Examination of Witness (Questions 714
- 719)
THURSDAY 28 OCTOBER 1999
MR JEREMY
CARVER CBE
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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