RAF broke embargo on Iran, court told: The sleazy state

Senior customs investigators tried to suppress evidence in an American court that would have revealed details of British companies breaching the arms embargo against Iran. The Scott inquiry is investigating the export of arms equipment to Iraq; the US court documents show a parallel trade with Tehran.

A Washington court is examining evidence, filed in a dollars 10m lawsuit brought against the US government by a CIA man, that:

Britain flew military equipment to Tehran in RAF VC-10s.

A British arms dealer, Ian Smalley, facing arms charges in Texas, threatened to reveal in court details of the illegal trade.

British Customs warned the US government of Mr Smalley's plans and, after the intervention of the US Justice Department, the case was dropped.

US embassy officials employed spies to investigate British arms sales to Iran.

The revelations will embarrass the two governments and add to concern about the willingness of the British authorities to disregard rules on arms trading. Since the fall of the Shah in 1979 it has been illegal to sell arms to Iran.

Much of the evidence submitted to the Federal Court of Claims in Washington by a former CIA operative, Gary Howard, who is claiming that he was not paid for undercover work in London between 1979 and 1982, has been heard in camera on the instruction of the US government, according to the clerk of the court.

Court papers show that Mr Howard was spying on Mr Smalley, and his alleged attempts to sell 40 reconditioned Jaguar vehicle engines to Iran for military use. Mr Smalley was arrested in the UK in 1982 by British Customs. He jumped bail and fled to the US, where he was arrested by US authorities, and put on trial in Texas. He is still wanted in the UK, but no attempt has been made to extradite him.

In the US court papers it emerged that Mr Smalley told the Ministry of Defence that if prosecuted, he would 'blow the operation undertaken by the British government in relation to sales of military equipment to Iran during the (Beirut) hostage crisis', and that he had photographs of RAF VC-10s landing in Tehran airport and discharging military cargo.

The threat was reported to the highest levels in the British Customs Service by Barry Riley, an investigating officer who went on to lead the supergun inquiry. There is no evidence that Mr Riley applied pressure on the US authorities to stop Mr Smalley's trial.

State of sleaze, pages 2, 3