Select Committee on Economic Affairs Minutes of Evidence

Examination of Witnesses (Questions 43 - 59)



  Q43  Chairman: Welcome. We are delighted you were able to come and talk to us. Thank you very much for your written evidence, which we have and which we have all read. We will ask you some questions and you have some idea what we are going to ask you. There may be questions that have arisen from your written evidence that others would like to ask. Although you have sent us written evidence, do you want to add anything to that as an opening statement or are you happy just taking questions?

  Dr Alexander: I feel that the written evidence summarises my position and what I would say, so I am happy to go right to questions.

  Q44  Chairman: My opening question therefore is: does the UK Government have a clear and coherent approach to economic sanctions, in your view? In particular, are the policy objectives of sanctions regimes usually clearly stated?

  Dr Alexander: I believe that in the last 10 years the UK economic sanctions policy has become much more clear and the Export Control Act of 2002, for instance, really does provide policy objectives. It provides specific definitions over what UK export controls can cover: military goods, dual-use items, technology and software that is related to military products. In that respect, the Export Control Act, I think, is very clear and it is a step in the right direction, of course embodying the recommendations of the Scott Report. The other area of economic sanctions is financial sanctions, where UK policy is pretty clearly stated that Parliament can adopt enabling legislation and direct the Treasury to implement statutory orders to enforce and to devise financial sanctions. Therefore, in that regard, the Bank of England has been delegated authority to impose financial freeze orders on designated terrorists, on alleged drug traffickers, and also to freeze the bank accounts of certain heads of state and government representatives of states that the UK is party to financial sanctions against, such as Zimbabwe. In that regard, the UK legislation, and I think the regulatory framework, is pretty clear regarding what the purposes of sanctions are. I think the one gap that someone might say exists has to do with the area of general economic sanctions, broader trade embargoes that deal with non-military goods, non-strategic items, and then non-financial sanctions type of economic controls. I think there is a bit of a gap in UK policy now. The US of course has a very comprehensive set of economic and financial sanctions for military goods as well as for general economic sanctions, and then they have more specific financial sanctions that are targeted. The UK Government has statutory authority to adopt economic sanctions more generally, but they simply have not stated the policy rationale behind the adoption of broader economic sanctions. Maybe they are not needed. Maybe it is the determination of the Government that they do not need to have broader economic sanctions for civilian-type goods, but they certainly have, I think, a very comprehensive regime regarding export controls on military items, dual-use items, technology software and on financial sanctions.

  Q45  Lord Powell of Bayswater: When it comes to the actual implementation of the sanctions, do we have all the necessary machinery we need and how is performance in practice?

  Dr Alexander: I believe that the legal and regulatory framework is fairly robust in the UK regarding the implementation of sanctions.

  Q46  Lord Powell of Bayswater: Is it applied effectively?

  Dr Alexander: It is applied effectively. I think in the area of financial sanctions it certainly is. We see the Bank of England now issues orders and notices to the financial services community to block assets of designated terrorists that are on the international sanctions list as well as the lists that are devised by the European Union. So the Bank of England and the Treasury have been sending the notices out regarding financial sanctions. I think the Export Control Act, on the other hand, is going through a birth phase. It has just recently been adopted. The enabling legislation was adopted in May 2004, and the effective implementation of that remains to be seen. The DTI publishes reports on compliance.

  Q47  Lord Powell of Bayswater: But clever people can always find ways round regulations and ways of dodging and evading them and so on. Do you think a lot of that actually goes on? Is our legislation sufficiently far-reaching to stop that sort of activity?

  Dr Alexander: I think there are some gaps in the UK financial sanctions regime. For instance, if the Bank of England issues a notice for the banks to block the assets of a named individual, it only applies to the banking operations in the United Kingdom; it does not apply for instance to the overseas branches of Barclays or HSBC. They might have a branch operating in Spain; it would not apply to the branch in Spain. The branch is part of the bank in London; it is just a branch office. So the financial sanctions regulations, I think, have a gap in that regard. They do not want to be too extra-territorial, I do not think, but they need to be sufficiently extra-territorial to cover the overseas and branch operations of UK businesses.

  Q48  Lord Powell of Bayswater: What about the machinery for monitoring the effectiveness of sanctions? Do we really have the capability to see and understand whether they are proving effective or whether they are being circumvented?

  Dr Alexander: I think the Treasury and the Home Office publish an annual report on financial sanctions and terrorist controls that appears to state the amount of money that is in blocked bank accounts, and so we see some measures of what have been going on through that. However, I do not think that there is any relationship between what has been done and how the sanctions are being applied and whether or not sanctions are achieving their objectives. That is one gap, I think, it is very difficult for policy makers to measure anyway. Certainly it is not clear right now whether or not the blocking orders that the banks have been applying in the UK are actually having an effect, that they are enabling the UK policy-makers to achieve their objectives.

  Q49  Lord Powell of Bayswater: My point is that the monitoring of reports will tell you what is being done; it will not tell you what is not being done. There is probably quite a large area of things that are actually slipping through the net. Do you agree?

  Dr Alexander: Yes.

  Q50  Lord Paul: Where do you think, out of 10 countries, in terms of our objective on sanctions, we have achieved the highest success?

  Dr Alexander: Historically, I think in the case of Southern Rhodesia the objectives were eventually met through the UN Security Council sanctions regime that led to the transition of the government. In South Africa, for instance, the UK participated in the UN Security Council resolutions with regard to South Africa. I think that the effectiveness of UK sanctions in each of those cases depended on the level of international support Britain gets. So you have to have effective enforcement and monitoring of enforcement at international level in the Security Council. In that case, Southern Rhodesia and South Africa, I think, are examples where you could argue, although it took a while to take effect, that actually it achieved the objective.

  Q51  Lord Paul: In Southern Rhodesia and South Africa, the belief was that sanctions achieved a better purpose eventually because those governments were depending upon those very countries for their existence to back them regularly. They got a lot of support from those same countries. It was achieved because they lost that support, but that is not the case in a lot of other countries.

  Dr Alexander: Another case where sanctions were successful, I would say, is Libya. In the Libyan case, you had a fairly intransigent regime that was involved in alleged state-sponsored terrorism in the 1980s, and they were the object of unilateral US sanctions, and the UN Security Council after the Lockerbie bombing and the UTA flight bombing went into action and imposed multilateral sanctions against Libya, which eventually brought the Libyans to heel. That does not mean that they work all the time, and so I think there are certain soft points in every government regime that you are trying to impose sanctions against. Whether or not sanctions are effective is very much a case-by-case analysis.

  Q52  Lord Skidelsky: Basically you have covered the ground of the question that I was going to ask, but I will persist anyway because there are one or two other points that can be brought out. As for the question "how can we assess the effectiveness of UK policy on economic sanctions?" may I suggest that the answer is we cannot. The fact that B followed A does not mean that A caused B.

  Dr Alexander: I think that is a very good point. I should have prefaced my remark by saying that generally there are four objectives of sanctions: behavioural modification; retribution; punishment; and signalling. So it depends what objective you are trying to measure your success by. Certainly, if you measure it by behavioural modification, sanctions could be seen to fail quite often, as in your suggestion, but in other areas where the goal of sanctions is simply to say, "We are good international citizens; we are participating in international multilateral institutions and we are going to go along with the US, with Japan or whatever they are doing", then the effectiveness of sanctions might be viewed in a different light.

  Q53  Lord Skidelsky: That is interesting. I was going to go on to that, and quite rightly in your written evidence you do give the three possible objectives: behaviour modification; retribution or punishment; or as a signal. The first one obviously is designed to affect behaviour. The second one is designed to punish behaviours to such a degree possibly that the behaviour might be changed. But the third one is purely symbolic. In that sense, sanctions can never fail. Obviously, if the object of sanctions is simply to express the disapproval of the world community and the world community or enough of it expresses disapproval, then sanctions succeed; they are effective. Therefore, is that any reasonable test of the effectiveness of sanctions to say that in their symbolic form they undoubtedly do what they are supposed to do?

  Dr Alexander: I think there is a case to be made. I do not think it is sufficient to say that sanctions are symbols, or that they just signal, but at least they voice disapproval in the world community of nations. Even though, for instance, I think it is legitimate for a small country to adopt economic sanctions against a targeted state that might be approved for sanctions by the Security Council, even though that small state's adoption of sanctions will have very little effect on the behavioural modification of the target, it is important that the small state be able to signal to the rest of the world that they are part of an alliance of countries that are denouncing the behaviour that is taking place.

  Q54  Lord Skidelsky: Why?

  Dr Alexander: Because of political communication; just because we cannot change a country's behaviour does not mean that we should not express our disapproval. If we do it simply verbally through diplomatic means, that is one way. If we do it through economic measures that impose economic cost, that is another way of doing it. Economic sanctions can be a political instrument for a number of different objectives. Just because it does not change the target's behaviour does not mean that voicing your displeasure is necessarily a bad policy.

  Q55  Lord Skidelsky: My difficulty is that it makes the test of the success of sanctions too easy.

  Dr Alexander: Yes, exactly, and I would think that is one of the problems, of course, that signalling itself is not sufficient. Ideally needs to be linked to some other objective.

  Q56  Lord Lamont of Lerwick: Following on from that, if we take sanctions as expressing disapproval, and sanctions as punishment, who is punished? Who bears the price? That is surely the question one has to ask. If one thinks of the sanctions that were in existence against Iraq before the invasion of Iraq, those were criticised by many people as causing shortages of medical supplies and suffering by ordinary Iraqi people, but the defenders of sanctions said that was because of action that was taken by the Iraqi regime pre-empting resources that might have gone to ordinary people, though that defence rather indicates that sanctions were not working as they were intended to work, and that would in itself appear to be a criticism of the sanctions.

  Dr Alexander: I agree that the Iraqi sanctions had collateral damage in the economic and social sense on the broader civilian population in that the economic and social damage it did to the civilian population may not have been effective in persuading the leadership to comply with Security Council resolutions or persuade the leadership not to be involved in developing weapons of mass destruction.

The Committee suspended from 4.12 pm to 4.20 pm for a division in the House

  Q57  Lord Lamont of Lerwick: Following on what Lord Skidelsky was saying about retribution or punishment, surely one has to ask oneself who is punished, who bears the cost of the sanctions? If one looked at the sanctions that were in existence before the invasion of Iraq, there was a lot of criticism of those sanctions that they hit ordinary people, that they hit hospitals, there was a shortage of medicines, of incubators for babies and so on. On the other hand, the defenders of sanctions said: "Ah, this is not because of the sanctions but because of the regime that is pre-empting resources that would have been available to ordinary people." Even that defence of sanctions seems in itself to acknowledge the ineffectiveness and the harm that sanctions do to ordinary people.

  Dr Alexander: I would certainly agree that economic sanctions, general economic embargoes and trade embargoes do enormous harm to ordinary people, the civilian population. For instance, the US embargo of Cuba has imposed tremendous economic cost and social suffering on the Cuban people. Whether it is achieving the objective of removing Castro from power is another question entirely. In the case of Iraq, I agree entirely with what you have said, that the UN Security Council economic embargo of Iraq was one that was overreaching because it was too broadly based. It imposed a lot of suffering on the civilian population. There was a debate in 1999 and 2000 that the Iraqi sanctions should become more targeted, more focused, on military items, on dual-use equipment, on financial sanctions, and also on monitoring the borders of Iraq to ensure that imports were not coming in from Jordan or from other neighbouring Arab states. There was a move to shift the sanctions to become more targeted. Of course, the role of the oil for Food Programme was to allow Iraq to sell oil and to use the proceeds for humanitarian purposes, but that turned out to be an unsuccessful programme, as the recent Volcker Commission report shows. I agree entirely that one of the main problems with sanctions was that they were too broad and too general. That is why in the 1990s we see a number of countries begin to adopt more targeted financial sanctions. I suggest that those might be more effective in achieving some objectives rather than broad-based embargo type sanctions.

  Q58  Lord Lamont of Lerwick: Do you think it is a coincidence that three of the longest lasting dictatorships—North Korea, Cuba and Iraq until the war—were countries that had long-lasting general US sanctions against them?

  Dr Alexander: I think that is a fair comment on the failure of US policy to achieve change, to achieve the stated political objective, which is to bring democratic government to Cuba and to reimburse confiscated assets, and also, in the case of North Korea, to induce them to stop development of weapons of mass destruction and try to bring about economic and political reforms there. US policy has not been successful in that regard, certainly, yes.

  Q59  Lord Macdonald of Tradeston: Can I ask how you might distinguish in Iraq between the received wisdom that the sanctions were very ineffective and the fact that we have subsequently discovered that Saddam had abandoned his weapons of mass destruction and we could therefore argue that it had been highly effective in whatever form? How would you distinguish between the different elements of that sanctions policy?

  Dr Alexander: I think that is assuming that there were no weapons of mass destruction, and I am not privy to any intelligence reports. I think the stated positions of the US and UK Governments were that Saddam was developing the capability to develop weapons of mass destruction. Whether or not he had them is another question. A lot of doubt has been raised regarding that. Certainly his intent to develop WMD capability was a breach of Security Council Resolution 687, and the US therefore tried to justify that and some of the Security Council members were for maintaining sanctions. Certainly you might say that Saddam did not have the economic means to get the programme off the ground. In that case, you could arguably say that the sanctions were successful.

  Lord Lamont of Lerwick: On the other hand, one justification for war was that it was better than the sanctions.

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