Her greatest coup was the huge Al-Yamamah contract with Saudi Arabia, negotiated in two parts in 1985 and 1987, said to be the biggest arms deal in history, worth something like ?40 billion to British Aerospace and other British companies, and partly paid for in oil. Mrs Thatcher met Prince Bandar, a nephew of King Fahd and son of the Saudi Defence Minister, at least twice in 1985, once in Riyadh in April, the second time in Salzburg in August, when she was supposed to be on holiday. On the announcement of the first part of the deal – for forty- eight Tornado fighter/bombers, twenty-four Tornado air-defence aircraft, thirty Hawk advanced training aircraft and thirty basic training aircraft – Heseltine told the press that Mrs Thatcher’s contribution ‘cannot be overstated’.39 She secured the second part at a stopover in Bermuda on her way to Australia in 1988. Given her usual readiness to boast of her achievements, however, it is curious that this went unmentioned in her memoirs.
The obvious reason was embarrassment over reports which soon emerged of huge commissions, running into millions of pounds, paid to middlemen – among them her own son. Mark’s business interests had already attracted attention in 1984, when questions were raised about a large contract for the building of a university in Oman, which Mrs Thatcher had personally secured on her visit – with Mark in attendance – in 1981. The company principally concerned was Cementation Ltd, for which Mark was then acting as a ‘consultant’. With no relevant qualifications or experience, his only possible value was his contacts, and specifically his name. ‘We did pay him,’ the company admitted, ‘and we used him because he is the Prime Minister’s son.’40 In the Commons and on television Mrs Thatcher indignantly denied any impropriety: she had been ‘batting for Britain’ not for any individual company, and Mark’s activities were his own affair.41 In fact, since Cementation was the only British company bidding for the university contract, this defence was disingenuous. Mrs Thatcher must have known that her son stood to profit if Cementation won the contract, though that is not necessarily to say that she should therefore not have lobbied for them. The allegation that Mark was enriching himself on the back of his mother’s patriotic salesmanship, however, did not go away. Much bigger sums were involved five years later in the Al-Yamamah contract, from which Mark was alleged to have pocketed ?12 – 20 million for his role as a ‘facilitator’. There is no doubt that he became inexplicably wealthy around this time, nor that he and his partner were active in the arms trade and in the Middle East.42 The evidence is only circumstantial, however, since an investigation of the Al-Yamamah deal by the National Audit Office was never published.
A second criticism of Mrs Thatcher’s enthusiasm for arms sales is that it distorted the allocation of the aid budget – a charge highlighted by the saga of the Pergau Dam project in Malaysia. Mrs Thatcher visited Malaysia in April 1985. On that occasion she ‘got on rather well’ with the Prime Minister, Dr Mahathir. Three years later she went back and negotiated – without reference to the Foreign Office – a deal whereby Britain financed the construction of an economically unviable and environmentally damaging hydroelectric power station in northern Malaysia in return for an agreement to buy British defence equipment worth ?1.3 billion. Subsequently a pro-Third World pressure group took the Government to court, alleging that this was an improper diversion of ‘aid’ for commercial purposes, and in 1994 won their case when the High Court ruled the deal illegal. Douglas Hurd, then Foreign Secretary in John Major’s Government, was obliged to refund the aid budget ?65 million from Treasury reserves.
The Pergau affair threw a murky light on Mrs Thatcher’s cavalier way with aid. In December 1994 Hurd was forced to reveal that three more aid projects – in Turkey, Indonesia and Botswana – had been found to breach the criteria of the 1980 Overseas Development and Co-operation Act. The money wasted on the Pergau project was more than Britain gave over the same period to Somalia, Ethiopia and Tanzania combined, while wealthy Oman alone received more British ‘aid’ than Ethiopia. Moreover, it emerged that nearly half the money expended under the Aid and Trade Provision (ATP) for projects in Third World countries went to finance contracts won by a handful of favoured companies all of which were major contributors to the Conservative party.43 In short, British aid was recycled to the Prime Minister’s friends and supporters at home and abroad.
The third charge against Mrs Thatcher’s pursuit of arms sales is that much of it was carried on secretly, in contravention of the Government’s declared policy. The most glaring instance was the supply of military equipment to Saddam Hussein’s Iraq throughout the eight years of the Iran – Iraq war when Britain was supposed to be restricting the flow of arms to both sides. This turned into a major embarrassment in 1990 when Saddam invaded Kuwait and Britain and her allies found themselves at war with a country they had been busily arming just a few weeks earlier. But this is an occupational hazard of the arms trade: much the same had happened with Argentina in 1982.The real scandal was the secrecy – duplicity – with which the policy had been conducted for the previous ten years.
Officially the West was neutral in the bloody war of attrition which began in 1980 when Iraq launched its troops against Iran: up to 1985 Britain continued to train pilots and supply low-level equipment impartially to both sides. In practice, however, both Britain and the United States covertly supported Iraq. Saddam was a revolting tyrant, but he was a tyrant of a familiar sort whom they could get along with: Iran’s fanatical Ayatollah Khomeini, on the other hand, seemed much more dangerous. With the trauma of the Teheran hostage crisis still fresh in American minds, Iran outranked even Gaddafi’s Libya as Washington’s ‘public enemy number one’. As Mrs Thatcher told Caspar Weinberger in 1984, ‘the West did not need another success by Moslem fundamentalists’.44 Moreover, the war provided a tempting opportunity. So long as the Shah was on the Peacock Throne, Britain had been a major supplier of arms to Iran. But Khomeini’s Islamic revolution had closed that market. British manufacturers were now keen to get into Iraq instead. Their American counterparts were hamstrung by Congress, which not only imposed an embargo on trade with both sides, but actually enforced it, so the Reagan administration was happy to see Britain secretly supply Baghdad. It was easier to deceive the House of Commons than it was to deceive Congress.
Officially Britain followed the American lead by banning the export of ‘lethal’ equipment to either side. But a meeting of the Cabinet’s Overseas and Defence Committee (OD) on 29 January 1981, chaired by Mrs Thatcher, agreed to define the critical word ‘as flexibly as possible’.45 Before the end of the year the MoD’s arms-trade subsidiary International Military Services (IMS) had won a contract to build an integrated weapons complex at Basra in southern Iraq; and this was just the beginning. Over the next four years ‘something like ten times as much defence equipment [was] exported to Iraq than to Iran’.46
For a time in 1983 – 4, when an Iranian victory seemed likely, however, the Foreign Office worried that this ‘tilt’ to Iraq might be imprudent and began to hedge for a more balanced neutrality. In November 1984 Richard Luce proposed more detailed ‘guidelines’ to restrict the supply of arms to either side. By the time Howe disclosed them to Parliament in October 1985 they had already been in operation for nearly a year.
Except that they never really operated at all. Giving evidence at the Matrix Churchill trial in 1990, Alan Clark dismissed them with typical candour as ‘tiresome and intrusive’, mere ‘Whitehall cosmetics’. 47 They were framed to be deliberately ambiguous. Only finished weapons were classed as ‘lethal’. Every other sort of military equipment, from aircraft spares to laser range-finders, and above all lathes for manufacturing artillery shells, went through without difficulty. They were made by a number of firms, all of which enjoyed a close relationship with the MoD, with little effort to disguise either their purpose or their destination. One of those most heavily involved, Matrix Churchill in Coventry, was actually acquired in 1987 by a subsidiary of the Iraqi Government, presumably to get round the fact that Britain had just signed a pact banning the export of ballistic missile technology to the Third World. Matrix Churchill was then developing the Condor 2 missile with a range of 1,000 kilometres and capable of carrying nuclear warheads, in which Baghdad was known to be interested.48 When questions were asked in Parliament they were batted away by junior ministers.
On 2 December 1986, when there was some question of changing the guidelines, Charles Powell wrote to the Foreign Office that Mrs Thatcher found them ‘very useful’ when answering questions in the House of Commons and had no wish to alter them.49 Two days later she gave a perfect example of what he meant when she told the House that ‘British policy on arms sales to Iran and Iraq is one of the strictest in Europe and is rigidly enforced, at substantial cost to British industry. That policy has been maintained scrupulously and consistently.’50 Presumably this formula accorded with her reading of the guidelines. But the reality was very different from the impression given to Parliament.
Is it possible that she did not know what was really going on? There is no doubt that some individuals in all the relevant departments knew. But did Mrs Thatcher know? Quite apart from the fact that no Prime Minister so prided herself on knowing what was going on in every corner of Whitehall, the involvement of the intelligence service is the clearest indication that she was fully informed. After the scandal broke, the Scott Inquiry set up by
