Sir Adam Butler, a former defence minister responsible for supervising the running of International Military Services, a government-owned arms company, said it was the first time he had heard the allegation.
Sir Adam, former Minister for Defence Procurement, also claimed to be unaware of government suspicions in 1985 that military equipment sent to Jordan was being sold on to Iraq in breach of official guidelines.
He was giving evidence to the Scott inquiry, which is investigating claims of collusion between ministers and civil servants in defence exports to Iraq which breached official guidelines and export controls.
Sir Adam was responding to questions from Presiley Baxendale QC, the inquiry counsel, who referred to previously restricted Ministry of Defence documents made available at the Scott inquiry. They revealed that military advisers who vetted export applications to Iraq had asked that International Military Services be 'rebuked' for trying to evade guidelines.
IMS applied for an export licence for spare parts for up to 30 Iraqi armoured recovery vehicles. The military advisers believed the parts were really destined for Chieftain battle tanks captured by the Iraqis from the Iranian army. Two advisers called for the company to be 'rebuked for attempting to deceive us or, if innocent, for being taken in'.
Sir Adam said that despite his responsibilities he only visited the London offices of IMS once. He said any 'rebuke' request would be investigated and carried out at a 'senior official' level if justified. He added that one instance of such evasion might not be brought to his attention but if IMS had persistently offended he would have expected to be informed.
Earlier, Sir Adam said that stricter guidelines controlling the export of arms-related equipment to Iraq went unannounced to save the Government international embarrassment.
Crucial changes to government guidelines on exports to Iraq and Iran were kept from Parliament and the public until nine months after they had been introduced, he admitted.
He said the then Foreign Secretary, Sir Geoffrey Howe, decided the news should be allowed to 'filter out' in response to questions put to ministers by either MPs or the media rather than a 'high-profile' announcement, as suggested by Sir Richard Luce, former Foreign Office minister.
When asked why it was decided not to announce the changes, Sir Adam said: 'To save embarrassment to HMG (Her Majesty's Government).'
The guidelines, agreed between the Foreign Office, the MoD and the Department of Trade and Industry, replaced rules designed to prevent the export of 'lethal' equipment to Iraq or Iran. Instead, export licences were to be refused if the equipment was deemed to 'significantly enhance capabilities which would prolong or exacerbate the Iran-Iraq war'.Reuse content