Plaid reveals Labour steel cash link

The Romanian PM received a letter from Mr Blair

Prime Minister Tony Blair is facing a new row over Labour's business links after a £125,000 donation to party funds from a steel tycoon.

Plaid Cymru MP Adam Price has obtained a copy of a letter written by Tony Blair to Romania's prime minister, promoting the sale of the eastern European country's state steel company to an Indian billionaire a month after Labour accepted the donation.

When you look at what has exactly happened, including the former leading Conservative Party people, there is no comparison

Tony Blair

Mr Price, Plaid's industry spokesman, said the prime minister was lobbying for billionaire Lakshmi Mittal - who runs the world's fourth largest steelmaker - while his competitor, the Anglo-Dutch concern Corus, was laying off thousands of Welsh steelworkers.

Downing Street has said the letter was perfectly proper and that it is important for Tony Blair to use his influence to encourage markets for British business.

Tony Blair has dismissed the new row as "Enron chapter 55".

"If anybody has got any evidence that the rules haven't been observed let them bring it forward," he said.

"Governments will back companies to win contracts the whole time.

"Otherwise you would end up with the absurd situation where government doesn't have anything to do with British business."

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But opposition parties have rounded on Mr Blair, accusing him of personally intervening to help a businessman complete a deal in return for a donation to the Labour Party.

Plaid Cymru wants an explanation of why Mr Blair was backing a foreign-registered company in competition with Corus - formerly British Steel - which a year ago cut 6,000 jobs, many of them in south Wales.

Mr Price said: "This company is actually a competitor to the British steel industry which is undermining British jobs and British products overseas."

He told BBC Radio 4's Today programme that the letter was "absolutely critical" to clinching the deal.

Shadow foreign secretary Michael Ancram called for a full inquiry into the matter.

Transparent rules

Mr Ancram pointed to claims that "giving large sums of money to the Labour Party ends up with the government either changing its policy or withdrawing a moratorium or, as in this case, trying to help the person involved to do business".

Mr Blair's letter was sent to Romanian Prime Minister Adrian Nastase two days before he signed a draft agreement for the £300m sale of the country's nationalised steel company Sidex.

Downing Street confirmed the letter had been sent but insisted the privatisation deal had been effectively sealed before it was written.

Competition with Corus

The potential buyer was a firm owned by Mr Mittal, the UK's eighth richest man with personal wealth of £2.2bn.

In the letter, it is claimed Mr Blair hinted the privatisation of the firm might help smooth the way for Romania's entry into the EU.

Mr Mittal had donated £125,000 to Labour on 26 June last year, a few weeks after the general election.

The gift followed a donation of "over £5,000" in 1997.

Though Mr Mittal's LNM group is based in London, the subsidiary buying Sidex, LNM holdings is not UK-registered.

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Mr Blair's official spokesman refused to say whether Mr Mittal or his company paid tax in Britain or reveal how many people it employed here.

A spokeswoman for LNM insisted that there was no link between Mr Mittal's donation and the Sidex deal.

He added that talks were essentially complete and the letter was effectively conveying congratulations.