|BAE is none of Washington's business
By Con Coughlin
The international arms trade is a murky business at the best of times, but when it comes to selling arms to the Middle East, it is positively cut-throat. So it is hardly surprising that the recent history of Western involvement in selling arms to the region is littered with scandal, from the Iran-Contra affair of the 1980s, which seriously damaged Reagan's presidency, through to the Scott inquiry of the 1990s into Britain's illegal sale of arms to Iraq, which drove the final nail into the coffin of John Major's credibility.
Soon - at least if the US Justice Department has its way - we will be examining the Government's involvement in the Al-Yamamah scandal, the multi-billion-pound arms deal negotiated between Saudi Arabia and the Thatcher government in the 1980s.
advertisementBy any standard, Britain's agreement to equip the Saudis with state-of-the-art fighters deserved the billing it acquired at the time as the arms deal of the century. Britain agreed to provide 48 Tornado fighters, 60 Hawk jet trainers, 80 helicopters, six minesweepers, millions of dollars worth of electronic gear and two air bases, in a deal valued at £20 billion over 15 years.
Although the details were negotiated by the MoD, British Aerospace, the country's main defence exporter which is now part of BAE Systems, was the main beneficiary and it has provided a large percentage of the company's profits ever since.
As is usually the case in Middle Eastern arms deals, Britain's success in securing the deal had more to do with politics than acumen. The Saudis, who were keen to enhance their defensive capabilities against Iran and Iraq, would have preferred to purchase the technically superior American F-15 interceptor, rather than the Tornado, primarily a ground attack bomber.
But repeated Saudi efforts, going back to the 1970s, to negotiate a deal with Washington foundered on the hostility of the Jewish lobby in Congress which, encouraged by Israel, bitterly opposed the sale on the grounds that selling F-15s to Saudi Arabia would challenge Israel's undisputed air superiority in the region.
As a senior Saudi official commented at the time: "We would prefer to buy weapons from the United States, but we are not going to pay billions of dollars to be insulted. We are not masochists."
Sensing a rare opportunity to revive the fortunes of Britain's flagging defence industry, the Thatcher government threw its full weight into securing the deal, with Mrs Thatcher even getting her son, Mark, to lobby on her government's behalf.
Prince Bandar, the senior member of the Saudi royal family responsible for negotiating Al-Yamamah, writes in his recent autobiography, The Prince, that Mrs Thatcher's response to Congress blocking the F-15 sale was: "Hurrah, I want that contract! I want it to be British. I want to get my factories working."
Mrs Thatcher was delighted with the deal when it was finally signed in 1985, having fought off competition from the French. But another influential Washington lobby, the one that represents America's defence industry, was less than pleased that it had been denied a lucrative commercial opportunity, and the rancour has continued to this day.
Officials at the Justice Department insist that their decision this week to launch a corruption investigation into claims that BAE paid millions of pounds' worth of bribes to Saudi officials was not motivated by political pressure or lobbying from the American defence industry.
Under the 1977 Foreign Corrupt Practices Act, Justice officials have the right to investigate any company with interests in America that is suspected of wrongdoing. BAE Systems has been gradually developing its commercial activity in the States, and only last week completed the £2 billion purchase of Armor Holdings, which makes protective armour for the Humvee.
But British and Saudi officials are convinced the American action has been motivated by jealousy over the vast profits that BAE and the Government have derived from the initial deal. And there are suspicions that the Americans are trying to derail the latest arms agreement between Britain and Saudi Arabia - "Son of al-Yamamah".
Under the new deal, agreed last year, the Saudis have agreed to pay £6 billion for 72 Typhoon Eurofighters to replace the ageing Tornados. As with the original contract, this was negotiated by the Government, with BAE Systems acting as the main contractor.
The Saudis have already made their displeasure known about attempts to investigate bribery allegations concerning Al-Yamamah. When it became clear at the end of last year that the Serious Fraud Office was minded to bring prosecutions against those accused of corruption, the Saudis told Downing Street in no uncertain terms that they would not only cancel the Typhoon deal, but would withdraw all co-operation on intelligence-gathering, which would severel