Companies making use of offshore secrecy include firm that supplied surveillance software used by repressive regimes

A number of nominee directors of companies registered in the British Virgin Islands (BVI) have connections to military or intelligence activities, an investigation has revealed.

In the past, the British arms giant BAE was the most notorious user of offshore secrecy. The Guardian in 2003 revealed the firm had set up a pair of covert BVI entities. The undeclared subsidiaries were used to distribute hundreds of millions of pounds in secret payments to get overseas arms contracts.

Today the investigation by the International Consortium of Investigative Journalists (ICIJ) and the Guardian uncovers the identities of other offshore operators.

Louthean Nelson owns the Gamma Group, a controversial computer surveillance firm employing ex-military personnel. It sells bugging technology to Middle East and south-east Asian governments. Nelson owns a BVI offshore arm, Gamma Group International Ltd.

Gamma's spyware, which can be used against dissidents, has turned up in the hands of Egyptian and Bahraini state security police, although Nelson's representative claims this happened inadvertently. He initially denied to us that Nelson was linked to Gamma, and denied that Nelson owned the anonymous BVI affiliate. Martin Muench, who has a 15% share in the company's German subsidiary, said he was the group's sole press spokesman, and told us: "Louthean Nelson is not associated with any company by the name of Gamma Group International Ltd. If by chance you are referring to any other Gamma company, then the explanation is the same for each and every one of them."

After he was confronted with evidence obtained by the Guardian/ICIJ investigation, Muench changed his position. He told us: "You are absolutely right, apparently there is a Gamma Group International Ltd. So in effect I was wrong – sorry. However I did not say that Louthean Nelson was not associated with any Gamma company, only the one that I thought did not exist."

Nelson set up his BVI offshoot in 2007, using an agency, BizCorp Management Pte, located in Singapore. His spokesman claimed the BVI company was not involved in sales of Gamma's Finfisher spyware. But he refused to disclose the entity's purpose.

Earlier this year, computer researchers in California told the New York Times they had discovered Finfisher being run from servers in Singapore, Indonesia, Brunei, Mongolia and a government ministry in Turkmenistan. The spying software was previously proved to have infected the computers of political activists in Bahrain, which Nelson visited in June 2006.

The Finfisher programme is marketed as a technique for so-called "IT intrusion". The code disguises itself as a software update or an email attachment, which the target victim is unaware will transmit back all his or her transactions and keystrokes. Gamma calls itself "a government contractor to state intelligence and law enforcement agencies for … high-quality surveillance vans" and telephone tapping of all kinds.

Activists' investigations into Finfisher began in March 2011, after protesters who broke into Egypt's state security headquarters discovered documents showing the bugging system was being marketed to the then president Hosni Mubarak's regime, at a price of $353,000.

Muench said demonstration copies of the software must have been stolen. He refused to identify Gamma's customers.

Nelson's father, Bill Nelson, is described as the CEO of the UK Gamma, which sells a range of covert surveillance equipment from a modern industrial estate outside Andover, Hampshire, near the family home in the village of Winterbourne Earls, Wiltshire.

In September, the German foreign minister, Guido Westerwelle, called for an EU-wide ban on the export of such surveillance software to totalitarian states. "These regimes should not get the technical instruments to spy on their own citizens," he said. The UK has now agreed that future Finfisher exports from Andover to questionable regimes will need government permission.

Other types of anonymous offshore user we have identified in this area include a south London private detective, Gerry Moore, who operated Swiss bank accounts. He did not respond to invitations to comment.

Another private intelligence agency, Ciex, was used as a postbox by the financier Julian Askin to set up a covert entity registered in the Cook Islands, called Pastech. He too did not respond to invitations to comment.

An ex-CIA officer and a South African mercenary soldier, John Walbridge and Mauritz Le Roux, used London agents to set up a series of BVI-registered companies in 2005, after obtaining bodyguarding contracts in Iraq and Afghanistan. Le Roux told us one of his reasons was to accommodate "local partnerships" in foreign countries. Walbridge did not respond.

A former BAE software engineer from Hull, John Cunningham, says he set up his own offshore BVI company in the hope of selling helicopter drones for purely civilian use. Now based in Thailand, he previously designed military avionics for Britain's Hawk and Typhoon war planes. He told us: "That account was set up by my 'friend' in Indonesia who does aerial mapping with small UAVs [unmanned aerial vehicles]. He was going to pay me a commission through that account … However, this was my first attempt to work in Asia and as I have found, money tends to be not forthcoming. I have never used that account."

The military and intelligence register

Gerry Moore

Company: GM Property Developments, LHM Property Holdings Story: south London private detective sets up BVI companies with Swiss bank accounts Details: Moore founded "Thames Investigation Services", later "Thames Associates", in Blackheath, south London. He opened a Swiss bank account with UBS Basel in 1998. In 2007, he sought to open another account with Credit Suisse, Zurich, for his newly registered BVI entity GM Property Developments. He sought to register a second offshore company, LHM Property Holdings, using his wife Linda's initials.

Intermediary: Netincorp. BVI (Damien Fong)

Comment: No response. Thames Associates website taken down after Guardian approaches.

John Walbridge and Mauritz le Roux

Companies: Overseas Security & Strategic Information Ltd, Remington Resources (Walbridge), Safenet UXO, Sparenberg, Gladeaway, Maplethorpe, Hawksbourne (Le Roux)

Story: former CIA officer and South African ex-mercenary provide guards in Iraq and Afghanistan Details: John H Walbridge Jr says he served with US special forces in Vietnam and then with the CIA in Brazil. His Miami-based private military company OSSI Inc teamed up with the South African ex-soldier and Executive Outcomes mercenary Mauritz le Roux to win contracts in Kabul in 2005. Walbridge set up his two BVI entities with his wife, Cassandra, via a London agency in June and August 2005, and Le Roux incorporated five parallel BVI companies.

Intermediary: Alpha Offshore, London Comment: Le Roux told us some of his offshore entities were kept available "in case we need to start up operations in a country where we would need to have local partnerships". His joint venture with OSSI was based offshore in Dubai, he said, but used BVI entities "to operate within a legal framework under British law, rather than the legal framework of the UAE". Walbridge did not respond to invitations to comment.

Julian Askin

Company: Pastech Story: exiled businessman used a private intelligence agency to set up covert offshore entity in the Cook Islands Details: Askin was a British football pools entrepreneur. He alleged Afrikaner conspiracies against him in South Africa, when his Tollgate transport group there collapsed. The apartheid regime failed to have him extradited, alleging fraud. He hired the Ciex agency to report on ABSA, the South African bank which foreclosed on him. Ciex was founded by the ex-MI6 senior officer Michael Oatley along with ex-MI6 officer Hamilton Macmillan. In May 2000, they were used to help set up Pastech for their client in the obscure Pacific offshore location of Rarotonga, in the Cook Islands, with anonymous nominee directors and shareholders. Askin now lives in Semer, Suffolk.

Intermediary: Ciex, Buckingham Gate, London Comment: he did not respond to invitations to comment.

Louthean Nelson

Company: Gamma Group International Story: Gamma sells Finfisher around the world, spying software which infects a target's computer.

Details: Nelson set up a UK company in 2007 on an Andover industrial estate to make and sell Finfisher – a so-called Trojan which can remotely spy on a victim's computer by pretending to be a routine software update. He set up a parallel, more covert company with a similar name, registered in the BVI, via an agency in Singapore, using his father's address at Winterbourne Earls, near Andover. He also sells to the Middle East via premises in Beirut. He ran into controversy last year when secret police in Egypt and Bahrain were alleged to have obtained Finfisher, which he denies knowingly supplying to them.

Intermediary: Bizcorp Management Pte Ltd, Singapore Comment: his spokesman declines to say what was the purpose of the group's BVI entity.

John Cunningham

Company: Aurilla International Story: military avionics software engineer from Hull with separate UK company launches civilian venture in Indonesia Details: Cunningham set up a BVI entity in 2007. His small UK company, On-Target Software Solutions Ltd, has worked on "black boxes" for BAE Hawk and Typhoon war planes, and does foreign consultancy. He also has interests in Thailand in a drone helicopter control system.

Intermediary: Allen & Bryans tax consultants, Singapore Comment: Cunningham says the offshore account was never activated. "I actually make systems for civilian small UAVs (unmanned aerial vehicles). I have never sold to the military. That account was set up by my 'friend' in Indonesia who does aerial mapping with small UAVs. He was going to pay me a commission through that account."

Offshore secrets

Guardian team: David Leigh, Harold Frayman and James Ball.

The project is a collaboration between the Guardian and the International Consortium of Investigative Journalists (ICIJ) headed by Gerard Ryle in Washington DC. The Guardian's investigations editor, David Leigh, is a member of the ICIJ, a global network of reporters in more than 60 countries who collaborate on in-depth investigative stories that cross national boundaries. The ICIJ was founded in 1997 as a project of the Center for Public Integrity, a Washington DC-based non-profit.

It seems outrageous that powerful, ruthless "vulture funds" can threaten action which may result in "an end to Argentina's recovery" and a fresh round of turmoil in the global financial market (Comment, 26 November). Another aspect is the legitimacy of debt incurred by regimes that are not democratically elected. If an individual borrows vast sums of money and spends it on the high life and doesn't repay it in their lifetime, it is right that creditors can use the law to go after all the funds and assets of the estate. It would not be right if they could use the law to go after the children and grandchildren of the debtor, forcing them to live in penury to pay back money they did not borrow nor benefit from. It seems the same logic applies when vast sums are borrowed by a corrupt dictator and the citizens of the country are forced to pay back the debt.
Brendan O Brien
London

• At the start of November, Vince Cable's UK Export Finance for the first time revealed information on the origin of developing world debts owed to the UK. This showed, for example, that three-quarters of Indonesia's debt to the UK comes from government loans to then dictator Suharto for military equipment. A quarter of Egypt's debt comes from loans for Mubarak and his predecessor to buy arms. In 2010 the Lib Dem conference adopted a policy to "conduct our own audit of all existing UK government and commercial debts, ruling invalid any past lending that was recklessly given to dictators known not to be committed to spend the loans on development".

The Norwegian government recently announced an audit into the debts owed to it. We hope the UK government will follow this example and publicly audit all the debts owed by countries such as Egypt, Indonesia and Iraq. This implementation of Lib Dem policy would help right past wrongs, and assist in making UK lending more responsible in the future.
John Leech MP, Stephen Williams MP, Mark Williams MP, Chris Rennard House of Lords, Roger Roberts House of Lords

Gary Hyde was seen as a pillar of his Yorshire community. Now he awaits sentencing over a £6m arms shipment

To his neighbours in the Yorkshire village of Newton upon Derwent, Gary Hyde, 43, was a respectable figure. A former special constable, he lived with his wife and two children in an attractive cottage near where he was born. Local people considered him a pillar of his East Riding community. His reputation was bolstered in the 1990s when he received a citation for helping to foil an armed raid during which a shotgun was pointed at his head. "It was terrifying – the worst moment of my life," he said at the time.

The experience did not deter him from pursuing a career as a gun dealer, his trajectory similar to that enjoyed by the UK's many other "lords of war" who broker huge weapons shipments without ever visiting the unstable countries they supply to see the consequences of their actions at first hand.

After leaving school in 1985, Hyde took a job at a local store, York Guns, that sold everything for field sports and shooting enthusiasts. When he became the store's managing director, his business acumen was eagerly sought. Indeed he was considered such an expert on international arms laws that, according to documents obtained by the Observer, he attended exclusive briefings at the United Nations Institute for Disarmament Research. He won contracts from the Ministry of Defence to bring in decommissioned weapons from conflict zones, and from the American government to supply anti-Saddam forces in Iraq.

But just like Robert Louis Stevenson's Mr Hyde, this was a man with two very distinct sides. And on Wednesday he will be sentenced at Southwark crown court after being found guilty of illegally supplying what prosecutors described as a huge shipment of arms from China to Nigeria.

The deal involved shipping 80,000 weapons, including AK-47s and Makarov pistols and 32m rounds of ammunition, a transaction that would have required 37 sea containers, each 6 metres long. It involved transactions stretching across Germany, China, Poland and Dubai.

According to documents obtained by the Observer, the $10m (£6m) Nigerian deal was supposed to earn Hyde more than $1m, which he intended to hide in a secret family trust in Liechtenstein controlled by a company based in the British Virgin Islands.

Ironically, Hyde's downfall owed much to a misplaced confidence that by structuring his deals offshore he could stay outside British law. As he protested upon his arrest, "I do not believe that I engaged in any activity in the UK which I understood required a licence."

However, following a search of his business premises and home, investigators from HM Revenue & Customs found emails on Hyde's computer confirming his role in the deal. Mobile phone records proved that he was in the UK when the shipment arrangements were made. It was a crucial breakthrough because it meant Hyde required a UK control licence, even though the guns never came into this country.

"UK legislation controls transfer of arms and military goods from one third country to another," said Elspeth Pringle, a Crown Prosecution Service (CPS) lawyer who specialises in arms prosecutions. "He failed to apply for a licence from the UK licensing authority. In this instance it didn't matter that the arms were not leaving the UK."

Hyde's arrest and conviction, following a five-year investigation, was a coup for the CPS and HMRC. "It was one of the largest cases I've ever come across in relation to the quantity of arms and ammunition," Pringle said. "It was unusual, too, in that it was a single deal. Other cases have often involved multiple deals to multiple customers or clients."

Documents suggest there was no shortage of companies offering to sell Hyde AK-47s – the world's favourite, and most poorly regulated, killing machine, according to Amnesty International, which estimates that there are 100m in circulation. What other deals did he broker? Only last year Hyde was arrested in connection with the alleged illegal importation into the US of almost 6,000 AK-47 magazines.

Confidential US embassy cables reveal that in 2008 York Guns tried to ship 130,000 AK-47s to Libya. Hyde acted as an intermediary in the deal, which, the cable noted, "raised eyebrows in diplomatic circles, as Libya has only 70,000 ground-force troops and these would be unlikely to use a weapon as dated as the AK-47". The export licence was rejected amid fears that the weapons would be re-exported to rebels in Sudan and Chad.

In 2007 the Observer first drew Hyde's activities to the attention of the UK authorities, reporting that companies in which he had an interest had sold tens of thousands of guns to Ziad Cattan, a former pizza parlour owner who became Iraq's head of military procurement, without the appropriate arms brokering licence. Many of the weapons shipped to Iraq disappeared after delivery.

"We could never nail down that the missing weapons went to insurgents, but some likely went astray because it appeared to us nobody was checking and monitoring them properly," said Oliver Sprague of Amnesty. Amnesty had flagged concerns about York Guns a year earlier, after it had imported thousands of assault rifles and machine guns from Bosnia for reasons that remain opaque.

A repeated failure by the international community to agree binding arms controls means there will be many other dealers like Hyde who will continue to broker huge weapons deals with impunity. But Pringle believes the Hyde case should be a warning to the UK's dealers. "The number of arms dealers in the UK is quite small," Pringle said. "They all know each other. This [conviction] sends out a signal that if you don't have the correct paperwork and you ship directly from the UK or from one country to another you will be prosecuted."

York Guns's files reveal that on 11 September 1995 Hyde dispatched a 9mm Browning pistol to a customer in Scotland who bought it for £304. Days later the buyer returned the weapon and phoned Hyde to say he was unhappy with its condition. "I then asked him if he would like it if we tidied it up a little bit and put in a few extra bits and pieces … and we would reduce the price, give him a part refund and send the gun back to him," Hyde recalled under questioning.

Asked at the Dunblane inquiry how much of a refund he had given to Thomas Hamilton, the former Scout leader who used the Browning that Hyde had sold him in a killing spree that left 15 children and their teacher dead, he paused. " … It was about £50," he replied.

Syria now alone using the weapons, says report which warns there are still many casualties, particularly in Afghanistan

It is rare, when it comes to weapons, to be able to report progress.

Campaigners on Monday marked the 15th anniversary of the treaty outlawing landmines saying the number of reported new casualties had fallen dramatically.

Between 1999 and 2011, the number of reported new landmine casualties had dropped by more than half, from 8,807 to 4,286.

"There has been remarkable progress in saving lives from landmines since the treaty to ban them was signed in 1997. This shows that international treaties do not end up as just words on paper," said Anna MacDonald Oxfam's head of arms control. "The fact that even those countries that have so far not joined the treaty are abiding by it is strong evidence that setting high standards in international agreements is the right approach".

Most landmine casualties occur in just a few countries. The one with the worst record is Afghanistan where 14,951 new victims were recorded between 1999 and 2011. Second worst was Colombia, which suffered 8,448 new casualties over the same period, and Cambodia, third with 8,041.

"From November 1992 to July this year, MAG's [Mines Advisory Group]
operations in Cambodia released 560 square kilometres of land back to communities", said Nick Roseveare, MAG's chief executive.

"The long term consequences on survivors and their families can be devastating" said Steve Smith, chief executive of Action on Armed Violence whose recent survey of more than 900 survivors in Western Sahara found that a quarter had no income.

The Mine Ban Treaty has been signed by 160 countries. They, and others which have not yet signed, are attending a meeting in Geneva, which started on Monday.

Before the treaty, it was estimated that 65m anti-personnel landmines had been laid between 1978-1993, said the campaigners.

Over the past decade, only a few non-signatory states have deployed the weapons.

Over the past year, Syria alone had used antipersonnel landmines, campaigners said. Last year, in 2011, they were deployed by three countries - Israel, Libya and Burma.

Four countries - India, Myanmar, Pakistan and South Korea - were still actively producing landmines, according to the International Campaign to Ban Landmines.

Though they have a combined stockpile estimated at more than 140m landmines and have not signed the treaty banning them, China, Russia, and the US do not deploy them and have not transferred them to other countries.

Monday's report says Britain has played an important role in the efforts to ban landmines and is one of the world's leading donors to mine clearance.

"Diana, Princess of Wales encouraged the UK to use its leadership in support of the global effort to ban landmines. This British leadership continued with the ban on cluster bombs and future UK leadership on other issues related to banning weapons which cause unacceptable human harm and encourage the protection of civilians would be a fitting way of continuing the Princess' legacy," said Dr Astrid Bonfield, chief executive of the Diana, Princess of Wales Memorial Fund.

One of Britain's leading human rights lawyers, Geoffrey Robertson QC, has pointed out that while there is a treaty outlawing landmines and dumdum bullets and other weapons, there is no law banning nuclear weapons.

Robertson, whose latest book, Mullahs Without Mercy, Human Rights and Nuclear Weapons, has just been published, was speaking on Monday on BBC Radio 4's Start the Week programme.

The British American Security Information Council (BASIC) thinktank on Monday adopted an optimistic note.

Acclaiming arms control anniversaries, it noted that on 3 December 1989, Mikhail Gorbachev and George Bush met in Malta to declare an end to the cold war. The Malta summit, it said, built on the success of a series of arms-reduction treaties between the two superpowers, including Salt II in 1979 and the Intermediate-range Nuclear Forces (INF) Treaty in 1987.

On 7 December, the 25th anniversary is reached of the INF, which banned all ground-launched ballistic and cruise missiles with ranges between 500 and 5,500km - missiles capable of hitting European targets, including western Russia, added BASIC.

While Reagan and Gorbachev agreed the treaty, European and American public opposition to US nuclear weapons in western Europe inspired it, it said.

Gary Hyde sentence to seven years in prison after being found guilty of breaching trade controls and hiding $1m in commission

An arms dealer who helped ship thousands of AK47 assault rifles and millions of rounds of ammunition from China to Nigeria has been jailed for seven years.

Gary Hyde, 43, was sentenced at Southwark crown court in London after being convicted on two counts of breaching UK trade controls and concealing criminal property.

Hyde, of Newton on Derwent, near York, moved the weapons without a licence and hid more than £1m (£620,460) in commission payments.

The deal between Beijing and Abuja was lawful, but Judge Nicholas Loraine-Smith said as the middleman, Hyde was caught out by his own greed.

He failed to apply for a licence to take part in the deal, fearing it would be refused, but was attracted by the "enormous profits" to be made, the judge said.

Hyde legitimately ran and expanded wholesale business York Guns to the point where it employed 20 staff in 2003. He helped broker various arms deals including some for the British government. But in 2006 he got involved in the deal between China and Nigeria which saw up to 40,000 AK47s, 30,000 rifles and 10,000 9mm pistols go to the west African country along with 32m rounds of ammunition.

Hyde was convicted after a retrial on two counts of becoming knowingly concerned in the movement of controlled goods between March 2006 and December 2007. He was also found guilty of one count of concealing criminal property between March 2006 and December 2008 after he hid the profits in a bank in Liechtenstein.

The judge told him: "You got carried away by the enormous profits that could be made elsewhere and, it would seem, in some less responsible company. I accept you opened your account in Liechtenstein to reduce your tax liability in lawful ways but it was there conveniently for you to launder the money from this unlawful deal."

The judge added: "Applying for a licence would have been easy. There was no evidence you would have got one, the question was never asked. I suspect you thought you would not. If you had, you would have also been concerned about the UK authorities finding out about your very substantial earnings."

Hyde's barrister, Stephen Solley QC, said his client had previously had "an impeccable record" and had once alerted the UK authorities about a deal between China and Libya in which "the very latest missile systems" were going to the north African dictatorship.

A forfeiture and destruction hearing will be held at the court on 17 December.

Money delivered by French government proxies across Turkish border has been used to buy weapons and ammunition

France has emerged as the most prominent backer of Syria's armed opposition and is now directly funding rebel groups around Aleppo as part of a new push to oust the embattled Assad regime.

Large sums of cash have been delivered by French government proxies across the Turkish border to rebel commanders in the past month, diplomatic sources have confirmed. The money has been used to buy weapons inside Syria and to fund armed operations against loyalist forces.

The French moves have stopped short of direct supply of weapons – a bridge that no western state has yet been willing to cross in Syria. But, according to western and Turkish officials as well as rebel leaders, the influx of money has made a difference in recent weeks as momentum on the battlefields of the north steadily shifts towards the opposition.

Some of the French cash has reached Islamist groups who were desperately short of ammunition and who had increasingly turned for help towards al-Qaida aligned jihadist groups in and around Aleppo.

One such group, Liwa al-Tawhid, an 8,000-strong militia that fights under the Free Syria Army banner, said it had been able to buy ammunition for the first time since late in the summer, a development that would help it resume military operations without the support of implacable jihadi organisations, such as Jabhat al-Nusra, which is now playing a lead role in northern Syria.

The French newspaper le Figaro reported this week that French military advisers had recently met with rebel groups inside Syria, in an area between Lebanon and Damascus, in further evidence of efforts by Paris to step up pressure on president Assad.

France has suggested that rebels should be given "defensive weapons" to use against the regime and was the first country to recognise a recalibrated political body as the legitimate voice of he Syrian people.

France has given a steady flow of humanitarian aid in recent months, including funds to rebel-held parts of Syria so that these "liberated zones" could begin to restore infrastructure and services for civilians. In September, the French defence minister stressed France was not providing weapons.

Foreign Secretary William Hague has added impetus to the new push to arm the opposition, again suggesting Britain would support moves to lift an arms embargo on the rebels.

A flurry of diplomatic moves this week, after months of political torpor, appear to have revitalised opposition efforts throughout Syria. The frantic diplomacy has been driven by fears that Syrian officials might use their stocks of chemical weapons as a last resort on battlefields that are no longer under their control.

A rebel siege of Damascus has now entered its second week. And although loyalist army divisions appear at no immediate risk of losing the capital, military units elsewhere in the country have lost influence over large swathes of land and are under increasing pressure over supply lines.

Rebels have been under pressure from the US, Britain, France and Turkey to fight under a joint command and control structure rather than as an assortment of militias, which often work at cross purposes.

At a meeting in Istanbul on Friday, commanders of the Free Syria Army – more of a brand than a fighting force throughout the civil war – agreed to establish a 30-member unified leadership.

After 21 months of crumbling state control in Syria, western diplomats in Ankara and elsewhere in the Arab world appear to be shifting their thinking from trying to manage the consequences to planning the future course.

"Assad won't be here next December," a senior Turkish official predicted. "Even the Russians have moderated on this. When we used to talk to them about Assad going, it was point-blank refusal. Now they are looking for common ground and wanting to exchange ideas."

The official said the US has also recently stepped up its efforts to oust Assad, but was not yet talking about arming the opposition and was refusing to deal with Islamist groups, such as Liwa al-Tawhid.

"What has happened with Jabhat al-Nusra (gaining influence), I would say is a product of (US) attitudes," he said. "They have a template by which they operate. And if a group fits perfectly into that, well that's fine. And if they don't it's a problem for them.

"Some of these groups have been forced to pretend that they are jihadists in order to get what they want."

US officials this week said that Turkey, for its part, was not prepared to directly lead the international response to Syria and was expecting Washington to fill that void.

President Barack Obama's warning during the week to Assad not to use chemical weapons was seen as his most strident stance yet, but it signalled no shift from an official wariness of the opposition, which had become more pronounced as jihadist groups gained prominence around Aleppo from late in the summer.

Turkey also remains wary of a potential threat from chemical weapons. However, officials said they were not convinced that even cornered regime leaders would use them.

Ankara will soon to take delivery of several patriot missile batteries, along with 400 German troops who will operate them along the southern border with Syria.

Officials say the increased Nato presence in Turkey makes it likely that Turkish air space and military bases would be used in the event of a decision being made by the US to seize Syria's chemical weapons stockpiles.

"That would have to be dealt with through existing mechanisms of Nato," the official said. "There is now a framework in place."

Tim Lankester, the civil servant in charge during the aid for trade scandal in 1994, has written a revealing book about the scandal that redefined British aid

Nearly 20 years on, the Pergau dam affair remains Britain's biggest aid scandal. Not only were hundreds of millions of pounds in UK aid linked to a major arms deal, but the project was deemed hopelessly uneconomic by officials in Britain and Malaysia. In late 1994, aid for the project was declared unlawful in a landmark case at the UK high court.

The Guardian ran more than 100 articles on Pergau that year, which dug into the secrecy surrounding the affair and asked how it was possible that so much could have gone wrong.

As the senior civil servant in charge of UK aid when the scandal broke, Tim Lankester found himself the centre of attention. It was a 1993 National Audit Office (NAO) report– which noted his refusal to sign off the spending without formal, written instruction from ministers – that effectively blew the whistle on the project. His move raised the question: why had senior politicians approved £238m in aid – then the largest grant awarded for a single project – against the advice of civil servants?

Lankester has now written a fascinating but eye-wateringly expensive book on the affair. Uncovering forgotten documents and reconstructing the twists and turns of events, it offers a behind-the-scenes take on the controversy that would redefine British foreign aid.

"We were slipping in this direction for years," he says, describing the "pessimistic" mood among UK aid officials at the time. The aid budget had been slashed, more was being directed through international organisations, and what was left was increasingly being abused by commercial interests. "Pergau was us drawing a line in the sand," he says.

The UK aid programme at the time was managed by the Overseas Development Administration (ODA), a department of the Foreign Office. Without its own cabinet minister, the ODA was too weak to defend its corner, says Lankester. Meanwhile, the government's controversial aid-for-trade policy brought increased pressure from business, which saw the aid budget as a honey pot.

The end of the cold war had ratcheted up competition in the global arms trade; British firms, along with some people in government, were after any opportunity to boost sales.

The trouble began in 1988 with a secret defence agreement linking the promise of civilian aid to Malaysia with a major arms export deal. Lankester, at the Treasury then, sent a memo to John Major warning that the linkage could "create acute embarrassment to ministers and wasteful public expenditure … I have little doubt that the press will eventually get on to this".

However, it would take five years for details of the project to emerge. There were more people who knew about Pergau in business than in Whitehall, says Lankester, while NGOs knew nothing before the NAO report. He doubts the project would have gone through had more people known more about it earlier. Lankester cautions against solely blaming politicians, saying civil servants "gave way too easily".

Looking back, he admits he had doubts about the legality of the project and should have sought formal legal advice. He also underestimated the power of the business lobby in Whitehall and the Malaysian prime minister's own desire to push through the dam project, he says. On the UK side, he puts much of the affair down to the "extremely dominant" Margaret Thatcher, who was known to have views on aid and trade with Malaysia. "It was difficult for ministers to stand up to her."

Lankester visited Pergau for the first time last summer, and contrasts the drama of the affair with what he found – immense natural beauty and the relatively well-functioning dam. "It does work quite well, but it came at such a high cost," he says. The affair did leave some positive legacies: a cross-party consensus that aid should be officially "untied" from commercial interests, a new act enshrining in law its poverty reduction focus, and a cabinet minister for the new Department for International Development (DfID). Now, when a permanent secretary dissents from a spending proposal, parliament is immediately notified.

His book, however, ends with a warning: "It is impossible to say that something like this will never happen again with British aid."

Revelations that £500m in UK aid is spent through a small group of, primarily British, consultants raised questions in September about who benefits – and who profits – from the UK aid programme.

The World Development Movement, which led the legal challenge against aid for the Pergau dam, sounded the alarm and pointed to the legacy of Pergau after the former development secretary Andrew Mitchell reportedly linked aid to India with ambitions to sell Typhoon fighter jets last year.

"We just shouldn't go there," Lankester says of linking trade with aid. It's a message he'll take to DfID this month, where he's presenting his book. "I'm happy for us to spend money in countries where we have trade relations, but I don't want any linkage," he says. "It's just too dangerous. It's a slippery slope. That's the lesson of Pergau."

• The Politics and Economics of Britain's Foreign Aid: The Pergau Dam Affair, Routledge, September 2012

Private equity firm will begin selling investment as pressure grows following killings in Connecticut

US private equity firm Cerberus Capital Management has said it will begin selling its investment in gunmaker Freedom Group in the light of last week's school shooting in Connecticut.

Cerberus acquired Bushmaster in 2006 and later merged it with other gun companies to create Freedom Group, which reported net sales of $677.3m (£418m) for the nine months ending September 2012, up from $564.6m in the same period a year ago.

Bushmaster is the manufacturer of the AR15 rifle used by the gunman in the Newtown killings that claimed 27 lives, including 20 schoolchildren.

"We do not believe that Freedom Group or any single company or individual can prevent senseless violence or the illegal use or procurement of firearms and ammunition," Cerberus said in a statement.

The private equity firm said it will retain a financial adviser to sell its interests in Freedom Group, and will then return that capital to investors.

Cerberus had come under pressure from the California State Teachers' Retirement System (CalSTRS) which said on Monday it was reviewing its investment with the private equity firm following the school shooting.

David Cameron hopes to seal deal, which is worth billions of pounds and will safeguard thousands of jobs, on official visit

Oman is expected to sign a multibillion-pound deal to buy 12 fighter jets and eight training planes from BAE Systems on Friday, a sale that the government says will safeguard thousands of jobs in the north of England.

David Cameron is hoping to seal the deal on a visit to Oman, his second since taking office. Cameron will meet the Sultan of Oman to discuss trade and regional foreign policy challenges – including Iran, Egypt and Yemen – and then the two men will view Typhoon fighter jets at the country's Seeb airport.

Oman is expected to order 12 of the fighters, worth £2.5bn, and eight Hawk 128 training aircraft from BAE Systems.

"I'm determined to put Britain's first-class defence industry at the forefront of this market, supporting 300,000 jobs across the country," Cameron said ahead of the deal. "The Typhoon fighter jet performed outstandingly in Libya, and so it's no surprise that Oman want to add this aircraft to their fleet." The deal will safeguard jobs at BAE factories in Lancashire and Yorkshire, and small companies throughout the UK that support production of the aircraft, he added.

The Oman deal is part of a government effort to sell 100 aircraft to the Gulf region in 2013, sales which could be worth more than £6bn to UK firms, Downing Street said in a statement.

Exports to Oman in 2012 are already worth more than £370m.

On a visit to Oman's capital Muscat the prime minister says thousands of UK jobs are being supported by the sale of 12 Typhoons and eight Hawk aircraft in a £2.5bn defence deal

Institute for Security and Resilience Studies is supported by Ultra Electronics, which is involved in drone technology

A senior academic at University College London has raised questions about a security and defence thinktank set up by Labour's former home and defence secretary John Reid, with the backing of an arms company involved in developing drone technology used in the US military's targeted killings.

The Institute for Security and Resilience Studies (ISRS), whose inaugural conference was addressed behind closed doors last month by Tony Blair, has an 11-person "advisory board" which includes figures associated with some of the most controversial foreign policy and security episodes of the post-9/11 international landscape and New Labour's time in power.

The ISRS names its "founding partners" as EADS UK, the British wing of the pan-European aerospace and defence corporation whose profile has been heightened by the Serious Fraud Office inquiry into whether a subsidiary bribed Saudi officials, and Ultra Electronics, a UK defence and security company which describes itself as a key partner in the US Predator drone programme.

Human Rights groups have become increasingly critical of the use of drones, which Pakistan's ambassador to the UN says have been responsible for thousands of civilian deaths. Their use to carry out targeted killings presents a challenge to the system of international law that has endured since the second world war, according to the UN's special rapporteur on extrajudicial killings. It is to set up a dedicated investigations unit in Geneva early next year to examine the legality of drone attacks in cases where civilians are killed in so-called "targeted" counter-terrorism operations.

Philippe Sands QC, professor of law at UCL, said: "It does look like a bit of a throwback to the Bush years. It's right that UCL should be a broad church, but there must be real openness to a range of views and perspectives, real transparency about funding sources, and real academic activity. Otherwise it will be seen as little more than a front offering a patina of academic respectability to one set of views."

UCL's website describes the ISRS as "an incubator for 21st-century approaches to security and resilience.It is a hub for researchers, educators, developers and users of concepts and capabilities, which are vital to the delivery of security and resilience services".

The 11-person advisory board includes Prof Philip Bobbitt, a director at the US national security council under Bill Clinton and an outspoken advocate for the 2003 invasion of Iraq; Michael Chertoff, a secretary of homeland security under George W Bush; and Prof Pat Troop, a former Health Protection Agency chief executive who was deputy chief medical officer in 2003.

Others board members include Ronnie Flanagan, the former RUC chief constable who is now a strategic adviser to the Abu Dhabi police; Lady Manningham-Buller, the former director general of MI5 between 2002 and 2007; Michael Boyce, the chief of the defence staff, 2001-2003; BT Group chief executive Ian Livingstone; and UCL's provost, Malcolm Grant.

It is completed by the chairman of Ultra Electronics, Douglas Caster, and Len Tyler, who leads the institute's promotion of its work on "cyber security and cyber doctrine" and has been head of business development for Cassidian Systems, part of EADS.

The institute's "director of programmes" is Jamie MacIntosh, a special adviser to Reid during his time as home secretary, who was previously chief of research and assessment at the Defence Academy of the UK. The institute's directors include its chief executive, Simon Gillespie, a former military adviser to Reid in government, and Rees Aronson, who was seconded by his employers, KPMG, to act as the Labour party's finance director in the year running up to New Labour's 2001 general election win.

Accounts filed by ISRS, which was established as a not-for-profit limited company, show that it received close to £288,889 of donations last year (up to 31 March 2011) in what appears to be "seed" money. The institute is due to file new accounts by 31 December.

This summer, as part of a $2m contract, Ultra delivered fuel cells to the US military to enable drones to fly further and faster than those using traditional batteries. Other products include the interface equipment used by drone controllers. In the UK it is involved in the development, with the MoD, of "loitering munitions", missiles so-called because of their ability to lurk in the sky for hours.

Ultra Electronics said the company was not prepared to discuss its relationship with ISRS, but added: "Companies in the UK don't fully appreciate the extent of the cyber-security threat and ISRS are working to highlight that, which is something we support as a group."

A spokesperson for Reid said he was unavailable for interview.

UCL said: "ISRS is an independent institute affiliated to UCL. All UCL affiliated organisations are required to meet the same high academic standards. ISRS brings together practitioners and scholars from many diverse walks of life, all of whom are committed to learning. UCL has many affiliate organisations. What makes ISRS a distinctive and attractive addition is their commitment to pragmatic learning in keeping not only with UCL utilitarian tradition but more importantly contributing in practical ways to the grand challenges UCL sees as a vital contribution from academia to the world."

The Labour MP for Islington North, Jeremy Corbyn, put forward an early day motion calling for the university to reconsider its position in hosting the institute, which he described as being "dominated by arms manufacturers and politicians who promoted the war against Iraq".

Not content with blocking gun safety laws to prevent US shooting massacres, the NRA is working to thwart international action

While the final funerals for the victims of the Newtown, Connecticut school massacre have been held, gun violence continues apace, most notably with the Christmas Eve murder of two volunteer firefighters in rural Webster, New York, at the hands of an ex-convict who was armed, as was the Newtown shooter Adam Lanza, with a Bushmaster .223 caliber AR-15 semiautomatic rifle. James Holmes, the alleged perpetrator of the massacre last July in Aurora, Colorado, stands accused of using, among other weapons, a Smith & Wesson AR-15 with a 100-round drum in place of a standard magazine clip.

Standing stalwartly against any regulation of these weapons and high-capacity magazines, the National Rifle Association continues to block any gun control laws whatsoever, and even trumpets its efforts to block the global arms trade treaty, slated for negotiations at the United Nations this March.

On Christmas Eve, the same day as the attack in Webster, the UN general assembly voted to move ahead with 10 days of negotiations on the arms trade treaty, to commence 18 March. Recall it was last July that the Obama administration said it "needed more time" to review the proposed treaty, effectively killing any hope of getting a treaty passed and sent back to member nations for ratification. This was just one week after the Aurora massacre, and in the heat of a close presidential election campaign.

The NRA succeeded in helping to scuttle the global arms trade treaty, delivering to President Barack Obama and Secretary of State Hillary Clinton a letter opposing the treaty signed by 50 US senators, including eight Democrats, and 130 members of the House of Representatives.

The global treaty shouldn't be controversial. By signing on, governments agree not to export weapons to countries that are under an arms embargo, or to export weapons that would facilitate "the commission of genocide, crimes against humanity, war crimes" or other violations of international humanitarian law. Exports of arms are banned if they will facilitate "gender-based violence or violence against children" or be used for "transnational organized crime".

The treaty deals with international exports of weapons and ammunition, not any nation's internal, domestic laws that govern the sale or use of guns.

Amnesty International last week called on the NRA to "immediately drop its campaign of distortions and lies about the pending United Nations' global arms trade treaty". Amnesty USA's Michelle Ringuette elaborated:

"Every day, 1,500 people die in armed conflicts around the world – one person every minute. These unregulated weapons are used to force tens of thousands of children into armed conflict and to rape women and girls in conflict zones. More than 26 million people around the globe are forced from their homes, and their livelihoods destroyed, by armed conflict.

"The NRA must immediately stand down on its campaign to block a global arms trade treaty."

NRA CEO Wayne LaPierre rolled out his public response to the Newtown massacre one week after it happened, blaming the violence on "monsters" and everything from video games to hurricanes, but not allowing that guns and their ready availability in the US might have something to do with it. At his press conference, LaPierre was twice dramatically interrupted by peace activists from the group Code Pink.

The first banner, held by Tighe Barry, read "NRA Killing Our Kids". Barry held the banner in front of the podium, silently, as LaPierre tried to continue his speech. Barry was then pulled out. After LaPierre resumed his speech, Medea Benjamin rose, holding a banner reading, "NRA: Blood on your hands", after which she was hauled away.

Two days later, on NBC's Meet the Press, LaPierre denied that regulating semiautomatic weapons or high-capacity magazines would help stem the epidemic of mass shootings in this country.

The NRA exerts enormous influence over state and federal gun regulation. Andrew Feinstein, who wrote the book The Shadow World: Inside the Global Arms Trade, told me:

"I have not seen anywhere else in the world a gun lobby that has the same level of influence on its own government as the NRA does in the United States …

"The US buys and sells almost as much weaponry as the rest of the world combined. So what happens in the U.S. is going to have enormous impact on the rest of the world."

From the hallways of Sandy Hook Elementary School in Newtown, Connecticut, to Afghanistan, to Somalia, the flood of US weapons and ammunition fuels violence, death and injury. President Obama and Congress need to take action, now.

• Denis Moynihan contributed research to this column.

© 2012 Amy Goodman; distributed by King Features Syndicate

The 66-year-old pleaded guilty last year to one count of aiding and abetting the illegal export of defence articles

Extradited Briton Christopher Tappin has been jailed for 33 months for arms dealing after a deal with US prosecutors was given the all-clear.

The 66-year-old pleaded guilty last year to one count of aiding and abetting the illegal export of defence articles under a so-called plea bargain.

US District Judge David Briones fined Tappin $11,357.14 (£7,095), in addition to the prison sentence, at a court hearing in El Paso, Texas.

Judge Briones recommended that the former president of the Kent Golf Union should be allowed to serve his sentence in the UK but the decision ultimately rests with the US Bureau of Prisons, a spokeswoman for the court said.

Tappin's wife, Elaine, who suffers from chronic illness Churg-Strauss Syndrome, was unable to attend the court in Texas.

Following the sentencing, she said: "Now I can begin to see light at the end of this long dark tunnel - but remain frustrated that Chris' extradition was granted in the first place.

"Being returned to a US prison will be dreadful for him. He is learning to live with the regrets - it is a chastening experience after a 45-year unblemished business career.

"I'm hoping against hope that he'll have the mental fortitude to cope with whatever lies before him in the months and years to come."

Tappin, from Orpington, Kent, will commence his sentence at the Allenwood prison in Pennsylvania and must turn himself in to start the term by 8 March.

Tappin had previously denied the charges, claiming he was the victim of an FBI sting operation. He could have faced 35 years in prison under the original charges.

The case followed an investigation that began in 2005 when US agents asked technology providers about apparently suspicious purchasers. Those customers were then approached by undercover companies set up by government agencies.

Robert Gibson, a British associate of Tappin who agreed to co-operate, was jailed for 24 months after pleading guilty in 2007 to conspiracy to export defence articles. He gave agents 16,000 computer files and emails indicating that he and Tappin had long-standing commercial ties with Iranian customers. An American, Robert Caldwell, was found guilty of aiding and abetting the illegal transport of defence articles and served 20 months in prison.

Tappin's predicament is one that other extradited Britons have faced. David Bermingham, one of three bankers jailed for 37 months over an Enron-related fraud in a deal with US prosecutors in 2008, said no sane defendant would risk dozens of years in jail when a plea bargain could enable them to be home within months.

"A prosecutor can now effectively be judge, jury and executioner," he said. "He can say, 'I'm going to charge you with 98 different counts, each carrying a five- or 10-year maximum sentence, and potentially you could be sentenced to literally the rest of your life in prison.' And there's no parole. There's no two ways about it.

"However if you plead guilty, 30 years becomes five years. If you are then co-operating and willing to give evidence against others, five years becomes two."

Christopher Tappin is sentenced to 33 months in jail for attempting to sell missile parts to Iran

Ten children killed and 40 injured in incident near Damascus, which opposition claims was caused by outlawed weapon

The death of 10 children in an apparent cluster bomb attack near Damascus has been widely condemned by human rights groups, which claim that the outlawed weapons have been increasingly used by the Syrian regime against civilians over the past two months.

Images of the dead and wounded children were uploaded to the internet by residents of the town of Deir al-Asafir, hours after a vacant block of land where children had gathered was hit.

The uploaded videos also showed scores of spent cluster bomblets, with the shells they were discharged from. Small indentations in the ground, where some of the bomblets had landed, were also visible, along with a large shell embedded deep in the soil.

"May God punish you, Bashar," one of the residents is heard saying of the Syrian president, Bashar al-Assad, as a video pans across a room of dead children, many of them wrapped in white shrouds. Residents contacted in the town claimed that up to 40 people, some of them children, had been wounded.

Opposition groups have insisted since late in the summer that the Syrian regime has been using the banned weapon – a claim that has been denied by officials in Damascus.

There was no independent confirmation of the attack. However, numerous images of spent shell casings have now been published from opposition-held parts of the country. None had so far had the visceral effect of the gruesome footage from Deir al-Asafir, which is believed to mark the first time in the Syrian conflict that cluster bombs have killed a large number of victims.

"It is the first confirmed video showing casualties that we have seen of what has been an increasingly clear use of these munitions," said Peter Bouckaert, emergencies director of Human Rights Watch. "The vast majority of the casualties have been caused by ordinary dumb bombs. These are very different. They are Soviet-made weapons and they are dropped from jets, which is a clear indication of who's responsible, because the opposition doesn't have warplanes."

Bouckaert said the weapons visible in the video were clearly identifiable as an AO1-SCH weapon, made by the Soviet Union in the 1970s and 80s.

"This should be seen in the context of the continued escalation by the regime and the move towards heavier weapons as they try to reclaim streets that they are slowly losing control of," Bouckaert said. "It's becoming more and more difficult for them to move around."

Cluster bombs have become an increasing menace around Aleppo and in the nearby countryside, which is a stronghold of the armed opposition. Earlier this month one such bomb fell 20 metres from a car in which the Guardian was travelling on a road near Aleppo. A jet roared overhead. Further down the road, small parachutes illuminated by flares were clearly visible dropping to the ground. Hanging beneath them were the small, drink can-sized bomblets, which detonate over a 15-20-metre radius when they hit the ground.

Russia has continued to supply Syria with weapons throughout the 20-month war, although it says they are existing supply contracts. Moscow has remained resolute in its support of its cold war ally as the crisis has escalated.

The website ProPublica claimed on Monday that Russian aid had extended to supplying large volumes of banknotes to the cash-strapped Assad regime. It claimed to have access to flight records that show 200 tonnes of notes were flown into Damascus on eight flights in the summer.

A US official quoted by ProPublica said the cash injection was highly significant. Daniel Glaser, assistant secretary of the US Treasury's office of terrorist financing and financial crimes, said: "Having currency that you can put into circulation is certainly something that is important in terms of running an economy and more so in an economy that is becoming more cash-based as things deteriorate. It is certainly something the Syrian government wants to do, to pay soldiers or pay anybody anything."

Elsewhere in Syria, rebel groups claimed to have seized control of the Tishreen dam in the north of the country. The armed opposition is steadily consolidating its presence in the Idlib and Aleppo countrysides, while Aleppo city remains locked in a stalemate that splits it roughly in half.

US, Britain and France focused on securing anti-aircraft missiles but neglected other weapons, Human Rights Watch says

Urgent efforts to secure anti-aircraft missiles from Libya after the fall of Muammar Gaddafi blinded western governments to the danger of other weapons going missing and fuelling conflicts in Mali and elsewhere, an expert says.

Reliable information about the source of arms being used by Islamist rebels in Mali is hard to come by, but much of it appears to come from Libya. In one striking case, Belgian-manufactured landmines originally supplied to Gaddafi's army appear to have been used by the jihadi militants who attacked BP's In Amenas gas facility in Algeria last week.

The US, working with Britain and France, focused on securing shoulder-launched anti-aircraft missiles, known as Manpads (man-operated portable air defense systems). Britain's Ministry of Defence said last year it had located 5,000 of an estimated 20,000 in Libya.

Peter Bouckaert, of Human Rights Watch, said his organisation had warned of the risks if Libya's conventional weapons were looted.

"From March 2011 these governments were solely focused on the Manpads," he told the Guardian. "We tried to get them to pay greater attention to other weapons but were unable to put them on their agenda. The Manpads were a very serious matter and you can imagine what a nightmare it would have been for the US or UK if one of their civilian planes was shot down by a Manpad that had gone missing in Libya when they supported the opposition."

Dyncorp, a US contractor, used former US special forces and CIA agents equipped with armoured vehicles and satellite communications to locate the missiles. "But when we tried to raise the need to take broader measures, their eyes glazed over and they said they were contracted to deal only with the Manpads," Bouckaert recalled.

Other weapons that went missing in Libya included anti-tank missiles, Grad missiles and mortars, some of which have been seen in Mali. Malian army officers have described being overun by heavily armed rebel forces equipped "just like Libya's army", with heavy machine guns on four-wheel drive vehicles, as well as anti-tank and anti-aircraft rockets and light weapons. Tuareg officers serving in the Libyan army brought the weapons with them after the fall of Gaddafi.

Algerian security officials warned as early as April 2011 that al-Qaida in the Islamic Maghreb had acquired surface-to-air missiles from Libya. "What we are seeing in Mali is one of the peripheral, spillover effects of the removal of Gaddafi," an EU diplomat said as the crisis escalated.

Libya closed its border posts with Algeria and its other neighbours in December but the central government in Tripoli still relies on local brigades and former rebel fighters with divided loyalties to maintain security in border areas.

"It takes a tiny fraction of the weapons missing in Libya to supercharge a conflict like Mali," said Bouckaert. "The arrival of new weapons changes the game. One day the rebels fight with AK47s and the next day they show up with anti-aircraft guns and other weapons and it's a completely different conflict.

"In a lot of these conflicts the focus is on the most exotic weapons, whether chemical weapons in Syria or Manpads in Libya, but we have to go back to Iraq in 2003 and look at the carnage caused by much more conventional weapons in the aftermath of the war.

"Two artillery shells can make a car bomb, and there are hundreds of thousands of them missing in Libya. For 10 years the US and its allies lost soldiers in Iraq to the weapons that they failed to secure in 2003, and now the same thing has happened on a more massive scale in Libya."

Transparency International estimates cost of corruption in defence sector amounts to at least $20bn a year

Most countries, including a large majority of the world's biggest weapons importers, lack the tools to prevent corruption in the arms trade, according to an unprecedented international study of national defence ministries and armed forces.

A number of Britain's most lucrative existing and potential markets for arms, including Saudi Arabia, Indonesia and Oman, are among countries where there is "a very high risk" of corruption, says Transparency International (TI) in a report released on Tuesday.

TI, a charity set up to combat corruption and promote good practice in commerce and industry, describes its study as the first index measuring how – or whether – governments counter corruption in defence.

It estimates that the global cost of corruption in the defence sector amounts to at least $20bn (£12.6bn) a year – the total sum pledged by the G8 countries in 2009 to fight world hunger. Its estimate is based on data from the World Bank and the Stockholm International Peace Research Institute (Sipri).

Mark Pyman, Director of TI's defence and security programme, said: "Corruption in defence is dangerous, divisive and wasteful, and the cost is paid by citizens, soldiers, companies and governments.

"Yet the majority of governments do too little to prevent it, leaving numerous opportunities to hide corruption away from public scrutiny and waste money that could be better spent"

TI's Government Defence Anti-Corruption Index analyses measures by 82 countries to reduce corruption risks. Such countries accounted for 94% of global military expenditure in 2011, equivalent to $1.6tn.

The study places countries into six bands. Those in Band F, where there is what it calls a "critical risk" of corruption, include Algeria, Angola, Egypt, Libya, Syria and Yemen.

Band E countries, where there is "very high risk" of corruption, include Saudi Arabia, Indonesia, Oman, Sri Lanka, Venezuela, Iran, Iraq, Nigeria, Morocco, Qatar, Uzbekistan, and Zimbabwe.

Britain is among countries, also including South Korea and the US, where the risk of corruption is considered "low". In only two countries is the risk of corruption considered "very low" – Australia and Germany, where there is robust parliamentary oversight of defence policy.

Some 70% of countries leave the door open to waste and security threats as they lack the tools to prevent corruption in the defence sector, according to the study. Half of the those countries' defence budgets lack transparency entirely, or include only very limited information, TI says. And in 70% of the countries, citizens are denied a simple indication of how much is spent by their government on classified weapons projects.

The index shows that only 15% of governments possess political oversight of defence policy that is comprehensive, accountable and effective. In 45% of countries there is little or no oversight of defence policy, and in half of there is minimal evidence of scrutiny of defence procurement.

Oliver Cover, the main author of the study, said: "This index shows unequivocally that there is a severe risk of corruption in this sector. It is a shock that in some areas it is also so poorly understood, for example in conflict situations, where corruption can become deeply embedded. Our index will help everyone to understand and address the risks".

Cover added: "Governments should clean up this sector, and our report will give them practical solutions to achieve transparency. Doing so will save the lives of troops and citizens and governments billions of dollars."

Giuseppe Orsi held on charges relating to allegations company paid £500,000 in bribes to secure £480m contract in 2010

The boss of Italy's biggest defence company, Finmeccanica, has been arrested over allegations he paid bribes to secure a deal to sell 12 helicopters to India.

Giuseppe Orsi, chairman and chief executive of the defence group, was arrested on corruption and tax fraud charges during a dawn raid on his home on Tuesday. He was remanded in custody.

Bruno Spagnolini, the chief executive of the group's wholly owned Anglo-Italian helicopter company AgustaWestland, was also arrested on the same charges and placed under house arrest.

The charges relate to allegations Finmeccanica paid 40m Indian rupees (£500,000) in bribes to secure a €560m (£480m) contract to sell helicopters to India in 2010. At the time of the deal Orsi, 67, was head of AgustaWestland. Police also raided the offices of Finmeccanica and the Milan office of AgustaWestland.

The high-profile arrests are the latest in a series of scandals to rock Italy less than two weeks before a general election. Finmeccanica is 30%-owned by the Italian state, and is the country's second-biggest private employer behind Fiat.

Italy's prime minister, Mario Monti, said: "There is a problem with the governance of Finmeccanica at the moment and we will face up to it."

India's defence ministry has asked the country's central bureau of investigation to investigate the deal, which included "specific contractual provisions against bribery and the use of undue influence as well as an integrity pact", the ministry said in a statement.

The latest arrests follow at least two other high-profile corruption investigations involving the defence company. Former chairman Pier Francesco Guarguaglini resigned after he was targeted in one investigation that led to criminal charges against his wife, who ran a Finmeccanica unit.

Orsi has previously denied any wrongdoing in the case and said he would not resign.

Finmeccanica denied any wrongdoing, and said it was business as usual, according to a statement.

India, the world's largest weapons importer, has a history of corruption in defence deals. A multi-million dollar scandal in the 1980s over the purchase of Swedish Bofors artillery guns contributed to an electoral defeat for the then prime minister Rajiv Gandhi.

Westland, originally a British helicopter manufacturer that merged with Italy's Agusta in 2000, was at the centre of a 1980s political scandal that led to Michael Heseltine quitting as defence secretary in Margaret Thatcher's cabinet. It employs more than 3,000 people at its main UK site in Yeovil.

Police investigate purchase of 12 luxury choppers – for use by country's political leadership – from Italian defence group

India will blacklist Finmeccanica and cancel a deal to buy 12 helicopters from the Italian defence group if allegations of bribery are proven against the company, defence minister AK Antony said on Wednesday.

Antony said India's Central Bureau of Investigation (CBI) had been ordered to investigate the purchase of the luxury choppers – destined for use by India's political leadership. He said that if the allegations were proved true, those involved would be punished.

"If anybody is guilty, they will have to pay the price, we will have to take actions, no one will be spared," he told reporters.

Italian police arrested Finmeccanica's chief executive Giuseppe Orsi on Tuesday over alleged bribes paid to secure the sale of 12 AgustaWestland executive helicopters to the Indian Air Force, when he was head of the Finmeccanica helicopter unit.

India, the world's largest weapons importer, has a long history of corruption in defence deals. A multimillion dollar scandal in the 1980s over the purchase of Swedish Bofors artillery guns contributed to an electoral defeat for then prime minister, Rajiv Gandhi, of the Congress party.

The current Congress party-led government has been buffeted by a series of corruption scandals that opposition parties plan to exploit ahead of general elections due in 2014.

Antony said that so far internal inquiries by the defence ministry have found no evidence against Finmeccanica in the $754m helicopter deal. He refused to answer specific questions about the Italian allegations.

The minister formally ordered the CBI to investigate the deal after Orsi's arrest on Tuesday. It was not clear why the agency had not been asked to investigate before. Antony criticised Italy for not responding to requests for information about the allegations uncovered by Italian investigators.

"From day one, we have been trying to find out the truth and we conveyed that to them," he said. "So far we have not received any details."

British government hopes New Delhi's plans to buy rival French jet in a £9bn deal may collapse

David Cameron is to press the case of the British-backed Eurofighter Typhoons during a visit to India next week, amid hopes that New Delhi's plans to buy a rival French jet in a $14bn (£9bn) deal may collapse.

Amid signs that the prime minister's trip could be overshadowed by a row over a separate £483m helicopter deal, No 10 made clear that Cameron would go out of his way to promote the Eurofighter when he meets his Indian counterpart Manmohan Singh.

The prime minister is to make a renewed push for the Eurofighter after François Hollande, the French president, failed to finalise a deal to sell 126 Dassault Rafale fighter planes to Delhi during a trip to India this week. Delhi opted for the French jet in a $14bn deal last year, nudging aside Eurofighter which is made in part by BAE Systems.

A Downing Street official said: "We respect the fact that the Indians have chosen their preferred bidder and are currently negotiating with the French. Of course, we will continue to promote Eurofighter as a great fast jet, not just in India but around the world."

A government source added: "Hollande was in India this week and a deal has not been signed so we will want to find out from the Indians how their talks are progressing with the French."

India and France insisted that they were still determined to finalise the Rafale deal. In a joint statement Hollande and Singh cited the "ongoing progress of negotiations" and added that they "look forward to their conclusion".

Cameron will start his second official visit to India, which will last three days, on Monday as the Indian defence ministry moved to cancel a deal to purchase twelve AgustaWestland luxury AW101 helicopters which are built at the company's Yeovil plant. The Times of India reported on Friday that the defence ministry had issued a formal "show-cause notice" to the Somerset subsidiary of the Italian defence manufacturer Finmeccanica to explain within a week why the contract should still go ahead.

The ministry has frozen payments for the helicopters and has despatched a team from the Central Bureau of Investigation (CBI) to Italy after Italian police arrested Giuseppe Orsi, the chairman and chief executive of Finmeccanica as part of an investigation into allegations that bribes were paid to Indian government officials. Orsi, who denies the allegations, resigned on Friday.

Sitanshu Kar, an Indian defence ministry spokesman, said in a statement: "[The Ministry of Defence] today issued a formal show cause notice to AgustaWestland of UK seeking cancellation of contract. The operation of the contract has been put on hold. The company has been asked to reply to the notice in seven days."

The row over the helicopters is likely to dominate parliamentary proceedings in Delhi as the prime minister visits the Indian capital. Brinda Karat, a politburo member of the

Communist Party of India (Marxist), told the Hindustan Times: "We are not happy with the CBI probe announced by the government, because it acted against the VVIP helicopters matter only after it surfaced in Italy. So, we would like the CBI investigations under supreme court's monitoring."

Defence sales to India will be at the heart of the prime minister's visit, which will largely focus on trade. Britain is confident that a deal to buy 145 M777 Howitzer artillery pieces, manufactured by BAE Systems, to India at a cost of around $0.5bn will soon be sealed.

The prime minister will also be making the case for Tesco which is struggling to break into the Indian market.

The supermarket giant has a wholesale business in India and has teamed up with Tata to run the Star Bazaar hypermarkets.But Tesco is unable to operate what is known as a "multi-brand retail operation" in India – industry speak for proper Tesco outlets selling its own goods. The Indian government is reforming the law to open up the market to international supermarket chains. But Tesco is concerned that the new legislation that is going through parliament imposes an unfair burden on the proportion it would have to pay towards the local infrastructure around new hypermarkets and the high level of local goods they would have to sell.

A government source said: "We do expect the issue of removing barriers to trade to come up during the trip as part of working together with the Indians to open up markets and to unleash opportunities for our businesses to succeed."