Prevention of Nuclear Proliferation

Paul Flynn Excerpts

Tuesday 13th December 2011 Commons Chamber

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I beg to move,

That the Financial Restrictions (Iran) Order 2011 (S.I., 2011, No. 2775), dated 21 November 2011, a copy of which was laid before this House on 21 November, be approved.

Today I seek the support of the House for the financial restrictions measures against the Iranian banking sector that the Chancellor announced on 21 November. The Government have taken decisive action to respond to a significant threat against UK national interests by putting a stop to all business between UK financial institutions and those in Iran. The Treasury has laid the Financial Restrictions (Iran) Order 2011 before Parliament under the power in schedule 7 to the Counter-Terrorism Act 2008. This order contains restrictions requiring UK credit and financial institutions to cease business relationships and transactions with all banks operating in Iran, including their branches and subsidiaries, and with the Central Bank of Iran.

I turn first to the rationale behind the order. The Government have serious concerns about activity in Iran that facilitates the development or production of nuclear weapons. This concern has been repeatedly raised by the International Atomic Energy Agency, the UN body charged with monitoring Iran’s nuclear activities. Its latest report, in November, highlights its deepening concerns about

“possible military dimensions to Iran's nuclear programme”.

The restriction in the order was made in response to Iran’s nuclear activities, as highlighted by the IAEA, and the urgent calls from the Financial Action Task Force for counter-measures to be taken against Iran. Iran’s nuclear programme poses a significant risk to the UK’s national interests. This order seeks to address that.

[Paul Flynn (Newport West) (Lab)]

Is there not a danger, if we push Iran too hard, of it expelling the IAEA inspectors from the country? If that happens, instead of acting in the knowledge with which they provide us, we would be acting in ignorance.

[Mr Hoban]

It is important that we continue the twin-track approach—of engagement and challenge—that the Government have set out and which the previous Government also followed.

The November IAEA report documents Iran’s failure to co-operate fully with the agency and the possible military dimensions to Iran’s nuclear programme. The IAEA reports on Iran’s programme on a quarterly basis, but the November report set out its concerns in the strongest terms to date. It states that information available to the IAEA indicates that Iran has carried out activities relevant to the development of a nuclear explosive device. The report notes that

“while some of the activities identified have civilian as well as military applications, others are specific to nuclear weapons”.

The Government view these developments with the utmost concern.

In response to the November IAEA report, its board of governors issued a resolution expressing “deep and increasing concern” about the possible military dimensions of the Iranian nuclear programme. The board urged Iran to abide by its international obligations and called on it to engage seriously on the nuclear issue. These concerns are of the most serious nature and have far-reaching consequences for the UK’s interests and those of the region. Some 32 of the 35 countries on the board of governors supported the resolution.

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[Paul Flynn]

Will the Minister give way?

[Mr Hoban]

I want to make some progress. This is a time-limited debate, and in looking at the number of Members present on both sides of the House, I am conscious that others wish to participate.

The Treasury asked various supervisors, including the Financial Services Authority, Her Majesty’s Revenue and Customs and other Government organisations, to publicise the restrictions and to provide information to firms on the requirements associated with them. Alongside the order, we published six general licences exempting specific activities from the restrictions. Those general licences enable credit and financial institutions with existing business relationships or transactions with the entities concerned to manage the cessation of business in an orderly and controlled way. The licences permit the provision of financial services for humanitarian purposes and of personal remittances between individuals here and in Iran. Further licences, whether general or individual, may be granted by the Treasury to manage the impact of the requirements on third parties. This approach is similar to that used in asset-freezing measures.

The restrictions apply requirements to persons operating in the UK financial sector, including FSA-authorised firms, money service businesses and insurers. Firms are required to establish whether any current or future business relationships or transactions are affected and comply with the requirements of the restrictions. Although the restrictions are given only to the financial sector, they will make it more difficult for other companies to trade with Iran. The UK Government actively discourage trade with Iran, and UK trade with the country has declined by 46% during the first eight months of this year in comparison with the same period in 2010.

As I said to my hon. Friend the Member for Wyre and Preston North (Mr Wallace), companies affected by the restrictions can apply for a licence of exemption, and we are willing to grant licences where UK companies are owed money under existing contracts that can only be paid via an Iranian bank to the company’s UK account. We will examine applications on a case-by-case basis.

The use of existing procedures means that firms will already have in place systems to meet obligations relating to financial sanctions and anti-money laundering, which should assist in minimising the burden of compliance with the restrictions. All institutions operating in the UK financial sector will need to ensure that they do not undertake new transactions or enter into new business relationships with any bank incorporated in Iran, including the central bank, and branches or subsidiaries. It is expected that compliance costs for the sector as a whole will be moderate, although any institution with significant business relationships with an Iranian bank will face higher costs.

Supervision of compliance with the restrictions will form part of the existing supervisory regime of entities such as the FSA, Her Majesty’s Revenue and Customs, the Office of Fair Trading, and the Department for Enterprise, Trade and Innovation in Northern Ireland. It is an offence to fail to comply with the requirements of the direction or intentionally to circumvent the requirements. Breaches may be subject to civil penalties imposed by supervisors, or to criminal prosecution. The maximum criminal penalties are: a fine not exceeding the statutory maximum, £5,000, in the magistrates court; or two years’ imprisonment or an unlimited fine in the Crown court. Those penalties are equivalent to those for breach of other financial sanctions regimes such as the EU asset-freezing regime in relation to Iran. The financial services sector takes very seriously the implementation of restrictions and sanctions, and takes steps to ensure its compliance with any restrictions.

To conclude, the order was issued by the Government to respond to the severe risk that Iran’s nuclear activities pose to the UK national interest. The measure is strong but necessary. Iran’s proliferation-sensitive activities are a serious and ongoing concern for the UK and the international community as a whole. It is vital that we continue to take steps to increase pressure on the Iranian regime and encourage Iran back to the negotiating table to find a diplomatic solution. For those reasons, I commend the order to the House.

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[Paul Flynn (Newport West) (Lab)]

The threat of war is far more serious than an increase in oil prices. The effect of a war, particularly if nuclear weapons were involved, would be almost unimaginable, particularly given the situation regarding Iran and its clients in Hezbollah and other groups. We should not treat this issue lightly or suggest that it is not important that we are seeing a new nuclear state because it would lead, I am certain, to others such as Turkey and Saudi Arabia also wishing to acquire nuclear weapons. The great fear is that a wall of sanctions can rapidly become a war of weapons. I have watched two terrible decisions being made in this House, and I believe we are on the brink of stumbling into another dreadful conflict.

When we went to join Bush’s war in Iraq, that decision was taken on the basis of a deception in the House. Eighty Labour MPs opposed the war and had signified their opposition to it, but during the debate they were bribed, bullied and bamboozled into abstaining or voting for the war. The majority on which that measure was passed was 179—coincidentally exactly the number of our brave troops who died in that war. If we had known the truth then, that war would not have taken place because 80 Labour MPs would have opposed it.

I have also seen the second-worst decision in my time here—the decision to go into Helmand province in 2006. At that time, only two British soldiers had died in the conflict. The figure is now 192. Again, the basis on which that decision was taken was the hope that not a shot would be fired and that we would be there for, at the most, three years for supervision purposes. We are now in grave danger of deepening the chasm of suspicion between ourselves and Iran.

There are reasons for saying that although the Arab awakening has not affected Iran in the same way as it has many other countries in the region, there is discontent in that country. There is division on almost all issues except one—the nuclear issue. If there is any way of guaranteeing that almost all sides of opinion in Iran join together it is the threat from outside—from us—which wants to deny it the possibility of having a nuclear power programme or the nuclear weapons that Israel, Pakistan and India already have. The great danger is that this escalation seems to be going on now. We should be seeking means of reducing the tension, building confidence and bridging the gap. We know the provocations that have taken place, but there is this grave danger. Unless we recognise the truth of the threat, we might find ourselves in another terrible situation of going along a slippery slope that could lead to warfare—in this case, possibly nuclear warfare.