Scott seeks Iraq link to Al-Yamamah: Inquiry to ask for details of arms shipments. Tim Kelsey and Peter Koenig report

THE SCOTT inquiry is investigating whether weapons shipped to Saudi Arabia under the Al- Yamamah contract, which Mark Thatcher allegedly helped to broker, were diverted to Saddam Hussein's regime.

A spokesman for the inquiry confirmed last night that Lord Justice Scott had asked British Aerospace for information on arms shipments to Saudi Arabia, following allegations that some of these had been diverted to Iraq. Mark Thatcher is said to have made around pounds 12m in commissions as a middleman in the negotiations for the contract, which was signed by his mother in 1985, when she was Prime Minister.

A former member of the Commons' Public Accounts Committee accused David Hunt, Chancellor of the Duchy of Lancaster who is also Minister for Public Service, of 'telling blatant untruths' by claiming on Monday that the PAC had audited the Al-Yamamah project and found that no commissions were paid. Dale Campbell- Savours, Labour MP for Workington, said: 'I can tell you they are deliberately misleading the public.'

The PAC chose not to publish a National Audit Office report, which allegedly contains details of commissions, after being told that Saudi Arabia would cancel the order if it did.

Adnan Khashoggi, the international defence consultant, issued a statement last night denying that he had ever confirmed Mr Thatcher's involvement in fixing the pounds 20bn Al-Yamamah deal, the largest in British history. The Sunday Times quoted him at the weekend talking about Mr Thatcher's role.

He accused reporters of misquoting him, but he did not threaten to take legal action against them. He said: 'I deny having any knowledge of . . . Mr Thatcher's involvement in (the) transaction.' He added: 'I and my companies have never worked in defence matters outside of Saudi Arabia. The intelligence services of the Western countries of the principal suppliers to Saudi Arabia are well aware that I and my companies have assisted in defence matters only in Saudi Arabia and nowhere else.'

There have been repeated allegations that weapons shipped under the guise of Al-Yamamah during the 1980s were destined, in fact, for Iraq as part of a clandestine Western effort to help arm Saddam despite sanctions. A spokesman for the Scott inquiry said last night: 'The inquiry has investigated various allegations regarding the possible use of Saudi Arabia as a diversionary destination for the export of arms and ammunition to Iraq. However, the inquiry is not investigating the Al- Yamamah project.' The terms of reference of the Scott inquiry would not allow for a wholesale investigation into Al-Yamamah.

Several witnesses have told the inquiry that Saudi Arabia was used by British companies as a false 'end-user'. Some of this testimony was heard in closed session. Among those who are known to have made such claims are Gerald James, former chairman of Astra, the arms company. He claimed that British Aerospace ground-to- air missiles were shipped as part of an Al-Yamamah consignment for Saudi Arabia but diverted to Iraq. The consignment was allegedly stored in premises belonging to Astra without the knowledge of all the firm's management. It is not known what British Aerospace, which is the prime contractor on Al-Yamamah, has told the inquiry. A spokesman said: 'Yes, there has been correspondence and other contacts with the inquiry.'