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Lord Hannay of Chiswick: My Lords, it is well over two years since this House debated, through an Unstarred Question that I put on the Order Paper, the question of Iran's relationship with the international community. It is thus timely that, on the initiative of the noble Lord, Lord Hurd, we should return to the subject now—all the more so because the relationship has not evolved positively, as was then hoped; quite the contrary.

The EU3's efforts to agree with Iran the objective criteria necessary to alleviate legitimate concerns about that country's nuclear programme have met with a frustrating combination of prevarication, evasion and the reversal of commitments to suspend all work on uranium enrichment. At the same time, the new president of Iran has fuelled international concern with a series of bellicose statements, in particular about the state of Israel, which would be unacceptable in the mouth of any head of government but which are all the more alarming coming from one whose country's nuclear programme cannot yet be demonstrated by the IAEA to be exclusively peaceful in nature and which possesses a sophisticated missile capability. It seems entirely appropriate that this matter should now be reported to the UN Security Council and quite unreasonable that Iran should consider such a report as being in some way a hostile act for which it is not wholly responsible.

What is the course of action in the Security Council most likely to secure the objective we all share—including, purportedly, the Government of Iran—of certainty that Iran's nuclear programme is and will remain exclusively civilian? As a first step, I suggest that the Security Council should clearly set out what is required of Iran to achieve that objective and what is needed to avoid a situation in which the further pursuit of Iran's nuclear programme might be considered a threat to international peace and security.

A complete cessation of all enrichment activities, whether research or production, is surely an essential part of this, not because it is a legal requirement under
 
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the non-proliferation treaty—it is not—but because Iran's long-standing clandestine activities in this field, including the purchase of technology from Pakistan, taken together with the better understanding that we have now of the scope that uranium enrichment production capacity provides for a country to switch to a military programme, makes it essential. Similarly, Iran's continued acceptance of the inspection regime provided for in the Additional Protocol will be essential. In return, Iran has the right to get absolute guarantees, but no obstacles will be put in the way of the development of a bona fide civil nuclear programme. In the short term that may best be achieved by the Russian offer of enrichment services; in the medium and longer term, and to counter Iran's claims that it is being treated discriminatorily, I would believe that we need a general system of international guarantees of enrichment services operating through the IAEA. This proposal was put forward by the UN Secretary-General last year on the recommendation of the high-level panel, and it seems to be gaining a wider degree of international support. I would be grateful if the Minister would tell us whether the Government are yet ready publicly to throw their weight behind it—and, if not, why not.

There is much talk of sanctions against Iran, and it may come to that; but it should surely do so only if Iran refuses to co-operate or endlessly prevaricates over fulfilling what the Security Council states is essential, or if it continues to reverse its policy of full co-operation with the IAEA. The most effective sanction is the unity of the international community. The Government have done well to secure the agreement of the five permanent members of the Security Council on the need for the IAEA to report on this matter to the Security Council. It will be of the greatest importance to maintain that unity. Of course, if the price of unity is inaction in the face of Iranian refusal to co-operate, that would be too high a price to pay. But patience and perseverance are more likely to produce results than pressure for immediate action on sanctions.

I also believe that we have to look wider than the nuclear issue in isolation, if the drift away from diplomacy and towards coercion is to be halted. Iran does have legitimate security concerns and, while it is not legitimate for it to develop nuclear weapons in response, it has a right to expect those concerns to be taken seriously. It is surely high time to begin exploring more actively whether the establishment of some regional security institutions, based on co-operation between the three main powers in the Gulf sub-region—Iran, Iraq and Saudi Arabia—could provide part of the response to those concerns.

It is also an inescapable fact that Iran has security concerns about the intentions of the United States. While I welcome the much strengthened US support for the efforts of the EU3, I cannot see how those concerns can be addressed or dissipated without some direct contact between Iran and the United States. If the US can talk to the North Koreans and discuss its security concerns, why is it so inconceivable that it
 
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should do so to the Iranians? If bilateral contact is unacceptable, perhaps a group of which the United States could be a member could take up a dialogue.

It is clear that we are going to have to live through a considerable period of heightened tension between Iran and the international community. It is important that the EU3 continues to pursue a coherent and flexible strategy—one that combines firmness over the nuclear issue with a willingness to look beyond that to a prospect of enhanced co-operation. So far as Iran's internal politics are concerned, recent developments cannot but be a serious discouragement to all who want to see a fully democratic Iran, in which sectarian and ultra-nationalist views no longer determine Iranian foreign policy. But it is for Iranians themselves, and not for us, to seek to bring that about. Loose talk about regime change is liable to be counter-productive, merely strengthening the hand of those in power and encouraging the very policy options that we are seeking to avoid—just as bad as public discussions of military options. Of course these do exist; it would be na-ve in the extreme to suppose otherwise. But it is surely right to make it clear at every stage and to every interlocutor that the policies that we are pursuing are to be achieved by diplomacy and peaceful means and not by the threats of force.

Finally, I make a plea as someone who began his diplomatic career 45 years ago in Tehran. We must really try to put ourselves in the shoes of the Iranians and to understand their thinking. It would be quite wrong to suppose that this is exclusively conditioned by religious extremism. Some of the things that President Ahmadinejad says could just as well have been said—indeed, they were said—by Prime Minister Mossadeq in the 1950s. Iran's experience of being pushed around and manipulated by the great powers is a long and bitter one. We need to appeal to the pragmatic instincts, which exist in every Iranian whom I have ever known and to avoid playing to those memories of earlier defeats and humiliations. To coin a phrase, we need to show them respect, even when we disagree with them.

12.45 pm

Lord Anderson of Swansea: My Lords, I follow and adopt the wise and measured words of the noble Lord, Lord Hannay, and particularly the appeal to see ourselves as the Iranians see us. I also congratulate, as have other noble Lords, the noble Lord, Lord Hurd, on his initiation of this debate and on drawing attention to the grave and in some ways urgent nature of the question. It is a test for us all of the limits of soft power and hard power.

When the Foreign Affairs Committee in another place published its report on Iran in March 2004, we began by stressing the geo-strategic significance of the country, surrounded by volatile neighbours, and with substantial oil and gas reserves and a large population, as well as the positive contribution Iran could make to vital UK interests—the Middle East peace process, the war on terror, Iraq, and the drug supply, on which we have co-operated very closely with Iran. Our conclusions appear today somewhat optimistic in the
 
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light of the wild rhetoric of President Ahmadinejad and Iran's conduct on the nuclear issue. But our broad conclusions remain valid. Iran is a powerful country. The balance of regional power, after the fall of Saddam Hussein, has swung decisively in its favour. It makes sense to co-operate in areas of mutual interest such as drug control. Now, however, the nuclear problem puts all others in the shade.

Dealing with that issue requires an understanding of the history of Iran, the motivation of its leaders and the complex dynamics of the parallel power structures. In particular, we should ponder where each step that we take along the road may lead, what is our end game and the attendant dangers to regional and indeed world peace. The deal brokered by the EU3 in autumn 2003 was hailed at the time as a triumph of EU diplomacy. Indeed, members of the Foreign Affairs Committee were there at the time of the deal. It certainly bought time in which other key countries, such as Russia and China, came to recognise the dangers. The question remains whether it has been wholly played out or whether parts, such as security guarantees—the attempt to address the real security concerns of an encircled Iran—can profitably be revived.

The US for historical reasons has been more sceptical, and its rhetoric, such as "axis of evil", and even the later State of the Union message on encouraging internal opposition, has been shrill and counter-productive. Ultimately, however, historians may conclude that the West was indeed deluded and that Iran's aim has been consistent—the development of military nuclear capability. This aim has been fuelled in part by recognition that if Iraq had nuclear weapons the coalition would not have invaded it and by perceived double standards in the West. Now Iran is emboldened, made more confident by the problems of the coalition in Iraq, by the rise in oil prices which has bought new dependencies from other major countries—new friends in India, China and Russia—and by technical help from Venezuela and missiles from North Korea.

What is the evidence of its intention of developing a military nuclear capability? There is the 18 years' history of Iran's duplicity; the fact that oil- and gas-rich Iran does not need civil nuclear power and the discovery of weapons-grade uranium traces at Natanz with implausible explanations on the Iranians' part. There is the hampering of IAEA investigations and the rejection, so far, of the Russian offer to enrich uranium in Russia, under Russian supervision. What is the current status of the IAEA initiative for an international fuel bank, under its management, to guarantee supply to countries like Iran? What is the Government's best estimate of when Iran is likely to have enough material to make a nuclear bomb, and how dangerous would it be if Iran obtained nuclear capability?

The rhetoric of their president is alarming, with the intent—and, potentially, the capability—to destroy Israel, together with links with terrorists groups that could lead to those groups obtaining dirty bombs. That would destabilise the wider region, including
 
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Saudi Arabia, and undermine the non-proliferation treaty with no consensus for replacement. The key questions are: what is to be done next, and where would different responses lead? The military option—that is, selective strikes on nuclear sites—has been raised. Potentially, that could be technically feasible in the short term. Yet the recipes and research scientists are there, and it would be realised at considerable political cost.

Is there any life left in the diplomatic track? It is certainly vital to follow solely the UN route and to keep Russia and China on board. It has been a miracle of diplomacy that they have indeed joined the international consensus. Are there incentives such as security guarantees which could even now divert Iran, which sees itself as surrounded by US forces?

Clearly, and to conclude, we need a twin track. We should continue to explore whether there is any realistic prospect of a deal including security guarantees and with enhanced technical and commercial co-operation as rewards. As other noble Lords have said, Russia is the best hope of providing a deus ex machina, the way out of such problems in classical tragedy. At the same time, while recognising the difficulties of reaching a consensus on sanctions—those that we mentioned as being mostly relatively ineffective, such as football sanctions—we should make clear to Iran that there is indeed a price to pay if it fails to respond and that penalties would increase incrementally to international isolation.

I conclude that the task is formidably difficult and that we may fail, with frightening consequences for regional and world security.

12.53 pm

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