Examination of Witnesses (Questions 120-139)
MR JIM
MURPHY MP, MICHAEL
DAVENPORT AND
DAMIAN THWAITES
18 JULY 2007
Q120 Sandra Osborne:
If not as much progress has been made with regard to UK policy
as perhaps we would like to see—we have taken evidence during
the current inquiry that Russia does not take particularly kindly
to public criticism from foreign countries of its human rights
record—is that because the UK is publicly criticising the
Russian authorities too much, or not enough?
Mr. Murphy: The UK has a choice
about how we influence events in Russia. It is either to acknowledge
what is happening there and stay silent—the certain way
for a voice not to be heard and to be devoid of any influence
in the evolution of Russian democracy—or we can offer frank
assessment. Members of the Committee have done so in the past.
As you rightly say, the UK Government did so in the FCO annual
report of last year. The EU has done so, as have other organisations.
Our approach is to be frank and honest in our assessment of where
we think there have been failings. In the past, I have listened
to conversations about what we are doing trying to foist UK perceptions
of democracy on Russia. The issue is not about UK values; it is
about international standards. That is what we have been trying
to do over recent years.
Q121 Sandra Osborne:
Can domestic political behaviour of the Russian authorities be
influenced seriously by foreign countries? If so, what effect
will the current stand-off between the UK and Russia have on any
influence that we may bring to bear?
Mr. Murphy: I was alluding to
the fact that our influence is stronger if we are frank from a
position of having very strong co-operation in a multiplicity
of other areas. Our influence is certainly much more significant
if we offer our advice and assessment rather than remain silent. As
for how we can continue to influence things, at a bilateral, ministerial
and official level there were 15 visits last year by Government
Ministers. We have a bilateral human rights forum, which helped
to enable a meeting earlier this year with our colleague Ian McCartney.
We are working on issues concerning Russia's approach to the European
Court of Human Rights. We continue to seek other multilateral
ways of exerting a positive influence to encourage international
standards of human rights and democracy through the OSCE, the
Council of Europe and the EU. This is not an issue that the UK
alone has concerns about or that the UK alone can assist in resolving.
Q122 Sandra Osborne:
You referred to the European convention on human rights. What
steps is the UK taking to encourage Russia to ratify protocol
14?
Mr. Murphy: As I understand it,
that is currently blocked by the Duma. An issue of fundamental
importance is the ability to streamline European Court of Human
Rights processes to work much more effectively. I think that I
am right in saying that there are currently 19,000 Russian citizens
with cases awaiting a hearing from the court. That is not a satisfactory
situation.
Q123 Andrew Mackinlay:
Nineteen thousand?
Mr. Murphy: It is not a satisfactory
situation. Part of the solution is a more effective European Court
of Human Rights, and the ratification of protocol 14 is an important
part of that. It is my understanding that Russia is the only member
state of the Council of Europe that has not ratified it. That
is an important block, particularly when you see the scale of
the cases pending for Russian citizens, which is on an upward
trajectory. I do not have the figures with me, but you should
certainly be aware that there is an upward trajectory in the number
of cases from Russian citizens.
Q124 Chairman: Perhaps
you could send us a note of the up-to-date figures.
Mr. Murphy: Of course. [1]
Chairman: We now have
some questions about energy security.
Q125 Mr. Heathcoat-Amory:
We have heard that Russia is not a country where the rule of law
features particularly prominently, nor is it a market economy.
We saw from our visit to Moscow last month that the Russian Government
are prepared to use the energy weapon as part of their foreign
policy, because they have colossal reserves of gas and oil which
they partly export. We in this country are at the end of the pipeline.
There is a big implication for security if they are an unreliable
supplier. How do you see that situation? Are the Russian Government
and oil exporters reliable partners in that respect?
Mr. Murphy: We have made it clear
through the G8—with Russian support—and through the
EU that in terms of its energy supply, Russia has to be sustainable,
transparent and predictable. That is in the declaration of St.
Petersburg, which the Russians agreed to. That is an important
set of principles if we can ensure that the conversation remains
within the context of those agreements on principle. An awful
lot is quite rightly said about our relationship, the EU's relationship
and international relationships with Russia on energy supply.
The Committee may already be aware of this analysis, but it is
helpful. The UK is a 12% net importer of gas, whereas the rest
of the EU is a 50% net importer of gas. Half the EU's import of
gas comes from Russia. The expectation is that by 2030, on current
trends, the EU's dependency on imports of gas will be between
65 and 85%. There is certainly a trend there. In the contexts
of sustainability, transparency, predictability and security,
one issue among others is the diversity of supply routes, which
takes us into the issue of the Caspian and the Caucasus. However,
the significance is that Russia has signed up to those principles.
If those principles can permanently be the basis of the EU energy
action plan, we will have made progress.
Q126 Mr. Heathcoat-Amory:
But Russia has not ratified the energy charter treaty. We have
seen—certainly in the case of Ukraine—how Russia is
prepared to turn off the taps in the event of any dispute. I ask
you again therefore: are we not vulnerable in this area, if not
now then in the foreseeable future? What are the Government doing
collectively to look ahead and either seek other partners with
whom to diversify, perhaps in other parts of the former Soviet
Union, or do more in Russia to secure long-term contracts that
we believe the Russians will adhere to?
Mr. Murphy: That is one of the
key issues facing us. There are two issues on diversity: diversity
of source and diversity of supply routes. Supply route diversity
will enable us to have multiple export routes. On source, you
are right to say that in places such as Turkmenistan, Norway,
Latin America and North Africa there are reserves that we think
can form an important part of a UK energy mix that gives the diversity
that is an important part of security. We are working on
assessment of those reserves in relationships with those countries
and with private sector co-operation there. Nevertheless, we still
have to resolve the issue of Russia's capacity to meet domestic
and international demand, and of Russian supply. We work closely,
both bilaterally and internationally, to do that—through
the G8 and the EU. We will continue to do so, because you are
right that the issue is crucial.
Q127 Mr. Heathcoat-Amory:
May I ask about the mechanics of British Government? Are there
cross-departmental efforts to secure energy supplies or look for
autonomous energy production or electricity generation here? Please
feel free to consult your officials, who might be part of that
process. I understand that the matter is not simply a Foreign
Office matter: other Departments are involved. I would like to
think that it is a matter that is being considered collectively,
because it is one of those cross-cutting issues that should not
simply be left to one Department. Can you help us on that?
Mr. Murphy: You are absolutely
right, which is why in answer to Ms Osborne's question I mentioned
that 15 different Ministers have visited Russia in the past year,
from a range of different Departments. It has not been asked for,
but if it would be helpful, Mr. Chairman, I would be happy when
appropriate to provide a list of those Ministers, unless there
is a security issue. I cannot imagine that there would be. [2] The
issue is one that is being handled across the UK Government, and
the Foreign Secretary and the Secretary of State at the Department
of Trade and Industry were involved in bilateral conversations
with their Russian counterparts. You are right to emphasise it,
and—with your encouragement—Damian Thwaites will correct
me if I am wrong. It is an issue of such importance that there
is Government-wide involvement based on bilateral visits and constant
bilateral communication. Parties outside of Government are involved
too. From a UK perspective, the decisions are taken on commercial
grounds. Private sector companies make vast investments, and significant
profits too. It is important to recognise, as I am sure you do,
that the issue is not just one for Government. I do not know whether
Mr. Thwaites would like to add anything.
Damian Thwaites: As you point
out, Mr. Heathcoat-Amory, the issue is fundamental and is one
of cross-cutting interest in Whitehall. Speaking in my position
as a Whitehall official, I have daily contact with colleagues
in the DTI—now the Department for Business, Enterprise and
Regulatory Reform—on the issues. There are a lot of official
contacts by way of ad hoc meetings and work under the aegis of
the Cabinet Office. Those are very strongly co-ordinated. A lot
of collective Whitehall work went into producing the Energy White
Paper in which the FCO actively participated.
Q128 Mr. Illsley: Is not
Russian energy supply an area where there is a real need for greater
co-operation among European Union member states? I am thinking
in particular of Lithuania and Estonia, which have both had their
energy supplies affected. Ukraine was affected a couple of years
ago, although it is not in the EU. Yet at the same time, Germany
signed a deal on their own with Russia for a pipeline, which upset
Poland because it basically bypassed them. Do we not need to sort
out our energy policy with Russia collectively, rather than allowing
countries like Germany to draw up a pipeline deal on their own?
Mr. Murphy: I do not think, Mr.
Illsley, that you would thank me for becoming involved in a conversation
about wider EU co-operation and treaties today. That is perhaps
for another time. Mr. Heathcoat-Amory and I, and perhaps one or
two others, have already had an outing on that in recent weeks.
In terms of the specific point, you are right. The UK Government
believe that there is a strong case for much more collective interaction
with all our energy suppliers, not just Russia, rather than, as
you have correctly alluded to, an ad hoc series of bilateral agreements
between EU member states and different suppliers. It is our intention
that the EU energy action plan will help us to achieve that, so
that we can have a common understanding.
Q129 Chairman: We have
had evidence over a number of weeks from different people about
Russia and energy. One of the issues that has been raised is that
there is insufficient investment going into Russia's energy resources,
so that as its economy grows it will not be able to meet its domestic
consumption demands and maintain its exports. You referred to
Turkmenistan earlier, but there could be other countries. It is
relying increasingly on central Asian supplies for its domestic
market which are at less than world prices. Then it is selling
on its domestic production at world prices and getting the revenue
from that.
Clearly at some point some of the central Asian
countries might decide that they do not want to be run by Gazprom
and they would rather have their own mechanisms and outlets elsewhere.
We were in Azerbaijan recently and so we are aware of some of
the related issues in terms of the Caspian and everything else.
Can I put it to you that there is potentially a problem of the
reliability of Russian supplies for the future, not just in terms
of the current situation but clearly long term? The UK is in a
better position than some other EU countries, but other countries,
and Germany has just been mentioned by my colleague Eric Illsley,
are very reliant on Russian supplies. Is there any assessment
of whether and how long Russia can maintain its exports at the
current level?
Mr. Murphy: Mr. Chairman, you
said that this is a long-term issue. Without seeking to strike
a discordant note, I do not think that it is a long-term issue.
It has a much closer horizon than that. Looking at the evidence
and notwithstanding your accurate comments about its diversity
and security of supply, it is not clear how Russia can meet its
domestic demand and its expected international demand, based on
its current level of investment and its current exploitation of
its reserves by 2010. There is a real need for clarity, based
on the St. Petersburg agreement, about predictability and sustainability
of supply, and there is a need for certainty about Russia's ability
to meet domestic and international demand within that time scale.
That is something that we are working on.
Q130 Chairman: You are
saying that there could be a problem within the next three years?
Mr. Murphy: I am saying that there
is not transparency on the issue of how Russia will meet its multiplicity
of domestic and international commitments in the next three years.
Q131 Mr. Moss: You remarked
on Russia's problems in meeting domestic supply and providing
enough gas under its contracts to serve western Europe. Do you
think that those problems have prompted them to annex huge tracts
of the Arctic ocean, under which we believe that there are huge
deposits of oil and gas? I read that that is contrary to international
law. Have the Government responded to that yet? How would they
respond?
Mr. Murphy: As I alluded to in
my answer to the Chairman, the UK Government do not have a clear
understanding of how Russia will meet the different demands on
its supply to 2010. Clearly, the Russian Government are in a much
better position to know about that. To some degree, Russia's actions
can be judged in the context of the pressures that it feels on
its capacity to meet domestic and international supply. On
the specifics, I have not been involved in the Government's response.
If Mr. Thwaites has been involved, he might wish to update the
Committee on the facts of it. It is clear that Russia, for a variety
of important economic reasons, which are perhaps also political
to some extent, wishes not only to diversify its own supply, but
to get involved in a process that reduces the international market's
capacity to exploit multiple export routes out of that part of
the world. That is something that we continue to discuss bilaterally
and internationally. Damian Thwaites: A project
of enormous importance, of which I am sure the Committee will
be aware because it is a long-standing issue under discussion,
is the development of the Shtokman field in the Barents sea north
of Russia. It is a massive deposit. For the Russian Government,
it can potentially make a huge contribution to meeting energy
supply requirements. Exploitation rights and roles are primarily
commercial matters, but from HMG's point of view, we would welcome
clarity from the Russian Government about how they wish to take
that forward. We will point out, as we have done, that Gazprom
would benefit significantly from the kind of technical expertise
that foreign investors, including those based in the UK, can provide.
Q132 Chairman: Before
I bring in Mr. Hamilton, can I ask whether you might be concerned
that the Russian reaction to the recent events might be to make
it more difficult for British companies operating in the Russian
oil and gas sector?
Mr. Murphy: Again, without rewinding
and repeating exactly earlier comments, I cannot speculate on
the likely shape of any Russian response, other than that which
we think appropriate, which is the extradition of the named individual.
We do not detect in the comments thus far a desire to become involved
in a diplomatic process with the type of impact to which you have
alluded. The Committee will be aware, from the evidence that
it has received and from its conversations with UK business, that
some UK businesses have found it difficult at times to operate
within the norms that it would expect to operate within in the
United Kingdom. We hear that comment from UK businesses operating
in Russia.
Q133 Mr. Purchase: I
will just follow on from that. We return again to extradition.
While we were in Russia, we heard about the very difficult circumstances
for British business there. Some British businesses were saying
"It's tough, we have to play by their rules but there is
good business". With regard to the extradition, what is currently
going on is this. We cannot hide—if that is the word—behind
our own judicial system that says on the one hand, "I don't
think we should be sending this man back," and then on the
other hand tells the Russians that because they have some kind
of constitutional issue, the matter should be disregarded. We
cannot go on like this, pretending that we have one set of cast-iron
rules that cannot be moved or varied, but that another country
is just being damned awkward. It will not work. We will have real
problems with businesses and in other relationships if that continues
in the present mode.
Mr. Murphy: I do not think that
it is too much in the Russian business environment for UK companies
to expect commercial contracts that are entered into to be upheld
and that there is a clear and transparent legal and regulatory
framework. Without unintentionally provoking a disagreement, I
do not think that there is a parity between this international
request for extradition and UK businesses having the opportunity
to fulfil in good faith the commercial contracts that they entered
into with other UK companies or, of course, with Russian companies
or authorities. I would not wish to draw the CBI into the wider
issue, but this week the Foreign Secretary met leading UK business
leaders to discuss the situation. It has issued a press comment
that is publicly available in which it says, "This seems
to be a proportionate response to what amounts to a clear lack
of co-operation by the Russian authorities in efforts to pursue
a serious crime." Those are the CBI's words, not mine.
Q134 Mr. Purchase: This
is not about parity or equity. It is about British businesses
working in Russia in very difficult circumstances and trying hard
to bring some bacon home. They find it extremely difficult, but
they can make money. The point is that, if we make it even more
difficult, they will not bring the bacon home. You have to bear
that right at the forefront of your mind.
Mr. Murphy: The answer to the
Chairman's first question, and, I think, the first thing that
I talked about before any other issue, was the environment for
UK business. We are abundantly aware of the importance of Russia
as a market for UK business and we are increasingly aware of the
importance of the UK for Russian business. When you look at the
context, of course it is difficult. Mr. Purchase, you have first-hand
experience of listening to UK businesses over recent times, as
do I. But we must look at the fact that we are regularly among
the top five private sector international investors in Russia. During
the first three quarters last year, we were the single biggest
foreign investor in Russia. Of course, British business is operating
in a very difficult environment, but it is doing so very successfully.
It could be more successful if the environment were more conducive
to contract maintenance and strong regulatory consistency.
Mr. Purchase: I will let you go
there.
Chairman: We have to move on.
Q135 Mr. Hamilton: May
I bring us to the area of EU-Russia relations? As you know, the
1994 EU partnership and co-operation agreement with Russia, the
framework for our dealings with Russia as the European Union,
is about to expire. I wonder whether the UK Government regard
having a successor agreement in place by November as a key priority.
Mr. Murphy: It is a key priority
to have a successor agreement. We are less tied to a specific
time scale. It is my understanding—of course, the Chairman
and the Committee may have a different understanding—that
the previous Finnish President had hoped to initiate that by November
last year. So it is a process that the Finnish presidency had
hoped to carry out last year, rather than something for the outgoing
German presidency or something the incoming Portuguese presidency
would seek to do by this November. However, there are clearly
some important bilateral stumbling blocks to this new partnership
and co-operation agreement. Polish relations with Russia, for
example, particularly over food exports, are an important stumbling
block on this issue. The UK and, importantly, Russia also see
that as significant. President Putin has alluded to it publicly
himself. So there is a need for a new partnership and co-operation
agreement that takes into account the myriad important bilateral
concerns —EU and Russian—that exist.
Chairman: I have been getting signals
that there may be a vote imminently, so I say to members of the
public that, if there is, we will suspend and continue after the
vote. When the bell starts to ring, we will halt at that point.
Q136 Mr. Hamilton: May
I move on to something that many people of my age and older never
thought would ever happen, which is that some of the old Soviet
bloc countries—the Baltic states, Poland, Hungary, the Czech
Republic, Slovakia and so on—have joined the European Union?
Now that they have been in the EU for quite a while—a few
years—what impact has that had on UK relations with Russia
and EU relations with Russia? Should we be concerned if there
has been deterioration because those countries are no longer within
the sphere of Russia?
Mr. Murphy: This is about one
of the most significant issues that we face: Russia's role in
the world and its perception of the allegiance of its near-abroad—a
dreadful phrase—which is increasingly western-facing, increasingly
open to EU membership and increasingly aspirant about NATO membership.
This issue registers highly among the Russian Government and in
the Russian psyche and will continue to do so. However, our assessment
is that expansion of the EU has been a positive development—up
to 27 states—and we would like to see it go further, in
terms of Turkey and others. As possibly the key proponent of EU
expansion, I do not detect that the EU, of itself, has had an
impact on UK-Russia or Russia-UK relations. But it is a factor
in Russia's general posture on a number of issues and will continue
to be so.
Q137 Mr. Hamilton: You
mentioned earlier the success of British business in Russia and
that we are now one of the key investors. Indeed, when we were
there last month we saw that for ourselves. We met a number of
key British investors first hand and heard what they had to say.
How useful do you think that the EU is as a vehicle for UK policy
towards Russia or is it not really relevant?
Mr. Murphy: Again, without wishing
to provoke Mr. Heathcoat-Amory, the relationship between the EU
collectively and Russia is of strategic importance to the United
Kingdom on a range of issues, not least the one we spoke about
earlier in our conversation today, on which the EU presidency
issued a statement that was supportive of the United Kingdom's
position. The EU continues to be strong in its support of the
United Kingdom's position. On a variety of issues—energy
supply and energy security—there is a clear EU perspective,
in terms of the energy action plan. It is certainly the UK Government's
belief that, of course, we can be effective bilaterally with Russia
on a number of issues, but we can be much more effective if we
work, where it is appropriate, collectively through the European
Union. The fact that the EU is now made up of 27 states adds greater
strength to our relationship.
Q138 Mr. Hamilton: Finally,
the European neighbourhood policy has been a cause of some friction
between the UK and Russia and the EU and Russia. Do you think
that we could have a shared understanding on neighbourhood policy,
or is that unrealistic?
Mr. Murphy: We increase our chances
of a shared understanding if we continue to have the same level
of bilateral engagement that we have had in recent years. However,
alluding to my earlier comment, the changing nature of the economics
and politics of many of the nations that border Russia impact
on its sense of self and status, and on its sense of its role
in the world. The neighbourhood policy is important in terms
of spreading a sense of prosperity and stability to the east and
south of the EU, and we will continue to invest considerable energy
to do that.
Chairman: You have returned from a vote,
Mr. Heathcoat-Amory.
Q139 Mr. Heathcoat-Amory:
I do not wish to lower you into the detail of the EU, so we shall
have a non-aggression pact on that.
It is tempting to communalise problems and hope
that they can be solved by doing so, but there are bilateral problems
between other member states and Russia. I am thinking of those
concerning meat exports from Poland, war memorials in Estonia
and energy supplies to Lithuania. Surely we do not want our bilateral
relationship with Russia inhibited or caught up in such issues.
Given that the Russians like dealing bilaterally with us, if we
can put the issue of the alleged attempt to assassinate British
citizens in London and get on to an even keel, could we make better
progress that way, as we always have, than if we thought that
Brussels could do things better on our behalf?
Mr. Murphy: I do not believe that
anything about the UK's approach or my comments suggests that
we have a default position that says that Brussels can do things
better. Equally, I would not think it right to hold the default
position that Brussels can never do things better for or with
us. On this issue, given the type of conversation that we are
having, I think that a constructive engagement with Europe strengthens
the UK national interest. Do we want to turn every bilateral issue
between Russia and one of the 27 EU member states into a 27-versus-one
scenario? Of course not, but it is right that we make comments
and act on the serious issues that are of strategic importance
to member states and when we believe that Russia has not fulfilled
its own stated purpose of being open, flexible and democratic,
and positive about the EU.
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