The Blair Government approved a $3.4m (£2.3m) grant to a company owned by Lakshmi Mittal in the same month that the billionaire businessman gave a £125,000 donation to the Labour Party.
Officials at the Department for International Development (DfID) approved the subsidy by the World Bank, in May 2001, in a company run by Mr Mittal in Kazakhstan.
The Independent has also learned the Government will soon be asked to approve a multi-million World Bank loan to Mr Mittal to invest in his Sidex steel plant in Romania. Tony Blair wrote to the Romanian Prime Minister to endorse Mr Mittal's bid to buy the business. World Bank officials confirmed yesterday they were expecting an application from the steel magnate for a "phase-two" application to help him pay up to £200m still owing to the Romanian government over the next five years.
The additional cash request comes on top of a second loan that Mr Mittal is expected to request from the European Bank for Reconstruction and Development (EBRD), which already gave him a £70m loan to help him buy Sidex. "In phase two, EBRD and IFC [International Finance Corporation, part of the World Bank] have been asked to structure the long-term financing," a World Bank spokesman said yesterday.
Labour's involvement in the Mittal business empire deepened further yesterday when the Government revealed that its officials had approved four loans to Mr Mittal's companies, including two made after the 1997 election.
Civil servants representing the Government on the boards of the EBRD and the World Bank voted in the autumn of 1997 to approve financial aid worth $450m (£315m) to enable Mr Mittal to buy a privatised steel plant in Kazakhstan.
The Department for International Development told the officials the requests for money were not controversial and were consistent with its aims of encouraging development in former Eastern bloc countries. No ministers were involved in any of the decisions.
Clare Short, the Secretary of State for International Development, said: "There was absolutely no link of any kind between any UK politician and UK supprt for LMN projects. Ministers were not consulted because they were judged to be uncontroversial."
Adam Price, Plaid Cymru's spokesman on trade and industry, who raised the first questions about Mr Mittal's links to Labour, last night called on the Government to "come clean". He said: "Day by day, we get fresh confirmation of Labour's involvement in his tangled business affairs. The Government needs to come forward with all the facts surrounding their support from loans, to investments and the Prime Minister's endorsement. The stain of suspicion goes deeper and deeper for every day the Government refuses to come clean."
In October 1997, the World Bank approved a $100m loan, in tandem with a $150m loan from the EBRD approved at the same time. The public bodies also approved a $200m investment through commercial banks to Mr Mittal for his Kazakhstan plant. Mr Mittal drew down only $100m of the investments after the rouble crashed in 1998, and he was forced to reduce his investment plans for the Kazakhstan plant.
The Government also revealed last night that officials under the last Tory government approved a World Bank loan to Mr Mittal in 1996. Its commercial investment and lending arm agreed a long-term advance of $82.4m to a Caribbean company owned by Mr Mittal. Government officials gave the go-ahead for their representative on the IFC to grant the cash to an integrated wire-rod steel plant in Trinidad and Tobago to bring the plant up to World Bank environmental standards.
On the IFC and the EBRD, which are backed by British taxpayers, loans are granted by a board of directors representing countries that invest in the bodies. The British representatives are senior civil servants who get advice from Whitehall about whether to approve loans, grants and investments.Reuse content