BAE, Airbus and the Iraq War

[John Simkin]

It has been announced that BAE Systems, the British military contractor is in talks with the European Aeronautic, Defence & Space consortium to sell its 20 percent stake in Airbus. This will bring to an end a nearly 30 year partnership that spawned the world’s largest passenger plane. It is estimated that the stake is worth 6 billion.

According to the International Herald Tribune (8th April) the decision to sell is linked to Blair’s foreign policy. The newspaper quotes Andy Lynch, a fund manager with Schroder Investment Management, as saying that Blair willingness to send troops to Iraq and Afghanistan has made the arms industry a more predicable business than the aircraft industry. Especially as Blair has been very keen to give BAE long-term government contracts (the company specializes in land-based artillery). BAE is also a major supplier to the Pentagon. In fact, in the past two years it has bought six military contracting companies in the United States.

The Herald Tribune claims that BAE is in the process of transforming itself into a quasi-American company (in the same way that Blair is a quasi-American prime minister). Apparently it is currently trying to takeover L3 Communications Systems (surveillance systems) and Raytheon (missile maker). BAE Systems is now the world's 4th largest arms company. Each year it sells arms worth around £11bn across the globe.

Is it possible that Blair is involved in a corrupt relationship with BAE and Boeing? For example, Airbus booked record orders for 1,055 passenger planes last year, versus 1,002 for Boeing. With the success of the A380 Airbus is in a good position to become the world’s leading aircraft production company in the world. Business analysts are saying that BAE’s decision to sell is undermining confidence in the A380 and will help its main rival, Boeing.

Is it possible that BAE is to Tony Blair what General Dynamics, Brown & Root, Halliburton and Bell Corporation were to Lyndon Baines Johnson?

Is it possible that it was really the agents of BAE that has been loaning money to Blair and New Labour (covered up by the claims of Lord Sainsbury)? Here is an account of Blair’s relationship with BAE that appeared on the Campaign Against Arms Trade website:

http://www.caat.org.uk/publications/companies/baes.php

BAE Systems has a turbulent relationship with the MoD and has faced accusations of heavy-handed lobbying tactics and poor project management. However, whatever its problem with the Ministry and its civil servants, BAE Systems can always rely on Tony Blair.

Ever since Blair arrived in government in 1997 it has been apparent that he has supported BAE Systems against all comers and all rational argument. He pushed through controversial sales to Zimbabwe and Tanzania and lobbied, amongst others, the South Korean and South African Presidents on behalf of BAE Systems.

Striking confirmation of the relationship was provided by Robin Cook in his book 'The Point of Departure'. He states 'In my time I came to learn that the Chairman of British Aerospace appeared to have the key to the garden door to Number 10. Certainly I never once knew Number 10 to come up with any decision that would be incommoding to British Aerospace'.

The extent to which Blair's love of BAE Systems permeates the UK government isn't entirely clear, but it is clear that BAE Systems receives 5-star treatment from a wide variety of official sources:

• minister after minister trooped out to promote the sale of the Hawk aircraft to India, regardless of the level of conflict over Kashmir.

• corruption allegations, reported to the government, have not been fully investigated.

• changes to guidelines have weakened arms export controls in areas relevant to BAE Systems, most obviously those announced in July 2002 which facilitated the transfer of the company's equipment to Israel via the US.

• the DSEi and Farnborough arms fairs receive financial assistance and ministerial support.

• the Defence Export Services Organisation continues to dedicate 600 civil servants to the arms trade under the leadership of an arms industry boss, currently seconded from BAE Systems.

• there is a proliferation of 'advisory bodies' which give the major arms companies preferential access to civil servants and ministers.

• a new Missile Defence Centre has appeared for no apparent reason other than to help UK companies win US 'Son of Star Wars' contracts, with BAE Systems as the lead contractor.

• and to bring things right up to date, just last month Prince Andrew and the UK's Ambassador to Bahrain opened BAE Systems' first office in Bahrain.

The reason for Blair's affection for BAE Systems isn't immediately obvious. It's often assumed that UK jobs lie at the heart of his interest but BAE Systems' record on that score is poor. In 2003 it stated that it would make 470 workers at its Hull Brough plant redundant if it didn't receive a contract from the MoD for Hawk jets. BAE Systems was duly given the contract even though the Treasury said an open competition would save the taxpayer £1 billion (£2 million for each of the 470 jobs!). In April 2004, less than a year on, BAE Systems announced the loss of 760 jobs and the following week a further 1,000 jobs. There has been little outcry. Jobs appear only to be important when BAE Systems wants to win a contract.

Tony Blair is fully aware of this so we need to look elsewhere to understand his enthusiasm for the company. The most likely explanation revolves around Blair's fondness for big business generally and his zeal for the grand foreign policy/military statement. BAE Systems brings these together in one entity and seems to hit all the right buttons.

BAE Systems continues to receive more than its fair share of corruption allegations. And, despite the unwillingness of the Serious Fraud Office (SFO) and the MoD to investigate, they won't go away.

In September 2003, the Guardian published details of its investigation into allegations of a £20m 'slush fund' set up by BAE Systems to bribe Saudi officials. It reported that a confidential letter from the head of the Serious Fraud Office (SFO) to the MoD alleged a possible fraud operation involving BAE Systems in relation to the massive Al Yamamah arms deals with Saudi Arabia. Neither the SFO nor MoD pursued the allegations despite being provided with a box of relevant invoices and other documents by a former employee of BAE Systems' front company.

Earlier allegations that BAE paid £7m commission into a Jersey trust for Qatar's foreign minister also ended with a failure to investigate. This, despite the SFO being asked for help by the Jersey authorities, and the UK Government admitting that it had a report of this commission payment in 1998.

Other allegations have been met with an alternative official response, if a similar end result. In June 2003 the Guardian alleged that 'BAE Systems paid millions of pounds in secret commissions' to win a South African Hawk jet contract. Astonishingly, it stated that the UK government had confirmed the payment but refused to reveal the amount paid. The DTI did, however, say it was 'within acceptable limits'!

There have been other allegations relating to the Czech Republic and India, but none of the allegations draw much of a reaction from BAE Systems. The company has a standard response of ignoring specific allegations and offering a variation on the theme, 'BAE operates rigorously within the laws of both the UK and countries in which it operates.' BAE Systems is certainly careful regarding corrupt practices, but the suspicion must be that it is careful to hide them rather than shun them. The Guardian recently reported that in 1997 BAE moved 'filing cabinets full of evidence of corrupt payments to foreign politicians to a vault in Switzerland' using a subsidiary registered in the Virgin Islands.

[John Simkin]

BAE Systems, Britain’s biggest arms company, is at the centre of a major scandal and is being investigated by the Serious Fraud Office. Barry George, acted as BAE’s agent during the government sale of two British frigates to Romania. Apparently, BAE paid Barry George over £7m in commission for this deal.

The deal was arranged in 2003 by William Bach, the government’s arms sales minister. Ironically, Tony Blair has been lecturing Romania on tackling corruption before being accepted into the EU. Obviously, he does not think they are sophisticated enough in their corruption. Maybe he will have to give them advice on this.

BAE Systems have a long record of corruption. Last year, it was alleged in Chile that BAE had paid more than £1m to intermediaries linked to ex-president Pinochet in return for arms deals.

In 1996 a secret £7m payment from BAE to the foreign minister from BAE to the foreign minister of Qatar was discovered in a Jersey account after an arms deal to the state.

In 2003 a whistleblower alleged that a £60m slush fund was being used by BAE to provide presents to the head of procurement for the Saudi air force.