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Economic Sanctions: (EAC Report)

My Lords, I start by thanking the noble Lord, Lord Wakeham, and his committee for this report. If he feels that there has been any lack of enthusiasm from the Foreign Office in its response, let me try to correct that this afternoon, at least. In listening to this very interesting discussion, I have the sense that the divisions between us are not that wide, as so often happens in this House. Every noble Lord who has spoken accepts that sanctions are an imperfect tool and that we are continuously trying to improve them. While some may conclude that the imperfections rise to such a level that one must question their utility at all, the sense of the House as a whole seemed to be that the way to go is to exercise prudence, control and continuous review to ensure that, when we employ sanctions, we employ them effectively while constantly evaluating results and making corrections if we find that those results are not in line with our policy objectives. Noble Lords have mentioned some of the great wins that have come from sanctions, such as South Africa and Rhodesia in the past and Libya more recently, as well as even less noted successes, such as the willingness of the Iranian regime to at least sit down and negotiate its nuclear programme, or of the regime in Khartoum finally to move, if only slowly and grudgingly, on Darfur. All those indicate the usefulness of sanctions as one arrow in the quiver. That will be the main theme of my response today: that between the two extremes of hard and soft power, the last being just the blandishments of diplomatic persuasion, there lies an area—as the noble Lord, Lord Howell, said—which should be defined not as sanctions alone but as sanctions plus, as a set of both economic disincentives and economic incentives, which can add a robustness and forcefulness to our diplomacy but falls short of employing military action against those whose policies we seek to change. The main issues that have arisen in addition to the case of Burma are more broadly about the humanitarian impact of sanctions. Can we target them so as not to do greater harm to the innocent, broader and often very poor population? Secondly, there is the critique that we all agree we need to make of UK sanctions policy. The report claims that the Government, "““repeatedly adopts sanctions with little sense of whether the objectives can be achieved or of how sanctions can contribute to the achievement of those objectives””." The Government do not accept that that is correct. In recent examples—Iran and the DPRK—we followed what we think has emerged as the correct UK policy. We imposed smart and targeted sanctions and played a role in designing sanctions that targeted the nuclear and missile programmes of those two countries, which were the areas in which we wanted to bring about a change of behaviour. The point has been made about the difficulty of exiting any set of sanctions, but we felt that in these cases the criteria for suspending and terminating the sanctions were carefully crafted, including benchmarks that focused on the development of a nuclear weapons programme and avoiding areas of other legitimate activity. In the case of the DPRK, we are already seeing positive results, with the remarkable progress that is now being achieved in the six-party talks. Similarly, on Iran, we believe that sanctions have sparked internal debate that has resulted in a decision to engage with the International Atomic Energy Agency on a work plan to address these outstanding issues. Similarly, targeted measures on Sudan, Liberia, the Democratic Republic of the Congo, the Ivory Coast and others have, we felt in each case, been appropriate and proportionate in terms of applying pressure for change, contributing to bringing the warring parties to the table to resolve those conflicts while minimising the broader impact on civilians. The case of Burma has given topicality to today’s discussion. The committee was correct to highlight that case and correct, too, in its judgment that the EU autonomous sanctions have not delivered the change that we all hoped for. Equally, we should acknowledge, as several noble Lords have said this morning, that the prospect of additional sanctions proposed by the Prime Minister and other European leaders has helped to sustain international pressure on the regime in recent weeks. The further sanctions being considered in the EU over the coming weeks are intended to put further pressure on the Burmese authorities by targeting the particularly profitable parts of Burma’s economy to initiate an inclusive process of reconciliation. Having said that, I concur with the remarks of the noble Lord, Lord Howell, in that without the Asian dimension there—without ASEAN, China, India and Japan being part of an international sanctions regime imposed through the UN Security Council—the effect will be limited. The noble Lord, Lord Newby, and other noble Lords have made similar points. We have moved past an era in which western sanctions alone can have the effect that we intend. Indeed, in a situation where there are western sanctions and other economic trading partners simply take advantage of that to increase their own involvement in a rogue state’s economy, our influence becomes net lessened, so it is enormously important to bring the world with us in terms of sanctions regimes. Let me answer the query on how far I expect us to be able to go in the case of Burma. I bring to the attention of noble Lords an article by the Singaporean Foreign Minister in the media this morning in which he affirms ASEAN’s strong condemnation of developments inside Burma and calls with equal force for reconciliation and for the UN envoy, Mr Gambari, to take the lead in securing a dialogue between the two sides. He feels that pressure needs to be applied, but is clearly cautious about moving swiftly to sanctions and, I suspect, at least in the first phase considering incentives rather than sanctions as the way forward. But that is the process that a UN Security Council discussion will steadily allow us to move on. The special envoy will return to Burma. He will come back to report on progress or the lack of it. As the process continues, if no further progress is made, there will be an opportunity to make the case for the world to join in on firmer action against the regime in Burma. I echo the noble Lord, Lord Hannay, and others who pointed out in their contributions that clearly not just the regime, but Aung San Suu Kyi herself, believe that this call for sanctions is having a real impact. That is why the regime has raised it as the first issue it wants her to drop as a demand if talks are to begin between the two sides. So when last week the Prime Minister said that he was committed to securing tougher EU sanctions, including a ban on foreign investment on top of the sanctions against individuals and their assets as well as measures aimed at specific commodities, we should look at that as just the first step in a process which needs to broaden this to include the Asian economic partners of Burma as well. I turn to the humanitarian impact of sanctions. The Government’s policy is based on a 1998 Whitehall review which recommended that sanctions should be targeted on specific individuals or groups, and be ““smart””, with clear objectives and criteria for exit. Since then we have sought to ensure that what we do meets those cases. Rightly, attention has been focused on Iraq and the early, very damaging impact of comprehensive sanctions on the ordinary people of that country. But we have to acknowledge that once that impact was recognised, the Oil for Food programme, despite its other major failings, was enormously successful in improving the living standards of poor Iraqis within a sanctions framework. In fact, the Volcker commission, which investigated the Oil for Food programme and did not find much to applaud in it, nevertheless noted that the feeding programme and humanitarian purchasing programme, "““reversed a serious and deteriorating food crisis, preventing widespread hunger and probably reducing deaths due to malnutrition. Undoubtedly, many lives were saved””." So it is possible to protect ordinary people within a sanctions regime. Indeed, looking at the success of sanctions, I note the observation of the noble Lord, Lord Howell, that sanctions may have been the cause of the end of the WMD programme in Iraq. That is no small achievement if it is the case. A further point to note is that since the comprehensive sanctions measures against Iraq were lifted in 2003, there is at the moment no proposal anywhere to apply such comprehensive sanctions against any country. Indeed, the UN has imposed such measures only four times, in Rhodesia, Haiti, the former Republic of Yugoslavia and Iraq. While we do not rule them out—all noble Lords could think of a few heinous candidates for sanctions—the fact is that they are not regularly used now precisely because of the kind of limitations to which the committee so properly drew our attention. We have to focus on targeted measures which avoid the major failings that were described. I want to say a word about the financial issues. First, financial sanctions are getting more sophisticated, reflecting the sophistication of global banking systems where moneys are moved easily between countries. The experience of the United States in being able to disrupt banking systems in the cases of the DPRK and Iran demonstrates the potent power of these new smart financial sanctions to achieve diplomatic objectives. I shall respond to the specific request of the noble Lord, Lord Hannay, about the recommendation of the panel of which he was a part to smarten up the UN’s own sanctions arrangements in the Security Council. I am afraid to say that despite strong support from the UK both for its work in general and for the proposal of the panel to which he referred, the Working Group on General Issues on Sanctions of the Security Council has been discontinued because others did not share our commitment to its activities. Nevertheless, through other means the Security Council is similarly reviewing the effectiveness of sanctions and improving one important exit issue, which is how to delist individuals once they have proved that they do not belong on a list of those who should be subject to sanctions. Perhaps I may say a word in favour of what was said by my noble friend Lord Brennan: do not underestimate the effect of financial sanctions. In the case of al-Qaeda and the Taliban, more than $85 million-worth of assets have been frozen in 36 countries. In our own case in terms of our sanctions against Iran, more than £500 million-worth have been held. These are numbers which can have a striking effect on a country’s willingness to change its policy line and comply with UN Security Council resolutions or other policy objectives of the UK Government. I close by repeating the observation of a former colleague—indeed, my former chief—Kofi Annan, the former Secretary-General of the United Nations: between war and diplomacy, we need a middle way, and often that is sanctions.