman reads that advice, is it likely that he is going to go to Kurdistan, whatever the challenges, prospects and opportunities? One of the purposes of our trade delegation was to give the lie to that advice. What can business do in face of such advice? As the noble Lord, Lord St John, said, we travelled around Erbil in a bus; British officials travelled in armoured land cruisers with security staff at their behest. The contract was quite striking. We tried to tease out from FCO officials why they were so cautious, but it was completely incomprehensible; there did not seem to be any particular explanation why the security advice that we noticed on the ground, which we were given by the interior ministry in Kurdistan was so very different from the advice that the FCO is dispensing. We met the chambers of commerce, the Trade Minister, the investment board and Health and Education Ministers and the message throughout was exactly the same: there is a great desire to see British companies engaged. There is a huge amount of good will towards UK companies. Why is the FCO not engaging more? Despite a pledge last year, the consulate has still not been moved to Erbil and now it appears that the consulate will be moved to a South Korean army camp because of fears about the security situation in Kurdistan. That seems somewhat disproportionate. We need to recognise that the only place that business can be done in Iraq is in the Kurdistan region. There are many issues—with the visa situation, for example, because students and business people find it very difficult to get visas into the UK. There are all sorts of other issues. I refer briefly to the Turkish situation. I believe that despite the public words of Mr Gul, the Turkish Foreign Minister, the Turkish Government are beginning to understand the advantages of an economically strong Kurdistan. I know Turkey extremely well and am a great supporter of its desire to enter the EU. Turkish businesses have invested some £1 billion in Kurdistan in recent years, and there is a huge mutual interest in ensuring prosperity and stability in Kurdistan. Both have secular societies and a strong common interest in not encouraging Islamic fundamentalism. The KRG—the Kurdistan Government—are co-operating with General Joe Ralston, the special envoy set to try to solve the PKK issue. There is good will on the part of the KRG and I very much hope that the Turkish Government respond to that and we can see a prosperous future for Kurdistan.