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 Two
Section D Arms and Defence-Related Exports to Iraq
Chapter 6 Specific Export Licence Applications After the Cease-Fire

Excerpt:
(XII) BADGER CATALYTIC LIMITED

(XII) BADGER CATALYTIC LIMITED

D6.343 On 15 December 1989 Badger Catalytic Limited (Badger Catalytic) submitted an application for ECGD cover in respect of a proposed £30m project to construct a chlori-alkali processing plant in Iraq. *642 The chlori-alkali produced by the plant was to be used in the manufacture of the chemical epichlorohydrin which, according to Badger Catalytic, was “an important chemical precursor in the manufacture of resins and plastics”. The project was to be co- ordinated by the Iraqi Technical Corporation for Special Projects (known as TECO). It appears that the chlori-alkali plant was not licensable under the then current EGCO. *643

D6.344 Badger Catalytic’s application was considered by Mr Tait (ECGD) who, on 19 December 1989, minuted Mr Foster (ECGD) as follows: “Although I have no real doubts about this business (we didn’t originally about Polibur!!) I think we ought to check with FCO and DTI Export Licensing Unit”. *644 Mr Foster agreed with the course suggested by Mr Tait and on 28 December he (Mr Foster) wrote to Mr Higson (FCO/MED), copied to Mr Steadman (DTI/ELB), in the following terms:

“We have recently been approached by Badger Catalytic who are seeking our preliminary approval to finance the provision of field services for supervision, commissioning and start up as well as supplying equipment and materials for a 36,000 tonne per annum grass roots chlorine plant. The location of the intended plant will be at the Petrochemical Complex No 2 at Al-Musayib in Iraq ....

In view of the sensitivities that have recently arisen we feel that in approving business under the Protocol we must have absolutely no doubt that the business does not have a sinister end use. We would however wish to notify you of this potential business, but unless you wish to comment our intention would be to advise Badger Catalytic in principle that the business would be financeable under the Protocol.” *645

D6.345 On 8 January 1990 Mr N (MOD/DIS), having considered the application by Badger Catalytic, wrote to Mr Musgrave (FCO/ACDD):

“2. Epichlorohydrin .... is on the Australia Group Warning List *647 and is a key precursor for the chemical warfare agent mustard. A chlori-alkali plant actually produces chlorine and sodium hydroxide. The chlorine, which is used to produce the epichlorohydrin, can also be used in the manufacture of phosphorus trichloride which is a key nerve agent precursor.

3. We currently assess that the Iraqi chemical warfare (CW) programme is moving towards the production of CW agents from indigenously available materials ....

4. There are direct parallels between this case and that of Polibur Engineering *648 and the HF plant. It is totally inconsistent to control the export of certain chemicals and not the means of their production.

5. Although MOD advice against the involvement of UK firms in the supply of chlori-alkali plants to Iraq has gone unheeded in the past, we continue to believe that the weight of evidence linking these plants to the Iraqi CW programme is sufficient to warrant such firms being strongly discouraged from involvement in such projects, and would advise this course of action in this case.” *649

D6.346 Badger Catalytic’s application, and the implications of the chlori-alkali project, were discussed at a meeting of the SXWP on 18 January 1990. Mr N agreed to provide further information about the organisations involved and, in particular, about the possible links with the Iraqi chemical warfare programme. The further information was provided in a letter dated 22 January 1990 from Mr N to Mr Pullen (FCO/ACDD). After repeating the information provided in his 8 January letter to Mr Musgrove, Mr N continued:

“7. There is no doubt that TECO [the Iraqi company co-ordinating the chlori-alkali plant project] is involved in military projects. It is one of the organisations responsible for the Iraqi missile programme and has also been involved in the procurement of CW agent precursors ....

11. Although there is no evidence of a direct link between the chlori-alkali project .... and the Iraqi CW programme, the organisation responsible for the project does have links with the CW programme.

12. There is no doubt that the CW programme will benefit from the construction of these facilities.... The construction of this chlori-alkali plant will assist them in becoming self sufficient in epichlorohydrin a key mustard precursor ....” *650

D6.347 It is clear from the papers which I have seen that the MOD in particular were not prepared to countenance the supply of the chlori-alkali plant to Iraq even though it was not licensable under the then current EGCO. The attitude of the MOD to this application is consistent with the evidence which I was given by a number of Government witnesses to the effect that they were “particularly anxious, always, about anything nuclear, or anything to do with chemical weapons.” *651 Mr N had proposed that Badger Catalytic be approached with a view to persuading them not to participate in the project. This was the same approach that had, very sensibly, been adopted in respect of the proposal by Polibur to supply a hydrogen fluoride production plant to Iraq. *652 However, in the event, further consideration of the matter proved unnecessary because the Iraqis awarded the final contract for the production of the chlori-alkali plant to an Italian firm. *653

Endnotes:

*642 - ECG/109.9

*643 - DTI/963; As epichlorohydrin is a key precursor for a number of chemical warfare agents (see paragraph D6.345 infra), the chlori-alkali processing plant could now be licensable under Schedule 1, Part II of the ECGO 1994, which prohibits the export of equipment “if the exporter knows that they are intended or likely to be used in .... the development, production, handling, operation, delivery, detection, identification or storage of any chemical or biological weapon”. No provision of this nature was in force in 1989; see also paragraph D6.327 supra

*644 - ECG/109.5

*645 - ECG/109.6

*646 - ECG/109.4

*647 - see paragraph C1.148 supra

*648 - see paragraphs D6.337 to D6.342 supra

*649 - MOD/31.1.324A

*650 - MOD/31.1.368A at 368C

*651 - see, for example, the oral evidence of Lady Thatcher, Day 48, 8 December 1993, p. 194

*652 - see paragraphs D6.337 to D6.342 supra

*653 - ECG/109.2

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