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:
(XV) PMK ELECTRONIC CONSULTANTS LTD

(XV) PMK ELECTRONIC CONSULTANTS LTD

D6.370 On 9 January 1990 PMK Electronic Consultants Limited (“PMK”) applied for an export licence to supply a package of software and equipment worth £3.17 million for the University of Technology, Baghdad, Iraq. The application stated that the nature of the ultimate user’s business was Research and Education. The licence application number was 3G/30440/90. The application was added to the list of ELAs for consideration by the MODWG at its next meeting on 7 February 1990. The lists were distributed on 31 January 1990 to the members of the MODWG. *696 Lieut-Colonel Glazebrook described the package of equipment and software as follows:

“the PMK package was, as far as I recall, a package to enable a country to build integrated circuits on a small scale, and integrated circuits can be taught to do anything, if you like, and they may be used perfectly harmlessly in a television set or a washing machine. They can also be used in part of a very complicated fusing system in nuclear weapons, chemical discharge systems and missiles, and so on. We [MODWG] were concerned about letting such a package go to Iraq.” *697

D6.371 PMK was incorporated in October 1989 to fulfil the contract with the University of Technology in Baghdad to supply the package of equipment and software. Two members of the teaching staff at Liverpool Polytechnic, as it was then called, were the major shareholders (72%) and Liverpool Polytechnic held the remaining 28% of the shareholding. *698 The contract was made subject to obtaining the required export licences. The package of equipment and software was to be supplied mainly by Qudos Limited (Qudos) but also included items made by Qudos under licence from Texas Instruments and Marconi, and a few items from other UK companies. *699

D6.372 On 7 February 1990 the MODWG discussed the application and recommended for “MOD(DIS) to consider.” *700 The recommendation was discussed at the IDC meeting of 16 February. A summary record of the IDC meeting made by the DTI noted the application for an export licence by PMK as being one where “action is with [the] MOD”. *701

D6.373 A further MODWG meeting was held on 7 March 1990. The application was assessed “R(Sy)” by the MODWG. Lieut-Colonel Glazebrook annotated his copy of the MODWG list by deleting “MOD(DIS) to consider” and inserting “Ability to design 1000 spec integ circuits”. *702 I have assumed that this meant “the ability to design 1000 specified integrated circuits”. The next IDC meeting was held on 19 March 1990. The DTI’s summary record of the IDC meeting listed the application as one which “should be refused now”. *703

Meeting with PMK and Qudos on 4 April 1990

D6.374 Mr Mayne, DTI, telephoned PMK on 20 March 1990 to inform them that the ELA had been refused. PMK requested that a meeting should be held to discuss the application. *704 A meeting was held on 4 April 1990 with PMK and Qudos. According to a note of the meeting made by Mr Mayne and dated 5 April 1990, Mr Steadman and Mr Mayne of the DTI and Mr Barrett and Mr Fletcher, a technical expert in the MOD, (MOD Sy (S&T)1d), were amongst those who attended. *705 The note records that Mr Fletcher and the representatives from Qudos discussed the level of technology in relation to the Qudos Q-Beam System for the “direct pattern writing on the premetallised wafers and quantity of items proposed for export”. *706 They agreed that Qudos would fax to the DTI “their understanding in respect of the guidelines for exports to Iraq together with a confirmation on the levels of technology on the Qudos Q-Beam machine and performance of the wavers [wafers] produced”. The request for Qudos’s “understanding of the guidelines” was in effect a request for Qudos to put forward its arguments as to why the application of the guidelines should not result in refusal of their ELA. Qudos and PMK duly sent a letter to Mr Steadman by fax on 5 April 1990. *707 Details of the fax letter were incorporated into the note of the meeting of 4 April 1990. In their fax letter PMK and Qudos confirmed that (i) “chip manufacturing technology [was] not specifically embargoed” and (ii) “the equipment and devices produced in themselves [were] not lethal.” It was further explained in the fax letter that the Q-Beam system that Qudos wished to supply “[could not] be used for military applications without modifications and process control” and that it was “most definitely not a production tool but a prototype facility producing a very low quantity [quality] of chips suitable only for short term use and in an academic environment”. The note of the meeting recorded that Mr Barrett and Mr Fletcher concluded the meeting by telling PMK and Qudos that they would “speak to their adviser(s) who were unable to attend the meeting before putting their appeal to Ministers”.

Submission to Minister (DP)

D6.375 On 6 April 1990 a written submission from Mr Barrett was put up to the Minister (DP), Mr Clark. Lieut-Colonel Glazebrook said to the Inquiry that he had assisted Mr Barrett in producing the submission. *708 A meeting had also been held on 6 April 1990 attended by members of the MODWG (including Mr Fletcher (MOD SY (S&T) and Lieut-Colonel Glazebrook), Mr Steadman, DTI, and Mr Sherrington, FCO, in order to discuss the wording of the submission to Mr Clark. Mr Peter Gall (DTI) made a contemporaneous manuscript note recording that the meeting had been held to “discuss HMG line on this export” and that the “Recommendation [was] refusal”. *709

D6.376 The submission to Minister (DP) dated 6 April 1990 described the “problem” as follows:

“Should we allow the export to Iraq of equipment and software to design, develop and produce integrated circuits in small quantities knowing that it could be diverted for use in research and development in connection with arms manufacture?” *710

The submission set out the points made in PMK’s fax letter of 5 April. Comments on the points made by PMK had been agreed by members of the MODWG and IDC at their meeting and were incorporated into the submission. The submission made it clear that officials did not accept the statements made by PMK that the Q-Beam system supplied by Qudos could not be applied for military purposes and that officials considered that the design of the equipment was intended to produce high quality chips. The submission concluded that:

“.... there can be no MOD objections to the proposal on simple security or technology transfer grounds. Neither are there direct MTCR or NPT grounds for refusal. It is also difficult to see how supply of such equipment and software to an Iraqi university could be technically in breach of the Ministerial guidelines. We have, however, had to consider whether the equipment and software could be used in arms manufacture, including the nuclear field. The evidence is that it could. We have to assume therefore that the Iraqis might use it for military purposes (without necessarily moving it from the university). The companies are not, as far as we know, part of the Iraqi Procurement Network, although PMK are involved in trying to obtain a sonar research facility from Plessey for the Iraqis....

9. It is possible that the stated end-use and user may be genuine. But the package is capable of designing and producing small quantities of integrated circuits customised for use in nuclear weapons, chemical and biological warheads and delivery systems, and all this can be done from the proposed facility in the university. In the light therefore of our serious concerns at Iraqi activity in all these fields, we have no alternative but to recommend refusal of the package.

10. It should, however, be borne in mind that much of the equipment and software is freely available around the world. There seems little possibility of preventing others from supplying it to the Iraqis, but we shall explore whether there might be ways in which this could be done.

11. This submission has been agreed by members of the MOD Working Group on exports to Iran and Iraq and the IDC who were present at the meeting. The FCO will be submitting in parallel to Mr Waldegrave recommending refusal.”

The conclusion suggests that the MODWG no longer considered that the application could be refused on security grounds. *711 The submission expresses the opinion that, although the MOD/DTI/FCO officials found it difficult to see that the supply of the package to an Iraqi university could be “technically in breach” of the guidelines, an export licence for the package should nevertheless be refused on the basis of other “serious concerns”. The package clearly had a dual use character in that it could be used not only for the purposes of education/research but was capable also of being “customised for use in nuclear weapons, chemical and biological warheads and delivery systems”. This potential use undoubtedly raised “serious concerns”. The problem, however, was the absence of any intelligence to suggest an intention on the part of the Iraqis to use the equipment for military purposes. In the absence of any such intelligence it was difficult to categorise the equipment as ‘defence’ or ‘defence-related’. If the equipment could not be so categorised, it was thought that Mr Clark, the Minister (DP), would not regard the equipment as being subject to the Guidelines at all. Hence the opinion that “it was difficult to see how supply to an Iraqi university could be technically in breach of the ministerial Guidelines”. The recommendation for refusal rested, therefore, on the “serious concerns” arising out of the possible use of the equipment in connection with “nuclear weapons, chemical and biological warheads and delivery systems”.

D6.377 According to Mr Barrett’s evidence to the Inquiry in relation to PMK, “The guidelines were never intended to prejudice trade that might be available after the conflict or civil trade during it (these goods were dual use)”. *712 I do not agree. The revised guidelines were plainly intended to be applied and licences to be refused if goods fell within the guidelines, even if that were to result in “prejudice [to] trade”.

D6.378 The submission to Mr Clark had noted that PMK and Qudos were not believed to be part of the Iraqi procurement network but that PMK were “involved in trying to obtain a sonar research facility from Plessey for the Iraqis.” Mr Fletcher had written to Mr Barrett on 6 April 1990 (the same date as the submission to Mr Clark) to inform him that PMK appeared to be “an Iraqi Research procurement agency”. *713 And on 5 April 1990 Mr Fletcher had written to the Security Service stating that it had become apparent that PMK was being “used as an Iraqi procurement agency for research facilities”. *714

D6.379 On 10 April 1990 the Assistant Private Secretary to the Minister (DP) informed Mr Barrett that Mr Clark was “content for refusal of this application to be recommended”. *715 The next MODWG meeting was held on 11 April 1990. The list of pending export licence applications did not include PMK. However, Lieut-Colonel Glazebrook’s manuscript note of the meeting revealed that it was discussed. The note stated:

“Arms Manufacture: Iraq

a. PMK package refused v. reluctantly. FCO?” *716

The reluctance referred to was reluctance on the part of Mr Clark. *717

D6.380 On 12 April 1990 a Qudos executive sent a fax note addressed to Lord Trefgarne at the DTI saying that Mr Steadman had told him that the MOD had recommended refusal of the export licence application. He appealed to Lord Trefgarne to allow the export to take place. *718 Having received no response he sent a further fax to Lord Trefgarne on 24 April requesting that he approve the export as soon as possible. The executive had also written to his MP, Mr James Paice, on 5 April 1990 asking for “any help you can give me”. Mr Paice wrote to Lord Trefgarne on 10 April 1990 asking that “very careful consideration” be given to the application on which Qudos “relies quite considerably”. *719

FCO Submission to Mr Lamport, Mr Gore-Booth and Mr Waldegrave

D6.381 On 9 April 1990 Mr Sherrington (MED) put up the “parallel” submission to Mr S Lamport, Mr Gore-Booth and the PS to Mr Waldegrave enclosing a copy of the MOD submission dated 6 April 1990. The submission recommended refusal to “allow” the export and added that “SEND and Defence Department agree”. *720 The submission went on to say the following:

“4. One of the British companies involved, Qudos, claims to be at risk of liquidation if the order for the equipment does not go through, and the DTI have been approached informally by MPs over the case. Given, however, the recent interception at Heathrow of capacitors bound for Iraq, which we believe were to be used in nuclear weapon or ballistic missile development, and our other concerns about Iraqi procurement activities and indigenous weapons development, it seems that we have little alternative but to refuse export of this material, even though it neither infringes the guidelines on arms sales to Iran and Iraq.

5. Given a broad interpretation of our commitments under the NPT, the sale of this equipment would give some cause for concern; however, refusal could not be justified on NPT or MTCR grounds alone. The Iraqis could freely obtain much of the hardware and software from other parts of the world. There is little possibility that we would be able to prevent other possible supplier countries from providing the Iraqis with what they require.

6. Mr Clark has now (reluctantly) agreed with MOD’s recommendation that the package should be refused.”

Mr Lamport’s response was that the case was “finely balanced” but thought that “it would be wrong to give the Iraqis the benefit of the doubt against the recent background of their procurement activities”. *721 Mr Gore-Booth’s response was as follows:

2. If there were a mechanism for bringing this case to the attention of our partners (sc. commercial rivals) with a view to extracting commitments from them not to supply in our despite, I should be happy to concur with this recommendation. But as far as I am aware there is not (except perhaps on an entirely ad hoc basis). So I am in favour of letting this deal go through.” *722

On 14 April Mr Waldegrave wrote in manuscript as follows on the submission of 9 April 1990:

“I am in favour of letting it through on slightly different grounds from [David Gore-Booth] namely that our refusals may all become the matter of public recrimination and analysis; they had better look convincing therefore. If it looks as if we were just looking for excuses to irritate Iraq for no reason, we should be criticised rightly.”

D6.382 Mr Waldegrave and Mr Gore-Booth therefore decided to override the advice of FCO, MOD and DTI officials to refuse PMK’s export licence application. Their grounds for doing so were understandable and were not expressed to be based on the Guidelines, although in his oral evidence Mr Gore-Booth told the Inquiry that the Guidelines were never out of his mind when he was making his recommendation. *723 But in fact his recommendation was based principally on the availability of the equipment from alternative sources. Mr Gore-Booth explained to the Inquiry in his written evidence that “it was becoming progressively more difficult to argue to the UK businessmen that only the UK should deny itself access to the Iraqi market for sophisticated technology”. *724

D6.383 At the time, Mr Waldegrave’s grounds for approving the PMK export related to concerns about public recrimination and Iraqi “irritation” if the licence were refused. In his written statement of 8 September 1993, Mr Waldegrave described the equipment and software as “a marginal dual use item” and stated in part that:

“... Damaging British firms for no perceptible gain in diplomatic or other policy objectives - minor irritants for minor irritants sake - seemed to me to be stupid then and still does now. There would certainly have been recrimination against HMG in such a marginal case - MPs were clearly lobbying on this ...” *725

There may not, in Mr Waldegrave’s view, have been a ‘perceptible gain in diplomatic or other policy objectives’. But the advice from the MOD, DTI and Mr Lamport was based on a serious concern that the package of equipment could be customised for use in nuclear weapons, chemical and biological warheads and delivery systems. Mr Waldegrave’s concerns as expressed in his note of 14 April 1990 were, by contrast, presentational; refusals might, in his view, have become a matter of public recrimination and analysis and might have resulted in Iraqi irritation. In fact, having regard to the recent execution of Mr Bazoft, the withdrawal of the British Ambassador from Iraq in consequence, the seizure on 20 March 1990 of the Euromac capacitators about to be exported to Iraq (and the related arrests of suspects on 28 March), and given what was known about Iraqi military procurement activities, Mr Waldegrave would have had an easily defensible position if there had been any public recrimination on a refusal to grant the export licence to PMK.

D6.384 In his written statement of 8 September 1993 Mr Waldegrave also stated:

“In relation to control of dual use equipment where proliferation is the issue, it was inherent in Britain’s controls that they were part of an international system - otherwise they would be quite pointless. Another good example of how the Iran/Iraq conflict guidelines were not the only policy involved...”

Mr Waldegrave’s opinion that control by the government over the exports of dual use equipment was ‘quite pointless’ unless it was part of an ‘international system’ is difficult to disagree with. Without an international system of control the obtaining by Iraq (or by any other country for that matter) of the proposed package from some source outside the United Kingdom could not be effectively prevented. *726

D6.385 In a submission dated 22 April 1990 from Mr Barrett to the Assistant Private Secretary to Mr Clark, Mr Barrett explained that Mr Waldegrave had approved the application and summarised Mr Waldegrave’s and Mr Gore-Booth’s grounds for approving the export licence application. *727 The submission reiterated that the MODWG and IDC had considered the possible uses of the package and had concluded that they had no alternative but to recommend refusal. The minute added: “There is no reason to change that view. But Minister (DP) may wish to reconsider in the light of Mr Waldegrave’s views”. In a letter dated 24 April 1990 to Mr Barrett, Mr Clark’s APS stated that Mr Clark saw “no reason to continue his objection in the circumstances” and requested Mr Barrett to inform the DTI of this. *728 Mr Devlin (DESS) telephoned Mr Mayne at the DTI to say that Mr Clark no longer had any objection to the export licence application for PMK and sent a letter to Mr Mayne dated 25 April 1990 confirming this *729.

D6.386 Mr Clark explained to the Inquiry his reasons for withdrawing his objection to the licence being granted:

“On the basis of information before me, I felt that this export should not go ahead. The surprising, one could almost say perverse, attitude of Mr Waldegrave and Mr Gore-Booth could only be explained, it seemed to me, by a level of intelligence access which I did not enjoy. I suppose I felt in addition, that it would be too much of a paradox for I, who had so often been forcing my opinions on them, now to turn round and attempt to block something which they were in favour of permitting.” *730

The evidence submitted to the Inquiry has not shown Mr Waldegrave and Mr Gore-Booth to have had any intelligence information regarding the PMK application, although Mr Clark obviously thought that they did. He may, moreover, have considered it “too much of a paradox” to continue with his objection in relation to the grant of the licence. However, if Mr Clark accepted, as I would assume he did, the advice given by his officials about the potential application of the package for proliferation purposes, this does not seem a sufficient reason to approve the licence.

D6.387 Mr Mayne subsequently telephoned PMK to inform them that the licence had been approved and would be issued in due course. *731 However PMK never started to fulfil any part of the contract because (i) the University of Technology in Baghdad failed to provide letters of credit (as required under the contract) and (ii) it was anticipated that the licence would be revoked by the DTI due to the events which ultimately led to the UN embargo on Iraq in August 1990. *732

Endnotes:

*696 - MOD/31.2.7

*697 - Transcript of Lieut-Colonel Glazebrook’s oral evidence, Day 5, 12 May 1993, p.30

*698 - TISC Memorandum of Evidence HC 607 p.50. At the time of PMK’s incorporation Liverpool Polytechnic had charitable status. To protect that charitable status its commercial activities were conducted through separate trading companies.

*699 - MOD/32.1.97

*700 - MOD/31.2.53 at 69

*701 - DTI/45.2.2788 at 2793

*702 - MOD/31.2.159 at 185. The MOD Scott Inquiry Unit has confirmed that it has no documents relating to DIS being asked to consider or having considered the application. This may have been because other reasons had been produced for the refusal of the application on security grounds.

*703 - DTI/45.2.2799 at 2801

*704 - DTI/756

*705 - DTI/756

*706 - The Q-Beam system is an electron beam machine which produces chips

*707 - MOD/32.1.117

*708 - Transcript of Lieut-Colonel Glazebrook’s oral evidence, Day 5, 12 May 1993, pp.30-31. Also Lieut- Colonel Glazebrook’s written statement dated 29 April 1993 paragraph 15b(2)(a), p. 18)

*709 - DTI/756

*710 - MOD/32.1.97

*711 - This is confirmed in Mr Barrett’s written statement of 27 October 1993, paragraph M.2.3,p. 97

*712 - Mr Barrett’s written statement dated 27 October 1993, paragraph M.2.3 p. 97

*713 - MOD/32.1.105

*714 - MOD/32.1.95. This is an issue on which Liverpool Polytechnic submitted evidence to TISC. PMK had been included in an American blacklist published on 1 April 1991 of alleged “front companies and agents of Iraq”. As it explained in a letter to the Clerk of TISC dated 2 May 1991 (TISC Memorandum of Evidence HC 607 p. 50) the Polytechnic had “vigorously denied all allegations made against it and sought to have its name removed from the list.” A licence was subsequently issued by the Office of Foreign Assets Control, US Department of the Treasury, on 26 April 1991 which removed the embargo on transactions between the Polytechnic and persons of the US.

*715 - MOD/32.1.139

*716 - MOD/32.1.9

*717 - FCO/62.1.753 paragraph 6 of the submission dated 9 April 1990

*718 - DTI/756

*719 - DTI/45.2.2930

*720 - FCO/62.1.753

*721 - FCO/62.1.755

*722 - FCO/62.1.755

*723 - Transcript of Mr Gore-Booth’s oral evidence Day 22, 14 September 1993, page129)

*724 - Mr Gore-Booth’s written evidence dated 21 August 1993, paragraph L.2.3

*725 - Mr Waldegrave’s written statement of 8 September 1993, paragraph L.2.4

*726 - see paragraphs D8.14-D8.16 infra

*727 - MOD/32.1.187

*728 - MOD/32.1.217

*729 - MOD/32.1.219

*730 - Mr Clark’s written statement 17/18 November 1993, paragraph M.2.5

*731 - DTI/756

*732 - Annex 1 to the letter to the Clerk of TISC from Liverpool Polytechnic dated 2 May 1991 - contained in the Memorandum submitted to TISC HC 607, p. 51

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