BAE Systems : Corporate Crimes

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BAE SYSTEMS

A Corporate Profile

By Corporate Watch UK

Completed June 2002




5. Corporate Crimes


Corporate Crimes

BAE SYSTEMS has committed an impressive amount of corporate crimes. What follows is merely a selection of some of the more recent ones and is by no means a comprehensive account of the company’s wrong-doings. CAAT have a wealth of information on BAE, and further details of the company’s deplorable record can be obtained from them (see Further Information/Resources).

Indonesia

BAE SYSTEMS’ arms sales to Indonesia are notorious. It has a long history of exporting Hawk Jets to the country, which was ruled by the vicious Suharto regime (and is still governed by a corrupt and undemocratic system, in which the military retains a large portion of power). Arms exports began as early as 1978, but the biggest controversy began in November 1996, when the Conservative government granted an export licence for 16 Hawk-209 aircraft. The purpose of the Hawk aircraft is not ambiguous - BAE themselves describe it as a ‘single-seat, radar equipped, lightweight, multi-role combat aircraft, providing comprehensive air defence and ground attack capability’.[44] Given that in 1996 Indonesia was also trying to purchase US F-16 aircraft (which are air defence fighters), it is likely that the Hawks were intended mainly for ‘ground attack’.

It is clear that these ground attack fighters were being purchased for use in internal repression, especially in East Timor. Despite Conservative denials, East Timorese leaders have frequently asserted that Hawk jets have been used in repressive attacks since 1978,[45] and whilst in opposition Robin Cook believed the same thing. As he stated in 1994, ‘Hawk aircraft have been observed on bombing runs in East Timor in most years since 1984’.[46] Unfortunately, this belief did not carry over into his stint as Foreign Secretary for the Labour Government, which renewed the export licence despite vehement protests. Needless to say, this change of heart had absolutely nothing to do with Lord Hollick (then a member of the BAE SYSTEMS Board of Directors) being a DTI advisor at the time of the decision[47], or BAE SYSTEMS’ massive influence over the Labour Government (see section on Influence/Lobbying). Despite continuing concerns over the use of Hawk jets in East Timor, the only action taken by the UK Government was a brief ban from September 1999 to January 2000. It eventually took UN intervention to stop the occupation of East Timor, and needless to say, BAE have never apologised for accepting contracts from a corrupt and murderous dictatorship.

Saudi Arabia

Before the protests over its exports to Indonesia, BAE (then British Aerospace) had already become involved in one of the biggest trade scandals of the 1980s; the Al-Yamamah deals with Saudia Arabia. In the words of the Financial Times, the arms deal known as Al Yamamah II was ‘the biggest [UK] sale ever of anything to anyone.”[48] The deals were condemned by Amnesty International as a clear endorsement of a country ruled by a repressive regime who displayed a ‘persistent pattern of gross human rights abuses.’[49] BAe was the prime contractor for the entire deal, which included the sale of 48 Tornado bombers, 24 Tornado fighters, 30 Hawk trainer-fighters, and a large number of Rapier missiles. It also involved millions of pounds worth of corrupt commissions paid to Arabian businessmen, which the Conservative government of the time denied, and which eventually led to the downfall of Jonathan Aitken. Bringing in the service side of BAe, the company provided training and advice for the Saudi military. Indeed, this was pursued to such an extent that The Economist suggested that ‘the company not only supplies Saudi Arabia with fighter aircraft, but virtually runs its entire airforce.’[50] The scandal was further added to by a Channel 3 TV documentary. This showed two BAe representatives offering electro-shock batons for sale and claimed that the company had supplied 8,000 of them as part of the Al Yamamah contract. In spite of the compelling nature of the evidence, the Director of Public Prosecutions decided not to charge BAe on public interest grounds.[51]

Turkey

The UK sold £84 million worth of arms to Turkey in 1998, most of which came directly from the BAE SYSTEMS empire. The orders for that year, which was largely typical, included tank turrets, military components and torpedoes. More worrying was the deal struck between Turkey and Matra Marconi Space, worth $110 million, for military satellite terminals, and the deal between a Turkish company and Matra BAE Dynamics for the manufacture of BAE’s Rapier anti-aircraft missiles. 850 of those missiles are to be supplied to Turkey.[52] The problem with all this, of course, is that Turkey is, an oppressive regime with an appalling human rights record. It routinely uses its military equipment to oppress and kill Kurds and other ethnic minorities. It has been accused by the Council of Europe, among other bodies, of having a history of ‘repeated and serious human rights violations’. The same body reported in July 1999 that it could see ‘no significant progress in limiting torture, disappearances, and extra-judicial killings’ in Turkey.[53]

Deliberate inflation of military spending

Selling military equipment to dictatorial and oppressive regimes is not the only corporate crime that BAE SYSTEMS commits (although they do seem to like doing it). Just as serious is its complete lack of scruples when selling weaponry to poverty-stricken and corrupt countries. The old argument ‘if we didn’t do it, someone else would’ is soon deployed when the examples (amongst others) of South Africa, Greece, Tanzania, Zimbabwe and India are raised. According to CAAT, ‘Arms purchases do not merely waste scarce resources, but also aggravate international tensions, generating mutual suspicion and hostility. The essence of this traffic is the alliance between Western arms companies and local military interests, which repeatedly show that they can manipulate even democratic politicians into needless extravagances.’[54]

  • South Africa

    At the time of writing, the government of South Africa has just decided to go ahead with the second phase of a deal with BAE worth £1.5 billion, involving the purchase of 24 Hawk aircraft as well as Gripen aircraft from SAAB (which BAE owns shares in). The deal has been roundly condemned by churches and NGOs across South Africa, as it will inevitably divert much needed resources from health, education and welfare policies. Raenette Taljaard, finance spokesman for the South African Democratic Alliance estimated that the money being spent on the Hawk jets could provide 4.5 million destitute South Africans with a basic living grant of R100 a month for a year, or offer housing subsidies for 337,500 homeless families.[55] Even if South Africa desperately needed new fighter aircraft, questions have been raised over the suitability of the ageing Hawk jets. Despite costing more than the aircraft which came first in the evaluation, BAE manufactured aircraft were chosen. This has lead to accusations of corruption and bribery.
  • Greece

    Arms sales to Greece would seem to be unobjectionable on first examination. After all, the country is a NATO ally of the UK and a European democracy. It is also, however, the poorest country in the European Union. At the same time, it spends a higher proportion of its national income on ‘defence’ than any other European power, except Turkey (Greece’s defence budget was 4.9% of its total budget in 1999). In the year 2000 Greece purchased 60 Typhoon aircraft from BAE SYSTEMS at a cost of £5 billion.[56] It is also looking to purchase additional submarines and attack fighters. This is disgraceful considering that the country cannot afford decent healthcare or housing for its citizens. This, however, is not a consideration for BAE, which will sell to any customer which has the money.
  • Tanzania

    Another case of BAE selling an expensive product to a country unable even to feed its own citizens came to light at the end of 2001, as the Labour Government approved the £28 million sale of a military air traffic control system to Tanzania. The country has an average per capita income of only £200, and the government of Tanzania has had to take out a hefty loan from Barclays to finance the deal. In an indication of the utter unsuitability of the deal, even the World Bank and the IMF refused to fund it, stating that they saw the system as a white elephant which would do nothing to benefit the country, and the Department for International Development rejected the deal on similar grounds before they were over-ruled by the Cabinet and Prime Minister. As Julian Forsyth, Oxfam’s head of policy, pointed out, the deal also makes a mockery of the Government’s supposed commitment to African debt relief. As he put it, ‘It is outrageous that Tanzania’s debt relief will go towards bolstering the profits of BAE and Barclays bank, rather than helping the poor people of Tanzania.’[57]
  • India

    In 2001, BAE SYSTEMS found itself involved in the ‘Hinduja scandal’ that prompted the resignation of Peter Mandelson. A former advisoer to the Indian government claimed that the company had paid a large “commission” to the Indian tycoons to fix a £1bn arms deal with the Indian Air Force for 66 Hawk jets. The ensuing controversy resulted in the resignation of India’s defence minister, George Fernandes, who also stood accused of manipulating procurement of the Hawks. Despite this embarassing setback, BAE continued to aggressively pursue the £1bn deal. This was at a time when India’s dispute with Pakistan over Kasmir threatened to turn into a (potentially nuclear) war, which would futher destabalise the entire region. Furthermore, whilst Tony Blair was expressing hope that the UK “could a calming influence” in the region, Geoff Hoon, the defence secretary, was pressing the Indian Government to make a quick decision on the Hawks. The proposed deal has faced harsh criticism from within India itself, with the UK being accused of “fleecing India over Hawks.” [58]

    According to The Guardian, the British government has recently admitted that British jets sold to India could be adapted to carry nuclear weapons or used to train pilots to fly nuclear-capable aircraft. The admission prompted angry reactions by MPs who said the sales flew in the face of the government's commitment to sustainable development, its guidelines covering arms exports, and its pledge not to encourage nuclear proliferation.[59]

    BAE SYSTEMS has already sold Jaguar combat aircraft to India in licensing deals which the Ministry of Defence (MoD) refuses to disclose.[60] Besides breach of contract, 'client confidentiality' is the explanation that's always trotted out to justify the obscurity within which the British Government is allowed to sponsor and subsidise gun-running, a BBC correspondent investigating the world of arms exports explains.[61] With regard to the Jaguar jet deal with India, junior defence minister Lewis Moonie told Tory MP Baldry that information about the end use in the Jaguar licensing deal, and the number of Jaguars involved in the deal, was confidential. Baldry said the deals were not consistent with the government's publicly stated concern about the impact of arms sales on sustainable development. "What the Indian government would spend on Hawk jets amounts to a decade of UK bilateral development aid," he said.[62]


Zimbabwe

BAE SYSTEMS was happy to provide spare parts to keep Robert Mugabe’s ageing Hawk jets in operation in Zimbabwe, which were obviously being used to sustain Mugabe’s operations in the Democratic Republic of Congo. Significantly, the Foreign Office had wanted to stop the export of the spare parts but are said to have been over-ruled by the Prime Minister, with whom Sir Richard Evans (Chairman of BAE) has a very close relationship (see section on Influence/Lobbying). BAE only stopped supplying spare-parts to Mugabe in mid-2000, when Mugabe’s behaviour became too outrageous to ignore.


Qatar/Algeria

In 2000, the Sunday Times reported that BAE had made an application to export £5 million worth of military equipment to Qatar, which Qatar intended to gift in full to Algeria. The information was leaked to the Sunday Times by a Qatari officer, and the DTI confirmed that ‘it had received the purchase order and it was being considered.’ Algeria has an ongoing conflict with Islamic groups and an infamous human rights record.[63]


Pressure on the Government and MPs

As the world’s largest arms manufacturer, and owner of a large majority of the UK’s ship-building industry, BAE is able to exert a massive amount of pressure on the Ministry of Defence. It has a history of threatening the Government with relocation and withholding of investment if it does not get the contracts that it desires. For example, in 2001 the company put pressure on the MoD to assign all 12 of the new Type 45 Destroyers to BAE, despite the original plan being to split their manufacture between Vosper Thornycroft and BAE SYSTEMS. It threatened that if it didn’t get the contract in its entirety it would scrap its planned investment of £150 million at Scotstoun on the Clyde, and effectively pull out of shipbuilding altogether, crippling the British manufacturing sector.[64]

BAE also boast close links to Tony Blair and the Government (see section on Influence/Lobbying).


Moving into the educational sector

BAE SYSTEMS has developed its PR machine far in advance of the traditional careers fair stall and occasional brochure. It has formed partnerships with a number of universities in the UK. It also sends many of its young engineers back into secondary schools to extol the benefits of a career with BAE. In addition, the company have sponsored various events and ‘educational’ displays, such as the Mind Zone in the Millennium Dome, further linking its name with scientific and engineering excellence, and avoiding its real business of manufacturing weapons to kill people. Having capital far in excess of any other UK engineering firm (partly because of its size, and partly because of its massive reserves from the Al-Yamamah deal) it offers extremely rewarding packages to the best UK engineering students, ensuring that the arms industry continues to leech off the most promising talents in the sector. (See also Influence/Lobbying)


References

[44] 'BAE SYSTEMS Facts, Hawk Aircraft', BAE SYSTEMS website: http://www.baesystems.com/facts/index.htm, accessed 30/4/02

[45] CAAT (2001) The International Arms Trade to Indonesia, Guardian Unlimited

Special reports, Guardian website: http://www.guardian.co.uk/indonesia/Story/0,2763,200783,00.html, accessed 10/5/02

[46] The Guardian (1999)Robin Cook defends his ethical foreign policy, Speaking on BBC Radio, 14 May 1997, Guardian Unlimited, 25/1/99, The Guardian website: http://www.guardian.co.uk/Archive/Article/0,4273,3811384,00.html accessed 30/4/02

[47] Gilby, N. (1999) Arms Exports to Indonesia, CAAT Briefing, CAAT website: http://www.caat.org.uk/research/Indonesia_Body.html,

[48] cited in Hirst, C. ‘TheArabian Connection: The UK arms trade to Saudi Arabia,’ CAAT website: http://www.caat.org.uk/research/Saudi_Body.html, accessed 9/5/02

[49] Amnesty International report (1999) – cited on BAE SYSTEMS, Reaching Critical Will website: http://www.reachingcriticalwill.org/dd/bae.html, accessed 9/5/02

[50] The Economist, 23 December 2000, cited in BAE SYSTEMS, Reaching Critical Will website: http://www.reachingcriticalwill.org/dd/bae.html, accessed 10/5/02

[51] Cooper, N. (2000) Minutes of Evidence, Select Committee on Defence, House of Commons website: http://www.parliament.the-stationery-office.co.uk/pa/cm199899/cmselect/cmdfence/541/9110314.htm, accessed 10/5/02

[52] Wrigley, C. (2000) BAE SYSTEMS Alternative Report 2000, CAAT

[53] ibid.

[54] ibid.

[55] Linton, L. (2002) Impoverished South Africa buys Hawk jets for £1.5bn, The Independent website, 6/4/02,: http://www.independent.co.uk/story.jsp?story=282099, accessed 30/4/02

[56] Aerospace 2000 / Defence, Industry Briefs: Financial Times Survey, The Financial Times website: A href="http://specials.ft.com/ln/ftsurveys/industry/sc22322.htm"> http://specials.ft.com/ln/ftsurveys/industry/sc22322.htm, accessed 9/5/02

[57]' Denny, C. (2001) Backlash over costly high-tech for Tanzania, The Guardian website, 21/12/01: http://www.guardian.co.uk/tanzania/story/0,11441,623358,00.html, accessed 10/5/02

[58] CAAT (2002) BAE SYSTEMS Alternative Report 2002, CAAT website: http://www.caat.org.uk/companies/BAES2002.pdf, accessed 10/5/02

[59] Norton-Taylor, R. (2002) British plane sales to India raise fears of nuclear use, The Guardian website, 23/4/02, http://www.guardian.co.uk/kashmir/Story/0,2763,688932,00.html, accessed 10/5/02

[60] ibid.

[61] Self, W. (2002) Addicted to arms - Tony's secret vice, 26/4/02, The Independent website: http://www.independent.co.uk/story.jsp?story=288959, accessed 30/4/02

[62] Norton-Taylor, R. (2002) British plane sales to India raise fears of nuclear use, The Guardian website, 23/4/02, http://www.guardian.co.uk/kashmir/Story/0,2763,688932,00.html, accessed 10/5/02

[63] Colvin, M. (2000) Britain plans Algerian arms deal despite ethical policy, Times Newspapers, 16/7/00, Algeria Watch (Germany) webpage: http://www.algeria-watch.de/farticle/britainarms.htm, accessed 10/5/02

[64] Bannister, N. (2001) BAE threatens to pull out of warship work, 2/3/01, The Guardian website: http://www.guardian.co.uk/Archive/Article/0,4273,4144885,00.html, accessed 30/4/0