British Allowed Iraq to Acquire Tooling for High-Tech Weapons, Documents Say : Gulf War: Data indicates machines could be used for nuclear weapons. Critics have said U.S. pursued a similar policy with Baghdad.

The British government allowed sophisticated machinery to be shipped to Iraq in the late 1980s despite knowledge that the equipment was essential to Iraqi efforts to build a nuclear weapon and other armaments, according to intelligence documents intended for disclosure at a London trial.

The trial ended suddenly Monday when a judge declared that four weeks of testimony had demonstrated that the shipments, made by three former business executives, were not illegal because the government had given them at least tacit approval.

The documents, obtained outside the courtroom, provide a far more extensive picture of how the British government allowed machine tools to be sold to known Iraqi military facilities.

The hundreds of pages of British intelligence reports and other internal documents show that British officials knew some of the equipment could be used for nuclear weapons and ballistic missiles.

Similar allegations have been directed at the Bush Administration by congressional critics, who claim that Iraq was permitted to buy U.S. technology for its weapons programs before the Persian Gulf War.

President Bush has vehemently denied that his Administration knowingly contributed to Iraq’s arsenal.

The British documents do not reflect directly on U.S. policy, although a British intelligence agent testified during the trial that he presumed data on Iraq’s arms-buying efforts was shared with the CIA and other Western intelligence agencies. Defense lawyers said that the U.S. and British policies were coordinated.

Prime Minister John Major, trying to contain the potential scandal, Tuesday ordered an immediate independent judicial inquiry into charges that Britain broke its own embargo on selling arms and military technology to Iraq.

“There have been some extraordinary stories about this matter,” Major told Parliament. “They must be clarified beyond any measure of doubt.”

Major’s announcement followed demands for a speedy investigation into the “deeply disturbing matter” by John Smith, a leader of the opposition Labor Party.

What is now called a “British Iraqgate” started four weeks ago in London’s Old Bailey court with the trial of the three former executives of Matrix Churchill Corp., a machine-tool company in Coventry, England, that was owned secretly by Iraq. Matrix Churchill also had a U.S. subsidiary near Cleveland.

Prosecutors charged that the men violated export laws by concealing that the purpose of machine tools sold to Iraq from 1988 to 1990 was to build weapons. But defense lawyers argued that the government knew of the military uses and had allowed the exports as part of a secret policy of supporting Iraq.

The attorneys said that the government was prepared to let the men go to jail to prevent disclosure of the policy.

Documents suggest that former British Prime Minister Margaret Thatcher, a strong supporter of Iraq during the Iran-Iraq war, was briefed on the policy just weeks before Iraq’s invasion of Kuwait in August, 1990. Major took over as prime minister in November, 1990.

The records also show that the British policy was driven by a keen desire to keep its machine-tool industry alive and by intelligence considerations.

In testimony at the trial, two intelligence agents testified that two Matrix Churchill employees, including one of the defendants, had provided intelligence data on Iraq’s arms-buying network since 1987.

A former trade minister also testified that he had encouraged the sales, although he knew the equipment could be used to help Iraq build conventional arms.

But the newly disclosed documents tell a larger story. They show that the British knew Iraq was engaged in efforts to buy Western technology for its nuclear, chemical and ballistic-missile programs--and that the Matrix Churchill machines could help develop the weapons.

A confidential report on Matrix Churchill exports submitted Feb. 1, 1989, to Foreign Office Minister William Waldegrave warned that Iraq had secretly taken over the company and intended to use it to supply machinery for its arms and munitions factories.

The report also said that Safa al Habobi, an Iraqi official connected to Matrix Churchill, was seeking nuclear-weapons technology.

“We know of course that machine tools capable of contouring in two axis, as is the case with these machines, are essential for the production of nuclear weapons,” said the report.

British intelligence was receiving information from the two Matrix Churchill employees at the time. The report cautioned that rejecting the sales could force the company to shut down and “we would lose our intelligence access to Habobi’s procurement network.”

The equipment, worth about $10 million, was shipped to Baghdad later in 1989. A follow-up report suggested it was used on a missile project and to produce components for “a nuclear explosive device.”

British intelligence had known since late 1987 that machine tools from Matrix Churchill and other English firms were destined for Iraqi weapons facilities, according to the records.

On Nov. 25, 1987, an intelligence agent wrote that one of the Matrix Churchill executives had provided details of contacts between Iraqi and British firms.

“Source is in no doubt that all these tools will be used in Iraq for the production of armaments,” the report said.

A year later, British intelligence reported that Saddam Hussein had “personally congratulated Habobi” for his procurement efforts.

Habobi also was active in arranging purchases of U.S. technology through Matrix Churchill’s subsidiary outside Cleveland.

Federal investigators, who shut down the operation in September, 1990, have said that much of that technology also wound up at Iraqi military facilities.

The British documents do not directly show that the information on Iraq was shared with the U.S. government.

However, the CIA and Britain’s MI6 have a long history of cooperation and a U.S. intelligence official suggested that British information had been passed on to the CIA.

Frantz reported from Washington and Tuohy from London.