Halt inquiry or we cancel Eurofighters
By Christopher Hope, Whitehall Editor
Last Updated: 1:05pm GMT 01/12/2006
Saudi Arabia has given Britain 10 days to halt a fraud investigation into the country's arms trade - or lose a £10 billion Eurofighter contract.
The Saudi government is on the verge of cancelling the contract
The contract supports up to 50,000 British jobs and there are now fears that the deal may go to France .
The Saudi government is on the verge of cancelling the contract - an extension of one brokered by Margaret Thatcher 20 year ago - because of a Serious Fraud Office investigation into allegations of a slush fund for members of the Saudi royal family, according to authoritative sources.
Tony Blair has been told that the deal faces the axe in 10 days unless he intervenes to bring the two-year investigation to a close.
The Saudis are said to be "outraged" by the probe into the activities of companies linked to BAE Systems. The investigation concerns alleged illegal payments made to members of the Saudi royal family and their agents.
The country's advisers have made clear through diplomatic channels that unless the inquiry is closed, the kingdom's arms business will be taken elsewhere.
The Saudis are understood to have already opened negotiations with the French about buying 36 rival Rafale jets.
The Daily Telegraph has learned that President Jacques Chirac has been to Saudi Arabia twice in recent months to offer full French co-operation on such a deal.
There has since been a series of meetings in Paris. Prince Bandar bin Sultan bin Abdul Aziz, the Saudi national security council secretary general, visited the French president on Wednesday of last week.
Last Monday, an envoy from the Saudi government is understood to have gone to Paris to confirm details of a potential new deal.
At stake is the future of the Al-Yamamah arms deal, Britain's biggest ever overseas defence contract. It is said to have been worth £40 billion to BAE Systems over the past 20 years.
Industry analysts estimate that the Government has benefited from a two per cent handling fee on that sum worth £800 million.
In 2002 a law was brought in to forbid British companies from offering bribes to third parties to secure business.
Mr Blair is being pressured to ask the Attorney General, Lord Goldsmith, to speed up the SFO's investigation to avoid the loss of the Saudi contracts.
Another prominent Cabinet minister is also thought to have approached the Attorney General about the case.
Lord Goldsmith is understood to have been warned that the flow of vital intelligence from the Saudi Government to the British secret services could be impaired following a break between the two governments over the contracts, thereby endangering national security, particularly during the war on terrorism.
However, friends of Lord Goldsmith maintain that he still feels compromised by the way in which he was pressured in 2003 to change his advice to the Government about the legality of the Iraq war.
He is said to be determined to ensure that on this issue no political pressure will be brought to bear upon him in deciding whether or not to bring prosecutions against any BAE Systems executives.
The renewed pressure on the Attorney General comes as the Foreign Office has been trying to smooth relations with the Saudis, with the British ambassador in Riyadh meeting representatives of the Saudi royal family last week-end.
There were early signs last night that a peace deal could be brokered, with suggestions that the UK Government has assured the Saudis that the investigation will be wound up "within a few months".
The Foreign Office today denied that any Government minister would even consider intervening in the inquiry.
A spokesman said: "The Serious Fraud Office is an independent Government department and part of the criminal justice system. Other parts of Government cannot and would not interfere in or prejudice its investigations."
BAE Systems denies that it has done anything wrong. A spokesman said: "We have always co-operated fully with the investigation. We are confident that we have done nothing wrong and we look forward to a swift conclusion."
The Conservatives declined to comment last night.
Norman Lamb, MP, the chief of staff to the Liberal Democrat leader Sir Menzies Campbell, said if anyone was leaning on the Attorney General that was "scandalous in the extreme". He added: "If you are going to pass anti-corruption legislation then you have to live with the consequences of it when the going gets tough.
" There cannot be any question of interference with a criminal investigation. The idea is abhorrent."