Guildlines - The Effect of the Cease-Fire

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 3 Defence Sales Policy after the Cease-Fire

D3.1 Guideline (iii) of the Howe Guidelines barred the supply of defence equipment which would “significantly enhance the capability of Iran or Iraq to prolong or exacerbate the conflict”. Once the conflict was at an end there was nothing to be prolonged or exacerbated, and guideline (iii) could not be applied according to its tenor. Some adjustment or re-writing was inevitable. But, more important, the advent of the cease-fire opened up the prospect that the two combatants would wish to rebuild their civil industrial facilities. Valuable opportunities for British exporters were envisaged. At the time the cease-fire was agreed a large number of ELAs for defence related goods were pending, a decision on them having been deferred by Ministers until, it was hoped, a more opportune time had arrived. The bulk of these deferred ELAs related to aircraft spares and communications equipment for Iran. Several, however, related to machine tools for Iraq. Prominent among the machine tool exporters whose ELAs had been deferred was Matrix Churchill.

D3.2 It was against this background that, in August 1988, discussions began between officials of the DTI, the FCO and the MOD, and their respective Ministers, regarding the direction that British policy on defence related exports to Iraq and Iran should take, and on the role that the Guidelines, in controlling those exports, should play. These discussions continued, somewhat spasmodically and with interruptions brought about by various international events, until July 1990 when, following a high level Ministerial meeting presided over by the Foreign Secretary, Mr Douglas Hurd, a new policy towards defence related exports to Iran and Iraq was agreed upon. The new policy was, however, overtaken by the Iraqi invasion of Kuwait in August 1990 and, although implemented for Iran, was never implemented for Iraq. In the period between August 1988 and July 1990, the continuing discussions to which I have referred led from time to time to consensus being reached by the junior Ministers at the three departments on various aspects of export licensing practice and policy. There were resulting changes in the basis on which or the manner in which export licensing decisions were taken. These changes were not put to senior Ministers for approval.

D3.3 A question much debated in the course of the Inquiry has been whether these changes constituted changes in Government policy or whether they constituted no more than a flexible application of the pre-cease-fire policy adjusted to take account of current circumstances. This is an important question for two reasons. First, the manner in which the changes are regarded bears on the question whether Government had any obligation to make Parliament aware that changes in policy had been put in place. Second, and more important, the adequacy and accuracy of Government statements that were from time to time made to Parliament, and to the public outside Parliament, depends, to some extent, on the manner in which the changes to which I have referred are regarded.

D3.4 It has been strenuously argued by a number of Ministers and officials who have given evidence to the Inquiry that the many statements to the effect that Government policy remained unchanged after the cease-fire and that the Guidelines announced in 1985 remained in force were not invalidated by the fact of the changes that were agreed upon by the junior Ministers in the period preceding July 1990. The essence of the argument proceeded on these lines:

D3.5 The alternative view is that the question whether the changes instituted by the junior Ministers constituted changes in policy is one of substance, not one of form. If a directed change in the criteria to be applied to ELAs and AWP applications for Iraq took place, it is, on this view, unimportant whether the change is described as a change in policy or as a change in the interpretation of existing policy. The extent of the Government’s obligation to keep Parliament informed, the extent of its obligation to account to Parliament for what it is doing, depends on the substance of the executiveactions in question, not upon the form in which they may be conveniently clothed.

D3.6 In reviewing the history of the discussions about export policy that followed the cease- fire in August 1988, it is useful to keep in mind the arguments to which I have referred in the preceding paragraphs. The importance of the issue lies not so much in whether, or in what sense, Government policy was changed but in the light it casts on the ministerial statements about policy that were made to the public and on the extent to which the natural meaning to be attributed to the words used in these statements was consistent with the facts.

D3.7 The story starts with a meeting of the IDC held on 2 August 1988. The cease-fire had been announced but had not yet come into effect (20 August was the date fixed) nor was it known whether the cease-fire would hold or whether there would be a resumption of fighting. According to the Summary Record of the meeting, the meeting was convened “at the request of the FCO, to discuss the implications of a settlement of the Iran/Iraq conflict for current policy on defence sales to the belligerents.” *1 Mr Blackley, FCO/MED, who chaired the meeting, gave a résumé of the FCO view of the political implications of the cease-fire on Iran and Iraq respectively and said that “... the central question for the IDC was how to fit our policy to the various stages which might occur in the process towards a settlement”. There was agreement at the meeting that “there would certainly be major opportunities for defence sales to both sides once the conflict was brought to an end.” Mr Blackley gave the FCO opinion that “If the ceasefire took hold, it was possible that the more innocent of deferred exports could be released” and Mr Simmons “drew the IDC’s attention to the presentational problems of too precipitate a relaxation of export controls”. “Parliament”, he said, “had shown a strong interest in this issue and would look for a restrained approach. The first phase of changing our approach would take the form of a relaxation of our interpretation of the guidelines. At a later date we could then recommend a fuller revision.” Mr Gallaher, DTI/OT4, said that “equipment which fell into the category of dual civilian/military use, and which could be used for reconstruction of the infrastructure should be looked on more favourably following a ceasefire.” Mr Blackley agreed “but pointed out that the [IDC] would have to be certain that such equipment would be for civilian end users and would have a strong bias to civilian use.” Mr Barrett, MOD/DESS2, “agreed with the [FCO’s] proposed approach”. He referred to MOD concerns about the Iranian Navy and the Armilla Patrol and added that “A further concern was the possibility of a negative reaction by other Gulf States at renewed defence sales to Iran, in particular the Saudis”. Mr Blackley agreed with Mr Barrett’s remarks. He drew attention to the importance of defence sales to other Gulf States and to the possibility that those sales might outweigh the potential benefits of defence sales to Iran. He added that “Significant defence sales to Iraq might also cause Gulf States some concern.” Later, Mr Blackley referred to diplomatic difficulties with Iran and to an attempt about to be made “to secure consular access to the Britons detained in Iran.” The IDC agreed that “since the situation ... was extremely fluid” further discussion should be postponed until the September meeting of the IDC, by which time, it was hoped, the cease-fire would be in place.

D3.8 Mr Barrett’s minute dated 16 August 1988 to the Minister (DP) on the 2 August IDC meeting said that “The IDC felt that the first step would be to relax our interpretation of the guidelines rather than change them” and that “It would be several months, however, before the IDC could expect to recommend changing the guidelines.” *2

D3.9 The DESS view expressed by Mr Barrett was not, however, the only MOD view. A note dated 18 August 1988 from Mr J, DIS Defence Sales, to another DIS desk said this:

D3.10 Mr Cowell’s minute to senior FCO officials on the 2 August meeting recommended that “the guidelines should not be revised until a peace settlement has been adopted and is seen to be working”, that “applications [should] continue to be looked at on a case by case basis, but that the IDC [should] be prepared to use the guidelines’ inbuilt flexibility to consider borderline cases more favourably than hitherto.” Mr Cowell gave examples of cases which might be affected by a gradual relaxation of ministerial guidelines. These included Matrix Churchill’s ELA 3M/0439/88 in respect of CNC lathes. *4

D3.11 The cease-fire duly came into force on 20 August 1988 and, on 31 August, the Foreign Secretary, Lord Howe, sent a paper to the Prime Minister entitled “The Economic Consequences of an End to the Iran/Iraq Conflict.” *5 The paper had been prepared by FCO officials after consultation with officials from other departments. In an accompanying letter to the Prime Minister, Lord Howe said that his paper “identifies those factors which we must take into account when reformulating our policies to the region” and emphasised the importance of making “the maximum available use of the opportunities for promoting British commercial interests.” *6 Copies of the letter and of the paper went to “OD colleagues”. *7

D3.12 Paragraph 20 of Lord Howe’s paper dealt with defence sales thus: “In the early post- conflict era the opportunities for sales of defence equipment to Iran and Iraq will be considerable. Our defence sales policy will need to be reviewed. We doubt if the review will lead to early withdrawal of the Government guidelines on defence sales to Iran and Iraq. Nevertheless we can use discretion within the ministerial guidelines to adopt a phased approach to borderline cases, relaxing control on a growing number of categories as peace takes hold. But we must take care not to upset our major defence equipment customers in Arabia whose purchases over the next ten years will exceed the value of any defence business we might permit ourselves to do with Iran and Iraq...”. The paper’s conclusion on defence sales, in paragraph 27, was that “(e) Iran and Iraq will continue to buy defence equipment. We should aim to get the non-lethal business and build on that. In the short term, military training for Iran and Iraq should be revived”.

D3.13 Lord Howe’s paper was placed before the Prime Minister by her Private Secretary, Sir Charles Powell, accompanied by a Note of his own dated 1 September 1988 *8. In regard to defence sales to Iran and Iraq Sir Charles’ Note advised the Prime Minister that “there is also likely to be a great deal of defence sales business. We shall need to consider fairly soon whether any amendment to our existing guidelines is required to enable British firms to compete for this”. Sir Charles’ Note made express reference to Iran’s detention of hostages both in the context of the normalisation of diplomatic relations between Iran and the United Kingdom, and in the context of increased defence sales to Iran. He advised that on the question of diplomatic relations with Iran “we obviously have to keep very much in mind the position of the hostages” and on the question of defence sales said this:

D3.14 In a letter dated 2 September 1988 to Lord Howe’s Private Secretary, copied (inter alia) to the Private Secretaries of MOD and DTI Ministers, Sir Charles said that the Prime Minister was “in general content with the strategy” set out in Lord Howe’s paper, but added “The general strategy, however, will obviously require decisions over the next few weeks and months on a number of difficult and sensitive issues such as the guidelines for defence sales to Iran and Iraq .... The Prime Minister will wish to be kept very closely in touch at every stage and consulted on all relevant decisions.”*9

D3.15 The Prime Minister’s expressed desire to be kept in touch and to be consulted on all relevant decisions was complied with so far as export credit arrangements for Iraq were concerned. In a letter dated 12 October 1988 from the Principal Private Secretary to Mr Tony Newton, Minister of Trade and Industry, to Sir Charles Powell, the details regarding a package of new credits for Iraq totalling £340 million were set out. The letter asked whether the Prime Minister was content with the arrangements. *10 In reply, by letter dated 14 October 1988, Sir Charles confirmed that she was. *11

D3.16 On 9 September 1988, Mr Cowell, MED, submitted to senior FCO officials (Mr R Young and Sir David Miers) and to the Minister of State at the FCO, Mr William Waldegrave, a paper on “policy in the very short term for defence sales to Iran and Iraq, in the light of the ceasefire”. Mr Cowell said that “If the paper commends itself, the Secretary of State may care to circulate it to the Prime Minister and OD colleagues ....” *12 In an accompanying note, Mr Cowell said that the paper had been agreed by the IDC. And Mr Young, who approved the paper, noted that it had been cleared with the MOD and DTI.

D3.17 The paper noted that “These guidelines contain flexibility which allows [the IDC] to take account of the situation in the conflict at a given time. Thus, over the past year, with heightened tension in the Gulf and the enhanced Western naval presence there, and at one time with the possibility of a UN arms embargo against Iran, the guidelines have been applied with particular stringency. The spirit of the guidelines has also been used to determine the acceptability of requests for military training....” The paper said also that the “peace negotiations should offer scope for some relaxation of the IDC’s strict application of the guidelines” and that “The ceasefire presents opportunities for significant sales of defence-related equipment to both Iran and Iraq,” identified “The objective” as being “to manage a phased relaxation within the existing parameters leading to a recommendation for revision or removal of the guidelines, as circumstances permit,” concluded that “We need a policy that enables us to justify re-entering the defence equipment market in both countries while not opening us to the charge that we are encouraging a resumption of hostilities”, but advised against “moving directly to revision or removal of present guidelines”. Four reasons were given for this advice. First there was the risk of refuelling the conflict if policy were revised too soon; second, the presentational problems of a relaxation of the guidelines were referred to: “A volte-face would likely encounter opposition from Parliament and public opinion”; third, a continuing concern by Gulf States about defence supplies to Iran had to be taken into account: “We can take advantage of the fear of arms sales to Iran and Iraq by others to keep up the momentum of our defence sales to the Gulf States while moving gradually into the markets in Iran and Iraq”; and, fourth, the continuing presence in the Gulf of the Armilla Patrol inhibited the grant of licences for the export of equipment to the Iranian Navy: “Although this policy, effectively a unilateral embargo, goes beyond the letter of the guidelines, it was considered advisable in the light of the direct threat to British interests.” Under the sub-heading “A Policy for the Short Term”, the paper recommended that, over the next six months, more defence equipment might be released and that a “first step would be to approve certain categories of dual use equipment such as civil aircraft spares, communications and transport equipment, and machine tools which have been held up pending developments.” The paper recommended that the “current ministerial guidelines should be operated with flexibility to release more material as progress is made on a peace settlement” and that “Certain categories of equipment currently held up should be released at once and other borderline cases favourably considered.” *13 Mr Young, Sir David Miers and Mr Waldegrave endorsed the paper with comments of approval, Mr Young noting that the proposed approach “should hold the line for the next six months.”

D3.18 Neither in Lord Howe’s paper to the Prime Minister nor in Mr Cowell’s draft paper was any express reference made to the detention by Iran of the hostages or to the atrocities committed by the Iraqi government against the Kurds. Knowledge of these atrocities had been known to the Government at least since March 1988 *14. Lord Howe has explained that “the Kurdish issue was an important part of the general awareness at the time” and that his paper “only dealt specifically with the economic consequences of the end to the Iran/Iraq conflict, not with wider questions of international politics or human rights issues.” *15 Since, however, Lord Howe’s paper was addressing the “factors” to be taken into account “when reformulating our policies to the region” the absence of any reference to the “Kurdish issue” or to the hostages does seem surprising. Presumably the “presentational problems” and the “opposition from Parliament and public opinion” to which Mr Cowell’s paper referred would have been attributable to the public attitude brought about, in the case of Iraq, by the atrocities against the Kurds and the use of CW, and, in the case of Iran, by the position of the hostages.

D3.19 Mr Cowell’s draft paper was placed before Lord Howe. He decided that the paper should not be put forward. His decision was communicated to the FCO officials and to the junior Minister, Mr Waldegrave, by a Note dated 22 September 1988 from his Private Secretary *16. The Note said that Lord Howe was “reluctant to put this paper forward and thereby to initiative a process whereby it will become known that our line on arms sales to Iraq has relaxed, while the Kurds/CW question is still hanging over us” and that “it could look very cynical if so soon after expressing outrage over the Iraqi treatment of the Kurds we were to adopt a more flexible approach on arms sales”. This Note demands some comment. Lord Howe’s objection to the draft paper and the recommendations for a more relaxed application of the Guidelines was not taken on substantive grounds. Substantively, the recommendations in the draft paper followed the lines of the recommendations on defence sales in Lord Howe’s paper of 31 August 1988 to the Prime Minister. Lord Howe’s objection was presentational. He did not want it to “become known” that the line on arms sales to Iraq had been relaxed. Both in paragraph 20 and in sub- paragraph (e) of the conclusions in paragraph 27 of his paper, Lord Howe had spoken in favour of relaxing control on a number of categories of exports to Iraq. His objection that “it could look very cynical if, so soon after expressing outrage over the Iraqi treatment of the Kurds, we were to adopt a more flexible approach on arms sales” was no more than an objection to the new approach becoming known. He was prepared for the new approach to be adopted but not for it to become known. In his oral evidence to the Inquiry Lord Howe confirmed that this was so. *17 He explained that although the new approach would have appeared to the public to be very cynical, he did not himself regard it as being cynical but, rather, as reflecting the importance of Iraqi defence sales to British trade. He referred to “the extremely emotional way in which such debates are conducted in public” and said that there was “very good reason for not volunteering this, [i.e. the new relaxed approach] because the scope for misunderstanding is enormous.” Lord Howe’s mistrust of the public and unwillingness to run the risk that public debate might embarrass government policy was consistent with his evidence, given earlier on the same day, that there was “nothing necessarily open to criticism in incompatibility between policy and presentation of policy.” *18

D3.20 The question whether Mr Cowell’s paper should be circulated to other departments and discussed was raised again a few weeks later. Mr Lillie’s Summary Record of the IDC meeting on 19 October 1988 recorded that “The FCO pointed out that there were still problems which made it necessary to hold back with the paper. There were still problems concerning Iraq and CW, and Iraq’s anti-US campaign. It was hoped to reconsider the paper in early November.” *19 A Note dated 25 October 1988 from Mr Simmons to Mr Blackley, Sir David Miers and the Secretary of State referred to Mr Cowell’s paper and to the fact that “The Secretary of State declined to circulate this paper in September as at that time the Kurds/CW question was hanging over us” and, “Given the time that has now elapsed, and ... that the sanctions issue has been shelved in the United States since at least until January”, recommended “that the Secretary of State again consider circulating the ... paper.” Mr Blackley supported Mr Cowell’s recommendation. In a manuscript Note also dated 25 October he said: : “Now that the imminent threat of American sanctions has passed, and the public interest in the allegations of Iraqi use of CW is waning, it may be appropriate now to circulate the cautious proposals on defence sales contained in the IDC paper. They are designed to carry the Government through the next 6 months before the question of revision or removal of the guidelines needs to be tackled.” Sir David Miers expressed no dissent and Mr Simmons’ recommendation was put before Lord Howe. *20

D3.21 However, Lord Howe remained of the same opinion regarding Mr Cowell’s paper. In a Note dated 28 October 1988 his Private Secretary said that “The Secretary of State still thinks it premature to circulate the paper to Ministers .., particularly when Iraqi use of CW is still so sensitive an issue here and in the United States. He thinks we may, in the meantime, be able to operate flexibly, within the guidelines, on a case by case basis ....” *21

D3.22 Paragraph 20 of Lord Howe’s paper to the Prime Minister, and its reference to the need for a review of defence sales policy and to the relaxing of control on various categories of exports, had been welcomed in the DTI. But, in a submission dated 2 November 1988 put up by Mr Petter, OT4/1, to the Minister for Trade, Mr Clark, it was noted that “Contrary to earlier indications the Foreign Secretary is not now expected to seek colleagues’ early agreement to relaxations in the guidelines ....” *22 The submission recommended that Mr Clark should write to his ministerial colleagues about government policy “on the present application of the defence sales guidelines for Iran and Iraq”. The submission referred to the number of ELAs that had been deferred by Ministers “because of the situation prevailing at the time of application” and identified the goods comprised in these ELAs as being dual-use goods valued at over £5.6 million for Iran and £3.1 million for Iraq and including parts for civil aircraft and helicopters, transport and communication equipment and machine tools. The machine tool ELAs related to Iraq. The bulk of the other ELAs related to Iran. The submission spelt out the DTI goal: “Ideally, DTI would like to see the guidelines modified to apply only to lethal equipment (as is the case with those of our partners who use the COCOM Munitions List as their guide) and dispensed with altogether after 6 months if the ceasefire holds”; but recognised that “this would go beyond the gradual relaxation previously envisaged by Ministers and might not command a consensus, particularly while allegations of Iraqi use of CW against Kurds persist and given recent problems with the Iraqi Embassy in London.” The submission advised the Minister that rather than risk delay by opening a full debate on the principles of the guidelines, “It would [be] better to avoid this and concentrate on persuading FCO and MOD Ministers to agree to early issue of these licences. Failure to issue them soon could embarrass British firms’ efforts to re-establish themselves in Iran and Iraq as well as denying them valuable business in terms of production and employment. Export licensing staff are facing increasingly bitter criticism for a policy of delay for which companies can no longer see justification.” Mr Petter advised that a copy of Mr Clark’s letter should be sent to the Prime Minister. He so advised because “No 10’s reply of 2 September to the Foreign Secretary indicated the Prime Minister’s wish to be consulted on difficult and sensitive issues such as the guidelines for defence sales” and the “Issue of a large number of export licences would clearly come within this request”.

D3.23 Accordingly, Mr Clark wrote a letter dated 4 November 1988 to Mr Waldegrave. *23 Copies were sent to Lord Trefgarne, and to the Prime Minister. The letter expressed concern about the number of pending ELAs that had been deferred by Ministers and commented that “... the case for continuing to apply a wide ranging unilateral UK embargo on defence sales is now well-nigh impossible to justify to British firms”. The letter suggested that licences on the deferred applications should be issued without delay and argued that this would represent only a “marginal relaxation of controls ...”.

D3.24 Mr Young put up a Minute dated 11 November 1988 to Mr Waldegrave advising on the appropriate FCO response to Mr Clark’s letter. *24 The Minute referred to Mr Cowell’s paper, and to Lord Howe’s view that “it would be premature to circulate the paper to Ministers” but that “we should be able to operate flexibly, within the guidelines on a case by case basis”, and suggested a special IDC meeting to discuss the deferred ELAs should be convened. Sir David Miers agreed with Mr Young’s advice and Mr Waldegrave wrote a letter dated 14 November 1988 *25 to Mr Clark accordingly. In his letter Mr Waldegrave agreed that “we should within existing guidelines adopt a more flexible attitude” towards ELAs for the export of dual-use equipment. Copies of the letter went to Lord Trefgarne and to the Prime Minister.

D3.25 Lord Trefgarne responded to Mr Clark’s letter of 4 November by a letter dated 17 November 1988 in which he said that MOD officials had “assessed virtually all the outstanding dual purpose items as militarily insignificant.” *26 He said he would agree to the grant of licences if the FCO were content. Copies of the letter went to Mr Waldegrave and to the Prime Minister.

D3.26 The proposed IDC meeting took place on 21 November 1988. There are no minutes of the discussions but in a DTI Minute dated 28 November from Mr Gallaher to the Minister for Trade, Mr Clark, Mr Gallaher warned that at the meeting “it became evident that there will be resistance to the complete abolition of the Defence Sales Guidelines particularly from FCO ....” *27 The fragility of the cease-fire and continuing public criticism of Iraq arising out of the use of CW against the Kurds were mentioned as being likely FCO arguments for the retention of the Guidelines. Agreement was reached at the 21 November IDC meeting to the immediate grant of the licences sought under a large number of the deferred ELAs. These licences all related to exports to Iran of, mainly, spares for helicopters and other aircraft.

D3.27 In a Minute dated 24 November 1988 Mr Lillie (MED) referred to the 21 November IDC meeting and said: “In all the cases on the attached list the MOD judged the military threat posed by export of such equipment to be insignificant.... Nevertheless Ministers decided in 1987 that because of the heightened tension in the Gulf at that time such applications should automatically be deferred until circumstances permitted a favourable decision. MOD Ministers have now agreed to consider releasing these items if FCO Ministers give their approval.” *28 Later in the Minute Mr Lillie added:

D3.28 As a result of the 21 November meeting a further letter was sent by Mr Clark to Mr Waldegrave. This letter was dated 30 November and, like its predecessors, was copied to Lord Trefgarne and the Prime Minister. It referred to “the high moral ground [gained] by our strong adherence to our guidelines” and commented: “From this dubious vantage point we can now see clearly the opportunities being denied to our defence industry. Both Iran and Iraq are anxious to establish a defence capability. We can answer possible criticism of easing restrictions on defence sales to Iraq in the light of continuing public concern about Iraq’s use of CW by pointing to the continuance of our strict controls on all supplies relevant to CW.” The letter argued that it was: “not only illogical but unnecessarily restrictive to continue to allow ourselves to be constrained by ‘guidelines’ whose original raison d’être has now been removed” and proposed that “our policy on licensable exports to both [Iran and Iraq] should be bought in Line with the practice of other western allies in bearing only upon Munitions List goods.” *29

D3.29 Mr Waldegrave’s response, by letter dated 14 December 1988, was to suggest a meeting between himself, Lord Trefgarne and Mr Clark “to discuss all the implications arising from the Gulf ceasefire.” *30 The meeting was arranged for 21 December. Each of the three departments briefed its Minister in preparation for the meeting.

D3.30 The FCO briefing for Mr Waldegrave was prepared by Mr Simmons and approved by Mr Stephen Lamport, who had become Assistant Head of MED in October 1988, and by Sir David Miers. *31 The FCO objective, as stated in the briefing, was “To agree a policy on defence sales which takes account of developments in the Gulf since Iranian acceptance of SCR 598, but which retains control over defence exports at least while uncertainties over peace negotiations remain”. The briefing stressed the need “to update our policy in the light of the ceasefire” and set out a number of considerations to be borne in mind, namely:

The briefing warned that “we must tread very warily indeed” and proposed “shifting policy from that of denying exports which would ‘significantly enhance the capability of either side to prolong or exacerbate the conflict’ to denying the exports ‘which, in our view, would be of direct and significant assistance to either country in the conduct of offensive operations’”. The suggested advantages of this re-wording of, in effect, guideline (iii) included the following: “sufficiently flexible to cover changing circumstances. As before we are free to interpret as we wish.”, “Covers not only Iran/Iraq, but also threat to Armilla or internal operations against guerillas/dissidents” and “A steer for companies considering promoting equipment.” This last advantage would, obviously, have required that some publicity be given to the re-wording. The final paragraph of the briefing said this: “It is very important that we not go too far too fast in relaxing the policy guidelines. At the same time, however, by maintaining the existing wording we are only confusing British companies, and giving an impression of inflexibility when in fact we have modified the implementation of the guidelines quite substantially. The advantage of the rewording which we propose is that it allows the public line to catch up with our current practice, retains our right to scrutinise export licensing applications for the foreseeable future and preserves our [ability] to adjust our practice according to changing events in the region”. This briefing was accompanied by a redraft of the Guidelines, with the proposed new (iii) replacing the original (iii).

D3.31 There is no doubt whatever but that the FCO proposal involved the re-writing of guideline (iii). The revised wording of guideline (iii) revived the point which, back in November 1984, had been advocated by the MOD and reflected in paragraph 7 of Lord Howe’s 4 December 1984 Minute to the Prime Minister, namely, that guideline (iii) should be applied only to equipment that might be of assistance in offensive operations. Equipment which might enhance Iran or Iraq’s defensive capability would not be caught by the proposed revision. This was, no doubt, a considered limitation. If all that had been intended, as some FCO witnesses suggested, had been a revision of guideline (iii) to take account of the cease-fire, it would have been simple to have formulated a criterion of “significant enhancement of the military capability” of either country. It seems clear that the FCO’s proposed revision represented an intentionally more liberal criterion. Exports which might indirectly enhance military capability would not be barred. Exports which might enhance defensive capability, even if the enhancement were both direct and significant, would not be barred.

D3.32 The DTI briefing for Mr Clark was prepared by Mr Gallaher. *32 A copy of the FCO’s proposed revised Guidelines was annexed. The briefing said that “throughout the period of the conflict the DTI officials have striven within the IDC to secure agreement to the granting of export licences for the supply of goods, including defence equipment, to Iran and Iraq under a liberal interpretation of HMG’s guidelines for such supplies” and recorded that during Mr Newton’s recent visit to Iraq (for the purpose of agreeing the new Financial Protocol) he had faced criticism from the Iraqis: “The Iraqis expressed incredulity in view of the liberal approach adopted by our competitors. Mr Newton was quite forceful in his views, expressed privately to DTI officials who accompanied him, that we should press urgently for a change in the system so that UK industry (including the defence industry) could supply non-lethal goods to both markets”. The DTI objective was stated to be: “To secure a significant change in the guidelines so that only lethal military equipment is automatically embargoed”, but “very strong resistance ... from MOD” was anticipated. The recommended “Line to take” was that “There is no justification for refusal to grant export licences for goods covered by Group 3 (Industrial List Goods) ... notwithstanding that the prospective purchaser may be military. We would be prepared to consider recommendations from other Departments for refusal of licences for such goods in specific instances.” The DTI briefing makes it clear that the DTI were looking for a substantive change in the Guidelines.

D3.33 Mr Barrett’s briefing for Lord Trefgarne was submitted on 20 December 1988. *33 The briefing reviewed the history of the Guidelines, the DTI’s proposals for revision and the more limited FCO proposal. Mr Barrett referred to the policy prior to December 1984 and said “This policy [that in force from September 1980 to December 1984] became dogged by problems of definition and it was refined at the end of 1984 to the current Ministerial Guidelines ... The guidelines have served the UK policy well. They have been, and still remain, capable of being interpreted flexibly and in a way which we could always justify to Parliament, the Press, Industry and the public. When British shipping was threatened we tightened the interpretation, since the ceasefire we have eased off a bit by letting some of the dual purpose spares go and agreed to hovercraft refurbishment in the UK for Iran.” The MOD view, in the formation of which the threat to the Armilla patrol posed by the Iranian Navy played a major part, was that the Guidelines should be left unaltered until March 1989 and then be reviewed. The significance of the March 1989 date was that it was believed in the MOD that the Armilla Patrol would not be remaining in the Gulf after February 1989. “In the meantime”, suggested the briefing, “we should be as flexible as we sensibly can be in our interpretation of the guidelines” and explained: “If we amended the guidelines now to appease Industry, we would find it difficult to explain the change in such a way that would satisfy Industry without upsetting public and Parliamentary opinion and Saudi sensibility”.

D3.34 The briefing for Lord Trefgarne included reference to some of the specific cases to which, it was believed, Mr Clark would be referring in order to illustrate his case that British industry was being unnecessarily restricted. One of these cases was “Matrix Churchill lathes”. As to these lathes, valued at £16.5 million, the briefing informed Lord Trefgarne that “Intelligence sources indicated that the lathes were to be used for making shells and missiles”. This must have been a reference to the Intelligence Report of 30 November 1987. The briefing then contained the inaccurate reference to the Prime Minister on which I have already made some comments *34 and said that “The current applications ... have been held up while we have tried unsuccessfully to obtain collateral for the intelligence which we could use without jeopardising the original source”. This statement was factually incorrect. A considerable amount of collateral had, by December 1988, been obtained and the collateral could have been used without jeopardising the original source. Mr Barrett, in his evidence to the Inquiry, agreed that collateral had been obtained but said that it was his understanding that SIS were still unwilling for the intelligence to be used. *35 He suggested that members of SIS and Mr J of DIS had given him that impression. He was unable to give chapter and verse, but, in view of some of the remarks about source protection emanating from members of SIS in the period up to August 1989, *36 Mr Barrett may well have received the impression that SIS was unwilling for source protection reasons for the collateral to be used. However, so far as I am aware, Mr Barrett was never expressly told that the collateral could not be used and did not ask either SIS or Mr J whether the collateral could be used in order to justify a refusal of current machine tool ELAs. In view of the importance of the issue, Lord Trefgarne should, in my view, have been informed that collateral was available but that Mr Barrett believed SIS to object to its use. The fact of the matter was that it was not the personal safety of the source that was exercising the SIS but, rather, the desirability of keeping open a potentially valuable source of information. The relative importance of keeping open the source of information and of preventing the export of machine tools intended for the production of munitions ought, in my opinion, to have been put to Ministers to decide. The problem with the submission of 20 December 1988 is that it would not have been apparent to Lord Trefgarne that any collateral information had been obtained at all.

D3.35 Mr Barrett had discussed the briefing with Mr McDonald. The discussion had, however, been on general lines and Mr McDonald had not read the briefing before its submission to the Minister. He said, in his oral evidence, “I did not feel it necessary, even to cast my eye over the draft, having already discussed with him what the draft was going to recommend.” *37 Mr McDonald told me that he was satisfied that his omission to read the draft brief before it went to the Minister was the right approach to his responsibilities. Bearing in mind that Mr Barrett was briefing a Minister on a matter of some difficulty and importance, I do not agree. I would readily accept that it was not necessary for Mr McDonald to read every word, or every line of the submission, but I would have expected Mr McDonald to have at least glanced at the submission to ascertain whether any feature of it required his attention. Whether if that minimal degree of supervision had been exercised, Mr McDonald would have noticed the reference to intelligence and probed whether there was any collateral and, if so, why it could not be used, is a matter of speculation. The probability, I think, is that he would not. But given Mr McDonald’s management style, the possibility was absent. *38

D3.36 A summary of the discussion at the Ministerial meeting on 21 December 1988 was set out in a letter dated 23 December from Mr Waldegrave’s Private Secretary to the Private Secretaries of the other two Ministers. *39 According to the letter:

The “attached revised guidelines” were the FCO revisions. The letter went on to say that the FCO would be consulting “Gulf Posts and Washington about the proposed changes in our guidelines” and that “When we have their reactions we shall be recommending to our Secretary of State that he should put these changes formally to the Defence and Trade Secretaries and the Prime Minister”. This letter, too, makes it clear that changes in the guidelines were being proposed. The letter was not copied to the Prime Minister, but copies were sent to the Foreign Secretary and to the Secretary of State for Trade and Industry. *40

D3.37 Telexes were, accordingly, sent to the British Embassies in the major Gulf capitals and in Washington seeking comments on “The likely reaction of your host government to a slight relaxation of our policy on defence sales to Iran and Iraq.” The proposed changes in the Guidelines were explained. The telexes said that “The new guidelines would in practice bring our public position into line with the more flexible approach to borderline and dual use licence applications which we have adopted since the ceasefire”. I would draw attention to the words “borderline and dual-use licence applications”, which constitute an implicit acceptance that the flexible approach, sometimes described as a flexible interpretation, was not confined to borderline, grey area, cases where the degree of enhancement of military capability was in doubt, but was being extended to dual-use goods generally. The telexes envisaged that the revised guidelines would in due course be made public. *41

D3.38 The responses to the telexes from some of the Embassies were favourable. *42 The responses from the Embassies at Riyadh and Washington, however, advised caution. In a telex sent on 31 December Sir Stephen Egerton, the then Ambassador to Saudi Arabia, said that “The suggested shading of policy on defence sales to Iraq/Iran will not be welcome in Saudi Arabia, but with careful explanation and handling should not in itself cause serious problems.” *43 He advised that “we should probably be able to cover ourselves if we can point to a continuing ban on sales of demonstrably ‘lethal offensive equipment’” but that “we shall ... need to explain the change carefully to Saudi Ministers.” Sir Stephen Egerton commented also “the wording proposed seems to open up the possibility of sales of much broader categories of equipment than are currently allowed....”

D3.39 The British Embassy in Washington, via a telex sent on 30 December 1988, warned that the United States Government was likely to be concerned that the revised guidelines “should not lead to a significant easing of restrictions on our defence sales particularly to Iran”, and that there was a “need for full and careful briefing of the Americans on the implications of the change in our guidelines in advance of any public announcement.” The Embassy suggested that, since a new US administration would be taking office on 21 January 1989, a public announcement should be delayed “long enough to enable us to give a full briefing to the new US team.” *44 Mr Waldegrave agreed with the advice. *45 Mr Stephen Lamport, in a manuscript Note dated 9 January, said that both the DTI and the MOD favoured “not making a spontaneous statement.” The Note went on: “This might enable us to agree on proposed changes soon without making a public declaration, though we could not, of course, guard against e.g. a PQ in the meantime.” *46

D3.40 Mr Alan Clark’s comments on the letter of 23 December 1988, in which the discussions at the Ministerial meeting on 21 December were summarised, were contained in a letter dated 10 January 1989 from his Private Secretary to Mr Waldegrave’s Private Secretary. *47 A copy was sent to Lord Trefgarne’s Private Secretary. The letter said that “The proposed revision of the guidelines ... was helpful” and that although DTI and MOD had “reservations over the wording”, “we see no real problem in adopting it as a temporary working premise for the IDC while officials seek a wholly acceptable form of words”. “When such agreement is reached”, the letter said, “we can proceed to formalise the situation by putting the changes to our respective Secretaries of State and the Prime Minister”. And, finally, after referring to the telex from the Washington Embassy, the letter said: “Neither we nor, I believe, the MOD feel that such an [public] announcement is either necessary or desirable. Any such announcement would trigger a significant number of enquiries from the UK defence industry and the press as well as interested third-parties in the Gulf. With so many conflicting interests any change would be likely to upset someone. We would therefore favour implementation of a more liberal policy without any public announcement.” *48 In a submission dated 1 March 1989 to the Minister (DP), Mr Barrett referred to the responses from the Embassies and commented:

D3.41 On 26 January 1989, Mr Simmons (MED) put up a submission to Mr Waldegrave on Mr Clark’s 10 January letter together with a suggested reply. The submission explained Mr Clark’s letter in this way:

Mr Lamport expressed his agreement with the submission. In a manuscript note he referred to “these modest changes to our policy.” *52 Any explanation to Washington he said, “should wait until these proposals have been agreed by Secretaries of State.” Mr Gore-Booth, too, agreed. He commented “The fact that the modulation is so fine, that it applies to both Iran and Iraq and that it will not be announced seems to me to alleviate the dangers to which the Secretary of State drew attention....”. And, finally, Sir Alan Munro, commented that although he considered “the distinction between ‘offensive’ and ‘defensive’ operations to be very difficult to apply”, he would not “press the point given MOD’s sales interest (in due course) in Hawk for Iraq.” *53

D3.42 Accordingly, Mr Waldegrave replied to Mr Clark by a letter dated 7 February 1989 from his Private Secretary to Mr Clark’s Private Secretary. The letter said that “... DTI, MOD and FCO officials have agreed that the form of words tabled on 21 December appears after all to meet our joint requirements, and should continue to be used on a trial basis for the time being” and that “Mr Waldegrave is content for us to implement a more liberal policy on defence sales, without any public announcement on the subject”. *54 The letter set out a form of words which had been agreed by officials of the three departments as suitable to be used in answer to “a direct question about our policy, either in the House or by Foreign Governments.” The proposed answer was: “The Guidelines on the export of defence equipment to Iran and Iraq are being kept under constant review, and are applied in the light of the ceasefire and developments in the peace negotiations.” The adequacy of this as an answer would, of course, depend on the content of the question that had been asked. The letter ended by proposing that the three junior Ministers “now put this approach to our respective Secretaries of State and to the Prime Minister.”

D3.43 A note dated 16 February 1989 from Mr Gallaher to Mr Clark’s Private Secretary enclosed a draft letter for Mr Clark to send in response to Mr Waldegrave’s Private Secretary’s letter of 7 February. In commenting on Mr Waldegrave’s acceptance “that we should simply implement a more liberal policy without publicising the fact”, the note added:

D3.44 Mr Clark’s Private Secretary, in a letter dated 21 February 1989 to Mr Waldegrave’s Private Secretary (in the terms of Mr Gallaher’s draft) confirmed that the letter of 7 February had correctly reflected the agreement reached by officials on the use of the `revised wording’ tabled at the 21 December meeting and on the proposed form of answer to questions. The letter said:

D3.45 The MOD, too, agreed with the proposals in the letter of 7 February so far as Iraq was concerned. A draft letter prepared by Mr Barrett on 1 March 1989 for Lord Trefgarne’s Private Secretary to send to Mr Waldegrave’s Private Secretary said that Lord Trefgarne was “pleased that there is agreement that there should be no public announcement and on this basis would now be content to agree to the use of the form of words tabled at the meeting on 21 December to provide interpretation of the guidelines in respect of Iraq.” *57 The Salman Rushdie affair had, however, intervened and the draft letter suggested a further meeting between the three junior Ministers “to discuss whether defence sales to Iran should be stopped, further curtailed, or left on an equal footing with Iraq with the interpretation of the guidelines now proposed.” The letter was, it seems, in the event not sent. The letter of 7 February had been copied to the MOD. On 3 March 1989 Mr Barrett marked the MOD copy with an ‘X’ against the final two sentences (cited above) and added, in manuscript, the comment:

However, MOD’s approval of the use of the revised form of words for Iraq was evidenced by the instructions given by Mr Barrett to the MODWG members on 6 February and by his note to IDC members (including, of course, FCO and DTI officials) of 14 February. *59

D3.46 In a letter to the Inquiry dated 21 June 1994, some eight months after he had given oral evidence to the Inquiry about his Private Secretary’s letter of 7 February 1989 *60, Mr Waldegrave sought to distance himself from the reference in the letter to “a more liberal policy”. He said, in his letter to the Inquiry, that “The fact that my Private Secretary’s letter uses the phrase in agreeing to do as DTI wish does not mean I would have accepted those words as a description of the change being discussed” and that “In my view, far too much weight has since been put on those words”. He added: “I think subsequent events show that what took place on this occasion was a pretty fine modulation in the application of an existing policy which is not accurately characterised by saying that ‘a more liberal policy’ was adopted”.

D3.47 Whatever subsequent events might show to be the result of the changes that were being discussed, the contemporary documents make it impossible, in my opinion, to quarrel with the expression “a more liberal policy” as being a fair and accurate description of what the players, including Mr Waldegrave, had in mind at the time. Mr Waldegrave did not find the expression jarring at the time. He did not do so for the reason that the words, “a more liberal policy”, describe in ordinary and simple language the reality of what he and his colleagues were discussing. *61

D3.48 At this point, the end of February 1989, it is instructive to leave for the moment the development of the Guidelines at Ministerial level, and look at the manner in which the Guidelines were being applied by the MODWG and the IDC.

D3.49 I have already referred *62 to Mr Barrett’s practice at the commencement of each MODWG meeting of informing the meeting of current developments, either at the IDC or in Ministerial thinking, of which the MODWG ought to be aware, and of Lieut-Colonel Glazebrook’s habit of making manuscript notes recording the gist of Mr Barrett’s remarks. At the MODWG meeting held on 4 August 1988 Mr Barrett informed them that there was unlikely to be any change in the Guidelines for some time, nine months was mentioned, but that they should “start thinking about ‘easing up’ ... on interpretation of Guidelines” and that, in particular, the approach to “infrastructure items and dual-purpose items” should be relaxed. *63

D3.50 At the 7 September 1988 MODWG meeting, Lieut-Colonel Glazebrook noted that “FCO paper on ‘way ahead’ will propose no relaxation in guidelines for 6 months.” *64 And at the 12 October MODWG meeting, Lieut-Colonel Glazebrook noted that “Nothing has changed on the Guidelines. Proposal to [Secretary of State] to relax a bit has been referred back.” *65 The “proposal” referred to must have been Mr Cowell’s recommendation in his 9 September paper. *66

D3.51 In his Note, dated 19 October 1988, to the Minister (DP) on the IDC meeting of 22 September 1988, Mr Barrett said that “UK companies [were] keen, in view of the ceasefire and progress on peace talks, to start promoting weapons systems to both Iran and Iraq to ensure a share in the lucrative market which will develop as both sides start to re-equip their forces” and that “The Committee agreed to recommend that the time is now right to allow early promotion to begin for equipment, which, in the longer term, we would be prepared to agree to supply”. *67 In his Note on the IDC meeting held on 19 October 1988, Mr Barrett told the Minister (DP) that decisions were being delayed while the Foreign Secretary decided whether he wished to make proposals about relaxing the guidelines and that “He is still not prepared to do that but wishes the guidelines to be interpreted ‘flexibly’.” *68

D3.52 At the MODWG meeting on 23 November 1988 Lieut-Colonel Glazebrook noted that “Guidelines are still in place, Foreign [Secretary] has declined to propose relaxation but wants WG to be more ‘flexible’. However, ‘dual-purpose’ items have been cleared (i.e. C130 spares).” *69

D3.53 At the IDC meeting on 1 December 1988, the more flexible approach was referred to. The Summary Record of the meeting *70 records that on ELAs for the export to Iraq of six shotguns and a quantity of shotgun cartridges, the MODWG had recommended refusal “in strict compliance with the Ministerial guidelines”, but that, in view of the “more flexible interpretation of the guidelines”, the IDC recommended approval. The Summary Record discloses also:

“It was agreed that this was very difficult to do, as there were various factors to be borne in mind. For example, the FCO pointed out that it was unlikely that military trade with the Islamic Republic of Iran would return to the levels enjoyed under the Shah. The presence in the Gulf of the Armilla Patrol was another inhibiting factor. MOD suggested that it might be at least five years before any lethal equipment could be supplied. The IDC agreed that Ministers would need to take account of these problems in reassessing export guidelines. For the time being, companies would have to continue to submit applications on a case by case basis.” It is interesting to notice that each of the inhibiting factors of which specific mention was made related to Iran.

D3.54 The IDC’s recommendation on the shotguns and cartridges was endorsed by FCO and MOD Ministers. Mr Barrett, in a Note dated 13 January 1989 to Mr Steadman said that “Mod Ministers [had] agreed the IDC’s recommendation that [the shotguns] can be allowed to fall outside the scope of the guidelines”. *71 The IDC’s choice of language is a nice illustration of the point that when Ministers and officials refer to a “flexible interpretation” they usually have in mind “flexible application”. “Flexible interpretation”, strictly so called, should be confined to the ‘grey area’ cases where, on an objective assessment, it is not clear whether the equipment is ‘lethal’, or would ‘significantly enhance capability’. The decision regarding the shotguns was nothing to do with interpretation of the Guidelines but was a sensible decision not to apply the Guidelines to a few sporting shotguns. The shotguns were, on any interpretation, flexible or otherwise, lethal equipment.

D3.55 The confusion, so far as the shotguns and cartridges were concerned, between a flexible interpretation and a flexible application of the Guidelines is unimportant. But the use of the concept of “flexible interpretation” in order to justify allowing important exports to go to Iraq where, on any sensible analysis, the decision reached had nothing to do with interpretation but simply represented a decision not to apply the Guidelines to the exports in question, is another matter. The shotguns item is usefully illustrative of the confusion.

D3.56 At the IDC meeting on 18 January 1989 an ELA for the supply to Iraq of Tactical Radar equipment was considered. In the Summary Record of the meeting the equipment was described as “land-based, state of the art, highly mobile tactical radar, with a primarily defensive role”. The MODWG, at its meeting on 10 January, had advised that the ELA be refused on significant enhancement grounds and had marked the ELA ‘R(Enh)’. The record of the discussion at the IDC meeting reads “It was possible (if stretching the point) to argue that its supply could enhance the purchasers’ offensive capability, for example by installing the radar at a newly captured airstrip. However, the IDC agreed to recommend approval of this application, in view of the more flexible approach to defence sales now agreed between Ministers.” *72

D3.57 Mr Simmons, on 1 February, submitted the Summary Record of the 18 January 1989 IDC meeting to senior FCO officials and in a Note dated 2 February 1989 Mr Young said that “There is little doubt in my mind that these [Tactical Radar] should not be regarded as offensive under the revised guidelines.” Mr Gore-Booth agreed. *73

D3.58 In Mr Barrett’s Minute dated 26 January 1989 to the Minister (DP) on the 18 January IDC meeting, he drew the Minister’s attention to the MODWG’s assessment that “these radars would represent a very significant enhancement of Iraqi capability and should therefore be refused” but said that “FCO and DTI officials argued that this type of radar, although state of the art, was essentially peace-keeping in nature as a defensive system and that the evolving wording of the new guidelines would allow approval to be recommended”. Mr Barrett added that FCO officials would be drafting a letter for Mr Waldegrave to send to Lord Trefgarne and Mr Clark “covering new draft guidelines citing this as a test case” and that the MODWG “would then be invited to review its recommendation in the light of any new guidelines agreed.” *74

D3.59 It appears from the manner in which the Tactical Radar ELA was dealt with that, at that stage, the FCO and the DTI were already applying the new formulation of guideline (iii), with its emphasis on offensive capability, but that the MOD was continuing to look both at defensive and offensive capability. Lord Trefgarne’s response to Mr Barrett’s Minute was to note that the Tactical Radar licence application “would be reviewed in due course in the light of any new guidelines that might be agreed between Ministers.” *75

D3.60 The next MODWG meeting was held on 8 February 1989. In a Note dated 6 February to each of the MODWG members Mr Barrett said: “There is no intention to publish revised guidelines yet. We have been asked, however, to be more flexible and to use the revised guidelines at Annex A on a trial basis. DTI Ministers have said that the supply of non-lethal defence equipment would be perfectly defensible as discouraging future aggression by upgrading overall defensive capabilities in the area. In order to advise Minister (DP) we need to test this idea.” *76 In Annex A, Mr Barrett set out, under paragraphs (a) to (e) the “Revised Guidelines - on Trial Basis”, namely:

D3.61 The main point about these revised guidelines was, obviously, the wording of paragraph (c). It followed the revision to the original guideline (iii) that the FCO had proposed. An additional point to notice, however, is that, in simply repeating under paragraph (b) the original guideline (ii), the meaning of “existing contracts and obligations” undergoes an inevitable change. In December 1984 the reference to “existing contracts and obligations” was intended to be a reference to the then subsisting contracts and obligations. It was so interpreted by all those witnesses to the Inquiry (other than Mr Channon) who had been involved in the formulation and early application of the Guidelines. But the same phrase included in revised Guidelines in 1989 would, read naturally, refer to contracts and obligations in existence in 1989. Whether it was intended to extend the scope of guideline (ii) is not clear. I think it unlikely. But the effect was to extend the scope of guideline (ii) some considerable distance from its originally intended scope.

D3.62 At the MODWG meeting on 8 February 1989, the ELA for the export to Iraq of Tactical Radar was reconsidered. Applying the revised guidelines, the MODWG assessed the export to be A(I) i.e. of insignificant assistance to Iraq in the conduct of offensive operations. It had been assessed ‘R(Enh)’ under the original guidelines. In addition, an ELA for the export of AR3 Radar to Iran, which had been assessed R(Enh) under the original guidelines, was assessed ‘A(I)’ under the revised version. For the sake of completeness, mention should be made of an ELA for the export to Iran of hovercraft, which was assessed R(Enh) under both the original and the revised guidelines. *77

D3.63 In a Note dated 14 February 1989 to IDC members, copied to, among others, MODWG members, Mr Barrett, reporting on the MODWG meeting on 8 February, informed them that “The MOD Working Group’s recommendations are based on both existing Ministerial guidelines and the revised ones which we used on a trial basis in anticipation of Ministerial approval.” *78 He enclosed with the Note a copy of his Note of 6 February to the MODWG members. *79 It is interesting to notice also the contents of a memorandum made by Lieut-Colonel Glazebrook on 14 February 1989 after the MODWG meeting on 8 February, and circulated to Mr Barrett and to the other MODWG members. In the memorandum Lieut-Colonel Glazebrook commented on the revised Guidelines that had been circulated by Mr Barrett and requested that the following provisos be added to the revised Guidelines “a. Nothing in these Guidelines replaces the general policy that security concerns are paramount and that security clearance as well as Guideline clearance is necessary in all cases. b. Cases which were ‘refused’ for any reason under the ‘Old Guidelines’ and which might be considered again under the ‘Revised Guidelines’ must be re- submitted to the MODWG for consideration.” *80

D3.64 In a Minute dated 1 March 1989 to the Minister (DP) and senior MOD officials, Mr Barrett endeavoured to sum up the situation that had been reached under the agreement between the Ministers. 81 He referred to the Ministerial meeting held on 21 December 1988 in which the Ministers had “agreed to consider the revised guidelines circulated at the meeting, to consult Gulf posts and Washington in view of Lord Trefgarne’s concern over possible Saudi Arabian reactions to a change in our public line, and then to put recommendations to Secretaries of State and the Prime Minister”. He then referred to the revised guidelines and said that “the amendments were therefore mainly cosmetic, although a measure of extra flexibility was provided by referring to `offensive operations’ ...” and that “MOD officials felt, however, that the revised guidelines should not be published because they would give misleading encouragement to Industry and alarm Gulf States, particularly Saudi Arabia”. He said that the effect of the agreement on no publicity for any change in the guidelines “will be to leave the published guidelines in place and to use the tabled new words for interpretation of the existing guidelines”. In a manuscript note dated 14 March and written on a copy of the Minute on DESS files, Mr Barrett recorded:

D3.65 The state of affairs, therefore, that had been reached by the end of February 1989 was (i) that the Ministers of State at the FCO, the MOD and the DTI had agreed that a more liberal policy towards defence equipment sales to Iraq and Iran should be implemented; (ii) that at MODWG and IDC level the liberal policy was being implemented by the application of the revised form of guideline (iii) “on a trial basis for the time being”; and (iii) that it had been agreed that no public announcement of these changes would be made. These changes were regarded as temporary or provisional, pending final agreement being reached on the form the new, more liberal, policy should take. Accordingly, neither the Secretaries of State nor the Prime Minister had been formally informed of the changes. However, each of the first two elements was consistent with the views that had been put forward by Lord Howe in his paper to the Prime Minister of 31 August 1988. As to publicity, Lord Howe had been against it “while the Kurd/ CW question is still hanging over us.” *82 It still was. The departments were, in addition, against publicity for fear that adverse reactions in foreign capitals might have damaging consequences on exports. The MOD and DTI were anxious, also, not to give “misleading encouragement” to UK exporters.

*7 - The “OD colleagues” would on 31 August 1988, have included, the Lord President of the Council (Mr John Wakeham), the Chancellor of the Exchequer (Mr Nigel Lawson), the Secretary of State for Trade and Industry (Lord Young) and the Secretary of State for Defence (Mr George Younger).

*11 - see CO/32.PM/2.210. Sir Charles’ letter was copied to “the Private Secretaries to members of OD, the Energy Secretary and... Sir Robin Butler.”

*14 - n.b Mr David Mellor’s remarks in the House of Commons on 30 March 1988. House of Commons Hansard: 30 March 1988 Cols. 1071 and 1072

*17 - see the transcript of his oral evidence Day 54, 12 January 1994, pp.137 to 140, especially at pp 139 and 140

*18 - Ibid.. p.98. In the editorial of The Independent published on 9 December 1993 the point was made that “The realities of foreign policy - and the tendency of public opinion to take impractical moral stands - may make it hard to debate the details of arms sales openly on the floor of the House of Commons.” The editor went on to say that “...outside the glare of publicity there can be no excuse for keeping policy secret from two or three trustworthy and senior members of a parliamentary committee overseeing policy or ‘intelligence on foreign affairs’.” Lord Howe has made the point that in the absence of any such body or committee, Ministers have to exercise their discretion as to what to tell Parliament (Lord Howe’s written comments of 4 July 1995; paragraph 74).

*20 - Mr Simmons’ Note and Mr Blackley’s Note, both dated 25 October 1988, were not supplied to the Inquiry by the FCO until 14 September 1994. (FCO/2.6.42A at 42B and 42C)

*35 see the transcript of Mr Barrett’s oral evidence, Day 38, 3 November 1993, pp 36-39

*37 - see the transcript of Mr McDonald’s oral evidence, Day 29, 7 October 1993, p.7

*40 - see DTI/41.2201 and see Annex J to Mr Waldegrave’s written submission dated 28 June 1995

*45 - see the Note dated 6 January 1989 from Mr Waldegrave’s Private Secretary to Mr Stephen Lamport FCO/13.1.165 “Mr Waldegrave thinks that the Washington Embassy’s advice is sound and that we should delay our announcement long enough to give a full briefing to the new US Administration.”

*47 - The letter was copied at the FCO to the Private Secretary to the Foreign Secretary among others

*50 - This comment reflected a manuscript note by Mr Lamport made on Mr Clark’s letter of 10 January 1989: “A turnaround by the DTI. We can certainly live with this!”

*60 - see the transcript of Mr Waldegrave’s oral evidence, Day 26, 22 September 1993, pp.160-164

*61 - In his evidence to the Inquiry Lord Trefgarne said that he considered that “a more liberal policy”, as referred to by Mr Waldegrave and Mr Clark, meant “a more flexible interpretation of the policy”. He explained that “what we decided upon was a more flexible interpretation of the policy and, if there are words in any of the documents that lead you to think otherwise, I would wish you to disregard them”. See transcript of Lord Trefgarne’s oral evidence dated 29 March 1994, Day 81, pages 105-106

*73 - see FCO/6.2.179-180. Mr David Gore-Booth succeeded Sir David Miers on 2 January 1989 as Assistant Under Secretary (ME).

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