Explainer

Feb. 12 2002 12:53 PM

Explainer

How scandalous is Mittalgate?

Tony Blair and the Labour Party stand accused of furthering the ambitions of a wealthy Indian steel magnate, Lakshmi Mittal, while disregarding British interests. The Mittalgate scandal, as it has been labelled in the press, suggests that Labour, which accepted £125,000 from Mittal shortly before last year's General Election, has become as susceptible to sleaze as its Conservative predecessor. According to Stephen Glover, "Blair now stands at the very centre of this latest and seemingly most serious, scandal of all, facing the accusation that he has put his own interests, or at any rate those of party, before those of his country." In the opinion of the Daily Telegraph's editorial writers: "Stated baldly, Mr Blair stands accused of putting the financial interests of the Labour Party before those of the United Kingdom. At best, his intervention on behalf of Mr Mittal's firm … is a misdeployment of his energies. At worst, he was intervening against the interests of rival steel firms in Britain."

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But if is this a scandal, what have Blair and Mittal done?

Who is Lakshmi Mittal?
Mittal is an ambitious Indian steel magnate who apparently wishes to emulate Andrew Carnegie, the late 19th- and early 20th-century American tycoon. His company LNM Holdings is the world's third-largest steel firm, and its corporate headquarters are in London. For tax purposes, LNM Holdings is registered in the Dutch Antilles. Mittal has a house on North London's billionaire's row, and his neighbours include the Sultan of Brunei and King Fahd of Saudi Arabia.

What did he do?
In an interview with The Daily Telegraph, Mittal says he donated £125,000 to the Labour Party on May 23, 2001, two week before last year's General Election. Labour officials accepted his contribution and, as the law demands, reported the donation to Britain's Electoral Commission. Mittal is an Indian national, but because he is registered to vote in British local elections, he, like any foreign national who puts their name on an electoral register, is entitled to donate money to a British political party. The Political Parties, Elections and Referendums Act of 2000 states rather vaguely that permissible donors to British political parties include anyone who is "registered in an electoral register."

Why is Mittal's contribution to the Labour Party contentious?
In July 2001, Tony Blair wrote a letter to Romanian President Adrian Nastase, thanking him for allowing Mittal's company to buy Romania's state-owned steel works, Sidex. This letter, according to Blair's critics, suggests that the Labour Party furthered LNM's interests after accepting money from Lakshmi Mittal. The Prime Minister's Official Spokesman, Alastair Campbell, denied the charge yesterday. He said Blair knew nothing of Mittal's contribution to the Labour Party and that Blair wrote his letter to the Romanian president at the request of Britain's Ambassador to Romania, Richard Ralph, not because of Mittal's donation. The letter, which the Ambassador read aloud at a public signing ceremony in Bucharest last summer, reflected Britain's hope that Romania's transition from Communist dictatorship to capitalist democracy would continue. In his interview with Telegraph, Mittal appears to support Downing Street's statement. He claims the deal to buy the steel works from the Romanian government was clinched before he made his contribution to the Labour Party.

Why is there a fuss about a Romanian steel mill?
Until it was acquired by Mittal, Sidex was Romania's state-owned steel mill and had been losing between £175 million and £200 million a year. Through the 1990s, Mittal had acquired a reputation for salvaging state-owned steel mills around the world. In 1989, he acquired Trinidad and Tobago's steel mill, and three years later bought Mexico's third-largest steel firm, Sicartsa, which had been built by the Mexican government in the early 1980s for $2 billion and had lost money for years. At the time of Mittal's purchase of Sidex, Corus, Britain's leading steel company had expressed no interest in acquiring the Romanian mill. But now that Corus has had to lay off workers and freeze wages, some steel workers unions have suggested that Blair has given the impression of aiding foreign steel makers at the expense of British companies.

Is this a scandal?
So far, there is no evidence to suggest that Blair or Mittal have done anything wrong. But Blair's insistence that he knew nothing of Mittal's contribution to the Labour Party two weeks before the election is peculiar; it was one of the largest contributions to the party in 2001. If Blair didn't know about it, why didn't he? As head of his party, surely he should have known.

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