Hans Blix: How do we stop Iran getting the bomb?

A preview of our exclusive essay by the former chief UN weapons inspector.

In this week's New Statesman cover story, the former chief UN weapons inspector and ex-head of the International Atomic Energy Agency Hans Blix offers a diplomatic alternative to military action against Iran - and warns that any such attack by the west would be illegal and catastrophic:

If Iran were to be bombed, it would be another action in disregard of the UN Charter. There would be no authorisation by the Security Council. Iran has not attacked anybody and despite Mahmoud Ahmadinejad's wild, populist declarations that Israel should be wiped off the map there is no imminent Iranian threat that could be invoked to justify pre-emptive action.

Blix says he does not believe that the Iranian regime is trying to build or acquire nuclear weapons:

It is possible - but is denied by Iran and not evident to me - that there is a determination to make a nuclear weapon.

The former director of the IAEA points out that the much-discussed report on Iran released by the UN's nuclear watchdog in November 2011 "did not . . . conclude that Iran was making a weapon or had taken a decision to make one". And he issues a stark warning on Iran to the agency's current head:

In my view, the agency should not . . . draw conclusions from information where the supplier is not ready also to show evidence. Both Mohamed ElBaradei and I were careful on this point and I hope the present director general of the IAEA, Yukiya Amano, follows that line. The agency should not risk its own credibility by relying on data that it cannot verify fully.

Blix says "bombing Iranian nuclear installations may be a path to disaster rather than to a solution" and condemns the "outrageous, gangster-style" killing of Iranian scientists. He writes:

Iranian leaders are not going to sit quietly and twiddle their thumbs . . . A war in the Gulf and skyrocketing of oil and gas prices are not exactly what a financially troubled world needs right now. Furthermore, not all relevant installations in Iran would be destroyed. Some may not be known. The capacity and know-how to produce more centrifuges will survive and after armed attacks the Iranian government, which many now hate, may get broad support in a nation feeling humiliated by the attack. If there was not already a decision to go for a nuclear weapon it would then be taken.

The former chief UN weapons inspector in Iraq calls for the establishment of a "nuclear-weapon-free zone" in the Middle East as a solution to the impasse over Iran:

To many, the idea of an agreement between the parties in the Middle East - including Israel and Iran - to renounce not only the possession, acquisition or development of weapons of mass destruction, but also the means of their production, might seem very remote. It does not seem far-fetched to me.

It would, to be sure, call for many difficult arrangements, including verification going beyond IAEA safeguards, as well as outside security guarantees and assurances of supply of nuclear fuel for civilian reactors. It would require that Israel give up its nuclear weapons, stocks of fissile material and capability to produce enriched uranium or plutonium. It would require Iran to do away with its enrichment plants and a number of other installations. All states in the zone would agree between themselves not to acquire or develop capabilities for the enrichment of uranium or production of plutonium.

And he explains why this arrangement would appeal to all sides.

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Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation