Mittal seeks more cash in Steelgate row

Published on Monday 18 February 2002 00:00

THE "Steelgate row" was set to continue to embarrass the Labour government today as it was revealed that controversial Indian tycoon Lakshmi Mittal would be seeking another massive euro loan to complete his purchase of the Romanian steel company at the heart of the funding scandal.

The news that he would need more money from the European Bank for reconstruction and Development (EBRD) came as a former minister said the Blair administration was now too close to big business.

Peter Kilfoyle expressed concern at Labour accepting donations such as Mr Mittal’s 125,000 and then apparently supporting the donor’s business activities. Despite Prime Minister Tony Blair’s dismissal of the row as "garbagegate", it was today refusing to go away.

Downing Street attempts to close down the scandal were clearly failing as more and more claims emerged.

Mr Blair wrote a letter supporting the bid by Mr Mittal’s company LMN Holdings to buy Sidex, the Romanian steel business in a major privatisation deal.

No 10 claims the deal was already effectively signed and sealed when he fired off a routine letter at the request of the British Ambassador to Romania.

But Romanian government sources have said the letter was crucial in deciding to give the contract to Mr Mittal’s company.

Claims that the firm is a British company have also been undermined by the fact that it is registered in the Dutch Antilles in the Caribbean and has only a hundred employees in Britain.

It then emerged that Mr Mittal had received a "soft" loan from the EBRD at the recommendation of International Development Secretary Clare Short.

Now it has emerged that Mr Mittal still has to pay some 200 million more to the Romanian government over the next five years and will be seeking further EBRD funding.

In addition Mr Mittal has also been lobbying for import tariffs against British Steel in America where he owns the sixth largest steel company Ispat Inland.

As Tory leader Iain Duncan Smith renewed calls for an inquiry, former Labour defence minister Peter Kilfoyle said that his party was now too close to big business.

He said: "I’ve always said that you need a long spoon if you’re going to sup with big business. I certainly think that spoon could do to be a bit longer."

Mr Blair’s claims that this is all perfectly normal were undermined yesterday when Cabinet Office Lord Macdonald of Tradeston was unable to answer questions about how often Mr Blair had written similar letters for British companies .

Mr Duncan Smith said: "My concern is that what the Prime Minister and the government seems to be doing now is leaving us with huge doubts about their probity, huge doubts about their honesty."