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:
ECGD ARRANGEMENTS

D2.65 Reference was made both by Colonel Eccles and by Wing Commander Marriott to Iraq’s financial difficulties and lack of liquidity as factors inhibiting defence sales to Iraq. It is convenient to refer, therefore, to the credit arrangements made available to Iraq by the government. I have already referred to the Financial Protocols negotiated between Iraq and the United Kingdom and the so-called “defence allocation.” *86 The first of the Protocols was signed in October 1983 and made available to British companies trading with Iraq a total of £250 million medium term credit supported by the Export Credit Guarantee Department (ECGD). In addition, the Protocol made available £25 million credit for the purchase by Iraq of pharmaceutical products.

D2.66 By December 1984, accordingly to a letter dated 21 December 1984 from Baroness Young to Lord Cledwyn, around £200 million of the medium term credit and £21 million of the pharmaceutical facility had been taken up. *87

D2.67 In November 1984, a second Financial Protocol was signed under which a further £250 million of medium term credit and £50 million for pharmaceuticals was made available to Iraq.

D2.68 When the first Protocol was signed it was made clear to the Iraqis that the credit arrangements were intended to facilitate the sale of civil goods and were not intended to finance the sale of defence-related goods. At the meeting of the Export Guarantees Committee held on 27 September 1984 *88 the MOD asked if £40 million worth of non-lethal defence equipment e.g. radars and non-lethal tank spares could be covered by the Protocol. The minutes of the meeting record that “ECGD said that they could not cover contracts with the Iraq Ministry of Defence but would look at other applications on their merits. FCO preferred that no defence equipment be covered. Their main defensive argument with Iran was that the cover was for civil contracts only. DTI said that negotiations at the Joint Commission would be easier if credit could be offered for non- lethal defence equipment.” *89 The Committee agreed that “The question of non-lethal defence equipment would be considered again if it was raised by Iraq. Any MOD sponsored contracts would be considered on their merits”.

D2.69 At the Joint Commission meeting in November 1984, which led to agreement on £250 million of medium term credit and £50 million for pharmaceuticals in addition to the £50 million odd from the first Protocol that was still unutilised, the question of the financing of defence contracts was not raised. *90 In April 1985, however, an application for ECGD credit support for a £17 million contract for the supply to the Iraqi Ministry of Defence of radio communications equipment was made. The ECGD proposed that the application be approved. Mr Henderson (MED) wrote a note on the issue for senior FCO officials and recommended that, subject to all requisite export licences being obtained, the FCO raise no objections to the proposal. In a letter dated 23 April 1985 to ECGD Mr Henderson conveyed the FCO’s agreement to the proposal but added that FCO’s “agreement in principle in this case should not alter the arrangements whereby all defence-related applications for inclusion in the Protocol are considered on a case by case basis, and that we are consulted in advance on each occasion.” *91

D2.70 In the summer of 1985 further discussions took place between ECGD and the departments regarding the manner in which applications for credit cover for defence related sales should be dealt with. In a letter dated 25 June 1985 to Mr Jaffray (ECGD), Mr Henderson (MED) agreed with ECGD that credit support “should be confined to goods and services of a clearly non-combat nature” and added “we also share your views about the need to avoid ‘high profile’ military contracts.” *92 These remarks were made in connection with an application for ECGD support for a £5 million contract for tank trackway to enable tanks and other heavy vehicles to cross soft ground. Mr Keeling of DESO objected to the FCO/ECGD approach. In a letter dated 25 June 1985 to ECGD he expressed “concern at your decision to allocate ‘profiles’ to defence equipment - in particular a ‘high profile’ for Trackway.” *93 He said “Defence equipment is either cleared by the IDC for supply or it is not...” In the event, support for the Trackway contract could not, for a while, be given because the defence allocation had been exhausted by the radio communications contract. Later, after the defence allocation had been extended, it was left open to the Iraqis to nominate, if they wished to do so, the Trackway contract for support under the Protocol. *94

D2.71 A letter dated 17 July 1985 from Mr Henderson (MED) to ECGD referred to the October 1984 agreement that credit cover for defence sales would be considered on a case by case basis and said “...it subsequently emerged in correspondence that we should take care not to allow combat-related items, or items of a controversial nature (e.g. tank or armoured vehicle spares). It was also generally agreed that it would be wrong to accept contracts which would use up too large a proportion of the funds allocated under the Protocol (I note that ECGD are now drawing the line at a maximum of 10 per cent). Our concern in placing these restrictions on support under the protocol is to avoid attracting criticism that HMG is financing Iraq’s war efforts.” *95

D2.72 The requirement that equipment to be covered should be of a “non-combat” nature led to refusals of cover for the sale of electronic jammers and of “simfire” kits. *96

D2.73 The concern to which Mr Henderson referred in his letter of 17 July was an obvious one, but the problem about the ‘defence allocation’ was not, or ought not to have been, simply the possibility of public criticism. Similar credit arrangements for the purchase of defence equipment were not extended to Iran and there was a real question whether the ‘defence allocation’ made available for defence related sales to Iraq was consistent with the government’s avowed neutrality or with its policy of impartiality or even-handedness. The question was one that although from time to time addressed was never resolved.

D2.74 The problem was certainly obvious to the FCO. At the EGC meeting on 5 August 1985 the MOD suggested that a “defence allocation” of 40 to 50 per cent of the 2nd Protocol, with a limit of £25 million for any individual contract, should be allowed. The minutes record the FCO’s disagreement: “They [i.e. the FCO] were not in favour of supporting any defence business, but if it was regarded as necessary they would agree to an allocation of £25 million with a contract limit of £10 million. Anything in excess of this would bring our neutrality into question and would threaten our long term relations with Iran. DTI supported this line.” *97

D2.75 The EGC meeting on 5 August had before it an important paper prepared by the EGCD *98 in which the four criteria which EGCD, in consultation with EGC applied to credit applications in respect of defence equipment were set out. These criteria were:

(i) the credit must be medium term and on a conventional basis (i.e. no “bullet” terms);

(ii) the IDC must approve the exports;

(iii) support for an individual contract must not exceed 10 per cent of the Protocol; and

(iv) even if IDC have approved the export, “ECGD has recommended against contracts for potentially controversial or high profile items (i.e. those which are not of a ‘manifestly non- combat nature’)”.

The paper proposed three principal questions for discussion. First, “how much defence business can be done under the Protocol consistent with Ministerial objectives for trade and foreign policy”. This question ought to have highlighted the difficulty of remaining even-handed between Iraq and Iran. Second, “should restrictions be maintained on the type of equipment to be financed (i.e. only items of a manifestly non-combat nature)”. The third question was how limitations on the volume or type of defence business to be supported could be translated into guidelines to be applied to specific applications.

D2.76 The first and second questions were not resolved. *99 The meeting simply agreed “for the present” the £25 million figure, i.e. 10 per cent of the £250 million medium term facilities, leaving it “up to MOD to consider whether they could make a good case for the allocation to be higher”. In addition, although the Minutes of the meeting do not disclose this, guidelines for ECGD to apply were agreed and subsequently endorsed by Mr Channon, the Minister for Trade. *100 The submission put up to Mr Channon raised the even-handedness problem without suggesting a solution. The guidelines were five in number, namely, (1) the credit was to be on a conventional basis (2) the export had to be approved by the IDC (3) the contract (or the UK. content of it) was not to exceed £10 million (4) the total volume of nominations for credit by the Iraqis was not to exceed £25 million and (5) the EGC would decide, case by case, with advice from FCO, DTI and MOD, whether support under the Protocol would be unacceptably “controversial”.

D2.77 After some correspondence with the interested departments, the Treasury agreed, in September 1985, that the whole of the £25 million would be used to finance the contract for radio communications equipment. *101

D2.78 In October 1985 the prospects for a third financial Protocol were being discussed. A paper, prepared by ECGD, reviewed the economic situation in Iraq. *102 It was estimated that UK exposure under short term (i.e. under one year) credit arrangements amounted to £52.6 million (paragraph 17), that £204 million had been utilised under the 1st Protocol, with the balance of £46 million carried forward to the 2nd Protocol and that contract proposals submitted by Iraq for medium term credit totalling £600 million were outstanding. The pharmaceutical credit facilities in the 1st and 2nd Protocols were expected to be fully utilised by the end of 1985 (paragraph 21). Paragraph 24 of the Review said that “Defence business has generally been excluded from the Protocols, the agreed purpose of which has been to assist Iraq’s civilian development”, but said that “...in July/August 1985 it was agreed that up to 10% of the value of the 1984 Protocol (i.e. £25 million) could be used for defence business”.

D2.79 At an EGC meeting held on 4 November 1985 an ECGD proposal that further medium term credit of up to £250 million be offered to Iraq was discussed. The Minutes of the meeting record that the “FCO said that for political reasons they would want cover to be given if at all justified.” *103 The minutes disclose also a dispute between the MOD, who wanted a higher proportion of the credit than 10 per cent to be allocated to defence sales, and the DTI and FCO, who thought 10 per cent should be the maximum. The Treasury and the Bank of England were gloomy at the prospect of further substantial credit being made available to Iraq, bearing in mind that ECGD’s total exposure was estimated to be already in excess of £1200 million. The meeting agreed, however, that, if necessary, the negotiators at the forthcoming Joint Commission meeting might offer up to £250 million additional medium term credit. *104

D2.80 On 14 November 1985 Mr Perry (RMD2) put up a submission to the Minister (DP) (Mr Lamont) on the subject of credit for defence sales. *105 In paragraph 1, Mr Perry, echoing comments which had been made by Colonel Eccles and Wing Commander Marriott in their respective reports, said that “New defence sales to Iraq are severely constrained by the Government’s policy guidelines” but added that, even where there were no military or political objections to defence sales, “at present our sales are being frustrated by shortage of medium term credit cover”. He said “The £25 million allocation for defence sales is woefully inadequate and in our view in fact discriminates against defence manufacturers in favour of civil exporters. This is certainly deliberate on the part of the FCO who seem more concerned about the short term potential for political embarrassment of defence sales to Iraq than our long term trading interests... DTI also seem (unfairly) to place more importance on expanding civil trade, though defence manufacturers have an equal claim to credit support”. Mr Perry, in illustrating the inadequacy of the £25 million credit defence allocation, commented that “the whole £25 million... was used to finance one contract for... communications equipment”. He continued: “Even then the contract had to be halved from its original £54 million to be accommodated within this ceiling. We are left with a queue of projects including the balance of the... communications equipment (£25 million approx.): ...recovery vehicles (£26 million); [tank] trackway (£13.5 million)”. He recommended that the 10 per cent allocation be raised to 25 per cent and submitted a draft letter for the Minister to write to Mr Channon at the DTI. The Minister (DP) wrote, accordingly, a letter dated 20 November 1985 *106 with a copy to Mr Renton at the FCO. The purpose of the letter was to argue for a higher proportion than 10 per cent of the agreed credit to be allocated to defence sales. The letter accepted “that it could be politically embarrassing if the amount of ECGD supported credit to Iraq which is used for defence contracts were to become too high a proportion of the total given our restrictive policy on sales while the Gulf War continues.” The letter said also that “I believe that decisions on credit should be made on commercial grounds by ECGD against their usual criteria. I do not see that our policy of even- handedness towards Iran need enter into what is essentially a matter of economic judgement.” This passage brushes aside the government’s policy of even-handedness to both sides in the Iran/Iraq war as being irrelevant to the amount of credit to be allocated to support defence sales to Iraq. In my opinion, the provision to Iraq but not to Iran of substantial credit for the purchase of defence equipment was plainly inconsistent with a policy of even-handedness. However, it seems not to have so appeared either to DESO or to the Minister.

D2.81 Mr Lamont has, in a letter to the Inquiry dated 16 February 1995, rightly pointed out that his letter of 20 November 1985 was written in the context of “a negotiation or bargaining between different departments” and that his “job in the Ministry of Defence was to maximise defence sales ...within the overall policy of controlled sales of non-lethal equipment.” I accept both points. The point of concern, however, is not whether Mr Lamont was effectively discharging his brief as Minister (DP) to maximise defence sales, within the constraints of government policy, which I am sure he was, but whether the means by which he was seeking to do so, namely, the 25 per cent defence allocation, was consistent with the Government’s professed policy of even-handedness. In my opinion, it was not. Similarly, Mr Perry in a letter dated 13 February 1995 made the point that “DESO’s job, within the constraints of the guidelines for defence sales to Iraq and Iran, was to act as advocate on behalf of the UK defence industry” and that “If it were the case.... that even-handedness meant that we could not provide credit for defence sales to Iraq unless we were prepared to make available equivalent credit to Iran, then there could never have been any credit for Iraq, since at that time ECGD medium term cover was not available for exports to Iran.” He said, also, that “even-handedness had never applied to the provision of credit for Defence Sales to the two sides of the Iran/Iraq war....”. Precisely so, but this exception to the policy of even- handedness was never made public.

D2.82 The “even-handedness” point was, however, taken up by Mr Eggar, responding on Mr Renton’s behalf to Mr Lamont’s letter of 20 November. In a letter dated 11 December 1985 *107 to Mr Channon, Mr Eggar pointed out that “The ceiling of 10% of the £250m protocol set for defence projects in August was intended to reflect the original intention that the scheme was to promote civil trade with Iraq”. He said “I take it as axiomatic that it is more difficult to promote civil than military sales to a nation that is devoting much of its resources to the armed forces and to its war effort. We were also mindful that there had already been Parliamentary interest in whether the Protocol would be used to support military contracts.” *108 Mr Eggar referred to a warning from the Baghdad Embassy that “the Iraqi military would be in a position to ‘highjack’ the total sum available under the Protocol if they gained the impression that they could get away with it” and commented “this action would not be difficult, but it would run directly counter to our policy of even-handedness in the Iran/Iraq conflict: we have no financial protocol to support our much more limited supply of equipment to Iran”. These comments seem to me obvious and correct. Mr Eggar went on, however, in his letter to agree to a suggestion made by Mr Channon that the defence allocation be raised from £25 million to £50 million “if you [i.e. Mr Channon] and Mr Lamont... are willing to respond to any Parliamentary criticism which might result from enlarging the defence sales element in this way”. In the event concern about Parliamentary criticism was unnecessary because neither in Parliament nor in any other public fora was the existence of a “defence allocation” as part of Iraq’s agreed credit facility, whether of £25 million, £50 million or any other sum, ever disclosed. Parliament and the public knew nothing of it. If they had, *109 I do not think there can be much doubt but that public criticism would have followed and that the “even-handedness” of Government policy to Iraq and Iran would have been called into question.

D2.83 The increase in the defence allocation from £25 million to £50 million was, accordingly, agreed, albeit somewhat grudgingly on the part of the MOD who wanted a greater increase. *110 One of the immediate beneficiaries of the increased defence allocation was a £5 million contract for the supply to Iraq of trackway to enable tanks and other heavy vehicles to cross soft ground. This equipment had been rated by the MODWG as not constituting a significant enhancement and the IDC had recommended the grant of an export licence.

D2.84 In April 1986 applications were received by ECGD for credit support in respect of sub- contracts connected with the repair of Iraq’s ship repair yard at Um Qasr. The main contractor was a South Korean company. *111 Mr Jaffray (ECGD) thought it likely that the main use of the shipyard was for military purposes and questioned whether support by ECGD would “contravene the Government’s even-handedness policy in dealing with Iraq and Iran” and whether support should be set against the £50 million defence allocation. As to the latter point, the yardstick recommended by the Treasury, as set out in a letter dated 11 April 1986 from Mr Adams, was that “The definition of military business should... be any purchases by the Iraqi MOD or any purchases by other Iraqi agencies which [are] military in use or application.” *112 As to the “even- handedness” point, Mr Ayres (MED) responded, very reasonably it may be thought, that “the fact that we support export credits for Iraq but not Iran is, of course, a major departure from a policy of balance.” *113

D2.85 In the event, credit support for the sub-contracts relating to the repair of the Iraqi shipyard was declined on risk grounds. *114

D2.86 In May 1986, the company whose contracts for communications equipment had exhausted the whole £25 million of the previously agreed defence allocation sought ECGD credit support for a further £12 million contract for communications equipment for the Iraqi Ministry of Defence. The ECGD was unenthusiastic but concluded that if the company received the requisite export licence and “if the Iraqis choose to allocate part of the remainder of the £50 million limit for military equipment to this order, we would not decline support, notwithstanding that the only company so far to have benefited is [the company].” *115 The Treasury agreed. *116

D2.87 By mid 1986 Iraq was experiencing severe debt servicing difficulties. The state-owned Rafidain Bank had failed to honour obligations on letters of credit falling due after March 1986. In these circumstances Iraq entered into discussions with a number of its major creditors seeking agreement to the re-scheduling of its debts. The United Kingdom was not, however, approached. The ECGD recommended (inter alia) that no additional credit should be offered to Iraq under a new Protocol but that the unutilised portion of the 1984 Protocol (£150 million) should continue to be made available and that the £50 million defence allocation should be maintained. The ECGD total exposure as at the end of August 1986 was estimated to be £1,260 million made up by £750 million in respect of medium term credit under the Protocols, £160 million under Pharmaceutical credits and £350 million in respect of short term business. *117

D2.88 In July 1986 the MOD circulated its quarterly report on defence sales prospects under cover of a minute of 7 July 1986 to the Prime Minister. The report, under the heading “Iraq”; said: “Credit for non-sharp defence equipment can be considered under the 1984 Protocol up to an aggregate of £50 million. EGC and IDC approval is necessary for each contract.” *118

D2.89 By the beginning of 1987 a balance of £22.03 million out of the £50 million defence allocation from the 1984 Protocol remained unutilised. However, contracts totalling £14.7 million (including the communications equipment contract for £12.9 million) had been approved for cover and major applications for cover totalling about £75 million had been submitted and were outstanding. *119

D2.90 In a letter dated 27 May 1987 to Mr T Jones at the Treasury, Mr Foster of ECGD made clear the ECGD view that all contracts relating to equipment with potential for a defence related use ought to be set against the defence allocation. He said that “contracts... for anything which is subject to export licence requirements would in our view be appropriate for defence allocation consideration.” *120 DESO, however, did not agree with this approach and placed the subject on the agenda of the next EGC meeting. At the meeting held on 26 June 1987 Mr Keeling (DESO) argued that only contracts with the Iraqi MOD or contracts that related to equipment “with a purely military purpose should be logged” against the defence allocation. *121

D2.91 The DESO contentions were unacceptable to the DTI, who did not wish to see the general credit allocation whittled away by support for contracts with a military flavour even if “not obviously designed specifically for the armed services.” *122 In an internal DTI Note dated 17 July 1987 to Mr Causer (OT1/2a), *123 Mr John Gallaher (OT4/1b) referred to his objective to try and “ensure that the available [credit] opportunities are secured by as wide a range of companies as possible”. He was, he said, “becoming deeply concerned that this... objective is being negated by the tactics of DESO...” There were two contracts that, particularly, gave rise to this criticism. One was a £8.6 million contract for the supply of ‘AMETS’ equipment to Iraq. AMETS was described in the Summary Record of the IDC meeting on 18 December 1986 as “an artillery meteorological system.” *124 In a letter dated 14 July 1987 to Mrs Case, the appropriate official in the Treasury dealing with credit decisions, Mr Knapp, Director General Marketing at DESO, provided detailed technical material about the AMETS system, which he described as “essentially civilian equipment associated with military standard radar and electronic interface equipment enabling the output of the system to be used for artillery Command and Control.” *125 Mr Knapp went on to say that the “military elements” had been removed from the equipment and that the system was to be supplied to the Iraq Ministry of Transport which had “responsibility for meteorological services and civil aviation.” He sought Treasury agreement that the contract could be “accepted for financing within the non-military allocation”. Mr Gallaher, in his 17 July 1987 Note, regarded the suggestion that the AMETS system was being acquired for civil purposes as stretching his “credulity... to the limit”. He said: “I find it impossible to accept that the Iraqis, given that their current priorities are for war related equipment, would seriously be spending £8.5 million on a civil meteorological system, especially when the equipment is primarily designed for use with artillery”. His conclusion was that the AMETS contract should be set against the defence allocation and not be allowed credit out of the general facility.

D2.92 Mr Gallaher’s remarks about Iraq’s priorities strike a strong chord of commonsense. I have found it useful to bear them in mind when considering the substantial machine tool contracts which, in 1987 and 1988, were approved by the IDC and by Ministers and in respect of which evidence was given to the Inquiry that it was believed they were intended for civil industrial purposes.

D2.93 The other of the two contracts was a contract for the supply to Iraq of “tactical mobile communications with encryption equipment.” *126 It had been decided at the EGC meeting of 26 June 1987 that this contract should be charged against the defence allocation. DESO argued that this equipment was suitable for use by “such forces as police, gendarmerie border guard or MOI [i.e. Ministry of the Interior].” *127

D2.94 The Treasury accepted that both the two contracts could be accepted for credit against the “non military allocation”. Mr Gallaher’s protestations did not prevail. This decision demonstrates how far United Kingdom policy had moved since the first Protocol in 1983. At first, the agreed line of credit was to be confined to civil development projects. Credit for the purpose of facilitating the purchase of defence related equipment was not to be allowed. Later, under pressure from the DESO and the Iraqi purchasing authorities, a part of the agreed line of credit was made available for defence sales, first 10 per cent then 20 per cent. By mid 1987, and notwithstanding the nature of the Iraqi regime, the knowledge of the atrocities committed against the Kurds *128 and the continuing hostilities with Iran, communications equipment, for use by police and border guards to “enable them to interface with the Army in times of internal or external stress”, was classified as civil and its sale to Iraq was facilitated under the general credit facility.

D2.95 A Joint Commission meeting between the United Kingdom and Iraq was arranged for the week beginning 21 September 1987. At a meeting on 11 September the EGC discussed an ECGD paper *129 dated 2 September 1987 on the line to be taken. The paper recommended the offer of £50 million new credit for Pharmaceuticals, £25 million for semi-consumables (e.g. Veterinary products) and up to £100 million on a general purpose medium term line of credit. As to a defence allocation, the paper advised that “it would be prudent for the time being for cover not to be given for defence-type sales to Iraq” and proposed that “such business should not be covered under the present credits”. At the EGC meeting the MOD “questioned the exclusion of defence contracts” but the FCO “advised against any offer of credit cover for defence sales without the qualification that they should be within the current guidelines which in view of the present tensions in the Gulf, Ministers might wish to review and tighten.” *130 The issue was left with an agreement to agree: “MOD and ECGD should agree a definition of defence contracts which might qualify for cover”. The EGCD advice was not, therefore, taken.

D2.96 The Joint Commission talks were held in London from 23 to 24 September 1987. The outcome of the talks was summarised in a letter dated 14 October 1987 from Mr Twyford of the ECGD to the Treasury. *131 A total of £175 million new credit was agreed upon. The letter records that: “There was no discussion at the Joint Commission of credit for defence contracts. We were however forced to concede that £20 million might be made available for project 701 (Um Qasr port)”.

D2.97 One of the problems experienced over 1986 and 1987 was that of late payments to ECGD by Iraq and of increasing overdues. In paragraph 3 of the ECGD paper the current figure for overdues in respect of Protocol indebtedness was put at £15.6 million. Discussions with the Iraqis about the overdues had been taking place and in a letter dated 21 May 1987 to the Treasury, ECGD said that they had made it clear to the Iraqis that “final approval would only be given to the inclusion of individual contracts within the credit facilities if arrears in payment on Protocol and DPA [Deferred Payment Agreement] debt did not exceed £1 million.” *132 The ECGD paper of 2 September 1987, in paragraph 15, referred to the overdues problem and said that “...it was made a condition, reluctantly accepted by the Iraqis, that new contracts would not be approved whilst overdues on Protocol facilities and DPAs exceeded £1m.” *133 The Minutes of the 1987 Joint Commission talks made no reference to this condition. However, a manuscript Note made by Mr Tegid Jones, Treasury, on 25 September discloses that the agreement on £175 million new credit was “subject to arrears not exceeding £5m. in 2 months”. Mr Jones’ Note also discloses that the MOD had secured agreement on a defence allocation of “25 per cent of GPLOCs.” *134 The £175 million was made up of £75 million for Pharmaceuticals and semi-consumables and £100 million as a general purpose medium term line of credit. *135 So the defence allocation was £25 million.

D2.98 The issue of what constituted a defence contract was taken up by Mr Keeling (DESO) in a letter dated 2 November 1987 to the ECGD. *136 He said that “...everyone accepts that in Iraq, certainly at the present time, we cannot assume that the customer denotes whether the equipment involved is military/defence or civil” and that DESO “would not disagree that credit for defence should be used for undeniably military equipment irrespective of the customer”. He suggested, as a definition of “defence equipment” that should be set against the defence allocation, the following:

“If the equipment/system has been specifically designed for use of the Armed Forces or is undeniably military by nature, it should be regarded as defence equipment for credit support irrespective of the customer within the Iraqi Government. The equipment not so specifically designed and/or not undeniably military should be regarded as civil”.

D2.99 This suggested definition is interesting for two reasons. First, the focus on “specifically designed” echoes the focus in the EG(C)O Military List on “special design”; and, secondly, the insistence on certainty of an intended military use may be regarded as a precursor of the similar line later taken in regard to the ELAs for machine tools. The MOD and the DTI regarded the certainty of a military use as necessary if an ELA was to be refused.

D2.100 The ECGD reaction to Mr Keeling’s suggested definition was, first, that the adverb “undeniably” should be dropped “since we believe this is at the root of many of our problems” and, second, to suggest that “equipment not so specifically designed” should “nonetheless be set against the defence allocation if it is subject to export licencing and has a clear military application either as supplied or after minor modification”. These suggestions were contained in a letter dated 16 November 1987 from Mr Foster of ECGD to Mr Keeling. *137 Mr Foster went on to say that “no definition is likely to be foolproof but it is clear that AMETS were mistakenly categorised. ...on that occasion ECG took advice from the Ministry of Defence and appear to have been misled by that advice...” Mr Foster did, however, agree that 20 per cent of the new line of credit would be set aside for military business. Mr Keeling, in a letter dated 4 February 1988, accepted Mr Foster’s proposed definition of “defence equipment” but did so with reluctance and “on the understanding that we should review the definition from time to time if it is seen to be inappropriate or in need of refinement.”*138 He disagreed, however, that the MOD’s advice about AMETS had been misleading.

D2.101 The FCO agreed with Mr Foster’s proposed definition *139 but the DTI joined the debate with a letter dated 9 February 1988 from Mr Gallaher to ECGD. *140 Mr Gallaher made clear that, in the DTI view, the ECGD ought not to place any further hurdles in the way of exporters whose applications for export licences had been granted. He said that “once an export licence has been granted... the DTI would be vociferous in resisting any attempts to frustrate the fulfilment of a contract”.

D2.102 In the application of the agreed definition, airborne video recording systems and group replay equipment were treated as defence equipment and set against the defence allocation. *141 So were High Frequency Receiving Stations and ancillary equipment. *142

D2.103 By contrast, ECGD credit was not set against the defence allocation in a case in which cover was provided in respect of a contract between Tripod Engineering Co Ltd and ostensibly Iraqi Airways, but almost certainly the Iraqi Airforce, *143 for the design, supply and installation of equipment for an Aviation Medical Centre, which included some items which clearly had a military application, e.g., an ejector seat trainer, flight simulators and a human training centrifuge. *144 The value of these three sets of exports alone would, according to the company’s figures specified in a schedule of equipment submitted by Midland Bank to ECGD, have totalled some £9,920,000 out of a total value of about £15-£16 million. *145 Although ECGD had initially viewed the contract as one which might have to be included in the defence allocation, it was decided that the contract could be viewed as a civil project since much of the equipment would have a non- military application.

D2.104 A case in which the ECGD’s decision regarding credit support acted as a complement to the licensing control exercised through the IDC was one in which the application for credit support related to a £5.4 million contract to refurbish a sulphur plant belonging to the Iraqi Mishraq Sulphur State Enterprise. The refurbishment contract was not subject to export licence control. The UK company that had obtained the contract applied for ECGD support under the UK/Iraq Protocol arrangements. The ECGD had, among other concerns, concerns about the nature of the work to be carried out under the contract, bearing in mind the potential use of sulphur in the manufacture of nerve gas. These concerns became of crucial significance to ECGD’s assessments of the risk involved in giving credit support to the contract. A letter dated 24 February 1988 from the ECGD to Mr Beston (DTI) expressed the concerns to which I have referred. *146 A copy went to Mr Barrett (MOD). Mr Barrett, in reply, advised that credit support should not be given to the contract. In his letter dated 13 April 1988 *147 he said that, although the MOD did not have any evidence that sulphur was being used by the Iraqis in any CW activity, it could be so used and he did “not believe that the UK should be assisting the Iraqis in any way to refurbish a plant which could be used in CW efforts”. He added: “Even if we said that we understood that the plant was for civilian sulphur processing, the public would not understand”. The DTI took an entirely different line, initially at least. A letter dated 14 April 1988 from Mr Gallaher *148 noted that there was “no evidence that this is other than a legitimate contract to refurbish a civilian sulphur plant” and said that the DTI “would support (or even press for) support of this civil contract”.

D2.105 The divergence of departmental views as to whether or not the sulphur plant refurbishment contract should receive ECGD credit support led to a meeting on 19 April 1988 attended by ECGD, DTI, FCO and MOD representatives. Mr Lunn-Rockliffe (ECGD) outlined the reasons for ECGD’s inclination to refuse credit support “on the grounds that the risk was unduly hazardous.” He mentioned two main concerns, of which the first was “the possible link with Chemical Warfare” and said that “it was ECGD’s conclusion to turn the business down primarily for reasons of concern over the company’s operations, although the possible links with Chemical Warfare.... would have obviously dangerous political ramifications.” He said, also, that ECGD had sought legal advice and that ECGD’s lawyer “was satisfied that ECGD’s position could be successfully defended in the unlikely event that the case went to judicial review”. The FCO and the MOD supported ECGD. Mr Barrett (MOD) said that the “MOD did not want to see the UK involved in any peripheral activity concerning chemicals and Iraq, especially in light of recent events” and expressed the opinion that “there would be no problems if the case went to Court”. Mr Simmons (FCO) “forcefully restated the UK position that we would have nothing to do with the furtherance of the Iraqi Chemical Weapon capability”, and said that he was “confident that any Iraqi protests which might arise from turning down this business could be successfully deflected by the FCO”. Mr Gallaher, the DTI representative “confessed he had come to fight for British industry and the continued development/protection of trade between the UK and Iraq” but, having heard the arguments, “reluctantly concurred with the FCO/MOD positions.” *149 Those present at the meeting preferred that the Iraqis and the company should be given “commercial reasons” for the ECGD decision rather than the Chemical Weapons reason.

D2.106 In a Note dated 20 April 1988, Mr Lunn-Rockliffe informed the Minister for Trade (Mr Alan Clark) of the position and submitted a draft letter for the Minister to write to his counterparts in the FCO and MOD. 150 Mr Clark wrote accordingly to Mr Mellor, with a copy to Lord Trefgarne. The letter was dated 25 April 1988 *151 and expressed the concern that “the equipment to be exported could be used in the manufacture of nerve gas”. The company was informed, by letter of 4 May 1988, *152 that credit support would not be forthcoming. The letter gave no reason for the decision. This was contrary to normal ECGD practice which was to give by letter a full explanation of refusals to provide cover. However, at a meeting held at ECGD on the same day, the company was given reasons in outline form for the refusal of credit support. An ECGD note of the meeting records that although Mr Foster (of ECGD) “emphasised that [he] was not at liberty to give reasons underlying [ECGD’s] decision to decline support, the discussion continued in broad terms and the visitors seemed to recognise that our reservations lay in several areas.” The Note recorded that “the high risk nature of the Iraq market” and “the nature of the.... contract” were important concerns. *153 The company’s Note of the same meeting confirms the accuracy of the ECGD Note and records reference by Mr Foster to “certain restrictions by the British Government on UK companies handling chemical business in ‘war countries’.” *154

D2.107 Perhaps not surprisingly, the company followed up the meeting with a letter to the ECGD dated 11 May asking for specific reasons for the decision and for a reconsideration of the case. The ECGD replied on 12 May that it could not expand on its earlier decision and told the company that “the decision had not been taken lightly, that the fullest consideration had been given to all the relevant facts and that it saw no purpose in a further review.” *155 The company then, through its solicitors, asked Mr David Sumberg MP to intervene. Mr Sumberg wrote to Mr Robert Atkins MP, Parliamentary Under Secretary of State at the DTI, asking for ECGD’s refusal of credit support to be investigated. Mr Lunn-Rockliffe provided a Note dated 22 June 1988 to the Minister for Trade recommending the Minister to reply to Mr Sumberg along the lines of an attached draft letter “which does little more than confirm that the Minister is satisfied that ECGD’s decision is reasonable.” *156 The Note referred to three reasons underlying ECGD’s refusal of credit. The first of these related to the control of the company; the second was that “The business is riskier because it represents a departure from [the company’s] normal activities”. The third was “the fact that sulphur is a necessary precursor in the manufacture of certain chemical weapons”. The Note then said this: “whilst these points overall underscore our real concern and might be used to justify the decision, each is vulnerable to counter argument and to stress them could provide fuel for an application for judicial review if the company is so minded. The draft reply is therefore drawn up in very general terms”.

D2.108 A letter, in the terms of the draft, from the Minister to Mr Sumberg followed. *157 The letter did not refer to the ECGD’s reluctance to provide support for a chemical plant in Iraq with the capacity to assist in the production of Chemical Weapons. Vague reasons were given to Mr Sumberg for the ECGD’s decision. There was reference to the decision involving “judgment about the factors relevant to the risk being assumed...”, to “...the company’s obvious difficulties in obtaining the recourse support necessary” and to “the need to focus on the structure and control of the company”. The letter concluded by saying that the Minister had considered the background and was satisfied “that in the particular circumstances of the case ECGD [had] taken a reasonable and prudent decision”. It is difficult to dispute that the ECGD decision was a reasonable one but it is, at first sight, not easy to understand why one of the main reasons for the decision, namely, that the sulphur plant had the capacity to assist in the production of Chemical Weapons, was not given. It is evident from the Note to the Minister that the officials in ECGD were anxious, among other concerns, to provide no basis upon which a judicial review application might be made. But the CW reason for refusing credit support seems to me so eminently reasonable and defensible, bearing in mind what was known of the Iraqi use of CW, that the omission to state it would have increased rather than reduced the vulnerability of the decision to judicial review. Mr Lunn-Rockliffe has provided the Inquiry with a full explanation of the background against which it was decided to omit any specific mention in the letter to Mr Sumberg of the CW reason for the ECGD refusal of credit support. In the circumstances, the omission was, I have concluded, understandable. Nonetheless it was, in my opinion, unnecessary. An overt attribution of the ECGD refusal to the CW implications of the work at the Mishraq Sulphur Plant would not, on my understanding of the circumstances, have brought about any of the adverse consequences to which Mr Lunn-Rockliffe drew attention. In the event, the ECGD refusal of credit prevented the performance of a contract which lay outside export licensing controls. If the performance of the contract had required the granting of export licences, I have no doubt that they would not have been granted.

D2.109 The case to which I have been referring is one in which the withholding of credit was used for the purpose of thwarting a commercial transaction between a UK company and Iraq that could not have been prevented by the exercise of export licence control. I hope I have made clear, and repeat, that this purpose was, in my opinion, in the circumstances of the case, a proper one.

D2.110 The ceasefire in August 1988 prompted a review of ECGD policy towards credit cover for exports to Iraq. I will leave until later more detailed reference to that review.

D2.111 As is apparent from this survey of ECGD policy from 1983 until the ceasefire, arrangements were in place, during the bulk of that period, for defence sales to Iraq to be facilitated by the provision of medium term credit cover up to the limit of the agreed defence allocation. These arrangements were not in any way inconsistent with the Guidelines. Credit cover did not avoid the need to obtain an export licence if an export licence was needed, nor did it improve the prospects of obtaining one. In my opinion, however, the defence allocation arrangement was plainly inconsistent with the Government’s professed policy of even- handedness or impartiality. A letter dated 22 July 1994 from ECGD to the Inquiry *158 has made clear that no financial protocols with Iran had been entered into since 1979 and that no medium term credit cover was made available to Iran during the period covered by the Iran-Iraq war. A limited amount of short term cover (for goods sold on cash terms or involving up to 180 days, or occasionally 360 days, credit) was available from 1983, subject to the security of an irrevocable letter of credit (limited to its validity period). These limited arrangements do not compare with the medium term credit made available to Iraq under the three Financial Protocols entered into during the war period. The even-handedness/ impartiality professed by the Government was, arguably, consistent with the 1st Protocol for as long as credit was limited to civil projects and defence sales were excluded. As soon, however, as the defence allocation was agreed, the ability of the Government to claim that it was treating the combatants even-handedly or impartially, in my opinion, disappeared. Thereafter the Government was financing, up to the agreed limit, Iraq’s defence purchases or defence projects but not those of Iran. The continued protestations of even- handedness/impartiality were only possible because no public disclosure was made of the existence of the defence allocation available to Iraq until oblique reference to it was made by ECGD in its memorandum to the Trade and Industry Select Committee dated 6 November 1991:

“ECGD cover was extended in respect of the supply of defence equipment between 1984 and 1987 under the inter-Government protocols signed with Iraq between 1983 and 1987. The supply of such equipment was permissible under United Kingdom export licensing regulations, but it should be noted that the Department’s cover did not extend to military hardware.” *159

Presumably the reference to “military hardware” was intended to be a reference to lethal military equipment. Otherwise the statement in the memorandum would have been untrue. It must be an open question whether the members of the Select Committee would have so understood the reference. *160 The Government was given a number of opportunities from 1986 onwards to inform Parliament about the defence allocation in response to questions from MPs and, in particular when Mr Allan Rogers MP tabled a number of questions for ordinary written reply in June 1990. Those opportunities were not taken. *161 Mr Alan Clark who, as Minister for Trade had been directly involved in negotiating the defence allocation with Iraqi Ministers and officials, did not reveal its existence when, in December 1986, he answered a question from Mr Michael Latham *162 about his visit to Iraq the previous month and again when, as Minister for Defence Procurement, he answered a question from Mr Rogers in May 1990 in which Mr Rogers had asked for “details of protocols 1 and 2.” *163 He told Mr Rogers that responsibility for the protocols lay with the Secretary of State for Trade and Industry but went on to say: “However, I can confirm that financial protocols 1 and 2 involved the provision of credit facilities of £275 million and £300 million respectively.” A full answer to the request for details of Protocols 1 and 2 would have had to mention the defence allocation. The first Ministerial Statement in Parliament about the defence allocation appears to have been that made by Mr Michael Heseltine MP in the course of the Arms Exports to Iraq debate in the House of Commons on 23 November 1992. *164

D2.112 The DTI has explained the absence of any public reference to the defence allocation in the following way:

[The defence allocation] was introduced not as a means of opening up cover for eligible defence-related products, but to limit the amount of cover available for them and to send a clear signal to the Iraqi Government that the Protocol credits should be used primarily for civil projects. The introduction of what was essentially an operational control did not require a change in the criteria that goods had to be of a non-lethal nature and comply with the export guidelines prevailing at the time. Against this background ECGD saw no reason to make a specific announcement in respect of the defence allocation.

....

It is correct that the defence allocation was not disclosed until ECGD referred to it in the Memorandum to (TISC) in November 1991. But for the reason already explained it was not perceived as necessary for it to be announced or notified specially to Parliament as it did not represent any change of policy, or increase in cover for defence related goods....” *165

The reasons given may explain why no special announcement of the defence allocation was made to Parliament. They do not, in my opinion, satisfactorily explain why information about the defence allocation did not form part of the answers given to the questions tabled by Mr Rogers in May and June 1990. The failure to give this information was not, in my opinion, consistent with the obligation expressed in paragraph 27 of Questions of Procedure for Ministers “to give Parliament... and the public as full information as possible about the policies, decisions and actions of the Government....” *166

D2.113 In any event, the DTI’s proposition that the defence allocation was introduced “not as a means of opening up cover for eligible defence-related products, but to limit the amount of cover for them ....” is inconsistent with the facts and I reject it. The contemporary documents make clear that when the 1st Protocol was signed it was contemplated that the agreed line of credit would be used to facilitate the sale of civil goods, not defence-related goods. *167 It was dissatisfaction on the part of officials in MOD/DESO over the difficulty of obtaining ECGD support for contracts for the supply of defence equipment to Iraq that led to the introduction of the defence allocation. *168 It is correct that the defence allocation limited the proportion of Protocol funds that would be applied in the support of defence contracts. But the main purpose behind its introduction was to earmark a specific proportion of the Protocol funds for that support. It was intended to, and did, open up cover for eligible defence-related products.

D2.114 A useful summary of the credit made available to Iraq in the period preceding the ceasefire is contained in the ECGD’s memorandum of 6 November 1991. The memorandum responded to the requests for information made by the Trade and Industry Select Committee (TISC). *169 TISC had asked, inter alia, to be given “An estimate of the proportion of [ECGD] cover in each year from 1980 which related to exports of defence equipment.” ECGD’s answer was as follows:

“Under its credit insurance facilities for business transacted on cash or short credit terms, ECGD’s recording system does not allow the Department to break down business by trade sector, and it is not possible therefore to answer the question in respect of such business.”

The answer then continued with the passage already cited at paragraph D2.111 and said that “figures for the supply of defence equipment are shown in the attached Annex.”

D2.115 The “attached Annex” contained the following details:

“Defence related equipment covered by ECGD between 1984 and 1987 was as follows:

Under 1984 Protocol facilities - £51.5 million
Under 1987 Protocol facilities - £4.2 million

Such equipment was permissible under the prevailing UK export licensing regulations, which distinguished between defence equipment and military hardware.”

D2.116 It will be noticed that the ECGD response did not disclose to TISC that in September 1985 it had been agreed that 10 per cent of the £250 million medium term facility agreed at the Joint Commission meeting in November 1984 (i.e. £25 million) would be allocated to defence equipment, nor that in December 1985 it had been agreed that the defence allocation would be increased to £50 million, nor that a defence allocation of 20 per cent of the £100 million 1987 medium term general purpose facility had been agreed upon. Nor did the ECGD response give an accurate description of the type of defence equipment that could be covered under the agreed defence allocation. In an ECGD letter dated 6 November 1991 which accompanied the ECGD’s response to TISC’s request for information, TISC was informed that ECGD had “given figures in relation to the second question [i.e. the question about exports of defence equipment] in a confidential annex because it is not usual and in our view inappropriate [for] information to be made publicly available.” *170

D2.117 An ECGD official involved in the preparation of the TISC Memorandum explained to the Inquiry:

“At the time that the letter was written, it was my understanding that, while ECGD was prepared to release global figures for the amount of its exposure and for civil and defence exports sales that it had covered, it would not do so in respect of individual countries.” *171

The ECGD policy not to disclose details relating to individual countries was referred to in a Written Answer to a Parliamentary Question in which Mr Jim Cousins had asked “what was the total capital project cost cover offered under the export credits guarantee system to (a) Saudi Arabia, (b) the Gulf States, (c) Malaysia, (d) China and (e) Brunei in each year since 1983; and what proportion was accounted for by cover for arms exports in each case.” In a Written Answer on 9 January 1990 Mr Ridley, Secretary of State for Trade and Industry, replied that “It is ECGD’s policy not to disclose details of its exposure on individual countries for reasons of commercial confidentiality.” *172 However, in reply to a later question from Mr Cousins on the same day in which the same information was sought but without reference to individual countries, Mr Ridley gave the information requested.

D2.118 A comparable point was made by Mr W A Perry who, as RMD2 in DESO, had in 1985 taken part in the discussions about the amount of ECGD credit for Iraq to be allocated to defence sales. *173 In a letter to the Inquiry dated 13 February 1995 Mr Perry said that the provision of information to Parliament about the amount of the defence allocation “would have been contrary to normal practice because it is ECGD’s policy not to disclose details of its exposure on individual countries for reasons of commercial confidentiality, and the adverse effect this might have on our bilateral relationship with the countries concerned.” The evidence provided to the Inquiry has borne out that, as Mr Perry put it, “it has... been the policy of successive Governments not to publish such information”.

D2.119 I do not, however, accept that information about the size of the defence allocation for Iraq or about ECGD’s actual exposure to individual countries needed to be kept secret from the public for any justifiable reasons of commercial confidence. Nor do I understand the force of the point based on the relationship between this country and the debtor country. Of greater importance, in my opinion, was, and is, the right of Parliament and the public to be informed of and to require Ministers to account publicly for the manner in which public money is being utilised.

D2.120 There is no doubt but that the existence of the defence allocation was known to the Ministers at the MOD, FCO and DTI. It was the subject of Ministerial correspondence to which I have already referred. It was known also to the Prime Minister, Lady Thatcher. Mr Channon’s letter to Mr John McGregor of 3 December 1985 seeking an increase in the defence allocation was copied to her and, in answer to a question from the Inquiry regarding the proposed increase, she said, in her written evidence dated 3 December 1993, that “whatever the allocation of export credits to defence related equipment for Iraq, only 6 per cent of the credits actually went on these goods.” *174 In oral evidence to the Inquiry, Lady Thatcher approbated the increase of the defence allocation from 10 per cent to 20 per cent in 1985. *175 Mr Michael Heseltine MP in his written evidence to the Inquiry submitted on 24 February 1994 expressed the opinion that the defence allocation was an appropriate adjunct to government policy whereunder, after IDC scrutiny, the export to Iraq of a certain amount of defence-related equipment would be allowed. *176 It was not the defence allocation policy itself, but, rather, the concealing of that policy from Parliament and the public, while at the same time repeatedly professing a defence sales policy that was impartial and even-handed as between Iran and Iraq, that was, in my opinion, reprehensible.

Endnotes
*86 - see paragraphs D1.13 and D1.14 supra

*87 - FCO/568.3.11

*88 - T/9.15.60: The EGC was chaired by an official from the Treasury and its members included representatives from the MOD, the ECGD, the FCO, DTI and the Bank of England.

*89 - see T/9.15.60 at p. 63

*90 - see T/9.15.70

*91 - see FCO/568.3.24

*92 - see ECG/13.4.(Folio 48)

*93 - see ECG/13.4.(Folio 49)

*94 - see ECG/13.4.(Folio 108) and ECG/13.4.(Folio 109)

*95 - see ECG/13.4.(Folio 63)

*96 - see ECG/13.4.(Folio 58) and ECG/13.4.(Folio 62)

*97 - see T/9.13.86 at paragraph 25

*98 - see ECG/13.4.(Folio 72)

*99 - see the Minutes of the Meeting: ECG/13.4.(Folio 73)

*100 - see ECG/13.4.(Folio 75) and ECG/13.4.(Folio 78)

*101 - see Mr Adams (Treasury)’s letter of 19 September 1985 to Mr Jaffray (ECGD): T/9.13.108 and Mr Jaffray’s letter of 11 October 1985 to Mr Adams: T/9.13.115

*102 - see T/9.15.92

*103 - see T/9.15.115

*104 - see also Mr Harding (MED)’s Note dated 5 November 1985 reporting to senior FCO officials on the ECG meeting: FCO/568.3.47

*105 - see MOD/8.3.113

*106 - see MOD/8.3.119

*107 - see MOD/8.4.79

*108 - Mr Eggar may have had in mind Lord Cledwyn’s PQ in the House of Lords on 11 December 1984 and Baroness Young’s letter dated 21 December 1984 in response: FCO/568.3.11

*109 - Reference to the defence allocation was eventually made in a submission to the Trade and Industry Select Committee on 6 November 1991. See paragraph D2.111 infra

*110 - see Mr Heseltine’s letter of 20 December 1985 to Mr Channon: MOD/8.4.121. See also Mr John MacGregor’s letter of 19 December 1985 to Mr Channon, signifying Treasury agreement to the £50 million and noting “Tim Eggar’s concerns about the need to ensure that we appear to be even-handed between Iraq and Iran over the supply of [defence] equipment”: CO/32.PM/2.88

*111 - see T/9.13.141

*112 - see T/9.13.143

*113 - see Letter dated 16 April 1986. T/9.13.146

*114 - see T/9.13.147 and T/9.13.148

*115 - see T/9.13.149 at paragraph 4

*116 - see T/9.13.152

*117 see the ECGD’s September 1986 Review at T/9.15.170 at p. 171, and at T/9.15.195 and T/9.15.198

*118 see ECG/13.4.(Folio 129)

*119 Details of these applications supplied by ECGD in February 1987 are at ECG/13.5.(Folio 160) and ECG/13.5.(Folio 172)

*120 - see ECG/13.5.(Folio 177)

*121 - ECG/13.5.(Folio 184) and see also the letter dated 14 July 1987 from Mr T Knapp of DESO to Mrs Case of the Treasury ECG/13.5.(Folio 186)

*122 - see Mr Knapp’s letter of 14 July 1987: ECG/13.5.(Folio 186)

*123 - see ECG/13.5.(Folio 188)

*124 - see MOD/11.1.121

*125 - see ECG/13.5.(Folio 186) and ECG/13.5.(Folio 185)

*126 - see Mr T Jones’ letter of 21 July 1987: ECG/13.5.(Folio 189)

*127 - see ECG/13.5.(Folio 185)

*128 - the atrocities against the Kurds were first reported in April 1987: see FCO/1306

*129 - see ECG/13.5.(Folio 195); T/9.16.117

*130 - see ECG/13.5.(Folio 199)

*131 - see ECG/13.5.(Folio 200)

*132 - see T/9.16.91

*133 - see T/9.16.117

*134 - see T/9.16.141

*135 - see DTI/50.3951 at p. 3955

*136 - see ECG/13.5.(Folio 204)

*137 - see ECG/13.5.(Folio 205)

*138 - see ECG/13.5.(Folio 208)

*139 - see ECG/13.5.(Folio 209) and ECG/13.5.(Folio 211)

*140 - see ECG/13.5.(Folio 210)

*141 - see ECG/13.5.(Folio 206), ECG/13.5.(Folio 215) and ECG/13.5.(Folio 231)

*142 - see ECG/13.5.(Folio 227) and ECG/13.5.(Folio 231)

*143 - see, for example, MOD/166.95

*144 - see ECG/13.6.(Folio 297) and ECG/13.6.(Folio 301 at paragraph 2), see also letter from ECGD to the Inquiry dated 21 June 1993 (ECG/58)

*145 - see ECG/13.6.(Folio 297). Various figures are set out at D2.375 and at D2.401 and it will be seen that precise figures cannot be given with any certainty

*146 - see ECG/13.5.(Folio 216)

*147 - see ECG/13.5.(Folio 219)

*148 - see ECG/13.5.(Folio 220)

*149 see the Note of the meeting at ECG/13.5.(Folio 221)

*150 - ECG/13.5.(Folio 222)

*151 - ECG/13.5.(Folio 223) 152 ECG/13.5.(Folio 224)

*153 - Annex B to letter from Mr Lunn-Rockliffe dated 9 February 1995 (ECG/78)

*154 - ECG/13.5.(Folio 234)

*155 - ECG/13.5.(Folio 226)

*156 - ECG/13.5.(Folio 233)

*157 - ECG/13.5.(Folio 234)

*158 - see ECG/69

*159 - “Exports to Iraq” (EQ 20): HC 86-i; see also ECGD’s letter to the Inquiry dated 28 October 1994 (ECG/72). In this letter, ECGD explained that, in fact, the Defence Allocation was not agreed until 1985 (cf. the reference to “1984” in the memorandum to TISC)

*160 - The Select Committee did not seek clarification of the words used from ECGD. See written comments attached to the letter to the Inquiry dated 2 October 1995 from Mr Ian Lang who succeeded Mr Heseltine as President of the Board of Trade on 5 July 1995

*161 - see House of Commons Hansard Written Answers: 20 June 1990, Col 596; 25 June 1990, Col 21; and 26 June 1990, Col 127

*162 - see House of Commons Hansard Written Answers 2 December 1986, Col 549

*163 - see House of Commons Hansard Written Answers 2 May 1990, Col 602

*164 - see House of Commons Hansard: 23 November 1992, Col. 644

*165 - Written comments attached to the letter to the Inquiry dated 2 October 1995 from Mr Ian Lang

*166 - see paragraphs D4.57 et seq. infra

*167 - see paragraph D2.68 supra: “ECGD said that they could not cover contracts with the Iraq Ministry of Defence ... FCO preferred that no defence equipment be covered ...”

*168 - see paragraphs D2.70 to D2.70 supra

*169 - ECG/86.3-5

*170 - ECG/86.2

*171 - see the letter dated 6 April 1995 from Mr Peter Maplestone (DTI/813)

*172 - see House of Commons Hansard 9 January 1990 Col 606

*173 - paragraphs D2.80 to D2.82 supra

*174 - see paragraph 5 of Lady Thatcher’s written evidence and note that 6 per cent was the figure given by Mr Heseltine to the House of Commons on 23 November 1992. The 6 per cent represented £54.3 million of medium term export credits taken up between 1983 and 1989 for defence related goods.

*175 - see the transcript for Day 48, 8 December 1993, pp. 215 to 219

*176 - see Section H of Mr Heseltine’s written statement

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