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Financial Restrictions (Iran) Order 2011

My Lords, the Minister will be delighted to know that we support this order. I would like to thank him for his introduction and to say that he has certainly satisfied any questions that I might have had on the technical side of the banking—not that I am particularly qualified to be able to ask him any questions on that. This is, essentially, a foreign policy issue and I will say a word or two on what has led to this very strong action, which we support. We are contemplating a nuclear-capable Iran, the consequence of which would be dire. It would destabilise the region; it would cause other states to react; it would probably put the non-proliferation treaty under pressure—perhaps terminal pressure; and, of course, it would lead to an increased possibility of the use of nuclear weapons. The military solution that has been talked about in some international circles is no less dire. The idea of a simple, surgical strike is almost certainly unreal and we may well see ourselves in military conflicts whose breadth and depth are quite appalling to think about, stretching from Hezbollah as one actor through to Saudi Arabia, the Emirates, Israel, US facilities in the area and, as ever, the Strait of Hormuz. Fortunately, actions taken to date that are short of military actions are being successful. Most commentators seem to view them as successfully holding Iran some two years away from capability. This order is part of that widespread non-military action that international states are taking to keep Iran away from that capability. Nevertheless, the seriousness of this order and the reaction to it in Iran is illustrated by the probability that the attack on the British embassy in Tehran was stimulated by it. I pay tribute to the bravery of our staff in Tehran during the violence that they were subjected to in that difficult situation. Having looked at the FCO’s statement, it seems to me that the order has a twin-track set of reasons. The first is the International Atomic Energy Agency's latest report on Iran, highlighting fresh concerns. In situations such as this, I always like to try and turn to the source information. The document that it refers to has 25 pages and is quite chilling reading, if one knows anything about nuclear weapons. The general view is that nuclear weapons are about getting enough nuclear material but they are much more difficult than that. They are about clever explosives, hydrodynamics and all that sort of thing. Just flicking through the report, the chilling thing is to see the amount of energy that Iran is apparently putting into that technical side of making a bomb work. Sadly, one of the problems with the IAEA is that while it is a very capable body, at the end of the day it does not have the ability to instruct people to do things. If you actually read its resolution, it uses words such as press, stress, urge, express and commend. The only thing that it decides to do is to remain seized of the matter, so I would be grateful if the Minister could express to me just how widely this concern, which I think was expressed on 18 November this year, has been followed up by other countries. Can he flesh out any more detail of the actions on it that other countries have taken? The Financial Action Task Force is the secondary reason for pressing ahead given in the FCO’s press release. Although it has 37 members, it does not have mechanisms within it to compel members to do anything. It is an organisation that is once again about urging people to do things. The declaration says that the task force, "““with a renewed urgency, is particularly and exceptionally concerned about Iran’s failure to address the risk of terrorist financing””," and so on. It is not a hard-nosed, ““do something”” type of organisation, so I am once again curious enough to know how many states, having read the declaration from 28 October, have come in behind the UK and other countries and introduced similar powerful orders to produce the required effect. It is important, first, that the measure has an international effect and, secondly, that the risk of avoidance is addressed. This is set out in the impact assessment on page 8, which says: "““There is a risk that the measure will be weakened by financial institutions in other countries providing financial services to Iranian banks, including in support of Iran’s proliferation-sensitive activities. The Government will raise this risk with international partners and push for further international action””." Can the Minister say a few words about how significant the avoidance might be and what progress we are making in further discussions with international partners to ensure that avoidance is either avoided—forgive the pun—or is at least mitigated? At first sight, the penalty provisions do not seem very significant. It is two years’ imprisonment, which would be quite a frightening thing for an individual, or a fine. I have no idea of the size of the fine, and I would be grateful if the Minister could give us a feel for the mechanisms that the Treasury or the FSA have to make these things really bite. When one looks at events that have happened in the United States, with Credit Suisse, Lloyds and Barclays, which have ended up with penalties—one more than £500 million, one £350 million and one nearly £300 million—it is clear that they are of quite a different order of magnitude from the penalties referred to in the impact assessment. Having said all those things, I think that what the Government are trying to do here is to mitigate, to prevent Iran achieving nuclear weapons and to stop them using the banking system to finance terrorism, and these are aims that we totally support. We will, of course, support the order.