Britain-Iran Relations

Debate between Seema Kennedy and Richard Bacon

Wednesday 12th October 2016 Westminster Hall

[Seema Kennedy]

I thank the hon. Gentleman, who always speaks very powerfully in defence of Christian minorities. As I said in my opening statement, I am not blind to what happens in Iran and the treatment of certain groups. I hope that when the Minister sums up he will address what steps Government are taking through the Foreign Office, and now through our full diplomatic relations, on that issue.

[Mr Richard Bacon (South Norfolk) (Con)]

Will my hon. Friend remind the hon. Member for Upper Bann (David Simpson) that in Iran the Majlis reserves places, not only for the Jewish community but for the Christian community, in the Majlis, so that they have a part in the legislative process. That is not well-known and is something that is rare in the middle east.

[Seema Kennedy]

My hon. Friend has made the point, and I am sure the hon. Member for Upper Bann (David Simpson) has heard it.

We cannot underestimate the wider implication of the nuclear deal for bringing Iran back into the international fold, and the joy with which the deal was greeted both on the streets of Tehran and in the wider diaspora of between 4 million and 5 million people. Shortly after that, in August, the then Foreign Secretary, my right hon. Friend the Member for Runnymede and Weybridge (Mr Hammond), visited Tehran, which is something of a feat knowing the weather at that time of year. Full diplomatic relations were resumed this September, and in the same month British Airways resumed flights to Tehran six days per week. Just a few weeks ago at the UN General Assembly, the Prime Minister met Iran’s President Rouhani, who called the joint comprehensive plan of action a basis for closer bilateral co-operation.

There are plenty of warm words between Britain and Iran, but not an awful lot has happened since implementation day. The deal promised so much to businesses in the UK that wanted to trade, and to the Iranian people who are crying out for jobs and a better standard of living. Those promises are yet to be fulfilled. Iran has great potential as a country with which to build even stronger trade and cultural links.

Literacy in Iran is 85%, and the figure rises to 97% in 18 to 24-year-olds. The country holds 10% of the world’s oil and natural gas reserves. Historically, it has suffered from low economic growth, sharp fluctuations in revenue and low productivity, which has typically led to an overdependence on oil. Of course, we see that all over the region, and I would contend that overdependence on oil is part of the region’s problem, with a restive cohort of young people who have relied far too much on hydrocarbons.

Iran is moving towards a reduced dependence on oil, as it now accounts for only 30% of Iran’s budget and, for the first time, there is a positive trade balance in non-oil goods amounting to $1 billion. The International Monetary Fund estimates that Iran’s GDP will grow by at least 4.5% over the next year, and the rial continues to strengthen. Iran is focused on reducing inflation, and has reduced the role of its central bank to facilitate that and to make exports more competitive. Inflation is down from the historic high of 59% in the mid-1990s to 8% this year.

Companies are reticent about investing in Iran even though it is a natural market for Britain to export to. There are opportunities for British trade not only in energy, but in infrastructure. Last week, the state-owned National Iranian Oil Company sold condensate to BP for the first time since implementation day. However, anyone who has travelled in Iran knows that its infrastructure is crying out for investment, and it is said that the country needs $50 billion every year to upgrade its infrastructure. There are other opportunities for exporting British goods and services, particularly training. Businesses have told me that there is a dearth of people trained in administration and management, so the country could benefit from British expertise.

The big stumbling block about which British and Iranian businesses complain—I have spoken to the Minister about this on numerous occasions—is the remaining pre-nuclear sanctions, especially those around access to finance when doing business with Iran. Any banks with United States links are banned from doing business with the country: they are rightly terrified after the $9 billion fine that was levied on BNP Paribas. Lenders are restricted to those with absolutely no dollar exposure, which is a very small pool. Will the Minister confirm what further conversations he has had with his US counterparts on reassuring US banks that they will not be subject to large fines from the US authorities?

UK Trade & Investment statements on Iran are optimistic. UKTI says:

“There is a positive outlook for UK-Iran trade relations”,

and that the UK Government

“fully supports expanding our trade relationship with Iran and we would encourage UK businesses to take advantage of the commercial opportunities that will arise”.

But the level of such trade remains unclear. Indeed, the European Union traded €6.5 billion to Iran in 2015 and imported €1.2 billion, but I was unable even to find UK-specific statistics.

On the size of cover allocated by UK Export Finance, it states that

“the total cover allocated for Iran will be under continuous review”.

Will the Minister tell us how much total cover is allocated for Iran and when will that be reviewed? Furthermore, will he confirm how much of the £50 million facility guaranteeing payments to UK professional advisory service providers advising the Government of Iran has been spent? There have been a lot of warm words but seemingly little progress on opening up the market to British businesses. How many, if any, business opportunities have been identified as a result of the memorandum of understanding signed between UKEF and the export guarantee fund of Iran?

France and Germany have led delegations to Iran, but Britain, even with the strong historical links that I outlined in my introduction, has lagged behind. I know that other hon. Members share my concerns about the effects of Brexit on Britain’s relationship with Iran.

Many of the smaller businesses that seek to trade with Iran are those run by members of the Iranian diaspora in the UK—a group of approximately 83,000 people. On behalf of that group, I pay tribute to the Minister for his role in saving Persian GCSEs and A-levels earlier this year. Knowledge of Farsi is crucial to preserving cultural heritage, and it eases the process of doing business between the two countries.

Members of the Iranian diaspora—who are, for the most part, dual nationals—are justifiably concerned about their status if they visit Iran, particularly in the fevered atmosphere leading up to next year’s presidential election and following the imprisonment of several dual nationals. Can the Minister give any guidance to dual British-Iranian nationals on their visits to Iran?

Soft power, it is always claimed, is key to British foreign policy. We are said to be the leader in soft power—[Interruption.] Somebody is laughing; I always wonder where we get these stats from as well. We should be exploiting our place in the world and our deep historical roots in the middle east to strengthen and encourage British trade with the region.

When it comes to soft power away from trade, there have always been cultural exchanges between universities, and art and cultural heritage groups. A series of exhibitions at the British Museum in 2009 were well attended and involved loans from museums in Iran. Those exchanges have continued and are an essential part of building understanding between the two peoples.

We cannot underestimate the power of cultural exchange and soft power, nor of symbolic gestures. Has the Minister’s Department considered the suggestion by the Select Committee on Foreign Affairs that the Government admit their role in the coup to overthrow Mosaddegh in exchange for an apology for the storming of the British embassy in 2011?

There is no doubt that many of our regional allies, especially members of the Gulf Co-operation Council, have been troubled by the UK’s renewed relationship with Iran, which they see as a threat to their relationship with us. However, it is not in the British national interest to see this as an either/or relationship, as that does not reflect the reality on the ground. Some 500,000 Iranians live in the United Arab Emirates, 80,000 in Kuwait, 173,000 in Bahrain and many in Saudi Arabia. The value of trade between Iran and the GCC is approximately $14.8 billion. Surely it is in the UK’s national interest to be part of that flourishing trade of people and ideas between Iran and the GCC. Is it not in our national interest to dampen down some of the fevered rhetoric between Iran and its Gulf neighbours, to unite in combating the evil death cult of Daesh and to work towards stability in the region?

Another area on which Britain and Iran have worked successfully together in the past is Afghanistan, in supporting the national unity Government and on counter-narcotics. What conversations has the Minister had with his Iranian counterparts on co-operating to defeat the Taliban in Afghanistan?

In conclusion, relations between Britain and Iran are of long standing. They are complex and often immensely frustrating. I look forward to hearing the contributions of hon. Members on both sides of the House who bring great experience, expertise and passion to this important debate.