Select Committee on International Development Minutes of Evidence

Memorandum submitted by Peter Hain, MP, Minister of State, Foreign and Commonwealth Office

  I promised, when I appeard before you on 25 November, to revert to the Committee on two points; the agenda for the forthcoming G8 Foreign Ministers' meeting on Conflict Prevention and the way in which financial sanctions against Iraq are implemented in the UK.


  When they met in Cologne in June, G8 Foreign Ministers agreed to dedicate a special meeting to conflict prevention and conflict resolution. The UK warmly welcomed this: given the huge human and financial costs of conflict, we want to see the issue higher up the international agenda.

  The meeting will be held in Berlin from 16-17 December 1999. We do not have a formal agenda for the meeting. But we understand the issues to be discussed are likely to include:

    —  action to combat the proliferation of small arms;

    —  the problems of children affected by conflict;

    —  how to tackle war economies (including the illicit trade in diamonds and other high value commodities which can fuel conflict);

    —  reducing the role of organised crime and drug-trafficking in perpetuating conflict;

    —  the risk of conflict arising from environmental stresses such as water shortages;

    —  supporting the role of the UN and of regional organisations in conflict prevention.

  The UK will be arguing for a comprehensive approach bringing together political, economic and development policies. We will call for action now on specific major contributing factors to conflict, including small arms and the illicit trade which fuels war economies. We will also stress the need to lay the foundation for the longer-term work needed to sharpen the tools which the international community can use to deal with conflict.

  Foreign Ministers may, in addition, use this opportunity to discuss other major foreign policy issues of the day.


  I promised to let you have further information on the freezing of Iraqi assets in the UK. The total amount of frozen Iraqi funds held in the UK in June 1999 was $739 million. This includes both funds held by the Iraqi regime and funds held by private Iraqi individuals. For legal reasons, we are unable to disclose information on transactions involving individual client accounts.

  Her Majesty's Government has no legal powers to sequestrate frozen accounts to pay for unmet debts, nor to recoup the £650 million owed to the UK by the Iraqi regime in export credits. Although frozen funds may be released to meet debts originating prior to the implementation of sanctions, the consent of the debtor (in most cases the Iraqi regime) is required. In 1996, ECGD issued writs on Iraqi debtors in order to keep its claim on Iraqi debts alive.

  On the implementation of financial sanctions in general, Ms King asked what I saw as the obstacles to financial sanctions being applied consistently by all Member States. I should note that, while political will is of course indispensable, the main difficulty lies in identifying the beneficial ownership of assets. Secrecy laws and poor financial regulation in certain jurisdictions allow the ownership of assets to be hidden. Furthermore, these days funds can be moved rapidly and often untraceably around the world. Officials have been tackling these issues rigorously for some time, not least because they have implications for other Government objectives, such as tackling money laundering, financial crime and regulatory abuse. The UK is seeking the views of G8 partners on how financial sanctions can be implemented more effectively on a global scale.

  There are a couple of further points on which I would like to amplify my evidence to the Committee, as follows:


  Mr Khabra referred to the recommendation by the humanitarian panel established by the Security Council that a standing list of humanitarian items be pre-approved by the Iraq Sanctions Committee and should be contracted and procured directly by the Government of Iraq without requirement for approval by or notification to the Sanctions Committee. The Committee may wish to be aware that the comprehensive draft resolution now under discussion in the Security Council incorporates the vast majority of that panel's recommendations (many of which reflect suggestions included in a humanitarian paper which the UK submitted to the panel in March), including the proposal that the Iraq Sanctions Committee should approve lists of humanitarian items, including foodstuffs and medicines, on the basis of proposals from the UN Secretary-General, and that these goods would not require to be submitted to the Committee for approval, except for items subject to the provisions of UNSCR 1051.


  Tony Faint, when he appeared before you on 18 May, informed the Committee that DFID had offered $300,000 to help fund the work of the Expert Panels. However, the UN then announced that the work of the Expert Panels could be funded through internal resources and that no donor contributions were necessary.

  Subsequently, the UN Secretariat reassessed the work plans of the Panels and produced a full budget for their work. This reinstated the need for donor contributions of $900,000 in addition to the $1,000,000 which could be funded internally. But by this time DFID's resources had been reassigned to match other funding priorities, and they only had $200,000 still available to support the work of the Panels. Officials are now processing this contribution of $200,000, which should be available for the use of the Secretariat by the end of next week.

Peter Hain MP

Minister of State, Foreign and Commonwealth Office

December 1999

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