The Tomahawk cruise missile salesman watched as a group of Iraqis, in identikit Ba'ath Party uniforms and Saddam moustaches, wandered past his marketing pavilion. "Have they dropped by the stand yet?" I asked, innocently. "No, sir," said the man, giving the single-forefinger gesture to the retreating Iraqis.

Welcome to Amman, Jordan, and to the Special Operations Forces Exhibition (Sofex). Even for a trade famously unfastidious about the people it mixes with, this was an unusually inclusive occasion. Apart from North Korea, every single member of President Bush's "axis of evil", "states of concern" and "sponsors of terrorism" clubs was down at Sofex, chequebook in pocket. Libya, Syria, Iran, Yemen, Sudan and Iraq - they all sent official delegations to see, and possibly to buy. On the other side were the sellers: Russia, Ukraine, Bulgaria, Slovakia - and, biggest of all, Britain.

The juxtapositions were weird, to say the least. The cruise missile salesman face to face with the people his missiles will almost certainly soon be fired at. Prince Andrew, head of the British delegation, in the same hospitality tent as Saddam Hussein's cousin. Mikhail Kalashnikov, inventor of the AK-47 assault rifle, at the same drinks reception with the fractionally less well-known British defence procurement minister, Lord Bach. Jordan's ruler, King Abdullah, an engaging figure in combat gear, clambering up the sides of tanks in an altogether better-received performance than that of our own dreary royal.

Britain's reaction to the Iraqi presence was, I am happy to report, in the finest traditions of Whitehall sang-froid. From Prince Andrew down, senior members of the UK delegation simply pretended that they did not exist. This masterful tactic survived even physical contact with the said Iraqis - when a group of them barged into the edge of the Prince's party as he left the hall occupied by a Jordanian defence company, KADDB. ("It's the Iraqis, Sir," said one of Andrew's handlers. "Oh God, the Iraqis!" said the Prince, and looked quickly in the opposite direction.) After the incident, which was witnessed by a colleague, the prince's press secretary gamely denied that an official Iraqi delegation was even present at the fair. This line became a little trickier to sustain when it emerged that Iraq was listed as an official attendee on Sofex's own website.

Never mind, even the Ministry of Defence could not dispute that the British stand existed. It took up an entire corner of the main exhibition hall, complete with a little stage on which people in military uniform acted brief playlets about rescuing hostages, storming buildings, capturing terrorists and all the other things made possible by the excellent products of Britain's world-class defence industry. Bizarrely, the performers were serving members of the British army seconded to the "defence demonstration team", travelling the world's trade fairs for Queen, country and the balance of payments. The Iraqis loved the defence demonstration team. I caught a couple of them eyeing one of the more aggressive demos with an air of wistful longing for the good old days when British arms washed up in Baghdad without too much bother.

I went up to one of them to ask what a country under UN arms embargo was doing at an arms fair. In an exclusive interview, he told me to get lost.

The squaddies were just part of an official British government sales force of about 40, very nearly equalling the 45-odd British industrialists and sales people at the fair. Britain has always had plenty in common with the Arab world, of course. Both, it might be said, are places where nothing much works properly, except the armed forces.

It does appear unlikely that any British companies were dealing directly with the Iraqis at Sofex - though, as the Scott report made clear, many did once trade with Baghdad through Jordanian middlemen. But Iraq was clearly using the fair to meet rather less scrupulous suppliers. We followed some of the delegation into Hall 3, occupied almost exclusively by the Bulgarians, where they appeared to be taking a close interest in anti-tank weapons. Later, I stopped by the stand of the Ukraine - accused by the United States of supplying Saddam with an advanced Kolchuga radar system that could endanger anti-terrorism coalition jets. Western intelligence sources say that Sofex 2000 was the event where the Iraqis finalised aspects of the purchase. The Ukrainians deny it. The Kolchuga radar has been taken off display this year, but many others are still on show.

There is an entirely defensible case for British arms sales to foreign allies. As the Ministry of Defence keeps saying, everyone has the right to defend themselves. Arms are also a valuable political tool; the need to keep Jordan onside for any war in Iraq may help explain the bloated British contingent in Amman. But the fair also dramatised many of the difficulties about the defence business. Should Britain support an event that could allow Iraq to evade an arms embargo? Now the government has in effect abandoned the aim of maintaining a truly self-sufficient British arms industry, can the level of state subsidy any longer be justified?

The fair raised another question, too. Sofex also focused on small-scale equipment, counter-terrorism and police gear - equipment, in other words, that could be used for internal repression by undemocratic states. Even without Iraq, you needed a pretty powerful telescope to find any signs of democracy among the attendees at this trade fair.

Andrew Gilligan is defence and diplomatic correspondent of Radio 4's Today programme