Background to UK dodgy arms deals with Egypt

By staff writers
October 31, 2011

The Jubilee Debt Campaign (, to which Ekklesia is pleased to be affiliated, has done a fine job exposing the UK government's dodgy dealings with the former dictatorial regime in Egypt. The latest expose can be read here:

This is the background to the story:

Egypt owes the Export Credit Guarantee Department (ECGD) £100 million. It is currently making repayments of £12 million a year. The debt comes from ECGD backing loans to President Sadat (1970-1981) and his successor General Mubarak (1981-2011) in the 1970s and 1980s. Liberal Democrat Business Minister Ed Davey says the debt comes from 400 export contracts finalised before November 1986, but that the details of the individual contracts are no longer held.

However, new research from Jubilee Debt Campaign from documents uncovered in the national archives reveals that some of these export contracts were for arms sales to President Sadat and his successor Hosni Mubarak.

a) By 1979 £40 million of loans (20 per cent of all UK backed loans to Egypt) were for arms sales to President Sadat. UK arms exports to President Sadat included Swingfire missiles and Lynx helicopters, which were jointly financed between the UK loans for Egypt and finance from Saudi Arabia.

These loans were considered to be too risky to be financed under ECGD’s normal rules to ensure British taxpayers received their money back. They were made under a special ECGD provision (section two) where there is an overriding ‘national interest’ that the loans are made.

b) In 1979 and 1980 ECGD available backing for loans that were too risky for normal cover, but in the national interest, increased from £65 million to £400 million. This included backing loans of £85 million for Egypt to buy Rapier missiles from BAe.

This decision was taken by then Financial Secretary to the Treasury Nigel Lawson. Defence Minister Lord Strathcona told Nigel Lawson “though there is some doubt as to whether the Egyptian economy is yet strong enough to justify a large increase in cover, there is also a strong feeling that we should, in the national interest, give these BAe proposals favourable consideration”.

Foreign Office officials at the time said backing loans for arms sales was preferable to loans for power station equipment because this “would demonstrate our political support for Egypt during their current international difficulties. Power generating equipment would not”.

c) In 1985 and 1986 ECGD backed loans of £250 million for further arms sales. This included a tank factory near Cairo and a military city west of Alexandria. By 1986, ECGD had stopped backing loans for Egypt because of their high debt except in exceptional circumstances when British national interest required the loans to be made – such as arms deals.

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