Select Committee on International Development Minutes of Evidence

Examination of Witness (Questions 714 - 719)



  Chairman: Good morning. I want to welcome you to the Committee and thank you very much indeed for coming. I am sorry for keeping you waiting slightly. This is a difficult area for us to investigate. We have noted from your evidence your different approach to some of these matters and particularly your conclusions that you are a supporter, really, on balance of the sanctions regimes, and this is contrary to much of the evidence we have received. Mr Worthington would like to lead us on those questions on the Interlaken process.

Mr Worthington

  714. Can we start with the general valuation of "smarter", targeted financial sanctions or whatever you want to call them, and how effective they could be? Can they be more effective than comprehensive sanctions? What is their contribution going to be in the future?

  (Mr Carver) Your question is aimed, as I understand it, to distinguishing financial sanctions, targeted sanctions as they are now being called, "smarter" sanctions, from general comprehensive sanctions; you are not asking me to draw any conclusions about sanctions or no sanctions.

  715. No.
  (Mr Carver) Targeted sanctions have a number of advantages. The principal one is that it allows sanctions to be imposed in such a way that there is no need for an expensive and active police force. The sanctions agents do not have to be national authorities—national authorities certainly will play their part—but essentially are, on the financial side, the market system itself. The market system knows what it can and cannot do and polices itself. Now that is much cheaper and, in fact, probably a great deal more effective than trying to maintain a naval blockade of the kind that was done in regard to Iraq in the early years and, later on, in the Adriatic. Financial sanctions aim at what sanctions are supposed to aim at, which is external relations, and they are targeting external funds not intruding internally, although the effects may well have internal results.

  716. But do they work? They sound very attractive, and we sit hearing this, but I cannot recall people telling us that they work; that they have been effective. There is an article in The Guardian today about a relative of Saddam Hussein who has just been visiting Switzerland. He would seem a very attractive target but he is not targeted?
  (Mr Carver) This question, I appreciate, is inevitable and I do not want to be semantic about it; but it does depend what you mean by "work". If you mean does it achieve a political aim of trying to weaken or overthrow the regime being targeted?, then the almost inevitable answer is no, it does not. If you define the object of sanctions on a much more limited scale, these sanctions can be a great deal more effective than a number of others.

  717. Can you give us examples where they have been more effective?
  (Mr Carver) Yes. In relation to Iraq they have undoubtedly been effective in terms of cutting Iraq off from free sources of funds. Now, from the very beginning of the Iraq sanctions regime, all humanitarian supplies, which were soon defined in very broad terms to include, among the more obvious things, cigarettes and whisky, were exempted. The Sanctions Committee under resolution 661 of the UN Security Council soon worked out a phenomenally effective and efficient way of managing the filter, if you like, to make sure that the goods that got through to Iraq under the regime were humanitarian in their broad definition. They work in the sense that Iraq has been deprived of the means to manufacture arms; has been deprived of access to external funds. Most of the pre-invasion external funds sit in the United States because their oil trading was all in dollars and, therefore, the dollars are there. Relatively little—and surprisingly little to many who thought that Iraqi funds were held quite broadly through the international banking system were in this country, in France and in Germany; and those were soon mopped up under the different sanction regimes applying here. But Iraq has been deprived of funds and, therefore, it has not been able to use funds in order to do certain acts forbidden by resolution 687 which was to ensure that Iraq did not re-arm itself in certain ways. In regard to Yugoslavia, again, there were fairly comprehensive sanctions so I cannot say it is necessarily the financial sanctions that work; but they did work in the sense that the Milosevic regime distanced itself from Karadjic—in Bosnia at a relatively early date, and it was from that that it was possible to negotiate the Dayton result; but those are political aims and I think they possibly go beyond the basic purpose of sanctions.

  718. Are we at a static point with financial sanctions, or targeted sanctions, in that they are as effective now as they are ever going to be, or are there further developments of financial sanctions that you would like to see or which could be introduced that would make them more effective?
  (Mr Carver) There are two particular ways in which I think financial sanctions can be made more effective. One is a highly technical one which is that it is essential that banks introduce, on a much broader scale, interdiction software. It is expensive and banks would prefer not to do it but it seems to me it is essential to do this, not just because there are sanctions regimes that need to be effectively self-policed, but because the whole fight against money laundering and narco-traffic, proceeds of crime, really requires much more effective internal ability to identify sources of funds. Interdiction software is the only way to do it. US banks have done it domestically because they have various tough regulations and very high levels of fines if they find themselves inadvertently in breach of those regulations; Europe has not, so far, encouraged a similar degree of intervention. The second area is simply changing the law. One of the most dismaying things I discovered when I started to work on sanctions in August 1990 was the appalling patchwork quilt of inadequate domestic laws to translate the international obligation down to the practical level. We have a United Nations Act, the 1946 Act, which is very good, clean and simple and it works, and in my written evidence I drew attention to what I thought was a false conclusion drawn by the Foreign Affairs Select Committee on a slightly different aspect. There are only twelve other countries that have comparable legislation and, interestingly, three of the other European nations that have comparable legislation have done so in the past eight years as a result of finding that it is impossible to give effect to these sanctions regimes on the basis of their, supposedly, self-executing domestic law.

  719. Finally, from me, Claude Bruderlein, whom I think you know, has suggested with regard to assets that are declared—assets of a country that is being targeted—those assets should be allowed to stay and gather interest, but the concealed assets should be confiscated. Do you think there is a role for that kind of incentive scheme?
  (Mr Carver) I am certainly not intending to evade but would you forgive me if I gave a slightly longer answer to the question?

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