December 28, 2012 12:01 am

The day Thatcher fell out with her ‘dear Ron’

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Ronald Reagan and Margaret Thatcher©AP

The cordial friendship between Margaret Thatcher and Ronald Reagan came under severe pressure in 1982 when the prime minister accused the US of hypocrisy.

The rift was triggered by the tougher trade sanctions the US imposed on the Soviet Union after martial law was declared in Poland in December 1981. The sanctions, on manufactured goods and technology, threatened British jobs and hundreds of millions of pounds in contracts to supply parts for the Western Siberian gas pipeline.

At the centre of the dispute was John Brown Engineering, a Scotland-based company that had a £400m contract to supply turbines to the Soviets.

The manufacture of the turbines in Britain was dependent on US licences and parts. If the company were forced to default on the contract because of the US sanctions, up to 1,700 jobs would be lost in Clydebank, an area of high unemployment already devastated by the closure of its shipyards in the 1970s.

The episode is in part acknowledged in Mrs Thatcher’s autobiography, where it is described as “a lesson in how not to conduct [cold war] alliance business”. But although the former prime minister has described her angry exchanges with US secretary of state Alexander Haig, the newly released files show she also left the US president in no doubt as to her strength of feeling.

The record of a meeting in the White House in June 1982 between Mrs Thatcher and Reagan, released by the National Archives under the 30-year rule, shows that the president described the US position as based “on a point of principle” in response to political repression in Poland.

But the prime minister responded by highlighting a discrepancy in the US principle: the sanctions did not apply to grain, the mainstay of US exports to the USSR.

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The official minutes then record Mrs Thatcher as saying the “reality” of the situation was that “American farmers would not suffer but John Brown’s employees would”.

“She could say,” the minutes continue, “that the latest decision was seen by the Americans as being based on principle, but the fact was US grain would continue to be sold while John Brown could not purchase the necessary rotors from elsewhere . . . There would be much resentment in Britain if America’s exports to Russia continued to rise while ours went down.”

But Mrs Thatcher did not persuade Reagan, who replied that “the Americans were prepared to be painted as the villains” and ultimately the sanctions could be ended if the Russians ended repressions in Poland.

Continuing the debate via telegram and letter, the prime minister warned her “Dear Ron” that the “very damaging” and “very severe” impact of the US measures on UK companies threatened to “overshadow” the “very close harmony” between the cold war allies.

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But Reagan remained unmoved, replying that the events in Poland were “a historic test of our will” – one he was certain Mrs Thatcher would want to meet. The prime minister said his response was “very disappointing.”

The stand-off was only brought to a close when Leonid Brezhnev, the Soviet president, died in November that year.

Mrs Thatcher wasted no time in writing to the White House to urge a relaxation of the US stance, in view of the “greatest importance” of western unity during the period of uncertainty expected in the USSR.

The letter was sent against the advice of her private secretary, John Coles, who was concerned it would be viewed as “an attempt to exploit the situation”. “Too late” was her reply, and she achieved her aim. The sanctions were relaxed and cabinet minutes tell us this brought “a welcome end to what had been a running sore in US-Europe relations”.

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