Iraq inquiry to question role of security service

SPY reports revealing Iraqi munitions production targets for Matrix Churchill lathes may have gathered dust in a Whitehall pigeon hole - or been ignored deliberately - while export licenses were granted.

Lord Justice Scott will this month begin his inquiry into British arms exports by gathering evidence which calls into question the activities of the Security and Intelligence Services (SIS).

The Attorney-General, at present considering whether to bring charges of perjury against civil servants who gave evidence for the prosecution in the aborted Matrix Churchill case, has also focused on communications between government departments.

In August 1987, SIS collated the work of a British spy in a report entitled Iraq, the Procurement of Machinery for Armaments Production. It was delivered to the Department of Trade and Industry (DTI) on 30 November; Matrix Churchill export licences were approved on 2 December.

The report, channelled through MI6, said: 'Iraq intends to use the machinery purchased to manufacture its own munitions.

'The armament production is to take place in two main factories in Iraq: the Hutteen General Establishment for Mechanical Industries in Iskandria, and the Nassr General Establishment for Mechanical Industries in Taji, near Basra. Both factories are large by Western standards and the annual production targets for the Nassr factory (the smaller of the two) are as follows:

a. 10,000 122mm missiles

b. 150,000 130mm shells

c. 100,000 mortar shells (60, 80, and 120mm)

d. 300,000 fin-stabilised 155mm shells (similar to those produced by PRB in Belgium).

'Most of the technical drawings used as blueprints for production of the Nassr factory are Russian. The one exception noted was a set of American drawings used for a large bomb. British businessmen visiting the factory were told that it was a 1,000lb bomb.'

The document suggests the intelligence community knew far more about the breadth of hi-tech arms procurement than ministers ever told Parliament. Mention of 155mm shells made by PRB, the Belgian propellant manufacturer, will be cited at the Scott hearings by associates of the murdered Gerald Bull, designer of Project Babylon superguns. They claim MI6 had been briefed on his arms deals from their inception. The report was seen by the jury at the Matrix Churchill trial during cross-examination of Tony Steadman, former director of the DTI export licensing department.

Mr Steadman told the court the document helped him brief Alan Clark, minister for trade, at a meeting in 1988 with machine tools industry leaders. Mr Clark admitted encouraging further exports by British companies for munitions manufacture.

Mr Steadman said in court that, as a result of the report, firms including Matrix Churchill were told they had to confine future orders to peaceful use. Questioned by Geoffrey Robertson QC, counsel for Paul Henderson, he said he did not see the report before his unit approved export licence applications on 2 December.

Transcripts record Mr Robertson asking: 'It is dated 30 November for distribution to the DTI, it would have gone to you?' Mr Steadman replied: 'It went to a central document section which I would have visited once every fortnight, three weeks, that sort of thing.'

Q: 'But, Mr Steadman, this is headed 'UK Secret', it was very secret and very urgent and very important information, was it not?'

A: 'Yes.'

Q: 'Of enormous importance to your decision in relation to these export licences?'

A: 'Yes.'

Q: 'Are you really saying that secret intelligence of this urgency and importance goes to a central document section which you collect every two to three weeks?'

A: 'Which at that time I went to visit on that sort of basis, every three weeks it would have been . . . I can't recall now but I think I was informed, I think the Foreign Office picked this up in the first instance and told other departments of its existence.'

Q: 'It has got on the front page 'Distribution: Department of Trade and Industry, FCO, MoD.' It would seem to have gone to all of you.'

A: 'As I say, I don't know what date it came into the department . . . I didn't see this and didn't know of its existence before the issue of the licences . . . I think it would have gone to the central documents section and it would remain there until picked up by the officials who were authorised to see this sort of information.'