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The Guardian (UK): Diplomatic clash looms with US over BAE arms sale investigation

(The article is about the so called “Scandal of the Century” involving Shell in allegedly laundering billions from the sale of oil to fund corrupt payments in the arms-for-oil scandal: The Times: Secret account under spotlight)

· UK asked to hand over secret payments evidence
· Refusal could endanger sharing of intelligence

David Leigh
Monday July 16, 2007

A potential diplomatic collision with the US is looming over the corruption allegations against the arms company BAE. The department of justice in Washington has formally demanded that Britain hand over all evidence of secret payments the company made to members of the Saudi royal family to secure huge arms deals.

The department has taken over the corruption investigation after British prosecutors were forced by the then prime minister, Tony Blair, to halt it late last year on alleged grounds of national security.

The Serious Fraud Office in London spent £2m and more than two years amassing documents which showed BAE had transferred £1bn to Washington accounts controlled by Prince Bandar of Saudi Arabia, and another £1bn to Swiss bank accounts linked to agents acting for Saudi royals. The records include highly classified Ministry of Defence files detailing the government’s involvement in the al-Yamamah arms deal payments.

The Saudis and BAE say the payments were all above board. But Mr Blair said the Saudi royals privately made threats to cut off intelligence links unless the investigations were halted. He claimed this might increase the risk of British citizens being murdered in al-Qaida terrorist attacks “on British streets”.

The US justice department has sent its formal request for mutual legal assistance to the Home Office in London. This was confirmed by the SFO at the weekend. If ministers refuse to cooperate, they will face a fresh international crisis. The OECD, which polices international anti-bribery treaties, has already accused Britain of potentially breaching those treaties.

If British ministers defy the justice department, this could go on to endanger reciprocal cooperation and intelligence-sharing with the US. Britain depends far more heavily on Washington than it does on Saudi Arabia. One senior source close to the US department of justice told the Guardian: “Britain’s definition of national security might have to change under these circumstances.”

Ministers are likely to be challenged today in the Commons on whether they will seek to obstruct US investigators. The Liberal Democrats have scheduled another opposition day debate in an effort to smoke out the prime minister’s position. The Liberal Democrat deputy leader, Vince Cable, said: “Gordon Brown has made much fanfare about promising a more open approach to government, but if he was serious, he would find a way of opening the lid on the secrecy surrounding this murky deal.

“Allegations that the British government has been complicit in large-scale corruption are incredibly serious. It is profoundly unsatisfactory to invoke national security as the reason for this government’s refusal to pursue either legal action or parliamentary oversight.”

Frantic lobbying is already going on on behalf of BAE to protect the company and its lucrative Saudi contracts. The arms sales minister, Paul Drayson, last week met Labour MP David Borrow, whose South Ribble constituency contains BAE Preston factory workers. Mr Borrow asked the government to intervene with Washington.

Mr Borrow, who has declared a trip to the Paris air show at BAE’s expense, told his local paper: “The investigation will come to a point where the UK government will say … details of these arrangements are not something they are prepared to disclose to the department of justice.”

He said the US criminal investigation “could affect jobs”.

The MoD had claimed that any public discussion of the Prince Bandar payments could cause the Saudis to carry out their threats. But since the disclosure of the Bandar transactions, and the announcement of the moves to investigate in Washington, there has been no indication from ministers in the Brown administration that the Saudis have made good such threats.,,2127191,00.html and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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