HC Deb 16 January 1974 vol 867 cc774-87

3.42 a.m.

Mr. Tam Dalyell (West Lothian)

When he was translated—or was it promoted?—from the Ministry of Defence to the Foreign Office, I doubt whether the Minister thought that he would be making his debut, as I think it is, from the Dispatch Box at 3.42 a.m. If it had been at 3.42 p.m., this is a subject on which he would have had a larger House than at present, as many of my right hon. and hon. Friends are deeply interested in the issues of trade and technical co-operation with Iran and the countries of the Middle East and are equally alarmed at the proportion of arms sales to those countries.

Perhaps our distilled feelings can best be summarised by Roger Woddis' "Over a Barrel (After 'Arabia' by Walter De La Mare)": Far are the lands of Arabia, Where the sheikhs are riding high And gold will flow through the desert Till the gushing wells run dry ; Yet such are the needs of the moment That the lords of Arabian soil Cry, 'Arms, for the love of Allah! Arms, in exchange for oil!' Sweet is the music of barter To the ears of a Western state That can dangle the prize of weapons As an oh-so-tempting bait ; For the sake of dark-eyed OPEC And those thirty million tons We'd gladly sell our immortal souls. Let alone a few tanks and guns. They haunt us, those buried riches That lie in that distant land, And the lure of industrial machinery Is the strongest card in our hand, Though the eyes of the world look coldly And cold voices whisper and say: ' They are crazed with the spell of the Saudis, Who have stolen their pride away.' I do not claim any originality for that poem, which appeared in a recent issue of the New Statesman, but it sums up the worries of many of my hon. Friends.

From one point of view this cupboard is full of skeletons. For what it is worth, my own position is not very commendable in retrospect—one of feeble protest and worry about the appointment of an arms salesman and acquiescing in the huge arms sales under Governments of both parties over the last 10 to 15 years. Let us admit it, those sales have been of real benefit to British industry.

From another point of view, not less moral, it can be argued convincingly that developed countries have no moral right to deny arms to less-developed countries if arms are what they say they need.

I raise this topic in no spirit of superior virtue or greater morality, and I hope that the Minister, in turn, will not take refuge in any "yah-boo" argument, or what the lawyers more elegantly call the tu quoque argument. I raise the subject first because we must be worried first about the increasing scale of arms supplies from the individual countries of the West and, secondly, to ask whether it has reached this scale because purchasers such as Iran and many of the Gulf States think that they really need such supplies, or whether it is rather because we need the oil at the new price and cannot think how to pay in full for it other than by persuading those countries that they need yet more weaponry.

Some of the facts must raise our collective eyebrows. For example, Iran has now substantially more Chieftain tanks than we have in Rhine Army. The Shah is involved in negotiations for participation not only in the purchase but in the development costs—yes, the development costs of America's Fl 5 and for purchasing the sophisticated Phoenix missiles. He is also said to be interested in a substantial purchase of the multi-rôle combat aircraft. We are not talking about toys. We are talking about the most sophisticated weaponry on earth.

When I suggested to a friend recently back from Iran that the Shah might see himself as some latter-day Xerxes or Darius, he replied glumly that that was not the position. The Shah has relatively more military capacity in today's modern world than had Xerxes in the ancient world. Herodotus would have shuddered at the weight of Persian armament.

The trouble about weaponry of this order is that either it is a colossal waste of human skill and the earth's resources or someone, somewhere, some time is likely to want to use it—or, perhaps most likely, the amount of cash spent on the Armed Forces enrages the civilian population, many of whom in some countries in the Middle East are among the poor of the world. Over the long term what we are up to could be dynamite. We must be careful that these poor people do not come bitterly to resent us, the suppliers of the arms. The arms build-up in some countries of the Middle East is far in excess of any threat posed by their immediate Arab neighbours.

Writing in Impact International, Mr. A. W. Hamid gives the figures—I cannot vouch for them—that in 1972 Britain and America—I leave out France and the rest of Western Europe—supplied Iran with £370 million worth of arms. In 1973 it was £800 million. I understand that this year it is going up at an even faster rater. The Americans, for example, are supplying a lot of sophisticated weapons to the Saudis, including 100 Northrop F5E international fighters. From his time at the Ministry of Defence the Minister will know what that means.

Against this background I have certain specific questions to ask about the recent visits to the Middle East of the Secretary of State for Defence and the Minister of State, Foreign Office, and about the industrial delegation under Mr. Peter Carey. I welcome, as we all do, reported Iranian interest in steel billets, plastics, tyres and paper products and particularly long-term factories. This kind of trade with the Middle East could not be more welcome. I do ask whether the various important people who have been to the Middle East have talked to leaders such as King Faisal, asking what they thought would happen to their countries when the signs become evident that the oil will cease to gush.

The argument is for anticipatory action that might be taken in the form, for example, of industrial development and massive irrigation schemes.

What effort is being made by the Government to dissuade Middle-Eastern Governments from buying arms and to persuade them to make purchases which will contribute to the longer-term improvement of the standards of their people? It is perhaps an understandable human situation. On the one side of the table we have Ministers who desperately want to win currency for oil. On the other hand are men bewildered by their own wealth and usually genuinely trying to secure the future of their own country. It would never occur to me to sneer at the capacity or intelligence of most of the Arab leaders with whom we negotiate. They are quite as patriotic as any of us. The issue is this: in difficult circumstances are we sure that we are presenting the options that will secure the real long-term good of their people? It is not only our moral duty but it is in our own interests to present options that are sophisticated, expensive, technical advances which are to their good and the long-term good of mankind, such as desalination plants and massive irrigation of the desert. I know that British industry is interested in such proposals.

Secondly, as one who voted in favour of our entry to the Common Market on 28th October 1971, I get a feeling of deep dismay and depression at the spectacle of individual countries in Western Europe separately and secretly running along to Riyadh and other capitals of the Middle East, each trying to persuade these countries to buy more arms. The Americans also seem to be in this to the hilt. Apparently the Minister disagrees. If he can deny this, I and many of my colleagues will be very relieved.

We want to know why we sent Sir Reginald Anderson off to Riyadh in December. Was it sell Harriers, Chieftains and Rapiers? Why did the German State Secretary, Siegfreid Mann, go off on 8th January? Why have numerous French delegations been selling Mirage IIIEs and AMX 30 tanks? What took place in the various discussions in Rome? What efforts have the Italians made to sell sophisticated weaponry?

The picture which has been built up is that of Europe in the spring of 1914 and not that of the Europe which many of us hoped to see in the spring of 1974 and of the Europe that we hoped for on 28th October 1971. … co-operation, not confrontation, offers the only hope which, of course, involves the achievement of a Middle East peace. This might be linked with plans for the flow of oil and the development of the Arab economies. Both the West and Russia would have to be parties to the arrangements. The longer-term problems stem from the sharp rise in the cost of oil rather than its relative scarcity. On present form, the Arab states could soon be running a favourable trade balance of some $20,000 million to $30,000 million a year, with corresponding deficits spread among the oil importing countries. Unless wisely handled a payments disequilibrium on such a scale could prompt each deficit country to try to protect itself by restrictive measures amounting to beggar-my-neighbour. Since the Arabs can hope to be able to spend on goods only a fraction of their swollen oil revenues, suitable investment outlets seem to be the answer. As part of a Middle East settlement arrangements might be made to channel Arab funds into the capital needs—which are bound to be larger than ever—of the international oil companies. The Arabs could even be offered a stake in the nuclear power and/or oil-from-coal/shale programmes of the West. Since the Arabs profess to want to conserve their petroleum assets, this is the way to help do so. Energy is now recognised as a world problem of international concern. It follows that we in Britain cannot hope to be able to sit back and expect the North Sea finds, diplomatic genius or anything else to get us off the hook. Energywise it is only too painfully true that things will never be the same again. There I quote from Chemistry and Industry, to which I am a regular contributor: The Arab oil embargo that started with the October Middle East war has opened a Pandora's box of international economic anarchy whose implications have inexorably expanded far beyond settlement of the Arab-Israeli border disputes. With the rapacious example of the oil producers and the vulnerability of highly industrialised nations to raw material supplies as an example, every controller of a scarce commodity from wood pulp to coffee and uranium is likely to follow the trend for the maximum price squeeze in the minimum time, setting off an inflationary spiral that could wreck the world economy. This year could be a period of modest progress and new and better policy formulation. Or it could be an unmitigated disaster. Thus, Bob Hoty, of Aviation Week.

A debate at this time of night is not the occasion for trying to overcome world disaster, but, if we are not to have an unmitigated disaster, Heads of Government must get together to make a collective response, perhaps along the lines outlined by Dr. Kissinger. If they do not get together to ask whether it is wise to make sales of this kind and scale to the Arab world, the present leaders of the West will appear in a very unfavourable light in history.

4.0 a.m.

The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Peter Blaker)

I am glad that the hon. Member for West Lothian (Mr. Dalyell) has raised this matter this morning. I agree with him about its importance and that had he been raising it 12 hours ago attendance in the House would have been much larger.

I believe that from what I have to say the answers to many of the points raised by the hon. Gentleman will emerge. I hope that I can put the matter in perspective and show that some of the assumptions made by him and some of the impressions that he has derived from what he has been reading are misleading.

The hon. Gentleman has raised two matters—technical co-operation with Iran and other countries in the Middle East and arms sales. I should like to start by talking about technical co-operation.

The hon. Gentleman knows that our aid policy towards Iran and other countries in the area, as in other parts of the world, is based upon the desire to help the Governments in that area to improve the quality of life of their people. This manifests itself in many ways, varying from country to country, according to the widely differing conditions in that part of the world.

There are, as the hon. Gentleman reminded the House, extremely rich countries with vast oil resources which are in people's minds at present, and countries with no oil resources and only limited material wealth where a great deal is needed to develop them and raise the standard of life of their people.

I should like to mention briefly what we do, before going on to deal more specifically with some of the questions asked by the hon. Gentleman.

We do not give capital aid to any of the oil-rich States in the Middle East, but we provide a great deal of technical assistance, which varies according to the needs of the various countries, usually in the form of advisers and instructors in a wide range of technical and educational spheres, often with supporting equipment.

Outside the aid programme, which is financed by Her Majesty's Government, there is often recourse, especially in the richer countries, to the services of specialist departments and technical institutions in this country and recruitment of experts, through such organisations as the Crown Agents, on a repayment basis. In general terms our policy is to help in the development of countries in the area by sharing with them our expertise in pursuance of the requests which they make to us and to the extent to which we are able to meet them.

Iran is the major recipient of technical assistance to the oil-producing States. Technical assistance is given in the form of experts, equipment in support of experts, and training fellowships. About 30 British experts are currently in post in Iran serving on contracts of about two years' duration. A number of short-term advisory visits have been arranged. About 140 Iranian trainees have received fellowships in the United Kingdom in 1973.

The bulk of the remainder of the technical assistance programme for oil-producing countries in the area for the current year is provided to Bahrain, Oman, Saudi Arabia and the United Arab Emirates. In addition we give technical assistance to Egypt, Jordan, Sudan, Lebanon, and the Yemen Arab Republic. We have also made a capital aid loan to Egypt of £15 million spread over five years from 1972, interest-free loans up to £10 million to Jordan to help with its three-year development plan, and to Sudan a £15.7 million programme spread over four years from 1973, which includes the provision for technical assistance to which I have referred. As the House knows, we are in touch with some of the oil-producing countries in the area which are seeking ways of involving the oil-consuming countries in their development, and that brings me more directly on to one of the main points made by the hon. Gentleman.

The hon. Gentleman asked particularly about the recent mission to Iran, led by a member of the Department of Trade and Industry. We are now at an advanced stage in the negotiations with the Iranian Government for additional supplies of oil to this country in exchange for the supply of certain commodities to Iran. These negotiations are taking place against the background of our excellent relations with Iran and after a series of extremely useful discussions between Ministers of the two Governments. As a result of the work of the Anglo-Iranian Joint Ministerial Commission set up in 1972 a highly successful investment conference was held in Iran in November last, attended on our side by my right hon. Friend the Secretary of State for Trade and Industry and a delegation of officials and senior British businessmen led by Lord Thorneycroft.

Mr. Dalyell

At the meeting with Mr. Ansari and other Ministers, was the case put for technical co-operation and trade, rather than arms supplies? Did the Government positively put that case?

Mr. Blaker

The discussions were about technical co-operation and trade, and I shall elaborate on that in a moment.

The result of the conference was the announcement of participation by British firms in joint ventures with Iranian partners to an overall value of about £250 million and covering a wide range of fields from steel to banking and from agriculture to diesel engines.

The hon. Member referred to the visit to London of Mr. Ansari, the Iranian Minister of Economy. During that visit the Minister put to my right hon. Friend the Secretary of State for Trade and Industry the proposition that in return for assured supplies to Iran in 1974 of certain commodities the Iranians would make available to the United Kingdom Government supplies of oil over and above what the United Kingdom could expect to receive from the consortium. The additional oil would come from oil available to the National Iranian Oil Company under the current agreement with the consortium.

As a preliminary, the Iranian Government communicated to us a "shopping list" of commodities in which they were interested and which included notably steel, chemicals, artificial fibres, tyres and paper.

The present position on these negotiations is that a mixed official and business negotiation team under the leadership of Mr. Carey of the Department of Trade and Industry went to Teheran on 5th January. This team put forward positive proposals for the export of goods worth considerably more than £100 million which the Iranians are now considering. We believe that it will be possible to conclude the negotiations on terms acceptable to both sides. We have every hope that the proposed deal will result in a substantial additional quantity of oil becoming available to the United Kingdom, and that, I am sure, will be welcome to the House.

I should like to pay tribute to the speed with which the United Kingdom firms concerned responded to this initiative, as a result of which we were able to put forward a substantial offer in a very short period of time.

The hon. Gentleman referred to other countries in the Middle East. The House will be aware from reports in the Press that Her Majesty's Government have entered into, or are about to enter into, agreements with a number of other Middle East countries for the long-term supply of oil.

The hon. Gentleman also referred to Saudi Arabia. The background is that several Middle East oil producers, notably Saudi Arabia, have made it clear in recent months that in future increased production of oil will be undertaken only in exchange for assistance from the developed world in the building up of their industrial and economic base. This is very relevant. I think it is something which the hon. Gentleman is suggesting is desirable, and I agree with him, because these States realise that what is in many cases their sole natural resource is a wasting asset. They are therefore, quite understandably, seeking incentives from the industrialised world not to keep their oil in the ground. They wish to exploit their resources in such a way that future generations in their countries will not accuse them of squandering their heritage. Hence the proposals for industrialisation, which should ensure for the countries concerned an economic infrastructure which is capable of withstanding any drying-up of the oil wells.

It is clearly to our global trading advantage if we can help to develop these countries industrially ourselves. British industry will benefit from participation in the industrial projects concerned and new markets for our consumer goods will develop as the standard of living in these countries rises.

With that general consideration in mind, and the more immediate need to secure long-term supplies of oil at reasonable prices, we have been exploring with several Arab oil-producing countries, including Saudi Arabia and some Gulf States, the possibility of participation in industrial development. The initiative for these discussions came in each case from the oil producer concerned.

In addition, in a period of continuing oil supply shortage, it would be irresponsible from our point of view for us not to do all we can to increase available supplies. It is oil from increased production that we are seeking from these arrangements. This will be not only to our advantage but to that of our EEC partners.

Discussions with Saudi Arabia have been going on for some weeks but we are some way yet from a successful conclusion. Contrary to Press reports, no agreement has yet been signed. All I can say at this stage—I stress this—is that there is no question of an arms-for-oil deal.

One of the main problems is, of course, price. Like most consumer countries, we are very concerned at the recent large increases in the posted price of oil. This will have an early impact on all Western economies.

Mr. Dalyell

If the Minister says that there is no question of an arms-for-oil deal, am I being told that I am wrong to suggest that the Anderson mission of December to Riyadh was unimportant?

Mr. Blaker

What I am saying to the hon. Member is that Mr. Anderson's visit was not connected with an arms-for-oil deal.

I was saying that one of the main problems is price, and we are very concerned at the recent large increases in the posted price of oil. We are not in favour of any bilateral deal which might accelerate price increases. This question, among many others, makes the recent proposal by Dr. Kissinger for an energy action group most timely. We have warmly welcomed that initiative, which I hope will make a significant contribution to the forging of consumer-producer relations. Co-operation at this level, involving not only the developed but the developing consumer countries, is essential if we are to establish a rational and equitable framework for the supply of oil in the future.

The hon. Gentleman referred to the EEC and I should like to say a word about that. As the House knows, my right hon. Friend the Prime Minister and his Community colleagues agreed at Copenhagen on the importance of entering into negotiations with the oil-producing States on comprehensive arrangements for the economic and industrial development of these countries and for stable energy supplies to the members of the EEC at reasonable prices. Her Majesty's Government entirely endorse this policy.

We have, however, been accused in certain quarters of pursuing solely a policy of national self-interest in discussing bilateral agreements with certain Middle Eastern States. I should like to take this opportunity of rejecting that criticism because it fails to take account of three factors. The first is that the necessary machinery for co-operation of this kind between the EEC and the producers simply does not exist at present. Secondly, we had to respond to the oil producers' initiative if we were not to lose their confidence. Thirdly, we hope by these arrangements to increase oil production and thus the total amount of oil available globally. Bilateral deals are therefore not incompatible with a Community approach to the question.

We are exploring and shall continue to explore the possibility that what the producers have to offer can eventually be developed within a Community as opposed to a national framework. There may indeed be early scope for Community involvement if, for example, certain projects in the Middle East prove too large for any one member to handle.

In short, the world's energy problems are far too serious to be solved by this country alone, or even by Europe alone. We strongly support President Nixon's imaginative proposals for a meeting in Washington, which we see as an opportunity to launch a new pattern of relationships with oil producers from which they will receive the industrial and economic development that they need and the consumers will get oil supplies at reasonable prices. The Community has agreed to accept President Nixon's invitation to take part in a conference on 11th February in Washington. We support the development of a Community energy policy on the lines set forth at Copenhagen. Meanwhile, we are making our own contribution to the evolution of these new relationships by exploring with certain producer countries how in the actual circumstances of each country mutually advantageous arrangements can best be made.

I deal now with another question that the hon. Member raised when he asked what was the purpose of the visit by my noble Friend the Member for Hertford (Lord Balniel) to the Gulf at present. The visit was arranged many months ago, well before the oil crisis and the hostilities in the Middle East last October. No Minister from this Department has visited all the Gulf States since the change in our relationship with them in 1971.

Originally, the main purpose of the visit was to demonstrate the continuing British interest in an area of importance to us, following the termination of our special treaty responsibilities. Recent events clearly gave the visit a rather different slant. Oil matters and related questions of producer-consumer relationships are bound to bulk larger than had been expected earlier. It is not, however, the purpose of the visit to conclude specific deals on oil supplies.

I have said that there is no connection between any of the contacts, to which I have referred and about which the hon. Member asked, with these Middle Eastern countries and the sale of arms to them. I now come to our policy in relation to the sale of arms.

It is well known that Iran is our ally in CENTO and an important purchaser of arms and that there is a significant British defence project for Saudi Arabia. Sales of arms to these countries have been made over a considerable period and are not the result of any particular recent initiative. I think that that answers one of the hon. Member's questions. It is not our policy to reveal details of individual arms sales to other countries, as we consider that such disclosure is primarily a matter for the customer. The hon. Member knows that that is our policy.

He conceded that it had been the policy of successive Governments to encourage the export of defence equipment taking into account in each case the political, strategic and security considerations involved for the United Kingdom. Defence sales make an important contribution to our balance of payments. The total for 1973–74 should reach £405 million.

A defence arms sales organisation in the Ministry of Defence was established by the previous administration in 1966 to assist and advise the arms industry, and the House will recall the statement by the then Minister of Defence, the right hon. Member for Leeds, East (Mr. Healey), on 25th January 1966 when he announced the setting up of this organisation. I respect what the hon. Gentleman said about his views on that matter. But it is right for me to remind the House that that important intiative was taken in 1966 by the previous administration.

When the hostilities broke out in the Middle East in October of last year, the British Government called for an immediate cease-fire and suspended all shipments of arms to the battlefield. We did that because we considered it inconsistent to call for an immediate end to the fighting and yet to continue to send arms to the area of conflict. This policy is kept under study in the light of the developing situation in the Middle East.

Mr. Dalyell

To say that because there is no EEC machinery for dealing with the Arab world and, therefore, to imply that we cannot do anything about a situation in which Germany, France, Britain and Italy separately go there to promote arms sales seems very unsatisfactory. I thank the Minister for most of his answers, but I should like to give him notice that I shall be putting a Question to the Prime Minister later today returning to this subject. From the point of view of one who voted pro-Market on 28th October 1971, it is not good enough to say that because there is no machinery, and for two other reasons, we cannot do something about our individual delegations to promote arms sales.

Mr. Blaker

With respect to the hon. Gentleman, he has put what I have said in the wrong context. But I take note of the fact that he proposes to raise the matter later today.

Summing up, the Government regard it as highly desirable in our long-term interests to raise the general standard of living of the countries in the area to which we are referring by helping those countries with their development. We shall continue, therefore, to explore with those countries ways in which we can co-operate to our mutual advantage. At the same time, we shall continue to consider requests for defence equipment from those countries in the light of our political, strategic and security interests.