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Romania: Scandal Over Sale Of Steelworks Tainting U.K.'s Blair

  • Kathleen Moore

British Prime Minister Tony Blair won his first election in 1997 on a promise that his Labour government would be clean and free of the corruption that tainted the Conservatives before him. But now Blair -- one year into his second term -- is fighting the latest in a series of allegations that appear to undermine his clean image. They center on a letter Blair wrote to the Romanian government backing the sale of its Sidex steelworks to a London-based businessman. Nothing wrong in that, you might think -- except that the businessman is a big Labour donor and his firm barely meets the definition of a UK company.

Prague, 21 February 2002 (RFE/RL) -- Every political scandal, it seems, has to end in "-gate," as in "Watergate," the affair that brought down U.S. President Richard Nixon in the 1970s.

In the recent row over British Prime Minister Tony Blair's support for the sale a Romanian steelworks to a London-based businessman, it's "Steelgate." Blair's preferred term for the affair is "Garbage-gate."

The controversy centers on Blair's backing for London-based steel businessman Lakshmi Mittal. Mittal heads LNM Group, which successfully privatized Romania's Sidex steelworks in 2001. In July, Blair wrote a letter to congratulate the Romanian government on its choice of a British company as investor.

There's nothing new or scandalous in the U.K. government pushing the business interests of British companies abroad. Governments routinely do this. That's how Blair has portrayed the letter. And his official spokesman said Blair recently sent letters backing British firms to countries such as the Czech Republic, Bulgaria, and Russia.

The Mittal letter itself was hardly secret, either. It was covered in the Romanian press at the time of the deal.

But Adam Price says the Mittal case does not fit the standard pattern of a British government promoting British interests overseas. Price is the Welsh nationalist member of parliament who provoked the scandal earlier in February when he brought the letter to the attention of the British media.

"The difference with this case is, firstly, it wasn't actually a British company, it was a company owned by an Indian citizen registered in the Dutch Antilles -- in a tax haven. So, in fact, even the profits would not benefit the U.K.," Price says. "Obviously what has aroused suspicion particularly is the fact that a little under two months earlier, the owner of the business, Mr. Lakshmi Mittal, had actually given a very substantial sum of money to the British Labour party."

That substantial sum of money was 125,000 British pounds, or about $180,000, a donation Blair says he was unaware of at the time he wrote the letter.

As for whether LNM is a U.K. firm, Blair countered that LNM does have some British employees -- though they number fewer than 100, out of thousands worldwide at LNM's offices and plants in Kazakhstan, Indonesia, Mexico, the U.S., and Ireland. Critics say any firm with offices around the world could meet Blair's definition of a British company.

Critics were further angered when it emerged that Blair's government had been in favor of a $100-million loan from the European Bank for Reconstruction and Development (EBRD) to help Mittal buy the steelworks. "So what?" said Downing Street, many other EBRD member states approved that loan, too.

Price says what also rankled is the timing of the letter, which came as the British steel industry was shedding some 6,000 jobs. Worse, Mittal apparently gave a large donation to a campaign lobbying in the U.S. to introduce hefty tariffs on overseas steel imports. The tariffs would affect exports of British steel and presumably cost the jobs of some British steelworkers.

"What made it all particularly galling for us in Wales was to find out at the weekend that Mr. Mittal, at the same time that he was flying a flag of convenience, if you like, in the U.K., was actually actively undermining British steel and indeed the European steel industry through his lobbying campaign in the U.S. to impose steel tariffs against foreign imports," Price says. "This was not a British business. This was not a businessman that had British interests at heart. In fact, he's actively undermining British jobs and the British steel industry abroad."

It's all adding up to a growing perception that Blair has not lived up to his promise to clean up government. That's the view of Bruce Anderson, a political commentator for the daily "The Independent."

Anderson says the first affair to cast a pall on Blair's clean image came early on, when the British Grand Prix motor racing championship was granted an exemption from the government's ban on tobacco sponsorship. It later emerged that the head of Formula 1 motor racing, Bernie Ecclestone, had donated 1 million pounds -- almost $1.5 million -- to the Labour Party.

In 2001, there was the Hinduja passport affair, when one of Blair's ministers appeared to intervene to help an Indian businessman, Srichand Hinduja, obtain a British passport. The minister, Peter Mandelson, was forced to resign.

"There is an impression that Tony Blair is close to businessmen and isn't too careful about the businessmen he's close to," Anderson says.

A recent poll in "The Sunday Times" appears to bear this out. It shows 60 percent of respondents think Blair's government is "sleazy" -- just under the 63 percent who thought the Conservatives were sleazy weeks before their 1997 landslide defeat.

But the whiff of corruption -- plus recent unfavorable media coverage over the state of the country's health and rail services -- does not seem to have dented Blair's personal popularity, as a poll in "The Guardian" daily this week shows.

Why the apparent contradiction?

Jonathan Freedland, writing in "The Guardian," suggests two reasons. One is that Blair is not accused of pocketing Mittal's money himself. Also, Freedland says, the scandal is too complicated to be interesting. He says the Conservatives' corruption scandals of the mid-1990s were much easier to understand -- and picture.

Just think of Neil Hamilton, the MP forced to resign in the cash-for-questions scandal. He received brown envelopes stuffed with cash from an Egyptian-born businessman in return for asking questions on the businessman's behalf in parliament.

Anderson offers some other explanations: "The British economy has been doing very well. Consumer spending is at record levels. Walk down the average British high street and you see the glint of plastic and hear the ring of tills. People are making a lot of money, and that means their complaints about government rarely rise above a mild grumble. And also the Tory [Conservative] opposition, who were very successfully demonized by the Labour Party in the mid-1990s, has not yet re-established itself as a potent political force."

Anderson says this could possibly change later this year, once Blair has been in power for five years and voters start to reflect more on his track record.