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David Leigh and Rob Evans
For more than a decade, yellowing paper files in a government store have hidden the story of the way £1bn of Whitehall money was thrown away in propping up Saddam Hussein's regime and doing favours for arms firms.
It took place when many in both the British and US administrations were covertly on President Saddam's side. But as yet another war against the Iraqi dictator looms, what may be the final skeleton in Britain's arms-to-Iraq cupboard has been uncovered.
Some information about the Thatcher government's duplicitous record in selling to Iraq emerged in the mammoth Scott inquiry of 1996. The judge found that although Conservative ministers had restricted major "sharp" arms sales to President Saddam, they had also connived at ways round Britain's supposed neutrality.
During Baghdad's prolonged and bloody invasion of Iran in the 1980s, the inquiry discovered, officials shredded documents after deliberately smuggling Chieftain tank hulls made by the then royal ordnance factories to Iraq via Jordan.
Ministers secretly "relaxed" official guidelines to help private companies sell machine tools to build munitions factories. The judge discovered they had also abused lines of credit meant for civil development trade deals in Iraq, to include military sales.
But the identity of most of the firms was not published, and the amounts of insurance money they subsequently collected from the taxpayer remained a secret.
Now, the export credits guarantee department - an agency of the Department of Trade and Industry - has been reformed. It publishes lists of most of the firms who benefit from taxpayer-funded export insurance. And it has agreed to release to the Guardian details of the money lost by Mrs Thatcher's policies.
In the 80s the ECGD's "bold strategy" - as it was described in Whitehall files - of guaranteeing loans to the bankrupt Iraqi dictator was imposed on it by Mrs Thatcher herself, her foreign secretary Douglas Hurd and her trade and industry secretary Nicholas Ridley.
They in turn were strenuously lobbied by officials from Whitehall's arms sales department - the defence export sales organisation - who had close links with arms firms.
The Iraq guarantees were too risky to be a genuine commercial proposition. They were made under section two - a special ECGD provision allegedly in the "national interest".
The guarantees were supposed to cover only civil projects. But one firm Racal, which under the chairmanship of Sir Ernie Harrison regularly donated £75,000 a year to the Tories, was then provided with a secret "defence allocation" of £42m of special ECGD insurance, after getting a contract with Iraq in 1985.
ECGD documents show civil servants protested that a single company was getting virtually all the benefit from this secret allocation. But they were overruled.
Racal shipped sophisticated Jaguar V radios to President Saddam's army on credit. Frequency-hopping enabled them to defeat enemy jamming on the battlefield.
Racal was building a factory in Iraq when the Gulf war broke out. Subsequently, the ECGD had to write Racal's bankers an insurance cheque for £15.7m.
The Washington thinktank CSIS reported in 1998 that Iraq now possessed a factory making frequency-hopping radios at Sala-al-Din and al-Dawr, at its Sa'ad-13 complex.
In 1987 Marconi Command & Control got a bank loan of £10m, backed by a taxpayer guarantee to sell Amets - the Artillery Meteorological System - to the Iraqi army. Crucial for accurate artillery fire, Amets uses weather balloons linked to radar to measure wind speeds
But ECGD's secret "defence allocation" had been used up by then on Racal. So Ministry of Defence officials got the contract reclassified as civil. This murky deal led ECGD officials to protest privately that they had been misled by the MoD.
The ECGD ended up writing a cheque for £8.2m when Marconi failed to get its money.
Another contract in 1988 was also subject to manoeuvring. Tripod Engineering, backed by John Laing International, succeeded in getting its £18m deal classed as civil, even though it was for a fighter pilot training complex for the Iraqi air force. Tripod got assistance in its negotiations from an air vice-marshal, who shortly after retirement was paid by Tripod as a consultant, without seeking consent from the MoD as rules required. The Scott report found that his behaviour was "however unintentionally ... apt to give rise to ... suspicion".
The government ended up paying £2.9m compensation for the Tripod deal.
In the same year, Thorn-EMI got ECGD insurance for a contract to ship further supplies of Cymbeline mortar-locating radar to the Iraqi army and to train Iraqi officers. ECGD had to pay out almost £1m in compensation on the deal.
Members of the Conservative cabinet refused to stop lending guaranteed funds to President Saddam even after he executed an Observer journalist, Farzad Bazoft, in 1990, minuting privately that they did not want to damage British industry.
The firms who benefited from this tender concern have since cashed in their chips. The Midland Bank has been sold to the Hong Kong bank HSBC and Morgan Grenfell to the German Deutsche Bank. Racal and Thorn-EMI have both been sold to the French firm Thales, and Marconi sold to the giant BAE Systems.
Even if Britain now obtains reparations for President Saddam's £1bn loan defaults after a successful US-UK invasion, it will go nowhere near meeting the cost of the war to Britain. This has been estimated at £3bn-£5bn, depending on how much occupying and administering Britain has to do.