MI6: BAe probe fallout unlikely
UK government dropped corruption inquiry, claiming it put national security at risk.
Last Modified: 16 Jan 2007 10:33 GMT
 Blair said he had no doubt that 'the right decision'
had been taken in cancelling the inquiry [AFP]

Britain's foreign intelligence service MI6 has disputed government claims that national security was at risk to justify halting a corruption inquiry into BAe Systems' dealings with the Saudi royal family, the Guardian newspaper said on Tuesday.

The report comes as Britain faces questioning on Tuesday by the Organisation for Economic Cooperation and Development (OECD) over the decision to quash the investigation into allegations the defence company established a slush fund for some members of the Saudi royal family to secure contracts. 

Citing unnamed officials and civil service sources, the newspaper said that MI6 and the domestic intelligence agency MI5 had no evidence that Saudi Arabia would indeed sever its security links with Britain, as the government had claimed when it stopped the Serious Fraud Office (SFO) investigation last month.


'Serious damage'


In the statement to parliament last month announcing the end of the inquiry, Peter Goldsmith, attorney-general, said that Tony Blair, British prime minister, as well as senior ministers and the intelligence agencies "... have expressed the clear view that continuation of the investigation would cause serious damage to UK/Saudi security, intelligence and diplomatic co-operation ..."


Blair said at the time that "our relationship with Saudi Arabia is vitally important for our country", and that he had "absolutely no doubt at all that the right decision was taken in this regard".


While MI6 and MI5 had agreed with a government assessment that Britain's national security would be damaged if Saudi Arabia were to sever its intelligence links, the Guardian reported, they did not see any indication co-operation would have been halted if the investigation continued.


Goldsmith's statement "contained quite a degree of conjecture", a source revealed to the daily.


Another unnamed official was quoted as saying by the Guardian that there was "nothing to suggest" that the kingdom had in fact warned "if you continue with this inquiry, we will cut off intelligence".




When the government dossier was sent to MI6 last week, the head of the agency, John Scarlett, declined to sign it, with unnamed officials telling the Guardian that there were "differences" between the intelligence services and the government over Goldsmith's parliamentary statement.


A spokeswoman for Blair's Downing Street office declined to comment on the report when contacted by AFP, in advance of Blair's monthly press conference on Tuesday.


Blair's government will have to defend the decision at the OECD anti-bribery meeting in Paris on Tuesday.


Britain is party to an OECD convention which states that signatories "shall not be influenced by considerations of national economic interest, the potential effect upon relations with another state or the identity of the natural or legal persons involved".


Slush fund


The SFO had been running an investigation into claims that BAE established a slush fund for some members of the Saudi royal family, which allegedly provided perks including luxury cars to ensure that they kept doing business with BAE, while attempting to secure a contract with the country in the 1980s.


BAE last year secured a $19.6bn deal with Saudi Arabia for 72 Eurofighter jets, and the deal was reportedly under threat because of the SFO investigation.


Separately, the Financial Times reported that before its conclusion, the SFO inquiry had widened to investigate whether British defence ministry staff were aware of the alleged payments to Saudi officials.


Citing unnamed sources familiar with the investigation, the business daily said that investigators had begun interviewing several current and former defence ministry officials involved in deals between the defence manufacturer and Saudi Arabia.

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