The Downing Street Years

by Margaret Thatcher

  CRISES IN THE MIDDLE EAST

  Wider international affairs had not stood still while we were engaged in bringing Rhodesia to legal independence and negotiating a reduction in our Community Budget contribution. In November 1979, forty-nine American diplomatic personnel had been taken hostage in Iran, a source of deep and growing humiliation to the greatest western power. In December at the invitation of President Carter I made a short visit to the United States — the first of many as Prime Minister. In a short speech at my reception on the White House Lawn I went out of my way to reaffirm my support for American leadership of the West. Then in a speech the next day in New York I warned of the dangers of Soviet ambitions and urged the need for strong western defence:

  The immediate threat from the Soviet Union is military rather than ideological. The threat is not only to our security in Europe and North America but also, both directly and by proxy, in the Third World … we can argue about Soviet motives but the fact is that the Russians have the weapons and are getting more of them. It is simple prudence for the West to respond.

  I also undertook to support the United States in the UN Security Council in seeking international economic sanctions against Iran under Chapter 7 of the UN Charter. The President and I discussed defence and the situation in Ulster. I took the opportunity to thank him for all he had been doing behind the scenes in the final stages of the negotiations on Rhodesia.

  Then, at the end of 1979, the world reached one of those genuine watersheds which are so often predicted, which so rarely occur — and which take almost everyone by surprise when they do: the Soviet invasion of Afghanistan. In April 1978, the Government of Afghanistan had been overthrown in a communist-inspired coup; a pro-Soviet government was established, which, however, was met by widespread opposition and eventual rebellion. In September 1979 the new President, Taraki, was himself overthrown and killed by his deputy, Hafizullah Amin. On 27 December, Amin in turn was overthrown and killed, to be replaced by Babrak Karmal, whose regime was supported by thousands of Soviet troops.

  The Soviets had long considered Afghanistan to have a special strategic significance and sought to exercise influence there through so-called ‘Treaties of Friendship’. It was said that they were probably concerned, in the light of events in Iran, at the possibility of anarchy in Afghanistan leading to a second fundamentalist Muslim state on their borders, which might destabilize their own subject Muslim population. The West had for some time been anxious that the Soviets would make a drive for the oil in the Gulf. And the energy crisis gave them a still stronger reason to do so.

  Perhaps I was less shocked than some by the invasion of Afghanistan. I had long understood that détente had been ruthlessly used by the Soviets to exploit western weakness and disarray. I knew the beast.

  What had happened in Afghanistan was only part of a wider pattern. The Soviets had instigated Cubans and East Germans to advance their aims and ambitions in Africa. They had been working to further communist subversion throughout the Third World, and for all the talk of international peace and friendship, they had built up armed forces far beyond their defensive needs. Whatever their precise motives now in Afghanistan, they must have known that they had threatened the stability of Pakistan and Iran — the latter unstable enough already under the Ayatollah — and were within 300 miles of the Straits of Hormuz. Moreover, bad as the situation was in itself, it could be worse as a precedent. There were other areas of the world in which the Soviets might prefer aggression to diplomacy, if they now prevailed: for example, Marshal Tito was evidently approaching the end of his life in Yugoslavia and there could be opportunities for Soviet intervention there. They clearly had to be punished for their aggression and taught, albeit belatedly, that the West would not only talk about freedom but was prepared to make sacrifices to defend it.

  On Friday 28 December President Carter rang me at Chequers and we discussed at length what the Soviets were doing in Afghanistan and what our reaction should be. What had happened was a bitter blow to him. Britain had not felt able to comply with all that the Americans had wanted of us in response to the hostage crisis: in particular, we were not willing (or indeed legally able) to freeze Iranian financial assets, which would have had a devastating effect on international confidence in the City of London as a world financial centre. However, I was determined that we should follow America’s lead now in taking action against the USSR and its puppet regime in Kabul. We therefore decided on a range of measures, including the curtailment of visits and contacts, non-renewal of the Anglo-Soviet credit agreement and a tightening of the rules on technology transfer. I also sought to mobilize the governments of the European Community to support the Americans. But, like President Carter, I was sure that the most effective thing we could do would be to prevent their using the forthcoming Moscow Olympics for propaganda purposes. Unfortunately, most of the British Olympic team decided to attend the Games, though we tried to persuade them otherwise: of course, unlike their equivalents in the Soviet Union, our athletes were left free to make up their own minds. At the UN our ambassador, Tony Parsons, helped to rally the ‘non-aligned’ countries to condemn the Soviet Union’s aggression. In London, on 3 January, I saw the Soviet Ambassador to enlarge in vigorous terms on the contents of my exchanges by telegram with President Brezhnev.

  From now on, the whole tone of international affairs began to change, and for the better. Hard-headed realism and strong defence became the order of the day. The Soviets had made a fatal miscalculation: they had prepared the way for the renaissance of America under Ronald Reagan.

  But this was the future. America had still to go through the humiliating agony of the failed attempt to rescue the Iranian hostages. As I watched President Carter’s television broadcast explaining what had happened, I felt America’s wound as if it were Britain’s own; and in a sense it was, for anyone who exposed American weakness increased ours. I was soon, though, in a position to demonstrate that there would be no flinching when it came to dealing with our own brand of Middle East terrorism.

  I first learned of the terrorist attack on the Iranian Embassy at Prince’s Gate in Knightsbridge on Wednesday 30 April during a visit I was making to the BBC. The early reports were, in fact, misleadingly anodyne. It soon became known, however, that several gunmen had forced their way into the Iranian Embassy and were holding twenty hostages — most of them Iranian staff, but also including a policeman who had been on duty outside and two BBC journalists who had been applying for visas. The gunmen were threatening to blow up both the embassy and the hostages if their demands were not met. The terrorists belonged to an organization calling itself ‘the Group of the Martyr’; they were Iranian Arabs from Arabistan, Iraqi-trained and bitterly opposed to the prevailing regime in Iran. They demanded that a list of 91 prisoners be set free by the Iranian Government, that the rights of Iranian dissidents should be recognized and a special aeroplane provided to take them and the hostages out of Britain. The Iranian Government had no intention of conceding these demands; and we, for our part, had no intention of allowing terrorists to succeed in their hostage taking. I was conscious that, though the group involved was a different one, this was no less an attempt to exploit perceived western weakness than was the hostage taking of the American embassy personnel in Tehran. My policy would be to do everything possible to resolve the crisis peacefully, without unnecessarily risking the lives of the hostages, but above all to ensure that terrorism should be — and be seen to be — defeated.

  Willie Whitelaw, as Home Secretary, took immediate charge of operations from the special emergency unit in the Cabinet Office. The unit is immediately activated when a security crisis occurs. On it representatives of the Cabinet Office, Home Office, Foreign Office, military, police and intelligence services advise a minister in the chair — usually, as on this occasion, the Home Secretary; I only once and briefly took this role at the time of the hijack of an aircraft from Tanzania to Stansted. Hour by hour information is gathered, sifted and analysed
so that every circumstance and option can be properly evaluated. Throughout the crisis, Willie kept in regular contact with me. In turn the Metropolitan Police kept in touch with the terrorists by a specially laid telephone line. We also made contact with those who might be able to exert some influence over the gunmen. The latter wished to have an Arab country’s ambassador act as intermediary. But we were extremely doubtful about this: there was a risk that the objectives of such an intermediary would be different from our own. Moreover, the Jordanians, whom we were prepared to trust, refused to become involved. A Muslim imam did talk to the terrorists, but without result. It was a stalemate.

  Willie and I were completely agreed as to the strategy. We would try patient negotiation; but if any hostages were wounded we would consider an attack on the embassy; and if a hostage were killed we would definitely send in the Special Air Service (SAS). There had to be some flexibility. But what was ruled out from the start was to let the terrorists leave, with or without the hostages.

  The position began to deteriorate on Sunday afternoon. I was called back early from Chequers and we were driving back to London when a further message came over the car-phone. There was too much interference on the line to be able to talk easily so I had my driver pull into a lay-by. Apparently, the information was that the hostages’ lives were now at risk. Willie wanted my permission to send in the SAS. ‘Yes, go in’: I said. The car pulled back out onto the road, while I tried to visualize what was happening and waited for the outcome. Executed with the superb courage and professionalism the world now expects of the SAS, the assault took place in the full glare of the television cameras. Of the 19 hostages known to be alive at the time of the assault all were rescued. Four gunmen were killed; one was captured; none escaped. I breathed a sigh of relief when I learned that there were no police or SAS casualties. Later I went to the Regent’s Park Barracks to congratulate our men. I was met by Peter de la Billière, the SAS commander, and then watched what had happened on television news, with a running commentary, punctuated by relieved laughter, from those involved in the assault. One of them turned to me and said, ‘we never thought you’d let us do it.’ Wherever I went over the next few days, I sensed a great wave of pride at the outcome; telegrams of congratulation poured in from abroad: we had sent a signal to terrorists everywhere that they could expect no deals and would extort no favours from Britain.

  The Middle East continued to occupy my attention throughout the rest of 1980. At the European Council in Venice on 12 and 13 June the heads of government discussed Israel and the Palestinian question. The key issue was whether the Community governments were to call for the PLO to be ‘associated with’ the Middle East peace talks, or to ‘participate in’ them: I was very much against the latter course, for as long as the PLO did not reject terrorism. In fact, the final communiqué reflected what seemed to me the right balance: it reaffirmed the right of all the states in the region — including Israel — to existence and security, but also demanded justice for all peoples, which implied recognition of of the Palestinians’ right to self-determination. So, of course, it pleased no one.

  Then the Middle East focus shifted again. In September 1980 Iraq attacked Iran and we were once again in the throes of a new crisis, with potentially dangerous political and economic implications for western interests. Saddam Hussein had decided that the chaos in Iran provided him with a good opportunity to renounce the 1975 Algiers Settlement of the two countries’ disputed claims to the Shatt-al-Arab waterway and seize it by force.

  Shortly after the outbreak of the war Peter Carrington came over to Chequers to discuss the situation with me. I was chiefly concerned to prevent the conflict spreading down the Gulf and involving the vulnerable oil-rich Gulf States, which had traditionally close links with Britain. I told Peter that I did not share the common view that the Iranians would quickly be beaten. They were fanatical fighters and had an effective airforce with which they could attack oil installations. I was right: by the end of the year and after initial successes, the Iraqis became bogged down and the war threatened both the stability of the Gulf and western shipping. But by this time we had put in the Armilla Patrol to protect our ships.

  As I looked back on the international scene that Christmas of 1980 at Chequers, I reflected that the successes of British foreign policy had helped us through a particularly dark and difficult time in domestic, and particularly economic, affairs. But as in economic matters so in foreign affairs I knew that we were only starting the course. Tackling Britain’s Community budget problem was only the first step to reforming the Community’s finances. Bringing Rhodesia to legal independence was but a prelude to addressing the problem of South Africa. The West’s response to the Soviet invasion of Afghanistan would have to be a fundamental rethinking of our relations with the communist bloc and this had barely begun. The renewed instability in the Gulf as a result of Iraq’s attack on Iran would ultimately require a new commitment by the western powers to the security of the region. All these issues were to dominate British foreign policy in the years ahead.

  * North Sea oil would soon give Britain an exceptional position among the major industrial powers, as we became a net oil exporter; but, of course, international recession would hit the markets for our industries: we were, therefore, not immune to the international consequences of the oil price rise.

  CHAPTER IV

  Not At All Right, Jack

  The restructuring of British industry and trade union reform in 1979–1980

  BRITAIN’S INDUSTRIAL PROBLEMS

  In the years since the war British politics had focused, above all, on the debate about the proper role of the state in the operation of the economy. By 1979 and perhaps earlier, optimism about the beneficent effects of government intervention had largely disappeared. This change of attitude, for which I had long worked and argued, meant that many people who had not previously been Conservative supporters were now prepared to give our approach at least the benefit of the doubt. But I knew that this entirely justified lack of faith in the wisdom of the state must be matched by a renewed confidence in the creative capacity of enterprise.

  A sort of cynical disdain, often disguised as black humour, had come to characterize many people’s attitude to industry and unions. We all enjoyed the film I’m All Right, Jack, but the problem was no laughing matter.

  British goods will only be attractive if they can compete with the best on offer from other countries, in respect of quality, reliability and price, or some combination of the three, and the truth is that too often British industrial products were uncompetitive. This was not simply because the strong pound was making it difficult to sell abroad, but because our industrial reputation had steadily been eroded. In the end reputation reflects reality. Nothing less than changing that reality — fundamentally and for the better — would do.

  In spite of what might seem the more immediate and pressing problems of strikes, price competitiveness and international recession, the root of Britain’s industrial problem was low productivity. British living standards were lower than those of our principal competitors and the number of well-paid and reasonably secure jobs was smaller because we produced less per person than they did. Some twenty-five years earlier our productivity was the highest in western Europe; by 1979 it was among the lowest. The overmanning resulting from trade union restrictive practices was concealed unemployment; and beyond a certain point — certainly beyond the point we had reached in 1979 — overmanning would bring down businesses and destroy existing jobs, and abort those which otherwise could have flourished. Outdated capacity and old jobs have to go to make the most of new opportunities. Yet the paradox which neither British trade unions nor the socialists were prepared to accept was that an increase in productivity is likely, initially, to reduce the number of jobs before creating the wealth that sustains new ones. Time and again we were asked when plants and companies closed, ‘where will the new jobs come from?’ As the months went by, we could point to the expansion of
self-employment and to industrial successes in aerospace, chemicals and North Sea oil. Increasingly we could also look to foreign investment, for example in electronics and cars. But the fact is that in a market economy government does not — and cannot — know where jobs will come from: if it did know, all those interventionist policies for ‘picking winners’ and ‘backing success’ would not have picked losers and compounded failure.

  Because our analysis of what was wrong with Britain’s industrial performance centred on low productivity and its causes — rather than on levels of pay — incomes policy had no place in our economic strategy. I was determined that the Government should not become enmeshed, as previous Labour and Conservative administrations had been, in the obscure intricacies of ‘norms’, ‘going rates’ and ‘special cases’. Of course, pay rises at this time were far too high in large parts of British industry where profits were small or nonexistent, investment was inadequate, or market prospects looked poor. Judged by relative labour costs, our level of competitiveness in 1980 was some 40 to 50 per cent worse than in 1978: and around three-fifths of this was due to UK unit labour costs increasing at a faster rate than those abroad, with only two-fifths the result of exchange rate appreciation. There was little, if anything, we could do to influence the exchange rate, without allowing inflation to rise still further and faster. But there was a great deal which trade union negotiators had it in their power to do if they wished to prevent their own members and others being priced out of jobs; and as the scale of union irresponsibility grew apparent, talk of the need for a pay policy began to be heard.