Return to an Address of the Honourable the House of Commons
dated 18 July 1996 for the Appendices to the Report of the Inquiry into the Export of Defence Equipment and Dual-Use Goods to Iraq and Related Prosecutions laid before The House on 15 February 1996*

Volume One
Section D Arms and Defence-Related Exports to Iraq
Chapter 2 Applications of The Guidelines in the period
December 1984 to August 1988

Excerpt:
Specific Cases - (xii) Armoured Recovery Vehicle (ARV) Spares

D2.218 The ELAs relating to the supply to Iraq of ARV spares were made by IMS. A brief reference to the history of the supply by IMS of ARV’s to Iran and Iraq is necessary. The pre- Revolution contracts for the supply by IMS of defence equipment to Iran included an order for some 1500 Chieftain Main Battle Tanks (MBTs) over a period of 10 years. The value of this contract was £650 million. A related number of ARV’s, approximately 250, had also been ordered. ARV’s are used for the recovery from the battlefield of MBTs which have, for one reason or another, broken down. The MBTs and the ARVs were to be manufactured by the Royal Ordnance Factories (ROFs). When the revolution took place 125 MBTs had been delivered to Iran together with a small number of ARVs. The ARVs were standard Chieftain vehicles. According to written evidence given to the Inquiry by Mr David Gibbons, who had joined IMS (then known as Millbank Technical Services (MTS)) in July 1976 as Senior Commercial Officer and who remained with the company until 7 July 1987, “when the revolution occurred something akin to panic broke out within the MOD/ROF axis... Export approvals across the board for military contracts were withdrawn. The MOD was faced with the nightmarish prospect of wholesale redundancies and disorganisation within the ROFs.... There were of course also the knock on effects into the sub-contractors.... As a result, there was imminent danger of the partial collapse of a significant sector of the UK defence industry, with the attendant political and industrial consequences”. Strenuous attempts were made to alleviate the situation. Of the ARVs ordered by Iran, some 100 were in various stages of manufacture. Of these, about 50 were absorbed into the Army procurement programmes, leaving a surplus of 50. MOD authorised the completion, on a speculative basis, of the manufacture of these 50 vehicles and attention was given to export possibilities. In November 1979 a contract for the sale to Jordan of 279 Chieftain tanks and 21 ARVs, the number roughly proportionate to the 279 tanks, was signed. This contract left 29 ARVs undisposed of and the search for buyers continued. Iraqi interest in the purchase emerged. Presentational difficulties that would be caused by a direct sale of the 29 ARVs to Iraq were feared, and accordingly, Jordan was nominated for the role of ostensible purchaser of the 29 ARVs, with the understanding that the ARVs would be transferred to and paid for by Iraq. Payment was duly made by means of funds transferred by Iraq to the Jordanian Central Bank.

D2.219 The contract between Jordan and IMS contained the usual “Disposals” clause, viz., “JAF agrees that it will not sell or otherwise dispose of the ARVs or allow them to pass out of its absolute control without the prior written consent of the [MOD] conveyed through IMS”. Accordingly, a letter from the Jordanian Ambassador to Lord Strathcona, Minister of State at the MOD, requested written permission for the transfer of the 29 ARVs to Iraq. Lord Strathcona wrote, giving the requisite permission (with a copy of the letter sent to IMS), and the 29 ARVs were, accordingly, sent to Iraq. The ARVs would obviously from time to time require spares and “the inference was that Iraqi spares requirements could be catered for through a similar arrangement with Jordan”.

D2.220 The details to which I have referred have been taken from Mr Gibbons’ written evidence. *323 The evidence has been confirmed by Mr M H S Muller, who was from 1977 to 1983 on secondment to IMS, first as Project Managing Director and later as Director of Operations, and in 1983 became a non-executive director of IMS. *324 Mr Gibbons gave evidence, also, that he was subsequently (but before the period covered by the Inquiry’s terms of reference) instructed by Mr Orford, chief executive of IMS, “to weed the IMS project file... of all papers referring directly to Iraq” and that “Mr Orford stated that he would personally shred them all with the exception of the Strathcona letter which he would retain in his safe in the Managing Director’s office.” *325

D2.221 The arrangement whereby the Iraqis obtained the 29 ARVs was not known to the members of the MODWG. In June 1985 an ELA was submitted by IMS for the supply to Iraq of ARV spares to be used for the purposes of Iraq’s 29 ARVs. Lieut-Colonel Glazebrook (LSOR 10a Sy) was highly suspicious. In a Note dated 1 July 1985 *326 he commented that there was “...no record of any sale of Chieftain ARV to Iraq. The British Army scale of issue is 5 x ARV to each tank regiment (60 tanks), therefore an Iraqi holding of 29 ARVs suggests they captured the equivalent of 6 armoured regiments from Iran!” He went on “whilst the spares quantities are not too excessive for a holding of 30 to 40 vehicles, we do not believe they are all ARVs. Instead we consider this to be an attempt by Iraq to acquire spares for their captured Chieftains - ARVs and MBTs”. The comment made by Lieut-Colonel Sweeting, D. Cts (ROW) 1, was that “the spares list is appropriate for 29 Chieftains but bearing in mind that all these vehicles were captured from the Iranians, we are dubious that all 29 are ARVs, as claimed, and believe that Iraq and/or the company are seeking to evade the guidelines. If the spares are produced, Iraq will be able to make up to 30 Chieftains battle-worthy and would thereby enhance their capability, but it is arguable that this is not significant in terms of Iraq’s overall Main Battle Tank strength of 4500+.” *327 Lieut-Colonel Sweeting believed that IMS should be rebuked “for attempting to deceive or, if they are innocent, for being taken in.” In his evidence to the Inquiry, Mr Hextall *328 said that he was concerned about the suggestion that IMS had disguised the truth. AWP members had been told about the sale of the 29 ARVs in 1981. Mr Hextall therefore telephoned Lieut-Colonel Glazebrook and Lieut-Colonel Sweeting to explain the background and to obtain their agreement that no rebuke was necessary; he also cleared the matter with Mr Aron (FCO/MED).

D2.222 The MODWG, through no fault of its members, who were unaware of what had transpired in 1981, was proceeding under a misapprehension. The inference was strong that Iraq could not have captured 29 ARVs and that the spares were wanted for MBTs that had been captured. I am satisfied that in fact Iraq’s 29 ARVs were those that had been supplied via Jordan under the arrangement of which Mr Gibbons gave evidence. The MODWG assessment, that an ability to render battle-worthy 30 Chieftain tanks would not significantly enhance Iraqi military capability, is nonetheless interesting. *329 The ELA (1A/5545/85) remained for the time being pending, but was in the lists submitted to the Minister (DP) on 12 September 1985, marked “A(I)”. The ELA was not, however, drawn to the Minister’s attention in the submission itself. It might have been better to have done so in view of the background summarised above.

D2.223 In May 1986 another ELA for the supply of additional ARV spares to Iraq was submitted by IMS and considered by the MODWG. Lieut-Colonel Glazebrook’s Note noted 9 May 1986 said that “Because it is HMG’s policy not to supply ‘lethal’ defence equipment to either side, we have to try and draw a line between what is reasonable to support 40 ARVs and what would be excessive for 40, but very useful to help maintain their fleet of 150 Chieftain MBTs.” He queried whether the proposed list of spares was “a fair and reasonable list to maintain not more than 40 ARVs?” *330

D2.224 At about the same time IMS proposed that a 3 or 4 man team of retired REME artificers should go to Baghdad for up to 12 months to train Iraqi personnel in the maintenance of Chieftain ARVs. The MODWG agreed on 14 May 1986 that “consideration of this proposal should be linked with that of the IMS application to supply spares for Chieftain ARVs which is continuing.” *331

D2.225 At the MODWG meeting on 15 July 1986 three IMS ELAs relating to ARV spares were considered. It was agreed that the spares cleared for supply in 1985 could still be allowed to go but that “the additional items listed under [a Defence Sales memorandum dated 24 April 1986] were too great for the normal requirement of 30 [ARVs] and could therefore be diverted to the Chieftain tanks which the Iraqis have captured from Iran. This therefore should be refused on enhancement grounds”. The third ELA, dated 1 May 1986, for tools and test equipment was approved as an insignificant enhancement. Further details of the training proposal were sought. *332

D2.226 At the IDC meeting held on 24 July 1986 it was agreed that the three ELAs would be dealt with in the manner the MODWG had advised and that further details of the proposed ARV training would be needed if the proposal was to be approved. *333 These recommendations were accepted by MOD and FCO Ministers.

D2.227 In May 1986 IMS applied to ECGD for credit support for an ARV spares contract worth £5.5 million. The application was supported by the DESO and in June 1986 the Treasury agreed that credit cover could be provided under the defence allocation. *334 Notwithstanding the acceptance for ECGD credit support of the ARV spares contract, requests for credit support for the supply of Recovery Vehicles to the Iraqi Ministry of Defence were consistently unsuccessful. In June 1985 cover was refused on the grounds that the goods were intended for military use and that the amount of support sought was too great, having regard to the amount available under the Protocol. *335 In December 1986, another request, in respect of a contract for £26.5 million, was made. Cover was declined for much the same reasons. *336

D2.228 Finally, I should refer to a decision by Ministers in the early years of the Iran-Iraq war, well before the emergence of the Guidelines, as to how requests by Iran for spares for the ARVs that had already been delivered should be dealt with. The decision hinged on how the “lethal” equipment bar should be applied. It was decided that ARV spares should be considered in four categories: (a) fire power (b) hull (c) automotive and (d) miscellaneous. Category (a) was barred by the “lethal” criterion. Categories (c) and (d) were not barred. Category (b) was doubtful. After the adoption of the Guidelines, the IDC recommended that the supply of all categories bar (a) could be allowed, but Ministers decided to approve the sale only of categories (c) and (d). The licences for export to Iraq of ARV spares granted in 1985 and 1986 were limited to categories (c) and (d). *337 This categorisation became relevant in 1988 in regard to a contract in which Jordan was asked to “front” for Iraq.

Endnotes
*323 - see Mr Gibbon’s written statement; see also the Sec (D Sales) Memorandum dated 28 June 1985, paragraph 8(b): MOD/8.2.199

*324 - see Mr Muller’s written statement supplied on 20 July 1994.

*325 - Sir John Cuckney was asked whether the destruction of documents was carried out to avoid embarrassment to the MOD and to IMS. His reply was to the effect that there could be no embarrassment since the Jordanian Ambassador had openly sought, and been granted, a waiver in accordance with the [non-] disposals clause. The Strathcona letter, as a Ministerial letter, was housed in the Managing Director’s safe to protect its security. IMS would not, in his view, have been embarrassed “by something which the Government wanted it to do” (transcript: 19 April 1994: pages 36-37).

*326 - see MOD/8.2.207

*327 - see MOD/8.2.205

*328 - see Mr Hextall’s written statement dated 1 November 1993: R-1

*329 - see MOD/8.2.205

* 330 - see MOD/9.3.111

*331 - see MOD/9.3.169 at 170, MOD/9.3.185 and MOD/9.3.186 and the assurance given by IMS that the training was associated with ARVs and not with Tank Transporters.

*332 - see MOD/9.4.202 at paragraph 2(c)

*333 - see MOD/9.4.221 at 222 at paragraph 3(c) and MOD/9.4.225 at paragraph 3

*334 - see T/9.13.151, T/9.13.153 and T/9.13.154

*335 - see ECG/13.4.(Folio 50) - The proposed exporter was not IMS.

*336 - see ECG/13.4.(Folio 145). The application for cover was supported by the DESO ( ECG/13.5.(Folio 152))

*337 - see FCO/2.6.139 at paragraph 4

* The Full report is available from The Stationery Office Ltd., PO Box 276, London, SW8 5DT.