Examination of Witnesses (Questions 260
- 274)
TUESDAY 17 OCTOBER 2006
MR KAREL
KOVANDA AND
MR ALBERT
STRAVER
Q260 Lord Powell of Bayswater:
Leaving Professor Kreutz to that special place reserved for German
professors and coming back down to earth, can you tell us a bit
about the mechanisms which are used by the European Union to decide
which individuals and institutions should be put on the list for
bilateral sanctions; and once they are on it, how do they get
off it? Is there an appeal process, is there a review process,
has it been used, does it work?
Mr Kovanda: My Lord Chairman, the EU makes its
own list. The list is adopted formally by the Council, as I mentioned,
in accordance with the CFSP, and in developing these lists all
appropriate branches of national governments are being employed.
Heads of missions or ambassadors of our Member countries, in a
given place, for example, last year, in Tashkent, in Uzbekistan,
provided their collection of suggestions as to which personalities,
which institutions, ought to get on the list of sanction targets.
Proposals that are developed in this way are discussed in the
Working Group of the Council, then approved by your Permanent
Representative and his 24 colleagues, then subsequently by ministers.
The lists, My Lord Chairman, are approved by unanimity. If we
have lists from the UN Security Council committees, these are
enforced without prior review, provided the UN lists are based
on Chapter VII of the Charter. The difficulty, indeed, as Lord
Powell hinted at, is how to get people off the list; there is
the review and delisting process. Appeals, in fact, have been
rather rare, but the Council and the Commission nowadays- I do
not want to say `even as we speak' but currently- are involved
in a process of developing ways by which personalities can appeal
their listing and by which we could make a review and, if necessary,
delist people that may find themselves on the list by virtue of
insufficient data, leading to same-name confusion, and so forth.
Q261 Lord Kingsdown:
What are your views about the application of extra-territorial
sanctions by the United States? To what extent has the US been
successful in ensuring the compliance of EU citizens and businesses
with US extra-territorial sanctions?
Mr Kovanda: As I am sure you know, My Lord Chairman,
as a matter of law and as a matter of principle, we cannot accept
the extra-territorial application of such domestic legislation
as Lord Kingsdown mentioned. The EU has systematically tried to
resist the extra-territorial application of this legislation,
and in this respect an important regulation was passed in 1996,
called the Blocking Statute, which is directed exactly against
that. If one were to estimate the effectiveness of these US extra-territorial
sanctions, it would be very difficult for us. We, the Commission,
have only access to instances where European Union residents and
companies would notify us, and we have received, I think, about
20 such notifications, and none of those have led to the imposition
of sanctions. There has been, My Lord Chairman, no assessment
of the overall impact of extra-territorial sanctions attempted
by the US.
Q262 Lord Sheppard of Didgemere:
I think actually you have answered the question I was going to
ask, about the comprehensive assessment—we were just talking
about the numbers that you estimated of the impact of US extra-territorial
sanctions. What effect have such sanctions had in Europe and have
European members suffered as a result, and what is the reaction
of the EU to that?
Mr Kovanda: My Lord Chairman, I think that the
only way we would know was if European persons or European companies
complained, and perhaps it is noteworthy that complaints have
been very few, so one would surmise that, unless there is a vast
pool of companies that have felt the effect of the US extra-territorial
sanctions and have not complained, in fact the effect of these
sanctions has been quite minimal.
Q263 Lord Skidelsky:
To follow up that line of questioning, is it the case that the
US authorities have been covertly obtaining payment details from
the SWIFT banking consortium based in Belgium, and, if so, what
has been the EU response? Would such an action by the United States
authorities contravene European Union banking regulations, or
any other European Union laws?
Mr Kovanda: My Lord Chairman, the primary responsibility
for the proper application of data protection rules lies not so
much, I think, with the European Commission as with competent
national authorities. Nevertheless, to answer Lord Skidelsky's
question with respect to the Commission, we follow the developments
actively and if necessary would make full use of the powers that
we have under the EC Treaty. The Commission, My Lord Chairman,
is in contact with the Belgian Government and is following closely
all the information on the facts on which the transfer of personal
data, processed by SWIFT, to the authorities of the United States
has been taking place.
Q264 Lord Skidelsky:
So it has been taking place?
Mr Kovanda: The transfer of SWIFT data- we believe
that it has, yes, My Lord.
Mr Straver: If I may add to that, the information
we have is that SWIFT has a mirroring facility, so it has a database
in The Netherlands and one in the US and all the data that concern
the transactions in Europe are mirrored in the US. That is done
for technical reasons, no doubt, but it has the disadvantage that
the US authorities can ask for the data to be submitted to them.
Chairman: That is helpful.
Q265 Lord Lamont of Lerwick:
The EU has suspended aid to the Palestinian Authority following
the election of Hamas. Is not that a rather odd response to a
situation in which they had been urging Hamas to participate in
democratic elections? It has led to violence and fighting between
different groups within Palestine. Within the territory of the
Palestinian Authority, are there really any grounds for rationally
believing that this is going to alter the Government from its
present political stance, on which it was elected in the democratic
elections?
Mr Kovanda: My Lord Chairman, the questions
of Lord Lamont invite a discussion of Palestinian politics, and
I think I would try to avoid the political part of it. Nevertheless,
what remains as an important fact is that payments to the Palestinian
Authority, once the Palestinian Authority consisted of Hamas leadership,
indeed have been stopped, as Lord Lamont points out. Bear in mind
that it was decided by the European Union, back in 2001, to list
Hamas on its list of terrorist groups, and it is terrorist groups
that are targets of financial sanctions, and in September 2003
the Council made the decision to include Hamas on the EU terrorism
list. This happened, obviously, a long time before the elections
and the handwriting was on the wall, so to speak. EU heads of
state and government decided in July, as you know, that the Hamas
Government needs to meet the three principles that were put down
by the Quartet, the principles of non-violence, a recognition
of Israel's right to exist and acceptance of existing agreements
and obligations. Already, in April, the Council had turned these
three principles into conditions for continued assistance. Whether
cutting assistance to the Palestinian Authority, led by Hamas,
would lead to Hamas' change of policy is questionable. We hope
that it might, that it might shift the Hamas policy, make it budge,
perhaps. There was great effort, as you know, supported by various
international actors, for Palestinian politics to develop in the
direction of a government of national unity, and the moment that
we would see that any Palestinian Authority would be prepared
to adhere to the three principles of the Quartet, I have no doubt
but that the question of suspending support would have been reviewed.
As to our support for Palestinian people, however, that is a different
matter.
Q266 Lord Lamont of Lerwick:
Can I ask a question about the difference between general sanctions
and smart sanctions, going back to the point which Lord Skidelsky
touched on. One can see how general sanctions work, albeit at
a price, which is felt by the general population, and it may or
may not cause the government to move its position, and that is
why, because it causes suffering, we move away from general sanctions;
but they can work. Is not the problem with smart sanctions that
in these non-transparent countries, whether you are talking about
Saddam's Iraq or Iran or Libya, there are many corporate entities,
many banks, many ways in which an individual can just move his
assets around, and, actually, effectively to target an individual
citizen in countries like that is well nigh impossible?
Mr Kovanda: One of the principles of effective
sanction application, My Lord Chairman, is the strictness and
the universality with which the sanctions are applied. Therefore,
everything else being equal, United Nations sanctions, which are
obligatory upon all Members, are going to have a greater chance
of success than sanctions on the other extreme which would be
imposed by a single country. From this point of view, whether
it is easier to bust general sanctions or bust targeted sanctions
I think is a question of debate. At any rate, if we have, for
example, EU sanctions directed at the financial activities of
a certain personality, at the very least what it might do is deprive
that personality of the possibility of making his, or her, investments
in some of the best places that the world has. In such cases,
it is very likely that other countries of the developed world
would be joining such sanctions and further diminishing the flexibility
that the targeted personality would have at his, or her, disposal.
It is not going to be a panacea, under the best of circumstances,
I will grant you that without any problem at all.
Q267 Lord Paul:
Mr Kovanda, you mentioned that giving the aid to the people is
a different matter, but these are the very people who have voted
Hamas in, and, in any case, do you think that this direct aid
has been effective at sorting out the humanitarian cause?
Mr Kovanda: My Lord Chairman, when it comes
to Palestine, the European Commission and much of the international
community have been very careful in distinguishing between the
Palestinian Authority, with the predominant influence, if not
the complete influence, of Hamas, and, underlined, listed as a
terrorist organisation since 2003, on the one hand, and the Palestinian
people, on the other hand. It is in view of this concern that
the Commission last June set up something called the Temporary
International Mechanism (TIM) at the request of the Quartet and
at the request of the European Council. The TIM was devised in
order to funnel into Palestine, by mechanisms which avoided the
Palestinian Authority, by mechanisms which bypassed Hamas, funds
to support the neediest of the needy in Palestine; some might
call it a palliative, but I will say that a palliative is always
better than nothing at all. Let me point out that the European
Community contributed to TIM to the amount of €105 million.
The TIM was set up originally for three months, to be ended, I
believe, in September, and, all told, the TIM supported electricity
generation in hospitals and health centres and water and waste
water infrastructure for the benefit of the 1.3 million people
in Gaza. In addition, TIM provided social allowances- we were
very careful not to describe them as salaries- to vulnerable Palestinians.
The Commission has paid €38 million for such allowances to
over 100,000 people, including 12,000 healthcare service providers,
50,000 low-income cases and pensioners, and 35,000 social hardship
cases. In September, the Council and the Middle East Quartet agreed
to expand the TIM to include other strata of the population and
extend it by three months into the phase two. Commissioner Benita
Ferrero-Waldner, from External Relations, personally was very
involved in setting up the TIM. I know this is a mechanism which
is very close to her heart and I think that she was successful
in persuading others and in getting TIM to work, as I say, to
help the neediest of the needy.
Q268 Lord Vallance of Tummel:
Can we move on to Burma? I think most commentators on Burma seem
to suggest that the current EU sanctions are ineffective in achieving
reforms, let alone a change in regime, but they draw very different
conclusions from this. On the one hand, there are those who say
that this argues for intensification of the sanctions so that
they really bite. On the other hand, there are those who say that,
as the current sanctions are bearing upon the population at large-
the point that Lord Skidelsky made- perhaps a policy of economic
engagement might be preferable. Where do you stand as between
those two points of view?
Mr Kovanda: My Lord Chairman, this is a constant
dilemma, is it not? When sanctions are being applied for a long
time and nothing happens, what do you do next? Do you lift them
or do you harden them, or do you find something else? The sanctions
actually do seem rather extensive, the sanctions against Burma
that are in effect today. They include financial sanctions targeting
members of the military regime, and restrictions on admissions
of those members- in this sense, very clearly-targeted sanctions;
also an arms embargo, which I do not think would affect the population
at large, and restrictions on investment in certain state-owned
companies and suspension of co-operation programmes. Even this
indicative list of how sanctions are targeted today suggests that
this is by no means a comprehensive ban on trade with Burma or
on investment in that country. Most of the sanctions, as I suggested,
are directed against members of the military regime and against
their personal assets. There may be some unintended and incidental—I
hate to use the word—collateral impact on ordinary people,
particularly if their names happen to be identical with those
of regime members, but, frankly, we are not aware of this being
a significant problem.
Q269 Lord Lamont of Lerwick:
Are not those sanctions just a subsidy to Japanese industry?
Mr Kovanda: May I take that as a rhetorical
question, My Lord Chairman?
Lord Lawson of Blaby: It may or may not
be rhetorical but it is a good point, and is it not clear; people
who have studied Burma very carefully have come to the conclusion
it is clear to everybody because the sanctions have had absolutely
no positive effect. The regime in Burma has not been weakened
and its policies have not changed. Those who have studied it very
carefully have come to the conclusion that actually it is counterproductive,
and indeed the motivation has been one of domestic politics in
the sanctioning countries. Does not that experience cause you
concern?
Chairman: I think that, before you move
into that, the witness ought to be allowed to answer the question
he was asked already. I think we will go back to Lord Vallance,
whose question it was.
Q270 Lord Vallance of Tummel:
Just to go back to the latter half of the question, which was,
do you think that, as commentators have suggested, that there
should be more economic engagement with Burma now, as the previous
regime of sanctions has not been effective, that is the way we
should go?
Mr Kovanda: I do not think, My Lord Chairman,
that increased economic engagement at this moment would be impossible.
In fact, I would point out that the composition of the Council
does provide for projects and programmes to support health, education,
poverty alleviation, and there is any number of economic sectors
where co-operation with Burmese entities is possible, I think.
Lord Lamont of Lerwick: If there are
no Asian sanctions, how can EU sanctions work?
Chairman: We have got to make progress.
We are running rather a lot over time, and I cannot say it is
entirely the witnesses' fault we are running over time, if I may
say so. Lord Layard.
Q271 Lord Layard:
I want to ask about Belarus and Zimbabwe. We have the EU travel
bans and asset freezes on leading officials, which appear to be
examples of sanctions designed to symbolise disapproval, to impose
costs on relevant officials and underline EU commitment to democracy.
Do you see these as being effective, or ineffective but better
than nothing?
Mr Kovanda: You know, in a world where sanctions
are one of the few things that you have at your disposal, My Lord
Chairman, I think the travel bans and the asset freezes that have
been imposed on the leaders of the two countries which Lord Layard
has mentioned are, to my mind, the very minimum that pretty much
we had to do. Trade and economic sanctions would have given rise
to concerns about the negative impact. We talked about that. It
is the targeted sanctions which are the most appropriate way to
affect leaders of countries which adopt policies which to us are
deplorable. I would add Uzbekistan, to that list, for example.
Whether and when these sanctions will be effective is the question
which has been permeating our entire discussion here this afternoon,
is it not?
Q272 Lord Sheldon:
On North Korea, it has been suggested that economic sanctions
should be increased to show the disapproval of the nuclear weapons
test and to deter development of the nuclear weapons programme.
What sanctions would be suitable in these circumstances? Other
than sanctions, do you think that negotiations, security guarantees
and economic engagement would be more likely to achieve an objective
we want to see?
Mr Kovanda: My Lord Chairman, I think Lord Sheldon
is raising a question which is as topical as can be, is he not?
Today, I would suggest, the question has been superseded by the
UN Security Council Resolution 1718, which has taken the decision-making
out of the Commission's hand. Just yesterday, at a management
meeting, when we were reviewing the positions of the European
Commission, the point was made that for the first few days we
were not exactly sure how we should react in the wake of a rather
differentiated response from various important countries of the
world. Now that we have UNSCR 1718 on the books, it is up to the
Council and the Commission, with all deliberate speed, to implement
into European legislation the provisions of that legislation,
which, as you know, concerns military imports, cargo with military
and non-proliferation matter. It includes luxury goods for the
North Korean leadership, which I think is an imaginative extension
of targeted smart sanctions, most recently, and other provisions.
Q273 Chairman:
What about Iran? To what extent do you think that there is a feasibility,
desirability, of using economic sanctions against Iran as a means
of influencing its nuclear programme?
Mr Kovanda: My feeling is, My Lord Chairman,
that the international community, most recently Dr Solana but
certainly, leading up to him, the EU `three', including the United
Kingdom, have gone every step of the way to reach a negotiated
arrangement with Iran to achieve the objectives of the international
community. We are actually very proud of the work that our colleagues
have been doing and, just as a footnote, with your permission,
we are particularly proud that the United States subscribed to
the European approach to diplomacy with Iran. I believe, now,
we have gone to the end of the road of negotiations; there is
nothing left to negotiate, no glimmer of hope that negotiations
might lead anywhere. Today, My Lord Chairman, as you know perfectly
well, the matter is in front of the Security Council again, following
1696 of last July. Another Resolution is under preparation, a
Resolution which may be under Chapter VII, but a Resolution which,
in all likelihood, will include sanctions; what kinds of sanctions
I would say it is not really appropriate to discuss, even if we
would all have our best guesses. We will cross that bridge when
we come to it.
Q274 Chairman:
Thank you very much. Both Lord Lamont and Lord Lawson asked you
questions which implied a suggestion of a change in policy, I
would have thought, and I stopped you answering, if you wanted
to. I do not know that you particularly wanted to go down that
road, but if you do please say so?
Mr Kovanda: I would say this. I would say that
the questions of Lord Lamont and Lord Lawson concerning Burma,
in the context of how European-imposed sanctions fit into the
broader international attitude toward Burma, are questions which
provide me with food for thought. I will take those questions
back to the Commission with me and consult on them with my colleagues
who focus on Burma as much as do your Lordships.
Chairman: A very tactful answer, if I
may say so. Can I say that we are very grateful to you and your
colleague for coming along and helping us with our inquiry. There
are one or two things to follow up but they are absolutely straightforward.
We are very grateful to you. Thank you very much indeed.
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