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Old 11-21-2006, 11:58 AM   #1
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Saudis Threaten To End Relations With UK In Bribe Scandal

Saudi Arabia threatens to suspend relations with Britain over bribery investigation

By Tom Regan
Christian Science Monitor, Nov 21

In a story that neither government has yet denied, the Sunday Times of London reported this weekend that Saudi Arabia is threatening to suspend diplomatic ties with Britain and cease cooperating on security matters, unless Prime Minister Tony Blair stops an investigation into $113 million "slush" fund allegedly set up for members of the Saudi royal family. The Times reports that a senior member of the Saudi government delivered an "ultimatum" to Mr. Blair that unless the investigation into "an allegedly corrupt defense deal" is stopped, the Saudis will also stop payments on the deal, worth about $76 billion to the British economy.

The payments, in the form of lavish holidays, a fleet of luxury cars including a gold Rolls-Royce, rented apartments and other perks, are alleged to have been paid to ensure the Saudis continued to buy from BAE under the so-called Al-Yamamah deal, rather than going to another country. Al-Yamamah is the biggest defence contract in British history and has kept BAE in business for 20 years.

The Times reports that the Saudis "hit the roof" when they learned that SFO lawyers had persuaded "a magistrate in Switzerland to force disclosure about a series of confidential Swiss bank accounts." United Press International reports that the Saudis told the British that they had broken their promise to keep details of the 20-year old contract secret and that "the British have no right to poke around in their financial matters." The Guardian reported Monday that the bank accounts belong to two "middlemen," a Lebanese politician and 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.

The Guardian noted, however, that the British government is discounting the Saudi threat to break off diplomatic relations. Internal cabinet documents, which the Guardian reports its reporters have seen, show that the Sunni Saudis rely on information from Britain's MI6 Intelligence service to key an eye on the Shiite regime in Iran. The British also keep them appraised of the movements of Al Qaeda outside their country. Cutting off intelligence links would actually weaken the Saudi royal family's position.

Interest in the Saudi deal with Britain was publicly reignited in late October when the Guardian published a telegram that showed the price of British fighter planes under the 1985 BAE contract had been inflated by one-third. Africa News Dimension reports that the document had mistakenly been placed in the National Archives, where they were discovered by an anti-arms trader advocate. The Ministry of Defense documents reveal that the price of each Tornado was inflated by 32%, from £16.3 million to £21.5 million. It is common in arms deals for the prices of weapons to be raised so that commissions can be skimmed off the top. The £600 million involved is the same amount that it was alleged at the time in Arab publications was exacted in secret commissions paid to Saudi royals and their circle of intermediaries in London and Riyadh, as the price of the deal.

Those allegations were treated with such concern in Whitehall in 1985, documents reveal, that a copy of the Arab magazine in question was immediately sent in confidence by the Foreign Office to Thatcher's chief aide at No. 10 Downing Street, Charles Powell, with advice that officials "should simply refuse all comment". In October 20 years later, the MoD at first sought to take the same line.
It insisted the Chandler telegram must have been leaked and said "we never comment on leaks". In fact, a copy was released to the National Archives on May 8 by the Department of Trade and Industry.

Stratfor, the defense and security analysis firm, reports that the real danger to Britain is the cancellation of the fighter contract, which would endanger thousands of British jobs and "force a restructuring of the British defense industry." The Stratfor analysis adds that the heart of the problem is also the different ways that business in done in Britain and in Saudi Arabia:

"Welcome to the real world of multiculturalism. The Anglo-American view of law is that it overrides custom and requires government officials to act in a disinterested fashion. The Saudi view of law is that the formal law must co-exist with the customary form of government. In other words, the giving of gifts to powerful people when seeking their favor is customary, and the idea that a government official may not profit while serving his country--while undoubtedly the Anglo-American view of law--is simply not theirs. There is, throughout the world, a profound tension between a wide variety of cultural norms. What is bribery in London is simply good manners elsewhere. In other words, if BAE is going to get a 40 billion-pound contract ($76 billion US) from the Saudis, the company is going to follow Saudi custom. Unfortunately, BAE is a British firm and, as such, it has to follow British law, which treats such behavior as a felony. Even if the Saudis are beyond that law, BAE isn't. Now, the British government did everything it could to help BAE win the contract, in hopes that its major defense contractor would prosper. However, the British government is now investigating the same company that it cheered on, knowing full well how business is done in Saudi Arabia."

Stratfor adds the real winner in this may be the US, who the Saudis will be forced to turn to for their defense needs. The Saudis are reportedly cautious about doing increased business with America, because of tensions within the Saudi kingdom, but they "may have no choice."
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