The questions that Mr Blair has to answer

Nobody does it better than Tony Blair. Nobody else manages that air of injured innocence. And this week the wide-eyed British Prime Minister put on an Oscarwinning performance. The air of piety and superior virtue he adopted after being accused of backing Indian tycoon Lakshmi Mittal and his bid to buy the Romanian steel industry in return for a £125,000 donation to the Labour Party was breathtaking. This was what the Prime Minister had to say: "If we are not careful we will be in an absurd situation of not backing British business. That would make us a pretty unique government in the world."

The Blair line that Lakshmi Mittal's company LNM Holdings is a British business was duly repeated by Downing Street spin-doctors. Downing Street later went even further. It insisted that British support for Lakshmi Mittal's bid had been initiated by the Foreign Office and, in particular, by Britain's ambassador to Bucharest, Richard Ralph. It said Tony Blair's involvement in the whole process was limited to signing off a pre-drafted letter to the Romanian Prime Minister, the kind of perfunctory note he signs all the time. The No 10 spin-doctors added for good measure that the Blair letter was a formality that was only dispatched after the contract had been agreed.

If the Downing Street account of events were true, all would be well. But it simply does not stack up. The draft agreement - let alone the final contract - between Romania and Lakshmi Mittal was signed two days after the Blair letter, while the Romanian government stated in terms that it attached the highest importance to Tony Blair's intervention. But that is a mere detail. The crucial point is that LNM Holdings is not even remotely British.

Consider the facts. LNM employs no less than 125,000 people worldwide, of which approximately 90 - or less than 0.01 per cent - are in Britain. Approximately 60 work in a wire-manufacturing plant in Kent, and another 25 or so in a corporate office in Berkeley Square, close by Annabel's nightclub in central London. Contrary to reports assiduously put out by Downing Street, this is not LNM's head office. LNM is registered in the Dutch Antilles, an offshore Caribbean tax haven of the type which New Labour affects to find offensive.

It is hard to think of any large company in the world - barring perhaps Indian Railways - which employs fewer British people than LNM. Microsoft, Nestl?, Coca-Cola or McDonald's are all foreign-owned companies - but they all employ a far higher proportion of the workforce in Britain. The assertion that LNM is British is, to put no finer point upon it, a gross deception.

What makes it such a shameless deception is the fact that LNM's bid actually acted against the British interest. Its acquisition of steel plant in Romania will undercut the domestic British steel industry and put British workers out of jobs. Indeed almost at the very moment that Tony Blair was helping out Lakshmi Mittal, Corus (formerly British Steel) was cutting 6,000 jobs in South Wales, although in fairness it should be said that the unions involved do not blame competition from LNM for this. The Corus chairman, Sir Brian Moffat, went to see Tony Blair and pleaded for help without effect.

Nothing in the Downing Street account of events makes sense. If we are to take the Prime Minister's spokesman at his word, the British Ambassador decided on his own initiative to help a foreign company hoping to buy assets off a foreign government. And not merely that: he felt so strongly about this that he went to the extraordinary lengths of recruiting the British Prime Minister to write a personal letter in order to facilitate this deal. If this were true, Richard Ralph would deserve the sack. It is emphatically not the job of British diplomatsto help foreign firms win contracts overseas, let alone to ask the Prime Minister to join in.

The reputation of the Foreign Office has never been lower than today. Successive Foreign Secretaries - Robin Cook and now Jack Straw - have allowed themselves and their staff to be steamrollered by 10 Downing Street. It is Jack Straw's job to stand up for the proud and honourable men and women who serve as our ambassadors overseas, often with great personal sacrifice and some physical risk. It is emphatically not his job to allow his officials to become scapegoats for cosy little deals concerted between New Labour and its financial benefactors.

Downing Street is also asking us to regard Mr Mittal's £125,000 donation to the Labour Party just two months before Tony Blair's letter as a sheer coincidence. The same goes for the donation of another substantial but so far unquantified payment to Labour three years earlier. And it is asking us to ignore the fact that another Mittal benefactor was Keith Vaz, Minister of State at the Foreign Office until the last election. In 1997 Lakshmi Mittal made, through his wife, a £5,000 donation to Keith Vaz's campaign funds (a curious gift, given that neither Mittal nor his company have any obvious connection with Vaz ' s Leicester constituency).

Downing Street is also asking us to dismiss as coincidence the fact that Vaz, who had hitherto not displayed any ostentatious interest in Romania, launched the UK Romanian Action Group in March 2001. Its purpose was to promote trade between the two countries at the very moment that Mittal was negotiating his steel deal. The very senior Foreign Office official, a man very close to Jack Straw, I spoke to last night claimed - and I am not making this up - that Vaz had no connection of any kind with Mittal's Romanian steel deal.

There would be nothing improper about Tony Blair backing an ambitious British company overseas, however heavily it had given to Labour funds. It is the job of a British Prime Minister to do his best for the hardpressed British economy. But the LNM group is not by any stretch of the imagination a British company. Tony Blair has many burning questions to face this morning, and he has not even begun to answer them.