Brexit: Sanctions Policy (European Union Committee Report)

Lord Tugendhat Excerpts

Thursday 3rd May 2018 Lords Chamber

[Lord Tugendhat (Con)]

My Lords, it gives me very great pleasure to speak in this debate on a report produced by the sub-committee of which I was chairman before my noble friend Lady Verma. I congratulate her and the members of the committee, and indeed the clerks, on the quality of the report that has been produced.

This debate is also taking place at a topical moment in the light of what is happening in Korea—events to which my noble friends Lord Horam and Lord Risby have already referred. What exactly has brought the North Koreans to the table? One cannot be sure, of course, but certainly United States strategic pressure on the one hand and Chinese economic pressure on the other have played a significant role. According to Reuters, in January China exported virtually no oil products to North Korea and imported no iron ore, coal or lead. This is an encouraging example of how effective sanctions can be. Of course, China is not the only contributor, but it was by far the most important one in bringing pressure to bear.

By virtue of its dependence on China, North Korea is, of course, an unusually simple case. I very much agree with the following in the Government’s reply to the report:

“sanctions regimes are more effective when they are implemented by a broad range of countries”,

in support of a strategic policy than when they are conducted by a single country or small group of countries.

At this point, it becomes clear how much damage is done to the European Union as a result of Brexit. I am reminded of an inter-parliamentary gathering I attended when I was chairman of the sub-committee. A member of some other Parliament—I cannot remember which—asked the representative of Mrs Mogherini whether it would not much easier to reach decisions if Britain were to leave the European Union. The representative replied, “Yes, it probably would be much easier to reach decisions—and they would be worth much less”. She pointed out how weakened the European Union would be without Britain’s global reach and without the other assets referred to in this debate, of which the City of London in this context is an important one.

As the noble Lord, Lord Taverne, and others have pointed out, Britain, too, will be weakened. The Government’s reply suggests that the United Kingdom’s influence on international sanctions policy derives only partly from our current EU membership and points to our membership of the Security Council, but, as my noble friend Lady Verma and other noble Lords have pointed out, that is somewhat disingenuous: we all know how difficult it is to organise effective policies of this kind through the United Nations because of the Russian and Chinese vetoes. It is in the EU that we have played our most effective role, and it is within the EU that we will be most missed.

The report and the reply therefore dwell, as other noble Lords have done, on the need as far as possible to continue close co-operation with our EU friends, which is in their interest—indeed, more so—as well as ours. However, it will not be easy. Clausewitz is reputed to have said that war is simply a continuation of political influence with the addition of other means. If that is true of war, it is certainly true of sanctions. Sanctions emerge from discussions on common foreign and security policy, from which a common purpose or a coalition of the willing begins to take shape. If our influence and the value of our contribution are to be maintained, we have to be part of the initial discussions and not simply come in when the broad lines of a policy have been set. I make this point because, to be effective, not only do sanctions need to be implemented by a broad range of countries but their burden needs to be shared as fairly as possible among the participants. If the burden of the sanctions is not fairly shared, it is unlikely that they will be fully implemented. If we are not a part of the initial deliberations, EU policies will inevitably begin to take shape without taking our views sufficiently into account. That does not mean that a joint policy cannot be formulated, but it does mean that time will be wasted in achieving that joint policy.

Regardless of our particular issues in the European Union, though certainly including them, financial measures are likely to play an increasingly important part in sanctions regimes in the future. That is, of course, because they can be targeted not only on states but on individuals, and because, in the nature of the modern economy, so much international trade is financed through operations in New York and, to a lesser extent, London. Therefore, the role of the financial sector in implementing sanctions will be increasingly important, which is why Brexit is so damaging to the European Union in this respect. If sanctions are going to rely increasingly on the financial sector, this will raise very considerable problems for the United Kingdom. It is going to be very difficult for us to ensure that, in imposing sanctions, we are not imposing restrictions on the way our markets work or putting ourselves at a disadvantage in coming to agreement on joint policies with other people. I do not have an answer to that; I just raise the point that I think financial measures will be more important, and this adds to the difficulties in formulating effective regimes in the circumstances that will apply after Brexit has taken effect.