NYT : Saudi Said to Receive Money for British Arms Deal

Saudi Said to Receive Money for British Arms Deal

By ALAN COWELL | June 7, 2007

LONDON, June 7 — Confronted today with fresh allegations of impropriety in a major British arms deal with Saudi Arabia, Prime Minister Tony Blair once again defended his decision to cancel an official inquiry into the multi-billion-dollar agreement.

Mr. Blair spoke at the Group of 8 summit of major industrial nations, taking place this week in a Baltic Sea resort in northern Germany.

His remarks came after British news organizations reported that BAE Systems, the leading British military contractor, paid more than $2 billion clandestinely into bank accounts in Washington that were conduits to Prince Bandar bin Sultan, the longtime Saudi ambassador to the United States.

BAE denied breaking British laws in connection with an arms transfer known as the Al-Yamamah deal, negotiated in 1985. The deal, which was then worth £43 billion ($86 billion at today’s exchange rate), included shipments of warplanes and a variety of other military equipment to Saudi Arabia from Britain. BAE has insisted that all the payments made under the agreement had government approval.

“The Al-Yamamah program is a government-to-government agreement, and all such payments made under those agreements were made with the express approval of both the Saudi and U.K. governments,” BAE said in a statement. “We deny all allegations of wrongdoing in relation to this important and strategic program, and we will abide by the duty of confidentiality imposed on us by the government.”

The BBC and The Guardian newspaper both reported today that payments of up to £120 million a year were made by BAE to Prince Bandar over more than a decade through the two accounts. The BBC said that journalists working on its investigative news program, Panorama, “established that these accounts were actually a conduit to Prince Bandar.”

“The purpose of one of the accounts was to pay the expenses of the prince’s private Airbus,” the BBC said.

Prince Bandar is currently the Secretary General of the Saudi National Security Council. His office in Riyadh, contacted by a Reuters reporter about the matter, declined to comment and said the prince was out of the country.

Last December, Britain’s Serious Fraud Office abruptly canceled an investigation into allegations of corruption in the Al-Yamamah deal, after pressure from the government. At that time, Mr. Blair said that continuing the inquiry would prejudice Britain’s diplomatic and intelligence ties with Saudi Arabia, which is regarded here as a crucial ally in combating international terrorism.

Speaking to reporters at the summit in Heiligendamm, Germany, Mr. Blair said that if the investigation had gone ahead, it “would have involved the most serious allegations in investigations being made into the Saudi royal family.” “My job,” he said, “is to give advice as to whether that is a sensible thing, in circumstances where I don’t believe the investigation incidentally would have led anywhere except to the complete wreckage of a vital strategic relationship for our country.”

On top of that, Mr. Blair said, “we would have lost thousands, thousands of British jobs.”

The news reports about the arms deal revived calls among some lawmakers to restart the official investigation.

“These matters need to be properly investigated,” said Roger Berry, who is chairman of a parliamentary oversight committee. “It’s bad for British business, apart from anything else, if allegations of bribery popping around aren’t investigated.”

But the British government showed no readiness to countenance discussion. The Ministry of Defense said it was “unable to comment on these allegations, since to do so would involve disclosing confidential information about Al-Yamamah and that would cause the damage that ending the investigation was designed to prevent.”

Prince Bandar was been regarded for many years as a prominent and influential player in Washington, with more access to President Bush, his family and his administration than any other diplomat. His 22-year term as Saudi ambassador ended in 2005, but he still seemed to wield influence.

More recently, however, Bush administration officials seemed puzzled over moves by King Abdullah of Saudi Arabia, Prince Bandar’s uncle, which seemed to contradict messages from the prince.

The United States has kept a close watch on development in the BAE case — out of concern, according to American officials, that the cancellation of the Serious Fraud Office’s inquiry conflicts with an antibribery convention overseen by the Paris-based Organization for Economic Cooperation and Development, to which the United States and Britain both belong.