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 7 Other Allegations of Illegal Arms Exports to Iraq

Excerpt:
PROPELLANT AND WEAPONS CARTELS

PROPELLANT AND WEAPONS CARTELS

D7.10 In evidence to the Inquiry Mr Cahill, Mr Gerald James (the former Chairman of Astra Holdings Plc) and Mr Tim Laxton have all referred to the existence of international cartels of companies supplying arms, ammunition, propellant and explosives to Middle East countries in the period covered by my terms of reference. *15 The allegation made is that the cartels were operated in order to evade export licensing controls operable in the countries in which the companies were based, including the UK. Royal Ordnance, among other UK companies, were alleged to have been members of the various cartels. *16

D7.11 The MOD were asked by the Inquiry whether they had any knowledge or reason to suspect the existence of such cartels. They were also asked whether they had any evidence to suggest that Royal Ordnance had exported, directly or indirectly, arms, ammunition, explosives or propellant to Iraq in the period covered by my terms of reference. *17 The MOD response was that they “had no knowledge or suspicion of a propellant cartel or a weapons cartel to which British companies belonged” and that they had no evidence that Royal Ordnance had exported arms, ammunition, propellant or explosives to Iraq. *18

D7.12 Mr James has told the Inquiry that “[UK] Customs received evidence from Swedish Customs re the propellant cartels’ operations as long ago as 1987 and failed to act. ICI and Royal Ordnance were two of the companies involved.” *19 The Inquiry has also been told, by Mr Cahill, that “The head of Swedish Customs has personally confirmed to me that the UK Customs were given details of UK shipments to Iran and Iraq, on three separate occasions, in 1985, 1986 and 1987. The approach by the Swedes was rebuffed and no cooperation was offered or given to Swedish Customs at the time or since.” *20 Customs were asked by the Inquiry to comment on the evidence of Mr James and Mr Cahill in this regard. *21 Customs replied that they had received a report and a number of documents from Swedish Customs in December 1986 concerning a Swedish investigation into the export of munitions to Iran by Bofors. *22 The documents, Customs said, referred to “supplies of munitions by Bofors/Nobel’s from various locations in Europe, including Nobel’s Explosives Co Ltd (ICI).... Scotland, to the Italian company, which were suspected of being transhipped to Iran.” As a result of this information UK Customs visited ICI Nobel and interviewed a number of the company managers. The investigators established that “The only export found to have been made to the Italian company by Nobel’s, UK was 50 tonnes of M1 propellant...” Customs confirmed that “No admissions were made by those interviewed and no evidence was found at Nobel’s or in the documents supplied to indicate that anyone within the UK organisation knew that these, or any other explosives, were destined for Iran”.

D7.13 In the same letter Customs also said that shortly after they were sent the report from Swedish Customs they were provided with information by the Belgian authorities about a shipment of explosives to Iran via Belgium and Greece, allegedly by Royal Ordnance. As a result of this information Royal Ordnance were visited by UK Customs in May and June 1987. The investigation revealed “no evidence that anyone within Royal Ordnance had knowledge of the ultimate destination of explosives consigned by them to a Greek company. Royal Ordnance had been granted the necessary export licences to Greece by the DTI. [Customs] understand that the Belgian authorities obtained a full admission of involvement in the diversion scheme from a forwarding agent in Belgium. The agent stated in interview that to the best of his knowledge Royal Ordnance were not aware of the ultimate destination of the explosives.”

D7.14 The existence of international weapons/propellants cartels, and the alleged involvement in them of UK companies are, per se, matters which fall outside my terms of reference. If, on the other hand, there were evidence of British Government knowledge of, or acquiescence in, the activities of any cartels whose existence was intended to defeat the prohibitions and restrictions on exports from the UK to Iraq, it would have been incumbent on me to investigate. In fact there was no such evidence beyond bare assertion. It is also an issue in relation to which it would have been very difficult for me to obtain sufficiently cogent evidence to reach a concluded view without extensive investigation. Extensive investigation, even if the Inquiry were granted the necessary powers to conduct it, would have caused unnecessary delay to the publication of this Report. I have not, therefore, attempted to do so.

D7.15 Matters concerned with exports to Iran are not per se within my terms of reference unless there is some feature of those exports which casts light on the way in which the British authorities approached exports to Iraq. The allegations made by Mr James and Mr Cahill were to the effect that, notwithstanding evidence given to UK Customs about the involvement of British companies in unlawful export activity concerning both Iraq and Iran, they (Customs) failed to take any action. In the event, it appears that the information given to the British authorities concerned possible shipments to Iran. It further appears that UK Customs did follow up the information and I have no reason to think that their investigations were not carried out diligently. I have no criticism to make of them in this regard.

Endnotes:

*15 - see page 3 et seq of Mr James’ statement dated 29 September 1993 (GENR/220); page 10 of Mr Cahill’s statement dated 29 July 1994 (GENR/421); page 2 of the letter from Mr Laxton dated 10 September 1993 (GENR/207); a similar allegation was made in the article in the September 1987 edition of Private Eye entitled “Arms and the Imam”.

*16 - see page 4 of Gerald James’ statement dated 29 September 1993

*17 - MOD/1030

*18 - see the letter from the MOD Scott Inquiry Unit dated 15 November 1994 (MOD/1055)

*19 - See letter from Mr James to the Inquiry dated 9 January 1994 (GENR/285). This allegation was repeated by Mr Michael Meacher MP in an article written in the December 1995 issue of the New Statesman and Society

*20 - see the letter from Mr Cahill to the Inquiry dated 20 November 1993, page 3

*21 - see the letter to Mr Russell (Deputy Chairman of Customs and Excise) dated 25 May 1994 (CE/353)

*22 - see the letter from Mr Andrew (Assistant Chief Investigation Officer) dated 6 July 1994 (CE/418)

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