Rembering old times and with next week�s events in mind I located the following on a US website:

�ISSUE

What action to take in respect of a request from Customs & Excise for our agreement for them to visit Matrix Churchill other UK companies to obtain evidence that machine tool export have been used for arms manufacture in Iraq.

RECOMMENDATION

That officials on the Iraq Gun Committee should be asked to prepare urgent advice for Ministers.

TIMING

Immediate. Customs are planning to visit the firms in the next week or so.

BACKGROUND

Customs have prima facie evidence that current machine tools exports from Matrix Churchill and other UK companies under license are being routed via Chile to Iraq for arms manufacture.

Evidence was available in 1987 to the same effect but to protect sources Ministers took a decision to let the particular exports by Matrix Churchill go ahead.

Subsequent applications were made by Matrix Churchill who claimed to equipment was for general engineering use. there was no firm evidence available about end use and Ministers agreed to allow these exports. A significant factor in reaching that decision was the cessation of the Iran/Iraq war.

Customs now have absolute evidence of the fact that Matrix Churchill and some other companies not subject to the current investigations knew about the real end-use of all these machine tools and thus made false declarations to us and Customs. An investigation will clearly bring all these cases to light.

Most of the machine tools in question will be removed from any export control following the recent COCOM meeting unless a decision is taken now to retain control to all or selected destinations.

ARGUMENT

There are three issues to be addressed:

(1) are Ministers willing to have the 1987 and subsequent decisions exposed and made the subject of courtroom argument?

(2) are Ministers willing to face a worsening in our relations with Iraq?

(3) if the answer to (1) & (2) are affirmative should we retain controls on machine tools despite the COCOM relaxation and if so to what destinations?

Given the fact that all machine tools can be used for manufacture of arms of decision in principle is now needed on whether the UK should license such exports to countries subject to a UK arms embargo. (Currently Syria, Libya, Iran, Iraq, S. Africa, Burma, China and Taiwan). While a stout defence of not doing so can be mounted any such decision would contrast sharply with the very far-reaching interpretation currently placed on the embargo (eg not supplying parts or spares for aircraft which could be converted for in-flight refueling). Presentationally such a decision would sit uncomfortably with the concern over the super-gun.

Iraq is already very huffy about recent successful attempts to break-up their arms procurement activities and a move against Matrix-Churchill which is Iraq owned will only add to the problem. To the extent that other companies are involved the current line--that if people break our laws they must expect punishment and that we are not picking on Iraq--can be sustained. but UK trade interests in Iraq will no doubt suffer (and possibly some unfortunate people also).

The dirty washing liable to emerge from the action proposed by Customs & Excise will add to the problems posed by the gun. For DTI the timing is extraordinarily embarrassing given recent correspondence between ourselves, MoD and FCO. Needless to say we were not aware of Customs knowledge and activity when we briefed MFT on this issue. This underlines the need for our formal inter-departmental forum for exchanging this sort of information to be looked at--this is currently in hand.

CONCLUSION

I expect you will wish to discuss this and Mr. Steadman and I are ready for this�

I knew the author quite well � we first worked together in 1980 � but I declined to go to his retirement party last year. I also had a brief interview with Tony Steadman about six years ago as he was leaving the department � at the end of the last great Media-Iraq-fest during which a grateful department had hung him out to dry for the hacks in quite a similar way to the case which is just now whetting everyone�s appetite so much. Well at least TS lived to tell the tale.

Riffling through the entrails of this affair two or three things stay with me. The first was the interview I did with the predecessor of the guy who wrote this submission � a guy called Eric who had also been TS�s boss. Eric was a reasonable guy and incredibly hard pressed while he was running the bit of the Department which carried out all this sensitive work � he had another separate and significant responsibility as well. Eventually given the complexity and danger in this situation something went horribly wrong. Eric had for years tried to get more staff and better quality staff in to carry out this work but got little support from his superiors, one of whom was called Hutton.

By 1997-98 when the manure was still coming off the air conditioning in sizeable dollops, Hutton was my boss and was part of the clean up operation. There was a report . Indeed -I think people have already started to recollect the pre-reading which Hutton organized in the Departmental basement. Hutton had a wheeze to keep the key assets out of trouble (which usually included himself). The wheeze involved letting a contract to one of his old friends � literally buying in some integrity to keep things sweet at the rarified levels at which these people operate.

Anyway the integrity report was duely delivered and within a year or so the person engaged was made the Ombudsman � the independent guarantor of the system�s integrity, there to see all our rights not to be abused by bureaucracy.

A further key player in the clean-up � who I now see as having taken professionalism to the very brink of sadism as far as Eric and TS were concerned � subsequently did me a very bad turn indeed. He had a big family and was absolutely determined to get promoted � at any cost especially when the costs were born by others. These people are lethal. Watch out a few more lethal strokes in days to come in the MoD.