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· No expense spared as UK wooed Saudi politicians
· US and France lost out on tens of billions
David Pallister
Friday December 15, 2006
The Guardian
It involved the sale of 72 Tornado fighters and 50 Hawk jet trainers, the construction of two airbases and a host of other equipment, training and spares, serviced by more than 3,000 UK experts stationed in Saudi Arabia. They called it Al-Yamamah: the dove.
Britain's role as one of the world's top arms exporters was guaranteed by the partnership, but it was a close-run battle. In 1985 the Saudis were desperate to upgrade their defences. They were concerned even then about the spread of Islamic fundamentalism touching their Shia citizens in the oil-rich east, as well as the possibility of being drawn into the Iran-Iraq war, in which they took the side of Saddam Hussein. They approached France for its Mirage 2000s and the US for the F-15E, in the face of strenuous opposition from the Israeli lobby.
In the end Britain triumphed, due, in large part, to the intervention of Margaret Thatcher. She assiduously cultivated Sultan on his private visits to London and developed a close relationship with King Fahd, whose opinion of the British prime minister verged on infatuation.
The British party that flew to Bermuda to sign the memorandum of understanding included Sir Colin Chandler, head of defence export services and now chairman of easyJet; air vice-marshal Ronald Stuart-Paul, head of the Saudi armed forces project at the Ministry of Defence; and John Weston, the British Aerospace director in charge of the project.
The deal was immediately controversial and perpetually shrouded in secrecy. It was paid for by the delivery of up 600,000 barrels oil a day, with the money going into a dedicated MoD account. But given the Saudi royal family's propensity for extravagance and corruption, the allegations of kickbacks soon surfaced and have never gone away.
It was not only princes and their officials who were said to have benefited but also, allegedly, Mrs Thatcher's son, Mark, through his friendship with one of the intermediaries, the Syrian/Saudi billionaire Wafic Said.
Campaigners against the arms trade argued that Britain should not be selling war planes and military equipment to an undemocratic regime that practised torture. They claimed that the British government refrained from criticising Saudi human rights abuses, even when British citizens were involved, in order not to upset the arms sales.
Such was the sensitivity of the arrangement that a National Audit Office report in the early 1990s was, unprecedentedly, suppressed. The official British line has always been that this was a government-to-government contract, and no agents were involved. But evidence that commissions or bribes were paid by BAE, as it now is, and some of its sub-contractors such as Rolls Royce, Thorn EMI and Royal Ordnance, have been seeping into the public domain for years. Rolls Royce was even sued in the high court by agents acting for one of the princes because it had reduced the level of its commissions.
The alleged principal method for concealing the bribes was to increase the price of the goods; so, it appears, the Saudi princes were stealing from their people.
But after Al-Yamamah 1, the deal just rolled on. It was renewed in 1993 when Saudis agreed to buy another batch of 48 Tornado war planes. In a third stage, signed last year, Britain is selling up to 72 more planes, this time Typhoons.
The Guardian disclosed that accidentally released Whitehall papers, including a telegram from Chandler, revealed how the price of the Tornados had been inflated by 32%. Another document in the archives quotes a dispatch from a British ambassador saying the family of Prince Sultan "had a corrupt interest in all contracts". Two years ago this newspaper also revealed something of the quantity of money that was allegedly being passed around when it published details of the lavish BAE Systems hospitality showered on Prince Turki bin Nasser, the deputy head of the air force, and his family.
By then, the Serious Fraud Office had launched an inquiry into allegations; laws that came into force in 2002 made paying bribes on overseas deals a criminal offence. SFO officers have been trawling seized documents and have arrested and interviewed some BAE officials.
They unravelled details of arrangements for commissions being paid through Swiss bank accounts, and appeared to be about to approach the Swiss authorities for access to them. The scale of the alleged slush fund, concealed in Swiss bank accounts of Panamanian companies, may be as much as £100m.
BAE and all individuals have always denied any wrongdoing.
All the allegations have infuriated the Saudi royal family, not least because they have fuelled the resentment against the regime by its own militants and fundamentalists throughout the Muslim world.
In the past few weeks there have mutterings - aired by BAE Systems itself - that the Saudis are upset, the new Typhoon deal is in peril, and thousands of jobs are at risk if the Serious Fraud Office continues its investigations.
Key dates
Mid-1980s
Saudis keen to upgrade defences; consider French and US-made systems as well as British.
1985
Al-Yamamah deal signed by Saudi defence minister Prince Sultan and then defence secretary Michael Heseltine. Britain's biggest arms deal, it provides for the sale of 72 Tornado and 30 Hawk warplanes to Saudi Arabia. Worth £43bn so far. Al-Yamamah means "the dove" in Arabic.
1989
Deliveries begin.
1992
National Audit Office scrutinises the deal following allegations that members of Saudi royal family and middlemen were secretly paid hundreds of millions of pounds in kickbacks. But report is suppressed over fears it would anger the Saudis.
1993
Al-Yamamah deal renewed. Saudis agree to buy 48 Tornados.
1997-1999
BAE sets up offshore accounts in British Virgin Islands and Switzerland to move around large sums of off-balance-sheet cash.
2002
Laws come into force making it illegal to pay bribes to foreign public officials.
2004
Guardian reveals scale of hospitality BAE showered on Prince Turki bin Nasser, deputy head of air force.
2004
SFO launches investigation into corruption, including allegations that BAE Systems ran a multimillion pound "slush fund" to secure the Saudi arms deals.
2005
Third phase of deal sees Britain sell up to 72 Typhoon aircraft in £6bn deal.
2005
Sir Richard Evans, BAE chairman, interviewed by SFO.
Oct 2006
Guardian publishes documents showing how price of Tornado warplanes was inflated by £600m.
Nov 2006
SFO pursues evidence that millions of pounds of BAE cash was found in Swiss accounts potentially linked to the Saudi royal family.
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