Ban on Iraq arms buyer 'was dropped': Visit in 1988 went ahead in spite of warning it would undermine weapons sales guidelines, Scott inquiry told

MINISTERS dropped a plan to ban the mastermind behind Iraq's weapons industry coming to Britain, although his visit would 'seriously undermine' UK guidelines on limiting military supplies to Baghdad, the Scott inquiry was told yesterday.

The Foreign Office called for Dr Safa al-Habobi's exclusion from Britain saying there was 'sufficient evidence' his visit in 1988 was to get equipment for Iraq's munitions industry. But within weeks they had completely changed their minds.

If Dr Habobi's visit to Matrix Churchill and other machine-tool manufacturers succeeded it would have 'serious implications' for Britain's defence sales policy to Iraq and Iran, then at war with each other, a Foreign Office report, read out at the inquiry, revealed. UK efforts to stop weapons reaching either country would be 'seriously undermined' if Iraq 'circumvented the guidelines' and secured the ability to produce munitions for itself.

But banning Dr Habobi might lead to the orders going elsewhere and the collapse of Matrix Churchill, the report warned. Relations with Iraq might worsen and intelligence service sources might be compromised.

The report said Dr Habobi's long-term aim was to help Iraq's industrial regeneration after the war. Allowing him to enter would help the UK secure a stake in this. Dr Habobi's exclusion 'would be the only certain means of ensuring our guidelines are not circumvented', but the disadvantages to Britain 'suggests we may have to compromise'.

It recommended his visit be 'closely monitored' and export licences refused on the equipment he wanted. Rules covering equipment not needing licences could be changed, it suggested.

The visit went ahead in 1988 but nothing was done to prevent the guidelines being circumvented, Sir David Miers, a senior Foreign Office official, told the inquiry.

Sir David, who supervised the Middle and Near East departments, also defended an earlier decision to allow Matrix Churchill and two other UK companies to ship machine tools to Iraq in January 1988, in spite of an intelligence warning they were helping set up Iraq's munitions industry.

The companies' commercial and employment concerns were more important than whether it was a significant enhancement of Iraq's military capabilities and strictly complied with the guidelines, he said.

A Foreign Office memo to him and David Mellor, former Foreign Office minister, said that an impending UN arms embargo would act like a 'falling guillotine' on the orders and said the companies should be warned to 'produce and ship as fast as possible'.

Sir David denied ministers had not been clearly briefed on this matter and rejected suggestions the approach was a cynical one based on expediency. The inquiry heard that one Matrix Churchill machine allowed to be exported was later found in use making Iraqi missiles.

Fears that Iraq was using Jordan to obtain prohibited military equipment existed in 1983, Sir David said. He did not know whether the FCO attempted to stop the use of Jordan as a staging post. 'We were trying to sell them things rather than stop them getting things and this was being carried out at the highest level.'