Mr Blair and his mates (or - Does Blair have any understanding of corruption)

Tony Blair is employing Charles Powell as his special envoy to Brunei, the Guardian can disclose, despite the fact that the businessman is on the payroll of BAE Systems. BAE is embroiled in a dispute with Brunei over the purchase of three warships.

The sultan of the small, oil-rich southeast Asian state, Hassanal Bolkiah, was persuaded to order the top-of-the-range vessels for his navy at a cost of £680m, but is now refusing to make the final payments to BAE and take delivery of the ships, which are marooned on the Clyde.
The three patrol boats were built and equipped with missiles at BAE's Scotstoun yard, and the first of them was launched by John Reid as Scottish secretary. The British taxpayer guaranteed the deal and may have to pick up a tab of more than £20m for any outstanding default.

Lord Powell denied yesterday that he had a conflict of interest by being a consultant for BAE while acting as the prime minister's special envoy to Brunei. Lord Powell's brother, Jonathan, is Mr Blair's chief of staff at No 10, and Lord Powell was previously Margaret Thatcher's foreign affairs adviser.

He told the Guardian: "There is no conflict of interest with BAE. Any consultation with BAE specifically rules out anything to do with Brunei." He said he had been acting in the unpaid role for three to four years. Asked how he got the job, Lord Powell said: "You do not advertise it and you do not apply." Asked how often he met the sultan, he said: "That is a matter between him and me."

The appointment of Mr Blair's friend and fundraiser Lord Levy as a special Middle East envoy angered some in the Foreign Office and there is also puzzlement over Lord Powell's new role. It is not clear what he will do that could not be done by the high commissioner to Brunei.
A Downing Street source said Lord Powell met the sultan, who owns the Dorchester Hotel, on his visits to London when Mr Blair was unable to see him. All discussions were on behalf of the British government, the source added.

A Downing Street spokesman said: "Charles Powell is special representative to the Sultan of Brunei and, in that role, he discusses a wide range of bilateral issues and regional issues."

A team from BAE Systems, which has been threatening to bring arbitration proceedings in Paris against the sultan, is believed to have flown to Borneo in July in an unsuccessful attempt to resolve the patrol boats dispute. Brunei claims the vessels do not meet the required specifications, but BAE sources say there are no facilities at the local Muara naval base capable of running and maintaining such advanced ships. BAE said last night the quarrel was in arbitration and confidential.

Brunei, whose sultan is propped up by British Gurkhas, is regarded as a crucial arms sales target. The defence ministry lists Brunei as a "priority market" which may buy more than £500m of weaponry if the warships row is resolved.

From Ewen MacAskill and David Leigh in The Guardian Saturday October 8, 2005