Call for inquiry after Blair is accused of supporting buyout by Labour donor

Downing Street strongly defended Tony Blair yesterday after the disclosure that he supported a multimillion-pound deal by an international steel tycoon who has donated £125,000 to Labour.

Mr Blair shrugged off criticism of his decision to backLakshmi Mittal's deal to buy a Romanian steel company as "Enron Chapter 55", and Downing Street officials insisted he had done nothing wrong.

But Michael Ancram, the shadow Foreign Secretary, called for a full inquiry. And Plaid Cymru, which highlighted the case, attacked Mr Blair for supporting a company based in a Caribbean tax haven while failing to intervene to save the jobs of Corus steelworkers in south Wales.

The row centres on a letter from Mr Blair to the Prime Minister of Romania, Adrian Nastase, on 25 July, expressing his delight at a deal to sell the state-owned Sidex steel plant to Mr Mittal's company, LNM Group.

He wrote: "I am particularly pleased that it is a British company which is your partner. This should send a very positive signal to investors and businessmen in Britain."

Downing Street said Mr Blair was simply supporting a British company. However, LNM Holdings, which concluded the deal with the Romanian government, is registered in the Dutch Antilles. The company, which has offices in London, said it was in British ownership through a UK-registered private company owned by Mr Mittal.

Mr Mittal gave £125,000 to Labour in June last year. In 1997 his wife donated money for campaign expenses for Keith Vaz, the former Europe minister.

Adam Price, Plaid Cymru trade and industry spokesman, said he was "shocked and outraged ... that the Prime Minister has been acting on behalf of a Corus competitor."

An LNM spokeswoman said the company had not sought help from the Government and insisted Mr Blair's letter was merely a letter of congratulation.