TONY BLAIR clashed with Jacques Chirac last night after the French President refused publicly to condemn Saddam Hussein.

The Prime Minister’s attempt to heal the rift between Britain and France on Iraq was left in tatters after M Chirac weakened a hard-hitting statement by EU leaders expressing their support for efforts to disarm the Iraqi leader.

An already tense summit in Brussels rapidly turned sour as Mr Blair sought to persuade M Chirac of the need to look ahead and put the deep differences over Iraq behind them.

But as all Europe’s other leaders agreed to the statement, M Chirac blocked any reference to Saddam’s failure to comply with UN weapons inspectors and Resolution 1441. He even tried to delete a reference to “full and effective disarmament” of the Iraqi regime.

Earlier Patricia Hewitt, the Trade and Industry Secretary, fuelled the diplomatic spat with President Chirac’s Government by revealing that France is Iraq’s biggest European trading partner by far.

France exported £136.2 million of goods to Iraq in the first half of last year, compared with just £17.3 million from Britain.

Germany was the second biggest exporter, selling £130.7 million of goods, with Italy third.

The issue was raised in Cabinet by Ms Hewitt, who said that some EU members had taken a more liberal interpretation of the UN trade regulations on Iraq than others.

While Britain told its companies they could only honour existing contracts and banned them from touting around for new business, other countries have managed to secure lucrative new deals, she said.

Massive infrastructure projects in Iraq, including water treatment plants and power stations, mean that the most lucrative export trade is in heavy mechanical machinery and electrical equipment. Pharmaceuticals and other chemicals are also high on the list of exports, along with iron and steel products.

In exchange for its exports, France bought £144 million worth of goods from Iraq in the first half of last year, making it Europe’s second biggest importer. In total, the EU exported £544.7 million and imported £434.9 million.

Trade with Iraq has been regulated by the UN since the Gulf War. Sanctions were relaxed in 1995 with the agreement of the “Oil for Food” Programme, which allowed Iraq to use oil revenues to buy goods for the “humanitarian needs” of its people. The scheme was eased again last year with the introduction of a Goods Review List, setting out all potential items of use in Iraq’s weapons programmes. Anything not listed can be imported without the UN Sanctions Committee’s approval.

After their row, Mr Blair and M Chirac were forced to sit opposite each other at a fraught dinner. By the end of the evening, Mr Blair had exchanged only the briefest of words with his counterpart. But his spokesman insisted the two leaders had shaken hands. Other sources claimed that the French leader had refused to shake Mr Blair’s hand.

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