Lord Lamont - A report to the Chamber on visit to Iran

Held at The British-Iranian Chamber of Commerce, 21st February, 2014

Thank you all very much for coming. I know you really have come for the food here which is quite excellent but it is great to have such a large crowd. I know also there is this incredible interest and excitement in Tehran which is certainly getting us excited in the Chamber. Our membership is once again increasing. The purpose of my visit to Iran - it seems a very long time ago, it was actually in the first week of January - was essentially a parliamentary visit. It wasn't a trade mission; it wasn't an officially approved Government visit. It was a parliament to parliament visit but it seemed a natural thing to do. It seemed to follow on both from the opening of negotiations between the West and Iran and also the thawing somewhat of relations between Iran and Britain and with what Martin said the prospect of full diplomatic relations being restored. That was one of the issues that we particularly wanted to explore with the Iranian government.

It was the first time I had been in Tehran for some time. But it was very interesting to be there after such a long time. I have to say that Tehran didn't look desperate, it didn't look different. I stayed in the Espinas Hotel which I think is in central Tehran rather than north Tehran and I must say I was very impressed by the hotel. My recollection of hotels in previous visits to Tehran was of fading carpets, antimacassars on sofas, fading curtains etc. But this was an absolutely spanking four or five star hotel with a business centre, computers and first rate service. The Iranians looked after us very well. Our hosts were nominally the parliament. What they called in Soviet terminology the Anglo Iranian Friendship Society. But we were entertained very generously and spent a lot of time, obviously with the Ministers and the Foreign Ministry. We saw Foreign Minister Zarif for about an hour and a half, we saw his deputy who handles the negotiations in Geneva, we saw Mr Ne'matzadeh and former Minister Kharazi, Mr Nahavandian, the Head of the President's Office and, of course we had our meetings in the Parliament as well.

I must say, I had never visited the Majlis before and I found that quite an interesting experience. One thing about being a politician is that you are always interested in other peoples' parliaments. If you have been a member of any parliament you are always interested to go and see the Chamber in another parliament. Eventually I got them to show me and, of course, as you will know better than I, there are actually three parts to the Parliament. On the one hand, you have the Majlis of the Islamic Republic, a very impressive Chamber with every member having a computer at his seat. I would like to see that at Prime Minister's Questions in the House of Commons.

Then there was the parliament that the Shah constructed, a rather hideous, modern building. Then we went into the Old Majlis, which I guess was the Majlis at the time of the 1906 Constitutional Revolution which was a marvellous, old building with a very impressive art collection. One of the things which really astonished me was when I went into this art collection, the painting in the middle of the room next to the Chamber of the Old Majlis was a painting of the body of Christ being removed from the cross. I could hardly believe this. It was there because it was painted by an Iranian artist. It was interesting that this had been made the central painting in their collection of Iranian art.

So we had a lot of discussions with the Anglo Iranian Friendship Society. The Chairman of that was Mr Mansouri whose constituency is near Isfahan. We hope that the result of this visit is that we are able to have a return visit which we hope can take place in June or July. But a lot of our time was spent in individual ministries. As I said, we had a very long session with Mr Zarif where we discussed the nuclear issue. He was absolutely adamant, as all Iranian minsters are adamant that it is not sanctions that had brought Iran to the negotiating table. He went out of his way to make a point, which became familiar to me with every meeting that, prior to the sanctions they had only a few hundred centrifuges and today, after many years of sanctions, they have nearly twenty thousand centrifuges. Their argument is that it shows that sanctions have failed. Frankly, I take that argument with a pinch of salt. It is true, as they were emphasising, that sanctions have not slowed down the nuclear programme but sanctions have indirectly brought them to the negotiating table via the pressure of public opinion which is fed up with sanctions and isolation and so voted for President Rouhani to bring about a change in Iran's relations with the rest of the world.

Mr Zarif used the phrase that he was "not particularly optimistic" about the negotiations but I am not sure that all his comments subsequently fitted in with that description. He thought that the most difficult issue was going to be, what he described "a vast problem":- reaching what the original November Geneva agreement described as "a mutually agreed definition of Iran's nuclear programme". That is, to have agreement between the west and Iran on the scale of enrichment in Iran. This is going to be an extremely difficult problem because it is the sheer scale of the number of centrifuges that Iran has that has caused so much concern in the west. But Iran has had for decades, plans on paper to build a whole series of power stations although they haven't managed to do that. They haven't managed to complete one on time. The scale of the enrichment causes concern in the west because if they enrich Uranium to the higher degrees, it would be very easy to "break out" and .produce a nuclear weapon in a short period of time.

The Iranians are very reluctant actually to demolish anything that they have constructed. It is one thing to say they won't use it - to make a distinction between capacity and unused capacity, to moth ball things. But that is not irreversible and so doesn't give other countries the assurance they are looking for. So this is going to be a very difficult point in these negotiations, reaching this mutually agreed definition of an appropriate programme.

I do think there are things where the west will have to give ground on, like, for example, the underground facilities at Fordo - I think it is quite unreal to think that those are going to be closed or that Iran ought to have all its nuclear facilities above ground just to make them available for bombing if necessary. That seems to me an unrealistic demand by the West. Then there is the issue of the heavy water reactor at Arak which is another separate problem as that can produce Plutonium which is another route to a bomb. But there are technical adjustments that can probably be made to the Arak reactor which would probably satisfy the west. Also, what was interesting and I have never heard this said before, Mr Zarif spoke of internationalising part of the nuclear programme, perhaps producing fuel in collaboration with other countries. I got the impression that he meant was other countries in the Gulf, probably the UAE. But he said that Iran would not depend on one supplier and I can absolutely understand that - with the Bushehr reactor they have had supplies cut off by Russia and also from the west in the past. Having a collaborative venture outside Iran with various partners would be one way in which it could get around this problem of security of supply.

Mr Zarif emphasised to us that Ayatollah Khameini was firmly opposed to the development of nuclear weapons, not only on religious grounds but also because he felt that nuclear weapons were of no strategic use to Iran whatsoever.

So those were the main points that they made about the nuclear issue. Where are we since then? It is a long time since our visit. Well, Martin referred to the reopening of the negotiations just this week, there has been an IAEA report that has just come out which shows, and this doesn't surprise me at all, that Iran is complying absolutely with what it has agreed in terms of the November deal. It has halted the enrichment of Uranium in the areas which were the most concern. The stockpile of the more highly enriched Uranium has been reduced. Fordo is now producing Uranium to only 3.5% enrichment, not the 20% that it was before and in the new facilities at Natanz they have not installed any of the more modern types of centrifuge that are much more productive and cause a lot of concern to the West. At Arak, the heavy water producer which produces Plutonium, they have frozen construction and have not installed any new major new components there. So this illustrates that the Iranians, for their part, are absolutely prepared to go through this for the six month period and honour their word. It is extremely important that the west does likewise. Any attempt to up the ante, impose new sanctions, make new demands on Iran, attempt to relate the nuclear issue with the political issues to do with Syria or human rights or Hezbollah - I think any of those things would torpedo the talks. I do strongly, myself, believe that having a nuclear deal, even if it is only a nuclear deal, is worth doing and it will, in time, possibly lead to improvements in relations.

One thing that was stressed to us and it echoed the language that was used to us by Dr Adeli when he addressed a meeting here a few weeks ago. Those who were at that meeting will recall that Dr Adeli said that there was a consensus between all the power centres in Iran and Ministers quite openly use the phrase "all the power centres in Iran". They are openly saying,"We the Government are not the only people who decide on this". There are other power centres in the Iranian regime - what some people sometimes call the "deep State". Iranians say everyone agrees that they have to go forward with the negotiations at the moment to see if it works but there will have to be a consensus between all the centres of power if a final deal is to be agreed and signed.

It is very well known that the Supreme Leader has publicly expressed doubts. Possibly, he is trying to cover his own position because, whilst saying he thinks the negotiations are doomed to fail, he nonetheless consistently praises the negotiators and says they are quite right to go to Geneva. He used a phrase about "heroic flexibility". And then you have other firebrands like Ayatollah Khatami, no relation of the former President, who preaches with his AK47 and denounces America but also praises the negotiators as "heroes of the Revolution". So I think there are attempts to get a synthesis between different viewpoints.

But I found it a terrible contrast. One would go into these meetings with ministers. All the ministers we met were usually people with American degrees. They say there are more American PhDs in the Iranian Cabinet than there are in Obama's cabinet. But every night I would go back from these meetings to the Espinas Hotel, turn on my television set and there were pictures of Mr Khamenei addressing a mass meeting, around the corner from our hotel, but a very large meeting with very conservatively dressed ladies and men all waving photographs of Ayatollahs Khamenei and Khomeini and chanting, I guess, "death to America". I just wondered which was the real Iran? The one that was chanting "death to America" or the one that was telling us they were really sincere about making and bringing off this deal.

Another occasion where we saw the slightly more hard-line Iran came when we had a press conference at the end of our visit. It was a huge press conference. There must have been two hundred journalists. There was a bank of microphones in front of Jack Straw. You'd have thought he had solved all the problems of the Middle East with the number of cameras that were zooming down on him. I was all prepared for a very penetrating and a very insightful press conference but the questions were like, "Are MI6 going to go on murdering people in Iran?"; "Hasn't the head of MI6 admitted that you are engaged in a programme of sabotage in this country?" Questions of that kind led Ben Wallace, another member of our group to shout out at the press conference, "You know, James Bond is only fictitious character!" But they didn't get it.

I only realised after the press conference that the people who were allowed to ask questions were all from the State media. There was no one from private sector media and no one from foreign media. The whole thrust of the questions was to portray the UK as the sinister force, always interfering, always malign in its attitude to Iran.

What about President Rouhani's position? Other people in this room will have their own opinion. My impression from the odd talk that I could have with people was that everything really depends on the nuclear issue. I think people maybe now are getting a little bit impatient, a little bit feeling that not a lot of progress has been made on other issues. But probably the population that voted for him are prepared to wait to see if the nuclear issue can be solved and that many then lead to progress on other issues. I asked Mr Nahavandian, the Head of the President's Office, whether progress on other issues such as freedom of the Press, the rights of women, the justice system, depended on the nuclear issue being resolved. He said no, progress would be made on all these issues. But frankly, I am sceptical. My impression is President Rouhani requires to make progress on the nuclear issue before he will have any flexibility if he ever gets it, to make progress on other issues. I thought it was interesting that this week, another reformist newspaper was opened. That was, of course, was one of the great contrasts between the period of Ahmadinejad and that of Khatami as, during the latter's years as President, newspapers would come and might close down again and another one would open up. There was far more closure than opening up of newspapers was my impression during the Ahmadinejad years. So I was quite encouraged that a new reformist newspaper was opened up with a lot of fanfare and we will just have to see what sort of life that paper has.

I had an interesting conversation this week with Lionel Barber the editor of the Financial Times who has met President Rouhani several times now. You may remember he did a very in depth interview with President Rouhani in Tehran. He said to me that President Rouhani, whilst being a sincere individual, very fluent, very comfortable talking about the nuclear issue, talking about cultural issues and economic issues. When talking about foreign affairs he becomes much more wooden, much more formulaic, perhaps indicating that when it comes to foreign affairs he has much less freedom of manoeuvre, much less control over what is happening.

We did, with Minister Zarif, speak quite a lot about foreign policy. The Iranian view of Syria was very straightforward. It was, "what are the west doing, trying to get a Salafist, Islamic government in to place in Syria. What are you doing supporting terrorism"? Zarif used the formula "We believe (they never mentioned Assad), that that future of Syria should be determined by free and fair elections". To be honest, I didn't take that very seriously when I heard that but I did notice that since I returned here that that is the same formula that he uses publicly. Given that it is the formula that he uses publicly, I don't know why the west doesn't take Iran at their word and say "Alright, well if that is your objective, let's immediately move towards it". Of course, to hold free and fair elections in Syria now today would be an impossibility. But to try to move towards it, to try and establish the conditions in which that end game might be possible, is something one should pursue.

The other point that kept coming up when one was talking about foreign affairs was the great fear of Saudi Arabia and a feeling that not just were the interests of the two States on a collision but a certain fear that Saudi was stirring the situation up, in terms of the religious divide between Sunni and Shia. A lot of fear was expressed, not just by ministers that we met, but other Iranians. Zarif did make one interesting point. He said that many of the Gulf States "are just as afraid of Saudi Arabia as they are afraid of us". Someone in the Foreign Office said to me the other day that when people in the Gulf say they are afraid of Iran, what they really mean is that they are afraid of Saudi Arabia. I think that there is a grain of truth in that and there is some support for Iran in some of the Gulf States, particularly of course, Dubai.

On the economy, as I said at the beginning, it wasn't immediately clear being there, that things are as bad as they obviously are. But one knows from the official statistics, from unemployment, from inflation, the problems with the banking system that the economy is in a dire state. Nonetheless, surveys of business confidence and business opinion have been extremely positive after Rouhani's election. The Administration claim that they are making some progress on the economy because inflation has come down two or three points. If you took the very latest monthly figures and annualised them you get a very much lower figure. All this seemed to me rather like counting ones chickens before they were hatched and potentially over optimistic. When we saw Mr Ne'matzadeh, the Industry Minister, I asked him about an observation that had been made Prof Pesaran. You recall that Prof Pesaran was the professor of Economics at Cambridge and spoke at our Annual Dinner and surprised everyone by saying that he thought that the economic problems in Iran were twenty five percent sanctions and seventy five per cent incompetence. And I asked Mr Ne'matzadeh whether he agreed with this. He replied that he thought it was 50/50. I think it underlines a serious point that there is huge scope for the government to improve the economy simply by better economic management: by the Central Bank, interest rate policy, monetary policy, policy towards the banking system, but also in the Government's industrial policy and fiscal policy. I wouldn't put it beyond this Government as there are some very impressive people in the Iranian government. A lot of ministries have been reconstructed with new people. I wouldn't rule out that some significant improvements come about in the economy.

Ne'matzadeh, himself, had a very impressive track record when he was Minister of Industry earlier. He said that Iran would go in for a programme of privatisation and I said to him you mean privatisation by which the Revolutionary Guards get all the shares and he said "no - proper privatisation - not going to the foundations, not going to the Revolutionary guards".

The sectors for the UK that are important, very obviously oil and gas - a lot of work going into the discussions about the re-writing of the oil contracts, pharmaceuticals, food processing, transport. We didn't manage to meet Dr Zangani, the Oil Minister but we are in contact with him. I read in a newspaper in Iran, that I had announced in Tehran that Dr Zangani would be coming to visit Britain. It was the first I had heard of it when I read it in the paper! But anyway we are hoping to be involved in Dr Zangani's visit when it happens. I think the issue which will be in the minds of the people in this room is that, "Is the UK falling behind the curve in terms of re-establishing commercial relations with Iran and my answer to that would be "Yes". I flew to Tehran via Frankfurt, via Lufthansa. The flight was absolutely stuffed full of German businessmen in both directions. Coming back I sat next to someone who was building a steel plant (I forget which part of the country). I asked him about business conditions and how he found it, working in Iran. He said "much easier than most countries" - which was rather surprising. You will have seen that France sent a delegation of a hundred businessmen to Tehran just the other day. America took the opportunity to warn France about signing of contracts and everyone in this room has to be aware that sanctions are still in place other than the exemptions that have been made for this six month period. I can understand that the Americans will be watching like hawks that sanctions are not broken in this intervening period. But I think, while observing sanctions, it ought to be open to Britain to be more energetic in exploring the possibilities in the event that there is a final deal. And I am certainly going to take this up with the Government myself as I think we could end up looking very foolish if we do absolutely nothing. Yes, we musn't sign contracts that are in contravention of sanctions but I think a lot more preparatory work could be done. The Government are taking the attitude that they don't agree with any business being done with Iran even when it is legal business, even when it is permitted business. I think it is time that this issue was addressed with the Government.

There are six months to go in the negotiations. The Iranians are very keen to do a quick deal. They keep emphasising that people should not just make trouble over details for the sake of making trouble over detail.

Although there is opposition both in America and the Middle East obviously from Saudi and from Israel and there is opposition in Iran, I believe a deal is just about possible. If is not achieved within the six month period, what I think is that there will be a roll-over to another six month period. Some pessimists have suggested that what will happen because of this issue of the scale of enrichment is that it is insolvable and what we will get is one roll-over period, followed by another roll-over period, followed by a continuation of roll-over periods. I think that would be completely unsatisfactory; I don't think it would last and I think that would put us right back to the beginning.

I believe nonetheless, that a deal is possible but it has to be restricted to the nuclear deal. As I said earlier, having a deal about the nuclear is important for the stability of the Middle East, important for those countries that are worried about Iran developing a nuclear weapon. I hope, once you have normal commercial relations with Iran that would pave the way for an improvement in relations. I think the influence of trade, of interaction with other countries would have a profound effect on Iran and would help to open up the country. I believe that would be a consequence of the dropping of sanctions and Rouhani will have a lot more room for manoeuvre then.