Select Committee on Economic Affairs Minutes of Evidence


Examination of Witnesses (Questions 285 - 299)

TUESDAY 24 OCTOBER 2006

DR KIM HOWELLS MP, MR STEPHEN PATTISON, MR CHRISTOPHER YVON, MR PAUL BENTALL AND MR PATRICK GUTHRIE

  Q285  Chairman: Good afternoon. You are extremely welcome to this Committee. We, as you know, are going to ask you a lot of questions. We have quite an agenda to get through, so I am encouraging my Committee to keep the questions relatively short, and we will not get upset if you keep your answers relatively short but, of course, we want adequate answers. If there is anything you feel you want to send to us in writing afterwards, of course, that might be helpful. First of all, I should say thank you for your written evidence, which we have received. I do not know whether you would like to start off by saying anything by way of a preliminary statement before the questions or not. Minister, would you like to say anything before we start the questions?

Dr Howells: Thank you very much, Lord Wakeham. It is very good to be here. Thank you very much for inviting me to give evidence today on this very important and topical issue. Before I respond to the questions which you have, I did want to make a few very brief contextual remarks on the sanctions environment, as it is now called, and the way that the scenery has shifted in recent years, and also some comments on the Government's overall approach towards the use of sanctions. The first thing that has to be pointed out is that there were only two UN sanctions regimes prior to 1990, but there have been 21 UN sanctions regimes since 1990, which when I read this I did not believe at first, but it seems to be true. So a real recent growth in the use of sanctions by the international community appears to be a trend. If we look at the history of sanctions in relation to one particular country, to Iraq, and in particular concerns relating to the levels of humanitarian suffering amongst the Iraqi population, it seems to have led to quite a vigorous international debate about the merits of one kind of sanction, which is usually referred to as "comprehensive sanctions". The international community's conclusion was that sanctions should generally become more targeted and smarter, and one conclusion of the 1998 Whitehall review of sanctions was precisely that. Our policy is to pursue such smart, targeted sanctions wherever possible, in the interests of minimising any humanitarian suffering. There are currently no comprehensive sanctions regimes in place—none that I know of anyway—and the UN has only imposed them four times in the past in relation to Rhodesia, Haiti, the Federal Republic of Yugoslavia and Iraq. So the use of extensive sanctions is quite rare. We believe that our policy, built on the 1998 Whitehall review, is still relevant today and there is clear evidence, including with sanctions regimes created only in recent weeks, that our international partners appear to take a similar approach to us. I will not go any further, Lord Wakeham, because I know that the Committee has a number of questions it wants to ask me, but I thought it would be useful if I outlined that approach.

  Q286  Chairman: That is very helpful and much appreciated, and my first question really flows from that. I just wondered what were the best examples of cases in which economic sanctions have, in your view, played a key role in achieving desired political objectives?

  Dr Howells: Certainly, I think a good example would have been the sanctions applied to the Federal Republic of Yugoslavia between 1992 and 1996. Those, of course, were comprehensive economic sanctions, and I think Yugoslavia felt the force to accept the proposed Bosnian settlement and to split from the Bosnian Serbs. I remember going there in 1992-93 and actually, it did feel as if the sanctions were having a real effect. We were certainly lobbied hard enough by both sides in that Bosnian dispute particularly—three sides—to see if there would be any movement on sanctions, if we could be persuaded to take a message back that it was having an effect. I think the military action and sanctions against the Bosnian Serbs certainly paved the way for the Dayton negotiations. The sanctions seemed to lever concessions from Milosevic at Dayton. Also, I think the economic, diplomatic and travel sanctions on Libya forced it to agree to the Lockerbie trial, and the suspension of sanctions in turn was useful in creating bargaining leverage in the negotiations on Lockerbie. Sanctions against South Africa undoubtedly highlighted South Africa's isolation, and I think that that sense of isolation is a very important feature of this. The idea of being a pariah state somehow tends to focus the mind; at least, it has in some governments. The sanctions increased the cost to South Africa of borrowing money internationally, which was, of course, a factor in their eventual decision to reform, and the gradual lifting of sanctions from 1991 helped to ensure white support for reforms. The other one I think is probably less convincing, but it is very important. I am someone who, because my brief includes counter-terrorism and counter-narcotics, I am very interested in the processes of money laundering and the use of funds by these organisations, and also of course by governments. The $94 million of assets belonging to al-Qaeda and the Taliban and associated terrorist groups across 34 countries have been frozen and are therefore not available for terrorist purposes. The assets freezing regime has made the financial markets a hostile environment for terrorists to operate in and it has increased the cost and the risk to terrorists of moving resources. So while I think we could find lots of countries where sanctions do not seem to have had an immediate and direct effect, and I want to give one example of that, the conflict in Liberia, for example, they have nevertheless levered important post-conflict domestic reforms, including most recently the passing of crucial legislation in Liberia in the timber regulation sector so that the government increasingly can control the timber trade there. What I am saying, Lord Wakeham, is that it can have perhaps very often not an immediate effect but consequential effects.

  Q287  Lord Layard: Would you say the Government pays enough attention to the likely cost and benefits of sanctions before imposing them, or is it mainly thought about afterwards? Could you just give us some examples of cases where there was a serious evaluation of cost and benefits before?

  Dr Howells: Yes indeed. We consult other Departments very carefully. I served my time in DTI for three years and I remember that, because of the special position of DTI as a sponsoring Department for British industry, the Department looks very carefully at proposals for sanctions and demands from us a cost-effective evaluation of whether or not it is going to be an irritation and one which could affect British industry without any real benefit to the people of the country against which the sanctions are being imposed or whether it really is going to have an effect. I think we consult very closely on these matters. I will ask Stephen Pattison to answer. He has been doing this job for a while now and I am sure he can give you particular examples of countries where this has happened.

  Mr Pattison: We certainly do look quite carefully at the implications of imposing any sanction regime before we would support imposing one, and we look at a number of aspects. One, of course, is the enforceability of sanctions here in the UK and also elsewhere. Another is the impact that sanctions would have, and there are two aspects of that. One is a humanitarian impact. The whole point of our policy of targeted sanctions is to minimise the unintended consequences, the unintended humanitarian damage that sanctions can sometimes do, and we would look quite carefully at that. The third element we would look at, of course, is the broad impact of the sanction, whether it is likely to achieve the effect we are after. In the past there have been numerous examples of how we have co-ordinated throughout Whitehall on this, but the UN has got much better at doing this too. The UN is now quite concerned to make sure that its sanctions are smart. One example, for instance, was the effort put into looking at the impact that a timber embargo would have on Liberia before the UN moved to introduce one. We did work here in Whitehall and the UN did work themselves, and we looked quite carefully at what the adverse humanitarian impact might be before we moved in that direction.

  Dr Howells: On the specific question about examples of countries, I think we have a very good record actually. One thinks of Libya, for example, but of other countries where we could be seen to be damaging our own interests in terms of being able to purchase cheap oil, for example. This has not always been the case, and certainly has not been the case with some of our EU partners, I fear, when it has come to maintaining sanctions against some of these countries. I think it was used very wisely in the case of Libya, and now indeed, I think we have got to a position where Libya is looking for our help. We have to be very constructive in the way in which we look not just at sanctions but at what happens when those sanctions are lifted. That often demands a very big change in psychology, I think. I have been to Libya very recently and seen that there are great strides being made. Libya feels a bit aggrieved about the fact that, in response, amongst other things, to sanctions, it gave up its programme of weapons of mass destruction, and it sees us offering countries who have not done that very large carrots, and they say, "Hang on, you haven't offered us anything. We have been through the sanctions regime and we want your help and your advice." It has been, for me anyway, a fascinating consequence of the imposition of what was quite a strict sanctions regime.

  Q288  Lord Vallance of Tummel: Can we turn to Iran? Is there any reason to believe that economic sanctions would persuade Iran to modify its nuclear programme, or would positive engagement, perhaps economic incentives, prove more effective, or is it just the case that Iran is impervious to any external pressure?

  Dr Howells: We have certainly been very flexible with Iran, offered very generous proposals and, to use the cliché, we have gone the extra mile with Iran. I remember coming into this job a year last May and we all assumed that there would be some kind of deal or an arrangement done by certainly July or August 2005, and we are as far away from it, it seems to me, at the moment as we have been. That is very worrying. I do not know what these sanctions could look like for Iran. I can only give you a very honest answer, which is that the messages that come back to me, not so much from Iran itself because it is very difficult to get messages from Iran which are comprehensive in any way, but speaking to people like the former foreign minister of Afghanistan, who seems to be one of the few people who knows President Ahmadinejad very well, he says, "Look, there is inside Iran a very complex society. It isn't just the theocracy and President Ahmadinejad who make the decisions. They are the main decision makers but what the Iranians are very good at is trading and making money, and there are a lot of people in there who would feel very, very wary about a regime which continues to issue this kind of bombastic rhetoric, who might be harming their ability to make money in trade." So I think we have to look at Iran and say Iran is not North Korea; there is not a simple way of doing this; it has a unique culture and it is a country which we have to understand the complexities of and we have to be very sensitive to those complexities. But they have managed to stall the international community for a very long time now, and I think probably they have made some pretty significant progress, certainly in the construction of centrifugal systems and processes, and that is very worrying. I think the international community is right to feel a great sense of impatience and a sense, I suppose, of saying nothing has worked so far, so maybe we had better come up with sanctions. I suspect that is the way the UN tends to feel at the moment.

  Q289  Lord Oakeshott of Seagrove Bay: I listened with interest to that. You told us that Iran is not North Korea and obviously my question is going to be about North Korea. What I heard you say on Iran is that they have pulled the wool over the international community's eyes pretty effectively for quite a long time. Iran is not North Korea. How are you going to stop North Korea doing that, and what are you actually going to do about North Korea? There is a lot of interesting discussion here, but I would like to hear a little bit more about how you are actually focusing policy, please.

  Dr Howells: The Security Council's, I think, very quick, decisive and unanimous adoption of Resolution 1718 underlined very powerfully the international community's condemnation of North Korea's behaviour. The resolution of course obliges the North Koreans to refrain from any nuclear or missile tests, to abandon its nuclear and ballistic missile weapons programmes and to comply with various international obligations and processes. Will those sanctions work? Obviously, I sincerely hope so. We will need, of course, to see how the North Koreans respond. They will be shocked, I think, and have been shocked by the quick and unanimous adoption of the resolution. It remains to be seen, however, what key players are going to do about this. We are not entirely sure about what the Chinese are likely to do. They are the big players in the area. The South Koreans and the Japanese also have a take on North Korea which is certainly different from ours. They are very worried, or so the reports tell us, about severe sanctions reducing the regime to a kind of economic basket-case which then becomes a great burden, a very unstable country in the area. Whether that is a worse option than a regime which is pursuing or has built a nuclear bomb, you have to take your pick, I suppose. I know which one I would come out on the side of. I think that the construction of a nuclear bomb is an infinitely more dangerous option. Will the change in the sanctions policy hurt the North Korean people? That is something we certainly have to be sensitive to, I think. We know that they are already very dependent upon the world food programme and food imports in general from China and from South Korea, and I think the aims of the sanctions that are spelled out in 1718 are quite clearly not about hurting the people of North Korea. The sanctions are targeted certainly with those ends in sight, and to highlight the personal cost to the regime, the head of the regime, of their policy through freezes on assets and a travel ban. We are hoping there will be no impact on ordinary North Koreans. Whether or not it will persuade that regime, which is a very peculiar one, I think, to change tack, is another matter altogether.

  Q290  Lord Oakeshott of Seagrove Bay: Does it not all depend on China? With great respect, we do know that China is a serious player in that region. Does it not critically depend on what they are actually going to do, and how do you read it?

  Dr Howells: I think China is very worried about North Korea. That is one thing. It has not necessarily been very worried in the past, but I suspect that anybody with a regime as unstable as this one, testing nuclear weapons on its doorstep, is going to be worried. I think Russia is very worried about it; it is not very far to Vladivostok from the nuclear test sites, and we know very well that the Japanese are extremely worried about it. The Chinese have through various ways and means propped that regime up for a very long time and what they do is going to be crucial in this; there is no doubt about it at all. I think however that China itself of course wants to be seen as a very serious international player. It has had a very material effect upon commodity prices and almost everything else that we care to trade in the world at the moment, and I think they want to be seen also as serious diplomats. We know they are thinking very hard about this, about just how far to go. They are making gestures, certainly, about examining cargoes, for example. How far that will become a serious operation as opposed to one which is just a gesture is anybody's guess of course. But you are quite right; it is China that is going to make or break this sanction, I suspect.

  Q291  Lord Sheppard of Didgemere: You mentioned the position, Minister, on food but people have mentioned food trading or food aid as a way of very rapidly getting their attention, including from the direction of China. Do you have any comments on that? Is that going too far towards the humanitarian problems?

  Dr Howells: No, I think it is a very good question. The sanctions as set out in 1718 are targeted on specific areas such as the North Koreans' nuclear and ballistic missile programmes. They are not targeted at the country's food supplies, and we do not favour reducing or suspending food aid to North Korea. Our policy is to pursue targeted sanctions that aim to minimise humanitarian impact on ordinary people. We know from experience in Iraq, of course, that regimes can use those good intentions by withholding food from certain areas. We know Saddam played this absolutely brilliantly. He had people from the Houses of Parliament who went over there and came back with tales, very honest ones, of populations going through desperate suffering as a consequence of sanctions. I have no doubt that the North Korean regime is as ruthless and could try to turn these things around so that they appear to be hurting the people and not hurting their own resolution to pursue a nuclear weapons programme.

  Q292  Lord MacDonald of Tradeston: Could I ask you, Minister, about Burma, where the sanctions so far have been ineffective in achieving reform or regime change and therefore some commentators have suggested that the sanctions should be intensified. But of course, you have the counter argument that, because they are not only ineffective but are harming the ordinary Burmese people, economic engagement would be a better way of bringing about reform or regime change in Burma. What is your response to those two options?

  Dr Howells: I was in New Delhi recently and there they have a policy of engagement; they think that is the way to change the attitude of the Burmese regime. There are others, of course, some of our European partners, who do not want to intensify any sanctions because they have very lucrative oil and gas contracts with the Burmese, and other commodities as well, precious stones and so on. I think the sanctions that have been imposed on Burma so far have not produced a political breakthrough. That is obvious. Nonetheless, this Government supports a policy of targeted sanctions which are aimed at those who implement and benefit from the Burmese government's policy, and we accept that our leverage over the regime is very limited. EU sanctions alone are unlikely to bring about change, but sanctions perhaps form part of a wider strategy of bringing pressure to bear on the regime, which, in co-operation with the UN international and regional partners, we hope will bring political, economic and social transformation to Burma's long-suffering people. I mentioned in response to Lord Wakeham's earlier question that this notion of a pariah state, of a regime being isolated, does have some effect. In the case of Burma I have yet to be convinced that it will have an effect. I feel deeply uneasy about the present arrangements vis-a"-vis Burma and there are some very powerful countries that do not wish to see sanctions intensified in any shape or form on Burma because they perceive that they need Burmese commodities and natural resources. So I suspect that really, the present regime is not working very well. I do not think we should walk away from it but we should certainly have a much more vigorous international debate about how we can make it more effective.

  Q293  Lord Paul: Minister, is it acceptable to continue with economic sanctions when humanitarian exemptions or other measures fail to prevent severe humanitarian costs in the targeted country? If so, on what grounds?

  Dr Howells: That is a very good question. To preface my answer, I would say that many of these regimes are not naïve and they are not fools when it comes to using the whole image and business of sanctions being applied against those countries. Saddam Hussein used it brilliantly. He portrayed a country that, through no fault of its own, was besieged and its people were starving and its children were dying. I heard passionate denunciations of sanctions regimes in the House of Commons on many occasions by Members of Parliament who had been over there as guests of Saddam Hussein to listen to this and to see for themselves, but I think in recent years, because there has been a much stronger trend towards the use of more targeted sanctions, severe humanitarian costs in reality are much less likely than they were previously. If situations where those kinds of severe reactions were to be evidenced in the future, we would want to take a very hard look at that particular humanitarian situation and at that impact, but our overall policy is to avoid that situation arising in the first place. I do not know if that is a convincing answer to your question, but I would simply reinforce the point that we are very, very sensitive to this issue of humanitarian effects and they can be very complex, and sometimes unforeseen. I know of very large communities which I have travelled through and visited where they have been smuggling, for example, for hundreds of years; that is how they have made their living. One has only to look at Basra—Basra is famous for it and always has been—or the Afghanistan/Pakistan border. Trying to impose sanctions on those areas means in effect trying to stop smuggling across borders, and that is very difficult, and if you are effective in doing it you can induce a great deal of local hardship, and that is something which governments themselves do not mind too much about.

  Chairman: I think we had better ponder that last answer while we vote.

The Committee suspended from 4.06 pm to 4.14 pm for a division in the House

  Q294  Chairman: I wonder if I could ask the Minister a question about targeted financial sanctions. It has been suggested to us that targeted financial sanctions are not much more than a minor inconvenience to their targets, and I just wondered whether you could tell us of any successes that you think targeted financial sanctions have actually achieved.

  Dr Howells: The first thing to say is that increasingly we are seeing the Americans, especially, develop a kind of black list for companies who seem to be involved in one form or another in illegal activities, some of which are associated with sanctions. I was in Colombia last week, in South America, for example, and easily the most effective weapon that anybody has is the threat of being sent to the United States or of having their companies put on the American black list. So I think this does matter, and the idea that you can be extradited to America seems to put the fear of God into some of these cartel bosses in Colombia and Venezuela. It is important. The second thing to say is the level of inconvenience, if you like, is not very easy to measure. I doubt if anyone wants their funds frozen, and even where there is change in leader, for example, where political and military leaders of illegal armed groups in the Democratic Republic of Congo turned themselves in while under the threat of sanctions, there are many factors at play; it is not just to do perhaps with the influence which it might have on the financial arrangements. So we cannot necessarily say that it is down only to a particular sanction but nevertheless, I would argue that it is an important one. We certainly would agree that, in terms of the scope of their impact, they appear more modest when compared with, say, more comprehensive measures but nevertheless there are benefits to targeted financial sanctions. They can be fairly precise so as to ensure that the target is hit, not the wider population, and they can be disruptive, and in individuals they highlight the personal cost that is involved. So I think that we do not want to be too dismissive about trying to freeze or otherwise influence the finances of individuals.

  Q295  Lord Layard: Sanctions which have little chance of changing the behaviour of the targeted regime are often defended as being valuable in symbolic terms. What is your response to the view that such sanctions actually symbolise weakness and may have the effect of increasing the resolve of the regime as well as demoralising any opposition within the country?

  Dr Howells: I certainly agree that sanctions can have a very strong symbolic component, and the global reach of UN sanctions in particular. It puts a regime or a group or a set of individuals clearly outside of the international mainstream, and I think that the impact of this pariah status, if you will, will vary between targets and over time. I agree that often the target's immediate response is to seek to evade sanctions, not to alter their behaviour immediately. I think we have seen that time and again, but over time it can change, and it is clear that Libya, Sudan, in the earlier days, Yugoslavia, they got to the point where they felt that they needed to reduce their international or regional isolation. But it is clear that pariah status is less of a concern to other targets: al-Qaeda, for example, is not particularly concerned with notions of international respectability; indeed, probably if they had the support even of Arab governments they would feel offended since they want to destroy those governments. They probably almost certainly revel in their pariah status, but in this case the symbolic importance of sanctions is about reinforcing norms of behaviour, and that is something we ought to be about, I think, as diplomats. The impact of sanctions on opposition groups is difficult to generalise. Often they have been the ones who have been calling for sanctions, and again, they can vary over time and it is not clear whether there is one single opposition or voice, and in some states the opposition is so repressed by regimes that those voices may struggle to be expressed, so sanctions can have an important symbolic significance.

  Q296  Lord Vallance of Tummel: Following on from that answer, if I may, in designing sanctions regimes in the first place, is there a formal assessment that is made of the extent to which sanctions are likely to encourage or discourage moderates within the targeted regime or otherwise affect the opposition to the regime? Can you give us some examples of such an assessment taking place in advance of the imposition of sanctions?

  Dr Howells: The views of groups within a target state are assessed where these are nominal where they are relevant, but they are certainly one part of a long equation in this sanctions mathematics. It can also be difficult to think in terms of moderates and opposition in many cases, and I will give you some examples. Iran and North Korea I think are particularly good cases in point. In Liberia, Sierra Leone, the Democratic Republic of Congo, the sanctions in effect target those who are opposed to peace processes. With Burma and Zimbabwe opposition groups largely support EU measures. The notion of bolstering opposition or moderate support to a regime does not really reflect the outcomes of sanctions. In the past some sanctions have included an element of regime change. Sanctions against Rhodesia, Haiti and Sierra Leone were in response to regimes that were deemed to be illegitimate, but recent sanctions have not been focused on regime change. It is the policies and actions of the target which we are trying to change.

  Q297  Lord Vallance of Tummel: In your answers to earlier questions, Minister, you made a clear distinction between Iran and North Korea, but in the answer to this one you seem to put them in the same basket.

  Dr Howells: No. It is a very good question. What I am trying to say is that the theocracy in Iran and President Ahmadinejad seem actually to revel in the idea of being a completely isolated example of a steel-backboned resolution not to succumb to the diplomatic efforts of the rest of the international community. That is true as well with North Korea. They do not seem to be particularly concerned about what other people think about them. I am trying to point out that below that level they are very different countries. In the case of Iran there is actually a very sophisticated opposition. There are very clearly discernible and definable classes of people, and they include a merchant class which has a very long history and wants to make money, and it knows that if it is going to make money, it needs to be able to trade freely with the richest countries in the world as well as its neighbours around it. I think that is a very different situation from the one in North Korea.

  Q298  Chairman: If I may just go back, when you were talking about South Africa, you actually made the point there that sanctions were to some extent designed to make sure that the white community in South Africa went along with the changes, and so there is a history, as I see it, of sanctions being geared to the internal situation within it. At the end of your answer you rather indicated that probably that is still relevant today.

  Dr Howells: I think it is very relevant today, and we have to be very careful that the imposition of sanctions does not strengthen the very individuals or the regime leadership that presumably those sanctions are either trying to weaken or influence in such a way that they change policy. That means that we certainly have to understand the nature of those societies and of the political tensions within those societies and use them in order make those sanctions more effective.

  Q299  Lord Oakeshott of Seagrove Bay: My question, if I can summarise it, is about the use of sanctions as a statement. We have heard a certain amount about reinforcing norms of behaviour and so on, but if the Government does disapprove of a policy or a regime and wants to make that clear, there are ways to do that publicly, UN resolutions or whatever. Should you not separate that from sanctions, which surely are actually designed to achieve a particular end? The danger with mixing the two up, it seems to me, and I wonder if you would agree, is that in a sense, sanctions cannot be seen to have failed if you can fall back on saying they have expressed our disapproval. Surely we should be rather more specific and more clear on what each thing is meant to do.

  Dr Howells: I think you have put your finger on really the most difficult question of all: should we set out on a sanctions regime if we fear that there is a good chance that it will fail? Does that not do more damage than it does good, because we are seen then to be retreating from a position which we have taken, whether it is a UN or an EU or even on a bilateral relationship? There are, of course, cases where that can be justifiable, and I have tried to point out one in the case of Libya, for example, and I am sure that there have been others. In South Africa, Lord Wakeham just described a process which was a very long one and, I think, an intelligent one in the way in which it was applied. I certainly agree that sanctions should not be a kind of measure of first resort. They should not simply be about gestures. They should not be embarked upon unless they have a hope, a real hope, of succeeding. That is why I am quite interested in the much more targeted or smart sanctions than in those more comprehensive sanctions although, having said that, I do not think we can abandon the weapon of comprehensive sanctions because there will be situations in the future, as I suspect there may even be at the moment, where comprehensive sanctions probably could do more good than damage.


 
previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2007