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Sir Malcolm Rifkind MP: The EU must threaten Iran with financial isolation

Rifkind_2 Sir Malcolm Rifkind was Foreign Secretary and Secretary of State for Defence in the last Conservative Government.

Ever since the capture of 15 sailors and marines on the Shatt al-Arab waterway, there has been an unnerving sense of déjà vu. As history since the Islamic Revolution of 1979 shows all too clearly, the Iranians are no strangers to tactics of this kind.

Now, as then, the regime is nervous because of outside pressure: a second unanimous Security Council resolution, targeted at Iran’s nuclear programme, has recently tightened sanctions and stepped up the freeze on regime assets.

To Tehran, the question of whether the British service personnel were in Iranian or Iraqi waters is essentially unimportant. What matters is the opportunity for additional leverage. The brazen seizure of the marines and sailors is one way of doing this. They have already demonstrated their ability  to create instability in Iraq through their close links to Shia militias and through disrupting traffic in the Persian Gulf.

A further possible motive lies with the recent US capture of five Iranian Revolutionary Guards in the north of Iraq. In the eyes of Tehran, the British service personnel may serve as a useful bargaining tool in any final deal. But the US has rejected a swap, and so it should. A deal such as this  would create an appalling precedent, encouraging the use of kidnapping as a foreign policy weapon across the Middle East.

Given the nature of Iran’s motivations, and the evident difficulty in securing an immediate release of the prisoners, what else can be done? Margaret Beckett and the Foreign Office have correctly taken the issue to the United Nations and have secured valuable diplomatic support from nations such as Turkey and Iraq. They have also signalled Britain’s strong determination by publicly demanding the release of the personnel, and by  providing proof that they were taken from Iraqi waters.

The Iranians, however, would have anticipated this response from the British government. Furthermore, the Security Council, which includes China and Russia, has failed to issue a sufficiently tough statement backed by the threat of punitive action. The Iranians will not be moved by words. Only meaningful action will cause the regime to back down.

The key would be financial pressure of the type that only the European Union can exert. The EU is Iran’s biggest trade partner and trade over the past few years has been increasing. Lucrative export credit guarantees make much of the EU’s trade with Iran possible. Indeed, Iran is one of Germany’s biggest recipients of export credit guarantees, just behind Russia and China. The EU, which aims at having a common foreign policy, must seriously consider suspending these export credit guarantees, in addition to other financial and banking sanctions if the British prisoners are not released.

Europe’s intentions should be communicated privately at first, so as not to force the Iranians into an embarrassing public climbdown. But the prospect of financial isolation would be deeply worrying for the regime. Iran’s weak economy, already the source of much internal discontent, cannot afford further strain. The EU has expressed its support for Britain, but now is the time to demonstrate that its aspirations and rhetoric, so proudly articulated at the recent celebrations in Berlin, are worth more than the paper that they are written on. Failure to act now would not only be bad news for the prisoners, it would also be bad for the future of joint European action.

It is encouraging that direct talks have now begun between the British and the Iranians. But even this may be a ruse by Tehran to reduce the risk of meaningful international action. The next few days will make it clear whether a new initiative is still necessary.


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