Tue, Nov 21, 2006 - Page 7 News List

Saudi arms deal inquiry closes in on secret papers

DODGY DEALS?The Saudi royal family and the UK's largest arms manufacturer could be implicated in the Serious Fraud Office's inquiry into corruption

THE GUARDIAN , LONDON

The UK Serious Fraud Office (SFO) is on the brink of obtaining information from Swiss banks which may implicate the Saudi royal family in secret arms-deal commissions of more than £100 million (US$189 million), sources close to the attorney general's office confirmed on Sunday.

The SFO has been inquiring for three years into allegations of systematic corruption in international deals arranged by Britain's biggest arms company, BAE Systems.

Progress

But it was only this autumn that the Saudis, along with BAE executives and officials of the Ministry of Defense's arms sales department, DESO, became aware of how much progress the SFO has made. Sources close to the Swiss say the authorities there notified two middlemen that access to their bank accounts was being sought.

One is believed to be a prominent Lebanese politician, the other a wealthy Syrian. A process of formal appeal by them has been taking place in Geneva. Legal sources said that the Swiss normally grant preliminary access in such criminal cases for accounts to be inspected. This would enable the SFO to trace any payments passed on to accounts belonging to the Saudi royals.

Since the Swiss disclosure to their account holders, the British attorney general has faced renewed political pressure from BAE to block the expanding SFO inquiry.

The company has hired a firm, Allen & Overy, to protect its position with the SFO. BAE denies wrongdoing and says it is cooperating with the inquiry. The attorney general, Lord Goldsmith, is reported to have refused to intervene, and MPs say any move by him to do so would provoke uproar. The Saudis also deny any wrongdoing.

Saudi officials are reported to have met British Prime Minister Tony Blair's chief of staff, Jon-athan Powell, to discuss the fate of Al Yamamah 3, the latest multi-billion-pound installment of BAE's warplane sales to the Saudis, amid fears for the deal if the Swiss probe is not blocked.

The Powell family have intimate knowledge of the history of the deals. Powell's brother, Charles -- Lord Powell -- has been on BAE's payroll as a consultant, and his son, Hugh, heads the UK Foreign Office's security policy department, which is concerned with BAE. But there is no reason to believe any threats would be met with other than an entirely proper response in the prime minister's office.

Threats

Reported threats from the Saudis to break diplomatic links and withdraw intelligence co-operation over al-Qaeda have been discounted in parliamentary circles.

According to internal Cabinet Office documents, the Saudi royal family relies on a flow of information from British intelligence on the neighboring Shiite Muslim regime in Iran. The royals, who are Sunnis, are also a target of al-Qaeda, being accused of despotism and corruption. It would weaken their own position to break off intelligence links with Britain.

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