The Government has defended its decision to close the full British consulate in the Iraqi city Basra amid warnings that lucrative infrastructure contracts could be lost to foreign rivals.
Foreign Office minister Alistair Burt insisted the UK would continue to maintain links with the city - which was the centre of British military operations - with embassy staff flying in from Baghdad when needed.
However the move was condemned by former Foreign Office minister David Mellor as "short-sighted" and "deeply damaging" to British interests.
Under the review of Britain's diplomatic presence across the country ordered by Foreign Secretary Mr Hague, there will no longer be a permanent consulate-general in Basra, which currently costs £6.5 million a year to maintain.
There will still be a British embassy office in the city although it will not be staffed on a permanent basis. Instead, the political section in the embassy in Baghdad will be expanded and more staff will be deployed at the consulate general in Irbil in the Kurdish region of northern Iraq.
The savings will help the Foreign Office to expand its diplomatic presence across the rest of the developing world with 11 new embassies and eight new consulates planned for countries in Asia, Africa and South America.
Mr Burt said that with the travel time from Baghdad now down to just one hour, it was no longer necessary to have a permanent presence in Basra.
Responding to Mr Mellor's criticism, he said: "Our team in Baghdad will do the job in Basra that needs to be done. It is a very important area for us with the oilfields, with the potential for infrastructure development.
"If we were to abandon the area completely that would have some sort of resonance but we are not doing that. We are able to put the resources into Baghdad, we are able to make sure we are able to service Basra from Baghdad."
However Mr Mellor warned that British businesses could lose out as a result to rivals from countries such as China and South Korea. He said: "I deplore a short-sighted, inept decision, deeply damaging to British interests."