Evidence of Iran arms deal puts new pressure on Aitken

DONALD MACINTYRE and CHRIS BLACKHURST

Michael Heseltine, President of the Board of Trade, yesterday stunned the Commons by confirming that the Government had been warned by intelligence in 1988 that arms sold by a company of which Jonathan Aitken was a director could be destined for Iran.

Mr Aitken, Chief Secretary to the Treasury, was facing fresh doubts about his future last night after Customs and Excise said it had opened an investigation into allegations that BMARC, the Grantham-based company which he joined as a non-executive director in 1988 breached the arms embargo during the Iran-Iraq war.

Mr Heseltine's highly unusual statement to MPs opens the way for a full Commons investigation into the reports first revealed by the Independent in March that BMARC was engaged in arms sales to Iran.

That was confirmed yesterday after Mr Heseltine's dramatic disclosure that the Department of Trade and Industry failed to match intelligence information to BMARC export licence applications and that 74 per cent of all military export licence applications between 1986 and 1989 did not have the necessary supporting documentation, including end-user certificates.

His disclosure of what amounts to a breakdown of procedures in the DTI for vetting applications for military export licences came as he gave the first official confirmation that Whitehall had been told as early as 1986 that Oerlikon, the Swiss company which then owned BMARC, had contracted to supply "weaponry and ammunition" to Iran.

Although most of the shipments - under "Project Lisi", the codename for BMARC's sales of naval armoury to Iran - took place before Mr Aitken became a director, DTI officials confirmed yesterday that one shipment of naval cannon covered by intelligence warnings was made in December 1988, four months after Mr Aitken became a director. A further 30 to 40 export licences had been granted to BMARC to supply arms to Singapore, the apparent destination.

Mr Aitken, who cancelled a trip to Northern Ireland to be in the Commons for Mr Heseltine's statement, stood firmly last night behind his statement to the Commons on 30 March that he had never been given any "information or indication" that arms apparently destined for Singapore had been shipped onwards to Iran.

Mr Heseltine took the rare step of using a full Commons statement to answer a series of parliamentary questions from Brian Wilson, a Labour industry spokesman, after ordering a full investigation into when the department first knew of allegations that Singapore had been used by BMARC as a conduit for arms sales to Iran.

Mr Heseltine, who warned John Major at a meeting after the Cabinet last Thursday of his intention to disclose the full extent of the DTI's failure, also surprised MPs by paving the way for a Trade and Industry Select Committee hearing into the affair by saying that the DTI would "be very ready to co-operate if the Trade and Industry Select Committee wished to examine the issues raised by the allegation that Singapore was used as a conduit for arms exported by BMARC to Iran".

The failure of the intelligence information to reach the relevant officials is also to be examined by the intelligence and security committee chaired by Tom King, former Secretary of State for Defence, and Lord Justice Scott's inquiry into the arms-for-Iraq affair is already examining the whole issue of the distribution in Whitehall of intelligence information. Mr Heseltine said procedures had been tightened up its export licensing practices since the collapse of the system in the late 1980s.

While the Prime Minister stood firmly by Mr Aitken last night - sitting beside him during Mr Heseltine's statement and authorising Downing Street to say that there was no reason for him to step aside, Labour last night called for his resignation.

Mr Wilson said: "We now have a bizarre situation in which Mr Aitken's Cabinet colleague, Michael Heseltine, has authorised two inquiries into allegations of illegal export of arms by Mr Aitken's firm. At the same time, one of his fellow directors is repeating that he must have been blind and deaf not to know what is going on. The idea that he can serenely continue in office after that is not credible."

Mr Heseltine said in his statement that it was for Customs to investigate breaches of export control. But he added: "However, it does appear that there may be grounds for believing that the final destination of naval cannon made by BMARC could well have been Iran ..."

Mr Aitken said in his statement issued shortly after the Commons exchanges: "There is nothing in today's statement by the President of the Board of Trade which alters or affects the answer I gave on this subject to the House of Commons on 30 March .

"I stand by that answer in which I said that I had never been given any indication or information which could suggest that a BMARC contract with Singapore might result in onward shipments of components to Iran." HISTORY OF THE AITKEN AFFAIR 1986 - BMARC makes export licence applications for arms to Singapore. Intelligence reports suggest similar equipment going to Iran. MAY 1988 - BMARC sold by Oerlikon to Astra. BMARC continues to supply equipment to Oerlikon. JULY & SEPT 1988 - INTELLIGENCE RPORTS REFER TO ARMS BEING SUPPLIED BY OERLIKON THROUGH SINGAPORE TO IRAN. SEPT 1988-MARCH 1990 - JONATHAN AITKEN IS NON EXECUTIVE DIRECTOR OF BMARC. 1991 - DTI'S ATTENTION FIRST DRAWN TO PROJECT LISI - OR BMARC'S CODENAME FOR SALE OF NAVAL GUNS WHICH WENT TO IRAN. NOV 1994 - MR AITKEN TELLS AN INDEPENDENT TELEVISION COMPANY THAT HE HAD "NO KNOWLEDGE OF PROJECT LISI". MAR 95 - THE INDEPENDENT REPORTS THAT MR AITKEN WAS SENT COMPANY REPORTS CONTAINING DETAILS OF PROJECT LISI. MINISTER SAYS HE LEFT BOARD MEETING BEFORE LISI WAS DISCUSSED. JUNE 1995 - MICHAEL HESELTINE SAYS GOVERNMENT TO COOPERATE IN INVESTIGATION INTO ALLEGATION THAT SINGAPORE WAS USED AS A CONDUIT FOR ARMS EXPORTED BY BMARC TO IRAN