Sir John Stanley: Which departments were involved in the clearance of the wording of the protocol - was it circulated to the DTI, Foreign Office and Number 10?
Mr Hurd: It was negotiated in Kuala Lumpur . . . It was a matter for the Ministry of Defence.
Sir John Stanley: Are you saying that the Defence Secretary (Lord Younger) left London with no prior wording of a draft protocol with him?
Mr Hurd: This was handled by the Ministry of Defence. I am not clear what he took with him to Kuala Lumpur but paragraph two (linking arms to aid) which you have described was not cleared with our departments in advance.
The wording is quite careful. The Government 'took note of the Malaysian government's desire' (to buy a list of arms) and then comes the suggestion of linkage with aid. It was agreed but in the light of discussion in Whitehall it was qualified in this respect in the letter which George Younger wrote three months later to the finance minister.
Sir John Stanley: I would put it to you the wording is not cautious in so far as it says 'the UK undertook to bring to bear the resources of its MoD in order to grant certain facilities including aid in support of non-military aspects of the programme, the details to be agreed by both governments'. That would seem to me to be a very, very firm undertaking in relation to linkage between the MoD and aid in support of non-military aspects.
As your department was clearly involved in drawing up the protocol, the High Commissioner was clearly in attendance of the Secretary of State . . . Your own department must surely have been aware of the wording . . .
Mr Hurd: The undertaking is there. It was an undertaking in principle with the details to be subject to further discussion . . . No, my researches indicate that the Foreign Office, the Foreign Secretary (Lord Howe) were not consulted before the protocol was signed.
Sir John Stanley: You are saying the High Commissioner in Kuala Lumpur on what is a major area of policy, in breach of established UK policy, which was unwaveringly followed since 1979, failed to report the intentions to sign the protocol on this basis back to your department? That would seem an extraordinary state of affairs.
Mr Hurd: I don't think so. These are two perfectly defensible and desirable policies, which the High Commissioner was aware. We desired to rebuild our relationship with Malaysia. We desired to include in that relationship a defence sales agreement. There was also a discussion about aid.
You can't deal in these things in compartments. This was a MoD-driven initiative, negotiation and agreement. It was successful but it included in it this particular linkage between two policies which are entirely defensible and desirable in a way which had to be qualified.'
I don't believe the essence of the thing is the linkage which occurred during these three months. The essence of the thing are both the policies are thoroughly defensible.
Sir John Stanley: You have made it clear that the linkage was incorrect, contrary to policy followed since 1979. Are you really saying the High Commissioner in Kuala Lumpur was unaware he was acting in breach of policy?
Is it possibly not the case he was aware it was in breach of policy but perhaps he took the view with the British Defence Secretary that the wider British interest was best served by signing up and hoping that it would not come to light?
Mr Hurd: I cannot answer that . . . I don't blame them for accepting it, if in their judgement the alternative was to lose the whole agreement.
KEY DATES IN THE DEAL
1981: Malaysia adopts Buy British Last policy.
1985: Lady Thatcher visits Kuala Lumpur, reopens trade.
March 1988: Lord Younger signs defence and aid protocol in Kuala Lumpur.
28 June 1988: Lord Younger writes to Malaysian finance minister separating aid and arms but confirming arms programme; High Commissioner writes to finance minister promising aid. Letters delivered simultaneously.
8 August 1988: Lady Thatcher writes to Mahathir Mohamad, Malaysian Prime Minister, letter confirming aid and arms packages, in separate paragraphs.
October 1988: Consortium puts Pergau dam project to DTI.
12-14 March 1989: Inspection visit by two officers, giving go-ahead. Price pounds 316m.
15 March 1989: Lady Thatcher meets Dr Mahathir and confirms go-ahead.
31 March 1989: Consortium informs government project price increased to pounds 397m.
November 1990: price set at pounds 417m.
February 1991: Sir Tim Lankester, accounting officer, objects to cost.
February 1991: Douglas Hurd, Foreign Secretary, tells John Major it should go ahead, in spite of Sir Tim's objections. PM agrees.