Former Minister tells of Iraq sales 'guidelines'

Iraq, then locked in war.

Sir Richard Luce told Lord Justice Scott's arms-for-Iraq inquiry that

it had become increasingly difficult to defend the approach that only

''non-lethal'' equipment could be sold.

''We wanted to get a sensible posture, because the approach of the

last two or three years had got increasingly difficult to defend,'' he

said.

He agreed with the counsel for the inquiry, Miss Presiley Baxendale,

that there had been pressure in Parliament and the press for tighter

restrictions.

After ''continual agonising'' during 1984, tougher guidelines were

brought in the following year.

Sir Richard, now vice chancellor of the University of Buckingham, was

the first oral witness to give evidence at the inquiry. Many present and

former Conservative Ministers -- including the Prime Minister and

Baroness Thatcher -- may also be called.

The inquiry will make history if it calls a serving Prime Minister and

his predecessor and asks them to explain their actions.

The inquiry is into possible ministerial collusion in breaches of arms

embargos prior to the invasion of Kuwait in August 1990 and allegations

that Parliament was misled.

The investigation follows the collapse of the Old Bailey trial

involving executives of the Matrix Churchill machine tools company.

Mr Malcolm Rifkind, Defence Secretary, Mr Michael Heseltine, President

of the Board of Trade, Kenneth Clark, Home Secretary, and Foreign Office

Minister Tristan Garel-Jones signed public interest immunity

certificates in an attempt to prevent official papers being used during

the trial of the three executives.

Before yesterday's hearing began, more than 80,000 pages of documents

from Whitehall departments and from MI5 and MI6 had already been

deposited with the inquiry.

Sir Richard, Minister of State at the Foreign Office from June 1983 to

September 1985, described the background to Britain's relations with the

Gulf states.

He said in the 1970s Britain had fairly stable relationships with Iran

and Iraq.

During the reign of the Shah of Iran, relations with Iran proved

''robust and strong'', which helped Britain pull out of the Gulf in an

atmosphere of stability.

That changed with Iran's revolution, but in the long term it was hoped

to restore good relations.

As for Iraq, relations could be up and down, and many Gulf states had

a long-term fear of a threat from Iraq.

Britain was under enormous pressure to support Iraq in the war, but

was just about the only nation in the world to take an even-handed

approach.

He said that background ''led to the posture that we should sell

non-lethal equipment to Iran and Iraq, but not lethal equipment''.

However, there remained a problem of contractual obligations to Iran.

''Were we not to fulfil those obligations we would be liable to

compensate British industry to many millions of pounds.''

Sir Richard said he saw the guidelines introduced in 1985 as a

tightening up of defence equipment sales to both countries while there

was still some room for manoeuvre.

He agreed with Miss Baxendale, QC, that there was no high profile

launch of the guidelines, but was ''surprised'' there were no documents

showing briefings with exporters had taken place.

Sir Richard added: ''If we had dramatised or given high profile to the

announcement of a modest change in the guidelines, it may have been

misunderstood, it wouldn't have helped.''

There were ways of getting information across selectively, he said,

and though informing business was a priority, firms who wished to do

business with Iran or Iraq in the middle of a war would naturally keep

in touch with the appropriate ministry to find out the position.

Sir Richard said the key criterion in the new arrangement was that no

items should be sold to either side which might significantly prolong or

exacerbate the conflict.

He agreed that when parliamentary questions were asked in January

1985, with the new guidelines already in force, he referred in the

answers to the most important criterion, without mentioning that there

were full new guidelines.

He could not recall why the answers were given in that way.

Miss Baxendale referred to a document in which she said the terms of

the new guidelines were fully set out for the first time in July 1985,

when they were said to have been agreed by Ministers in December 1984.

The hearing continues.