Concern that UK machine tool exports were destined for Iraqi munition factories, in breach of government guidelines, caused the Department of Trade and Industry to revoke a number of licences in January 1988, Anthony Steadman, head of the DTI's export licensing unit, told the Scott inquiry yesterday.
Mr Steadman said he outlined the reasons on the telephone to the affected companies after reading an MI6 intelligence report warning that the British-made lathes were going to make artillery shells.
But when the Machine Tools Trade Association, representing the companies, met with Alan Clark, the former trade minister, to discuss the problem, military use concerns were not raised at all. Instead the minister emphasised that he would 'do everything in his power to ensure no interference with existing contracts'.
According to a DTI record of the meeting, Mr Clark, 'choosing his words carefully', went on to emphasise it was important for UK companies to 'highlight the peaceful (ie non-military) use to which the machine tools would be put'.
Ms Presiley Baxendale QC, inquiry counsel, said: 'Everyone at the meeting has at the back of their minds that the DTI concern was the equipment is going for munitions. Is it not strange no reference was made to it during the meeting?' Mr Steadman denied it was strange and claimed no mention was made because of the sensitivity of the situation, and because the DTI 'needed to play a close hand over what they knew'.
Lord Justice Scott suggested the failure to mention it might lead the businessmen to think that the DTI approved. 'Wouldn't it be a natural assumption on their part that you didn't really mind?' he asked. Mr Steadman said that with hindsight that might be the case, but he did not know.
When the judge suggested one reason why the DTI failed to mention it and seek assurances exports were only going for civil use was because the DTI knew such assurances could not be given. Mr Steadman claimed this thought had never occurred to them.
What was said at the January 1988 meeting featured prominently in the subsequent trial of three executives from the Coventry machine tool company Matrix Churchill, who were accused of illegally exporting machinery to Iraq. Mr Clark admitted during cross-examination he had been 'economical with the actualite' when dealing with the businessmen.
Mr Steadman also admitted the DTI failed to seek assurances from exporters about the actual end use of machinery. Vague descriptions of 'general engineering applications' were assumed to be an indication of non-military use, he said.Reuse content