The Washington Diplomat / August 2012
By Larry Luxner
For the next few weeks, an estimated four billion people — well over half the world’s population — will be glued to their TV sets, iPads and smart-phones as London’s 2012 Summer Olympics unfolds.
From the moment on July 27, when Queen Elizabeth II declares the XXX Olympiad open and the final torchbearer lights the cauldron with the Olympic Flame, until the evening of Aug. 12, when that flame is extinguished during closing ceremonies, the eyes of the planet will truly be focused on the United Kingdom.
And that’s a good thing too, because aside from boosting tourism numbers, the Olympics will be a welcome diversion for the country’s 62 million citizens, who’ve been engulfed mostly by bad news since the last Olympics, held four years ago in Beijing.
The continuing debt crisis in the 17-nation eurozone has walloped the British economy, even though the U.K. wisely avoided adopting the euro as its currency. The Libor (London InterBank Offered Rate) scandal involving British banking giant Barclays and possibly other major banks that may have manipulated interest rates has further tarnished London’s reputation as a financial hub. A phone-hacking scandal involving Rupert Murdoch’s News Corp. has also shook the city and numerous top officials.
Meanwhile, joblessness and criticism of the government’s handling of the economic crisis continue to rise — so do military casualties in Afghanistan’s blood-soaked Helmand province. Nearly as many British soldiers have now died in that 11-year-old war as in the Iraq War and Britain’s 1982 Falklands conflict with Argentina combined.
The fact that it’s been raining nonstop all summer has only added to the gloom.
We cannot legislate the weather,” said Sir Peter Westmacott, Her Majesty’s ambassador in Washington, “but we are putting out all stops to ensure that this year’s Olympics is a very good news story and creates a lot of goodwill.”
Westmacott, 61, points out that London is the first city in Olympic history to host the prestigious event three times — in 1908, 1948 and 2012. This summer’s competition comes less than two months after the June 5 Diamond Jubilee celebration marking the Queen’s 60th anniversary on the throne, and three months after the royal wedding of Kate Middleton and Prince William, which was enjoyed by a TV audience of 2.4 billion.
“We’ve paid a huge amount of attention to ensure that the Olympics are genuinely sustainable, and that our investment will be a legacy of lasting value rather than a collection of white elephants which are left to rot,” the ambassador told The Washington Diplomat last month during an interview at his official residence. “Organizers of the games have given back some of the original money because it’s coming in under budget and ahead of time.”
That investment is worth roughly £9 billion ($13.9 billion), of which £6.5 billion ($10 billion) is going to British companies. Lloyds TSB estimates that within five years, the return to the British economy will be in the neighborhood of £17 billion ($26.3 billion).
“We’ve recycled 2 million tons of contaminated sewage and spoiled wasteland in East London in order to redevelop a part of the city which was really a mess,” Westmacott proudly told us. “Alongside the enormous development of a financial services center at Canary Wharf, this has brought a whole new life to the city.”
Some 10,500 athletes representing more than 200 countries and territories will compete for 302 gold, silver and bronze medals in 26 sports ranging from archery to wrestling. Another 4,200 athletes will participate in the Paralympics — an event for disabled athletes first staged in London at the 1948 Games. The Olympic Park alone is home to eight venues including the iconic Olympic Stadium, Aquatics Center and Velodrome. After the Games are over, the athletes’ village will be converted into 12,000 units of affordable housing, Westmacott noted.
In addition to the 300,000 to 400,000 additional visitors that will be lured to London for the Games, no less than 120 foreign heads of government are expected to attend the inaugural ceremony; the U.S. delegation will be represented by first lady Michelle Obama.
That represents a potential security nightmare for British counterterrorism experts, acutely aware that this is the third Olympiad since 9/11. Potential attacks could come from a dizzying lineup of terrorist groups ranging from al-Qaeda to the Basque separatist group ETA to the Irish Republican Army. (The ambassador’s cousin, Capt. Herbert Richard Westmacott, became the highest-ranking Special Air Service officer to be killed in action. His 1980 ambush in Belfast by an IRA unit nicknamed the “M60 gang” earned him a posthumously awarded Military Cross.)
“We are acutely aware of our responsibilities with security,” said Westmacott. “We know there are terrorists out there who are constantly planning to do terrible things against civil aviation. They like to get headlines, so we have to be on our guard. We will do whatever we feel is necessary to deter anybody who’s got bad ideas.”
In early July, British Home Secretary Theresa May confirmed that an additional 3,500 troops would safeguard the Olympics amid last-minute concerns that a private company, G4S, had failed to recruit enough staff. The decision brings the total number of armed forces at the games to 17,000 — far more than the 9,500 troops Britain has in Afghanistan. That’s aside from the 12,000 police, 3,000 volunteers, Typhoon fighter jets, two warships, bomb-disposal experts and surface-to-air missiles to be deployed across 100 Olympic venues.
“Large numbers of U.S. officials have been embedded alongside their British colleagues in London for many months to try to minimize the risk to U.S. and other citizens,” Westmacott told us. “We are also working closely with host governments to protect their teams” — an implied reference to countries like Israel, 11 of whose athletes were murdered by Palestinian terrorists during the 1972 Olympics in Munich.
In mid-July, British intelligence led to the arrest of 14 Muslims, including an al-Qaeda militant caught crossing through the Olympic Park five times. Westmacott said the men were “clearly up to no good,” though he said no specific threats have been received.
“I don’t believe in being overconfident, but I do think we’ve done all we can [to prevent any acts of terrorism],” he said. “We began preparing for this in 2005, as soon as London won the bid. But we won’t be 100 percent sure until the Games have happened. We’re crossing our fingers.”
Once the Olympics are over, however, headlines in U.K. newspapers will again focus on the country’s economic malaise.
Great Britain is now officially in recession. Its economy shrank 0.4 percent in the final quarter of 2011 and then another 0.3 percent in the first quarter of this year. It’s also in the first “double-dip” recession since 1975, with the cumulative downturn even worse than that recorded during the Great Depression of the 1930s.
By his own calculations, the ambassador spends 40 percent of his time on the ongoing eurozone debt crisis and its worsening impact on the British economy.
“We had two consecutive quarters of negative growth, but the IMF predicts that the U.K. economy is likely to grow slightly more than either France or Germany this year,” he said. “We’re all at very disappointingly low levels of economic activity. We are in recession, but the expectation is that in the latter part of this year, we should do better.”
In fact, while the Washington-based International Monetary Fund projects growth of 0.8 percent this year — citing the European Central Bank’s efforts earlier this year to avert eurozone meltdown by extending cheap lending to banks to £1 trillion — the Organization for Economic Cooperation and Development says Britain’s economy will actually shrink by 0.1 percent in 2012.
Westmacott, who took over as ambassador in January from his predecessor, Sir Nigel Sheinwald, concedes that his country has had “problems” with manufacturing output, but that the service sector is performing better.
“We are pleased about two things: One, we’re getting the deficit under control. We’ve come down from a high point of almost 12 percent, which is where we were in 2009, to just over 7 percent now, and with a strategy to get it down below 2 percent in the next four or five years.
“And secondly, although overall economic output remains very low, we have managed to create half a million jobs in the private sector since this government came to power,” he added. The ambassador noted, however, that 400,000 government jobs have disappeared during that time.
On that front, Conservative Party Prime Minister David Cameron’s insistence on austerity to slash government spending by nearly 20 percent (while cutting taxes for top earners) has sparked a public backlash, with critics blaming him for aggravating the economic slowdown.
Westmacott, who was appointed to the job by Cameron, defends the current approach. He says that even though unemployment hovers around 8.2 percent — about the same as in the United States — “we are rebalancing economic activity away from the public sector, which was necessary, and toward the private sector. We believe that together with the budget, which was deliberately designed to be business friendly — with incentives for more investment and the lowest corporate tax in the G7 — all this is setting us on the right path for recovery.
“What confirms us in that belief is that the messages we’re getting from the big foreign investors — high-tech companies, auto manufacturers, financial services, aerospace — are all positive. Our foreign investment figures are pretty good.”
Westmacott adds that his Conservative government is encouraging the Bank of England not to flood the economy with cash. In August, the BOE — along with the British Treasury — will unveil its joint Funding for Lending Scheme to encourage banks to boost lending to citizens.
“We’ve done a bit more QE [quantitative easing],” he said, using economic jargon that simply means printing money. The Bank of England’s previous QE programs “created” £200 billion in 2009 and 2010; in October, the BOE said a further £75 billion was deployed, with more added in February.
“There’s plenty of money out there but the banks are not lending, and borrowers don’t want to borrow because they’re not confident about their future,” Westmacott lamented. “Interbank lending has almost dried up, so we’re trying to get banks to do what they’re supposed to do.”
That won’t come a moment too soon for Britain, which could face the unpleasant process of stagflation — stagnant growth combined with inflation.
Westmacott, who like his predecessor is constantly seeking to lure U.S. investment to Britain, acknowledges that the Cameron government’s success depends on digging his country out of recession. He’s also convinced, as are most of his fellow citizens, that hanging onto the British pound was a wise choice.
“British public opinion has become more sure, as the eurozone crisis evolved, that the U.K. was right not to join,” he told The Diplomat. “It was set up as a monetary union without being a fiscal union. It has a single currency and a single central bank, but each government runs its own fiscal and taxation policy. One of the consequences was that imbalances within the eurozone — between the strong and the weak, the heavily indebted and the lightly indebted — were allowed to continue until somebody said enough.” That somebody was, of course, German Chancellor Angela Merkel, who recently infuriated German voters with her concession on giving more power to the European Central Bank in Brussels to bail out troubled eurozone members Spain, Italy and France.
The euro crisis has only heightened Britain’s historic separation from the monetary union, curiously leaving the country a “bystander,” as the New York Times put it, to a debt crisis that could bring down its economy.
“There is looming recognition at 10 Downing Street that if the euro falls, Britain will sink along with everyone else. But if Europe manages to pull itself together by forging closer unity among the 17 countries that use the euro, then Britain faces being ever more marginalized in decisions on the Continent,” wrote Sarah Lyall and Stephen Castle of the Times..
“Of particular concern here is the health of Britain’s financial industry, a vital economic engine at a time of slowing growth and deep cuts in government spending, which is seen to be vulnerable to new European regulations that could hurt British competitiveness in global markets,” they add.
“Despite all that is at stake, Prime Minister David Cameron’s coalition government looks doomed to be cast in the role of impotent bystander, torn between anti-Europe forces and European leaders’ moves toward greater fiscal integration on the Continent — with or without Britain.”
While Westmacott wouldn’t quite put it in such dire terms, he does admit that what happens to the euro will determine Britain’s economic fate as well.
“On one hand, the U.K. is pleased that it’s not a member of the eurozone, but on the other hand, we are in no sense smugly satisfied,” said Westmacott. “We are only 20 miles away, and half our trade is with our eurozone partners. The uncertainty created by the sovereign debt crisis is having a huge drag on U.K. economic growth and has a real impact on the city of London, which is the world’s largest international financial center.”
A survey taken in early June concludes that 83 percent of Liberal Democrats — who along with Conservatives make up the coalition now in power — see a breakup of the eurozone, with each country once again issuing its own currency, as bad for Britain. Only 5 percent of Liberal Democrats think such a move would benefit the British economy, while 11 percent either don’t know or don’t have an opinion.
Westmacott said the way he sees it, the eurozone was essentially flawed from the beginning because its members “flagrantly disregarded” the Maastricht Treaty, which stipulates that the annual deficits of individual countries may not exceed 3 percent of GDP and that accumulated official debt could not exceed 60 percent.
“That didn’t seem important at the time, because Europe was booming. But it began to look very irresponsible once the economy slowed down,” he said. It’s worth noting that the last European Olympics were held eight years ago in Athens — which today is seething with resentment over austerity cuts made by the Greek government to keep their country in the eurozone (also see “Cash-Strapped Greeks Stuck Between Rock and Hard Place” in the July 2012 issue of The Washington Diplomat).
Said Westmacott: “It’s up to the Greeks whether they stay in or not. A lot of work still needs to be done. There’s a long way to go before we’re out of the woods, but we hope Greece will remain part of the eurozone, because frankly, breaking it up raises huge issues of uncertainty and potentially very high costs.”
Keeping the eurozone together is one thing; keeping the United Kingdom united is quite another. Calls for Scottish independence have been growing louder ever since First Minister Alex Salmond began pushing for a referendum on the subject.
Yet polls indicate that Salmond may not get what he wants. Some 68 percent of respondents across Britain say the U.K. is stronger together, as opposed to just 24 percent who believe England and Scotland “are proud nations in their own right” that should thrive on their own. Even in Scotland itself, polls suggest that independence would be defeated in a referendum by a 61 to 39 percent margin.
“The people of Scotland have elected a Scottish parliament with a majority in favor of independence,” said Westmacott. “We hope the referendum will be organized sooner than later so that the uncertainty will be removed. The British government takes the view that the union is worth preserving. We will respect the views of the Scottish people, but our hope is that the people of Scotland will choose to remain within the U.K.”
Meanwhile, while the ambassador insists that the political relationship between Washington and London “is in very good shape and we don’t have significant differences on any subject,” some observers perennially wonder whether that “special feeling” still exists.
Heather A. Conley, director of the Europe Program at the Center for Strategic and International Studies, argues that history forever binds the United States and England.
“We have fought against one another and for one another,” she wrote. “We have agreed on many issues, we have fundamental disagreements on others. We have extraordinarily close military and intelligence ties, and our economies are closely linked as well” — with 2010 bilateral trade in goods and services amounting to $189.3 billion.
“This triumvirate — history, defense and trade — has always and will continue to constitute our special relationship,” she said. But even more important, wrote Conley, has been the personal chemistry between the two countries’ leaders, most notably Winston Churchill and Franklin D. Roosevelt, Ronald Reagan and Margaret Thatcher, and “for better or worse,” George W. Bush and Tony Blair.
“These close relationships were tested in war: World War II, the Cold War and the Iraq War,” she said. “For President Obama and Prime Minister Cameron, their relationship will be forged in Afghanistan, where the longest American war is now a political test of transition for the United States and its European allies in an effort to declare a semblance of success in a war that is increasingly unpopular in both countries.”
The ambassador, whose father had spent time in Norfolk, Va., as a naval officer during World War II, was born in rural Somerset. He went to New College Oxford, joined the diplomatic service in 1972, and was awarded a knighthood in 2003. Prior to coming to Washington, he served as British ambassador to France and Turkey. In addition, he worked as deputy private secretary for Prince Charles for three years and was also counselor for political and public affairs at the British Embassy in Washington from 1993 to 1997.
In March, President Obama and the first lady hosted Cameron for an official visit and state dinner, following their royal reception last year by Queen Elizabeth II at Buckingham Palace — an event filled with pomp and pageantry. (Since then, the two leaders have met three more times: at the G8 and NATO summits in May, and the G20 summit in June.)
He added that it doesn’t really matter that he was appointed by Cameron, a conservative, while his predecessor, Sheinwald, was hired by former Labour Party leader and Prime Minister Tony Blair.
“We’re all professional diplomats,” he told us. “Both Nigel and I knew the United States [before coming to Washington as ambassador]. He was a European specialist, and in my case, I had spent quite a lot of time in non-Arab parts of the Middle East. I don’t think we’re really very different from one another.”
Peter Reid, vice president of strategic communications at the Woodrow Wilson Center for International Scholars, worked for Westmacott in the mid-1990s, when Reid was at the British Consulate in New York and reported to Westmacott in Washington.
“We worked very closely on the Northern Ireland issue,” said Reid, himself a native of Belfast. “My job was to win over Irish-American support for the deal that later became the Good Friday Agreement. Critical to that was having America on board. Peter spent a lot of time in Washington, convincing people we were doing the right thing.
“Growing up in Belfast, you meet a lot of people who can’t get out of the trench. Like myself, he lost someone in the conflict, but it did the opposite for him: It made him want to solve it. He put aside his own personal grief and used it for better things.”
Reid said he has no doubt Westmacott will turn in a stellar performance as London’s ambassador here.
“A lot of diplomats come here and live in their own stratosphere without ever really understanding the place. Peter likes it, which is really important, and he gets it,” said Reid. “He’s one of these people who can deal with anyone at any level.”
Westmacott has always spoken the language of the countries whose capitals he’s been posted to: Farsi in Tehran (1974-78), French in Paris (1980-84 and again as ambassador in 2007), and Turkish in Ankara (first in 1987, returning again as ambassador in 2002). Westmacott’s Farsi won’t be forgotten anytime soon, thanks to his second wife, Susie Nemazee, an American of Iranian origin who grew up in Bethesda, Md.
“A lot of this job is trying to manage and empower the staff who work for you,” Westmacott said. “It’s also about developing relationships and understanding the local context of business, politics and other things that matter to your country. So you’ve got to get out there, speak to people and convince them.”
One of the things Westmacott speaks passionately about is Afghanistan.
As we went to press, the war in Afghanistan had claimed the lives of 422 British soldiers in the past 11 years. In early March, six British soldiers were killed, marking the highest death toll in a single incident since 2006.
“Proportionally, the U.K. has lost a larger number of soldiers than anyone else, largely because we’re trying to stabilize Helmand province” — one of the most dangerous in Afghanistan, he said. “Our intention has always been to clear Afghanistan of the al-Qaeda terrorist threat from which we all suffer, and to leave it in the best possible state to look after its own affairs, to manage its own security, and to ensure that the country does not again become a safe haven for terrorists. It remains our strategy to achieve that by 2014, which is when the bulk of our troops will leave Afghanistan.”
Despite the mounting casualties, Westmacott insists that “British public opinion is extremely supportive of our soldiers laying their lives on the line in Afghanistan, but it’s also quite clear that we now need to stick to the strategy of equipping and training Afghan armed forces. There is no overwhelming public demand for the British government to break ranks and leave early. None at all.”
He’s also spent a great deal of time on the Syria conundrum. In fact, the day we interviewed him, top officials from 100 countries converged on Paris for a “Friends of Syria” conference to discuss ways of dislodging Bashar al-Assad from power.
But asked if NATO will deploy troops to stop the bloodshed — which has killed an estimated 10,000 to 16,000 people since the uprising against Assad’s regime began in March 2011 — Westmacott said he doubts it.
“In Syria, unfortunately, there are no good answers to the problems we’ve got there,” he explained. “I don’t think NATO as an organization will get involved unless there is either an attack on a NATO member, or if the Security Council authorizes the use of force. We do believe Russia has an important role to play in bringing an end to the slaughter, and to grasp that the future of Syria does not lie with Assad — and that sticking to the current Russian policy risks encouraging Syria to descend into sectarian civil war.”
Furthermore, Syria is not Libya, for several reasons.
“In Libya’s case, there was a very clear authorization from the Security Council. In Syria’s case, we do not have that, because the Russians and Chinese are blocking it. Secondly, with Libya, the Arab League and the Libyan opposition asked us to take action. We don’t have that in the case of Syria. And the third point is that Libya — where there was a credible, capable opposition — came to us and engaged the coalition members with a strategy. In Syria, it’s not like that.”
Finally, he said, “Military action in Syria would be extremely complicated and difficult and would require a very substantial military commitment. After all, it’s well equipped and well trained, and it’s essentially a military regime. It also has chemical weapons scattered around the country, and there’s a risk of military action unleashing even more violence.”
The same goes for Iran, warned the ambassador.
It’s clear, he said, that there’s a strong international desire to keep nuclear weapons out of the hands of the regime led by President Mahmoud Ahmadinejad. “We have not taken any options off the table, but the clearly stated preference of the president is to try to achieve that objective through the twin-track approach of engagement and ever-tighter sanctions pressure.”
Asked about the possibility of a U.S. or Israeli strike on Iran, the ambassador said it’s not his place to speak about that. “Right now, my government is on record as saying it doesn’t believe military action against Iran would be helpful or appropriate.”
In the meantime, though, the ambassador seems to be relishing his first few months in Washington focusing on the major events generating positive headlines for his homeland. So far he’s hosted celebrations for the royal wedding, a D.C. visit by Prince Harry, various local events to pump up the pending Olympic Games, as well as a garden party at the residence to fête Queen Elizabeth II on her Diamond Jubilee.
Westmacott says his country’s love of Her Majesty and the monarchy in general is enduring and sincere. “There was what I’d call a blip — a downturn of public sentiment toward the monarchy around the time of Princess Diana’s death which did not last more than a few weeks. Apart from that, the monarchy is a much-loved and respected institution in the U.K., and if you look at any poll, you’d see that 70 or 80 percent of the British people have no desire to see the monarchy replaced with anything else.”