BOOK REIVEW / Toys for naughty boys: 'The Unlikely Spy' - Paul Henderson: Bloomsbury, 16.99

A YEAR AGO Paul Henderson was tried for selling arms-making equipment worth millions of pounds to Saddam Hussein's Iraq. But the case against the managing director of Matrix Churchill and two of his colleagues skidded to a halt when astonishing new evidence emerged. Henderson, the court heard, had been an unpaid volunteer spy, using his status as a favoured supplier to pass Saddam's secrets to our intelligence Circus. The revelation was like an Exocet on the credibility of the Crown's case.

How unlikely a spy was Henderson? On the whole we tend to believe that our intelligence boys are professionally trained for the job, not Boy Scouts. Yet, since 1990, businessmen recruited as Iraq intelligence stringers have been crawling into the daylight like slugs after a shower of rain. So was this modus operandi confined to one historical period, and to one theatre of operations, the Middle East? Was it a case of needs- must - provoked by the toughness of Iraqi security, and perhaps by budget cut-backs at home? To read Henderson's lucid account of his own recruitment is to realise it was neither of these.

He first came to the attention of MI5 because of his frequent trips into target territory selling machine tools for his Coventry-based company. One day he was invited to meet Miss Eyles, a smart young 'Ministry of Defence' official. 'She could,' he says, 'have been one of the bright university-educated businesswomen working in the City. Instead she was my first controller.'

Miss Eyles performed her siren song. Could Mr Henderson report on senior personnel in the industries and state-buying organisations of the target? What were their lifestyles, their weaknesses? Which of them would be suitable candidates for turning? However, he was told in clear terms that 'the intelligence service's main concern was the developing munitions and military industries . . . They were interested in what sort of equipment was being bought and what use it was being put to.' And then came the question which, in the light of later events, is richly ironic: 'Is anybody selling them equipment that they should not be selling?' she wanted to know.

To buffs of the Scott Inquiry, all this reads like an Intelligence shopping list for the Middle East during the late 1980s. And yet the above briefing occurred in 1973, and it was not Arabia to which Miss Eyles referred. It was the Soviet Bloc, where Henderson - then a near-workaholic sales director - was travelling for his firm, Coventry Gauge and Tool. His account shows that the espionage systems of the Cold War have survived intact into our new world order.

Attracted, as he admits, by the illusory 'glamour' associated with spying, Henderson accepted Miss Eyles's challenge. For a decade he was regularly debriefed by MI5 controllers interested in Communist dispositions and, in the meantime, rose to be managing director of Matrix Churchill, the successor of his original company. Eventually, however, with eastern Europe beginning to come unglued and the firm's profits evaporating, new markets were wanted. It was at this crux point, in 1987, that Iraqi interests bought 51 per cent of the company.

Having quite legally sold machine-tools destined for Soviet armaments factories, Henderson felt no guilt about supplying Iraq, even though, officially, the country was off-limits to arms peddlers. Had he not maintained relations with the Intelligence world? Had there not been official blessing for the Iraqi buy-out of the company? Were export licenses a problem? 'No' to all these, at least until early 1990. Then the Iraqis hanged the British journalist Farzad Bazoft, HM Customs discovered the Supergun and there were other Iraq-related shocks. Whitehall now began to dither about whether 'dual-use' tools should be licensed for export after all.

Yet ministers like Alan Clark and Lord Trefgarne still made sympathetic noises and, for Henderson, there were reassurances from 'John Balsom', his current MI5 deskman. These reassurances were a cruel illusion. After Saddam's invasion of Kuwait in August, the politicians back-pedalled for their lives and John Balsom no longer answered his phone.

The view from the dock of Henderson's prosecution, and of the government's attempt to hide behind Public Interest Immunity Certificates, is usefully given here. The defence's undermining of the Crown was a spectacular forensic success for Geoffrey Robertson QC. He hijacked the prosecution witnesses so successfully that after only five days (following Alan Clark's admissions under cross-examination about his economies 'with the actualite') the Crown had to throw in the towel.

This thoroughly good, plain book answers many lurking questions about the Matrix Churchill affair. But the big one is left begging. We still do not know why. Men like Henderson were stooges in the greater game, of course. One cannot expect him to know the truth. Yet the fact remains that, for whatever reason, the Thatcher administration sucked up to a vicious dictator hated by almost all other Arab governments, publicly denouncing him while secretly fuelling his monstrous ambitions and massaging his self- esteem. Knowing he used gas and starvation against his own people, and was developing a nuclear bomb, the British government chose to sell him a selection-box of lethal toys. Finally, by squandering billions of pounds in loan guarantees to his bellicose, bankrupt, egregious economy, it effectively invested in him.

So why? Was it so that a very few, well-placed countrymen of ours could grow extremely rich? We must now look to Lord Justice Scott for

the answer.