By Dr George Venturini
For the past fifty years, at least, the United Kingdom has been a major supplier of armaments to Saudi Arabia. The major source is the B.A.E. Systems plc, based in the City of Westminster. This is a huge combination of various aircraft, shipbuilding, armoured vehicle, armaments and defence electronics corporations. There is a subsidiary in Australia. B.A.E. Systems was named on 29 June 2018 as the preferred tenderer to build Hunter-class frigates for the Royal Australian Navy, through ASC Shipbuilding and building the nine ships in South Australia. (BAE Systems Selected as Preferred Tenderer to Deliver Australia Sea 5000, markets.businessinsider.com, 28 June 2018; S. Benson, ‘Britannia rules waves: UK’s $35bn frigate win’, The Australian, 29 June 2018; A. Greene, BAE Systems beats Spanish and Italian designs for $35 billion warship building program …www.abc.net.au/newsabc.net.au, 29 June 2018).
In 1964 the British Aircraft Corporation, B.A.E Systems plc, a manufacturer formed from the government-pressured merger of several large companies in 1960, conducted demonstration flights of its Lightning – the only all-British Mach 2 fighter aircraft – in Riyadh, and in 1965 Saudi Arabia signed a letter of intent for the supply of Lightning and Strikemaster aircraft as well as Thunderbird surface to air missiles. The main contract was signed in 1966 for 40 Lightnings and 25 Strikemasters, eventually raised to 40. In 1973 Saudi Arabia signed an agreement with the United Kingdom government which specified B.A.C. as the contractor for all parts of the defence system. Overall spending by the Royal Saudi Air Force was over 10 billion pounds.
Al-Yamamah, which means ‘the dove’ in Arabic, would be born out of Saudi Arabia’s need for state-of-the-art weaponry in the early 1980s as part of a rolling programme to counter ‘the growing threat from Islamic fundamentalism in the Middle East’.
In the 1970s some United States defence contractors won major contracts, including 114 Northrop F-5s. In 1981 the Saudi Air Force ordered 46 F-15Cs and 16 F-15Ds, followed in 1982 by the purchase of 5 E-3A AWACS aircraft. Following these deals and partly due to pro-Israeli sentiment in the United States Congress, which would have either blocked a deal or insisted on usage restrictions for exported aircraft, Saudi Arabia turned to the United Kingdom for further arms purchases.
Britain and France were the obvious choices, with the Americans privately favouring Britain. Two rival camps were formed to fight for the deal. On the French side were two wealthy international arms dealers, Akram Ojjeh and Adnan Khashoggi. On the U.K. side was another arms dealer, Wafic Said, a Syrian-born Cambridge graduate whose name, and contacts with the Saudi royal family, were well known to British defence officials.
Mr. Said had been brought into the deal by a group of businessmen, financiers and Ministry of Defence officials known as the ‘Savoy Mafia’ because they held their meetings at the London hotel, led by Alan Curtis, the former chairman of Lotus and a long-time friend of Denis Thatcher, Prime Minister Margaret’s husband. When the Saudi business began looming large, they decided to enlist the services of Mark Thatcher, Margaret’s son; his name, they believed, would be sure to impress the Arabs.
Sources close to the ‘Savoy Mafia’ have said that Mark Thatcher was attractive to its members; they believed that the Saudis over-estimated his influence over his mother. One senior Ministry of Defence official said: “We knew he was involved, and we didn’t like it. We wanted a clear run at the Saudis and we were afraid he would get in the way.”
The fortunes of the two groups ebbed and flowed, with the French bid, offering Mirage 2000 fighters, gaining early ground. It is understood, however, that members of the U.K. team, possibly including B.A.E. executives, flew to Geneva at the end of 1983 to persuade Mr. Ojjeh to withdraw. It is not clear what form the persuasion took, but it resulted in vain attempts by an abandoned Mr. Khashoggi to get on board the British bid, and the French challenge collapsed. Mr. Said’s team is reported to have received 240 million pounds for arranging the deal.
The deal between B.A.E. and the Saudi government may well have been brokered by a range of deep politicians at Le Cercle, a foreign policy think-tank specialising in international security. Set up after the second world war, the group has members from twenty-five countries and meets at least bi-annually, in Washington, D.C.
Chairman of Le Cercle, Mr. Jonathan Aitken, a former U.K. government Cabinet Minister, and member of the Privy Council, was later convicted for perjury in related matters. Another Le Cercle member, Lord Charles Powell, was one of Margaret Thatcher’s most trusted foreign policy aides and helped broker the Saudi deal. The first stage of the deal was signed on 26 September 1985, at which time Sir Norman Lamont, formerly a Chancellor of the Exchequer, already member of Le Cercle and later a chairman of the same, had been Minister for Defence Procurement. Also involved were the Saudi Ambassador to the United States, and son of the then Saudi king, Prince Bandar bin Sultan, as well as Wafic Said, who employed Mark Thatcher as a channel to his mother.
Former Prime Minister Margaret Thatcher lobbied hard for Al-Yamamah arms deal with Saudi Arabia.
Since early 1984 intensive efforts had been made to sell Tornado and Hawk to the Saudis. When, in the northern autumn of 1984, they seemed to be leaning towards French Mirage fighters, Mr. Heseltine, Defence Minister, paid an urgent visit to Saudi Arabia, carrying a letter from Prime Minister Thatcher to King Fahd. In December 1984 the Prime Minister started a series of important negotiations by meeting Prince Bandar, the son of Prince Sultan. The Prime Minister met the king in Riyadh in April 1985 and in August the king wrote to her stating his decision to buy 48 Tornado IDS and 30 Hawk.
In 1985 the U.K. and Saudi governments began negotiations on a series of unprecedented arms contracts known as Al-Yamamah, ‘the dove’ in Arabic. They continue to this day. The parties signed an initial Memorandum of Understanding, but there were secret Letters of Agreement which were attached to the M.O.U. and which have never been publicly released. The deal, which involved 6 billion pounds of corrupt commissions, has been covered up by the United Kingdom for decades. The Al-Yamamah arms deal involved massive orders for British Tornado fighter planes, helicopters, tanks and ammunitions, most of which were built and supplied by B.A.E. and its predecessor British Aerospace.
In time the deal developed along three main stages. They were:
- Al-Yamamah I, finally agreed on 26 September 1985 when Michael Heseltine, the U.K. Defence Minister, and his Saudi counter-part signed a Memorandum of Understanding in London, worth between 40 billion to 50 billion pounds, for 48 Tornado IDSs, 24 Tornado ADVs, 30 Hawk training aircraft, 30 Pilatus PC-9 trainers, a range of weapons, radar, spares and a pilot-training programme.
- Al-Yamamah II, was signed on 3 July 1988 in Bermuda by the respective defence ministers for another 48 Tornado fighter jets.
- Al-Yamamah III, was signed in 2005 for 72 Eurofighter Typhoons for up to 10 billion pounds. This latest development is better known as Al-Salam, which means ‘the peace’ in Arabic. In July 2005 Prime Minister Tony Blair flew to Riyadh to promote the deal.
It was to become ‘The dove of peace’. Obviously the Saudis had heard of – perhaps even read – Orwell!
Since the oil had to be shipped out of Saudi Arabia and sold on the world market, British Petroleum and Royal Dutch Shell became part of the negotiations and were asked, for a commission, to ship the hundreds of thousands of barrels of oil per day from the Saudi peninsula and sell it on the world market. The oil companies then deposited the proceeds from the oil sale into a specially set-up British Ministry of Defence account. From this account, B.A.E. was paid for the arms and support services. It was reported in the United Kingdom press that the U.K. government took a 2 per cent fee from the Al-Yamamah accounts, which amounted to close to US$1.6 billion over the life of the twenty-plus year contract.
The deal and the sale of Saudi oil thus generated a large fund of money in the U.K. account which was separate from the normal budget of the Saudi Ministry of Defence and Aviation. And the Saudis were apparently able to request that some of these Al-Yamamah funds be used for arms purchases from other countries.
According to reports in the United Kingdom press, an audit of the Al-Yamamah account at the Ministry of Defence, conducted by the U.K. government in 1992, was considered so secret that even members of the House of Commons on the relevant oversight committee were not allowed to see it.
The full extent of the deal has never been fully clarified, however it has been described as “the biggest [U.K.] sale ever of anything to anyone”, “staggering both by its sheer size and complexity”. It may be estimated that, at a minimum, it involves the supply and support of 96 Tornado ground attack aircraft, 24 Air Defence Variants (ADVs), 50 Hawk and 50 Pilatus PC-9 aircraft, specialised naval vessels, and various infrastructure works.
B.A.E. has approximately 4,000 employees working directly with the Royal Saudi Air Force.
There were no conditions relating to security sector reform or human rights included in the contracts. The U.K. government secretly insures B.A.E.’s deals with Saudi Arabia. This means that the government will pay B.A.E. 1 billion pounds if the Saudi regime collapses and the country cannot pay its debts to B.A.E.
The relevant contracts have been underwritten by the Export Credits Guarantee Department, a taxpayer funded insurance system. Guarantees on a contract worth up to 2.7 billion pounds were signed by the U.K. government on 1 September 2003. In December 2004 the House of Commons Trade Committee chairman, Martin O’Neill, accused the Government of being foolish for concealing the 1-billion-pound guarantee that it has given to B.A.E.
Al-Yamamah and Al-Salam have been controversial for many reasons. Within weeks of the deal being signed in 1985 allegations of corruption surfaced.
From the start, the contracts were shrouded in secrecy, and although little could be substantiated, suspicions began to surface that kickbacks and bribery were central to the deal.
The public first saw some details about the unusual structure of the deal in the early 2000s when the non-profit group Campaign Against Arms Trade came across classified documents between the U.K. and the Saudi negotiators which had been improperly archived by the U.K. government.
Some allegations suggested that the former prime minister’s son Mark Thatcher may have been involved. Of course, he has strongly denied receiving payments or exploiting his mother’s connections in his business dealings.
In February 2001 the solicitor of a former B.A.E. employee, Edward Cunningham, notified the Serious Fraud Office of the evidence that his client was holding which related to an alleged ‘slush fund’. The S.F.O. wrote to Sir Kevin Reginald Tebbit, then Permanent Under Secretary of State for the Ministry of Defence, who notified the Chairman of B.A.E. – but not the Secretary of Defence. No further action was taken until the letter was leaked to and reported on by The Guardian on 11 September 2003.
The Serious Fraud Office was reported to be considering opening an investigation into an alleged 20 million pounds slush fund on 12 September 2003, the day after The Guardian had published its slush fund story.
In May 2004 Sir Richard Evans appeared before a parliament’s defence select committee and said: “I can certainly assure you that we are not in the business of making payments to members of any government.”
In October 2004 the British Broadcasting Corporation’s Money Programme broadcast an in-depth story, including allegations in interviews with Edward Cunningham and another former insider, about the way B.A.E. alleged to have paid bribes to Prince Turki bin Nasser and ran a secret 60 million pounds slush fund in relation to the Al-Yamamah deal. Most of the money was alleged to have been spent through a front company called Robert Lee International Limited.
In November 2004 the S.F.O. made two arrests as part of the investigation. B.A.E. stated that they welcomed the investigation and “believe[d] that it would put these matters to rest once and for all.”
But the investigation would be stopped towards the end of 2006 just as Swiss banks were preparing to release details of the accounts held by middlemen in the deal.
In late 2005 B.A.E. refused to comply with compulsory production notices for details of its secret “offshore payments to the Middle East.” The terms of the investigation were for a prosecution under Part 12 of the Anti-terrorism, Crime and Security Act 2001.
An audit into Al-Yamamah I by the National Audit Office at the Ministry of Defence was conducted by the U.K. government under Sir John Bourn, a former Comptroller and Auditor General, therefore a former head of the National Audit Office, in 1992. But it was considered so secret that even members of the Public Accounts Committee were not allowed to see it. Police, however, later calculated that more than 6 billion pounds may have been distributed in corrupt commissions, via an array of agents and middlemen. Before its ascendancy to power the Labour government promised to publish the audit report, but never did and so, as of 2006, it was the only report on the subject which is not publicly available.
Charged with running a slush fund, B.A.E.’s chief executive Mike Turner did not deny the charge. At a press conference following the revelations, he stated: “They are old allegations and they are old hat. They are history.” Turner added: “Everything we do is legal and that is all I am prepared to say. Whatever the law is, we are legal.”
Those allegations have never gone away.
Article 5 of the Organisation for Economic Co-operation and Development Convention on Combating Bribery prohibits the decision to drop investigations into corruption from being influenced by considerations of the national economic interest or the potential effect upon relations with another state. This does not however explicitly exclude grounds of national security.
This prompted the investigation team to consider striking an early guilty plea deal with B.A.E. which would minimise the intrusiveness to Saudi Arabia – essentially that B.A.E. had paid massive bribes to Saudi royals – and would mitigate damage. The Attorney General signed off on the strategy, but briefed Prime Minister Blair, who in a reply dated 5 December 2006, urged that the case to be dropped. Prime Minister Blair wrote a “secret and personal” letter to the Attorney General to that effect.
Despite affirming his government’s commitment to bribery prosecution, he stressed the financial and counter-terrorism implications. That same day, Prince Bandar met with Foreign Office officials, after spending a week with President Jacques Chirac to negotiate a French alternative to the B.A.E. deal.
A week later, after consultation with the S.F.O., the Attorney General met with Mr. Blair to argue against dropping the case. It was Blair’s opinion that “Any proposal that the investigation be resolved by parties pleading guilty to certain charges would be unlikely to reduce the offence caused to the Saudi Royal Family, even if the deal were accepted, and the process would still drag out for a considerable period.”
On 13 December 2006 the Director of the S.F.O. wrote to the Attorney General to inform him that the S.F.O. was dropping the investigation, “real and imminent damage to the U.K. national and international security and would endanger the lives of U.K. citizens and service personnel.”
On 14 December 2006 the Attorney General Lord Goldsmith announced that the investigation was being discontinued on grounds of public interest. The 15-strong investigation team had been ordered to turn in their files two days before. The statement in the House of Lords read: “The Director of the Serious Fraud Office has decided to discontinue the investigation into the affairs of B.A.E. Systems plc as far as they relate to the Al-Yamamah defence contract. This decision has been taken following representations that have been made both to the Attorney General and the Director concerning the need to safeguard national and international security. It has been necessary to balance the need to maintain the rule of law against the wider public interest. No weight has been given to commercial interests or to the national economic interest.”
Prime Minister Blair justified the decision by saying “Our relationship with Saudi Arabia is vitally important for our country in terms of counter-terrorism, in terms of the broader Middle East, in terms of helping in respect of Israel and Palestine. That strategic interest comes first.”
Jonathan Aitken, a former Tory government minister and convicted perjurer, who was connected with the deals in the 1980s, said that even if the allegations against B.A.E. were true, it was correct to end the investigation to maintain good relations with Saudi Arabia.
Dr. Mark Pieth, director of anti-fraud section at the O.E.C.D., on behalf of the United States, Greece, Japan, France, Sweden and Switzerland, addressed a formal complaint letter before Christmas 2006 to the Foreign Office, seeking explanation as to why the investigation had been discontinued. Transparency International and Labour MP Dr. Roger Berry, chairman of the Commons Quadripartite Committee, urged the government to reopen the corruption investigation.
In March 2007 the O.E.C.D. sent their inspectors to the U.K. to establish the reasons behind the dropping of the investigation. The O.E.C.D. also wished to establish why the U.K. had yet to bring a prosecution since the incorporation of the O.E.C.D.’s anti-bribery treaty into U.K. law.
Continued Wednesday – A conga line of bludgers: Prince Charles (part 6)
Previous instalment – A conga line of bludgers: Prince Charles (part 4)
Dr. Venturino Giorgio Venturini devoted some seventy years to study, practice, teach, write and administer law at different places in four continents. He may be reached at George.firstname.lastname@example.org.
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