Truth Behind Saudi Arms Deal

The Secret Whitehall Telegram That Reveals Truth Behind Controversial Saudi Arms Deal

Taken from the Guardian, UK, Saturday October 28, 2006
By David Leigh and Rob Evans

The government was yesterday scrambling to recover secret documents containing evidence suggesting corrupt payments were made in Britain's biggest arms deal. The documents, published in full today by the Guardian, detail for the first time how the price of Tornado warplanes was inflated by £600m in the 1985 Al Yamamah deal with Saudi Arabia.

A telegram with the details from the head of the Ministry of Defence's sales unit had been placed in the National Archives. Yesterday it was hastily withdrawn by officials who claimed its release had been "a mistake".

Sir Colin Chandler's telegram was sent from Riyadh, where he was arranging the sale of 72 Tornados and 30 Hawk warplanes on behalf of the British arms firm BAE. It revealed that their cost had been inflated by nearly a third in a deal with Saudi defence minister Prince Sultan.

Sultan, who is crown prince, "has a corrupt interest in all contracts", according to a dispatch from the then British ambassador Willie Morris published in a recent Commons committee report. An accompanying Ministry of Defence briefing paper prepared for the then prime minister Margaret Thatcher describes Prince Sultan as "not highly intelligent ... He has prejudices, is inflexible and imperious, and drives a hard bargain". The Al Yamamah deal, worth £43bn in total, has long been the subject of allegations of secret commissions to Lady Thatcher's son Mark, and to several members of the Saudi royal family. All those involved have always denied the allegations.

The telegram from Sir Colin, now the head of budget airline easyJet, was unearthed by Nicholas Gilby, an anti-arms trade campaigner. After the Guardian showed it to the Ministry of Defence, officials were dispatched to the archives in Kew, where they loaded the files into a van and returned them to Whitehall's vaults. Campaigners had already copied all the papers and are planning to publish them on the internet.

Britain's politically sensitive Al Yamamah programme is under investigation by the Serious Fraud Office, which is probing corruption allegations against BAE.

The MoD documents reveal that the price of each Tornado was inflated by 32%, from £16.3m to £21.5m. It is common in arms deals for the prices of weapons to be raised so that commissions can be skimmed off the top. The £600m 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 Mrs Thatcher's chief aide at No 10, Charles Powell, with advice that officials "should simply refuse all comment". Yesterday, 20 years on, 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.

Mr Gilby, the researcher from the Campaign Against the Arms Trade who discovered it, said yesterday: "I was astonished when I saw the Chandler telegram. This information has been withheld by every single British government department, including the National Audit Office, for more than two decades."

Last night, the DTI said : "The files were placed in the National Archive by mistake. Successive governments have regarded the Al Yamamah agreement to be confidential. The files have now been removed." The MoD said : "We regret the fact that this material has been made public. We attach great importance to the confidentiality of the government to government Al Yamamah agreement with Saudi Arabia, and in order to protect that confidentiality we are not commenting on these papers."

Included is a copy of the original UK-Saudi memorandum of understanding, signed at Lancaster House in September 1985 by Michael Heseltine, then defence secretary, and Prince Sultan. It is marked "Royal Saudi Air Force. Secret".

The National Audit Office, recently rejecting freedom of information requests for this document, claimed release would harm international relations.

The NAO also refused to release a copy of a 1992 report on the deals, even to the police. This official memo of understanding between the two parties records the total UK-Saudi deal as being worth "£3.5bn to £4bn".

It was a misleading figure. Commissions on arms deals were theoretically illegal under Saudi law. It was within weeks of its signature that Sir Colin was in Riyadh alongside BAE executives agreeing a package in private negotiations with Prince Sultan which, he explained to London, would actually total £5bn. Once weapons, spares and training were added in to the basic price, each single Tornado would end up costing the Saudi air force more than £60m.

Nick Harvey, the Liberal Democrat defence spokesman, said yesterday: "The government must now throw light on the veracity of these allegations. There is no doubt that this will only add to the growing calls for the NAO report to be published as it should have been 14 years ago." BAE refused to comment, saying: "Al Yamamah is a contract between the governments of the UK and Saudi Arabia." Sir Colin also declined to comment.

Ian Gilmour, a Conservative minister at the time, recently confirmed bribes were common on Saudi arms deals.

Lord Gilmour told BBC2's Newsnight: "You either got the business and bribed, or you didn't bribe and didn't get the business ... If you are paying bribes to high-up people in the government, the fact that it's illegal in Saudi law doesn't mean much."
FAQ: Wheeling and dealing

What is Al-Yamamah ?It is Britain's biggest arms deal, signed in 1985. Britain agreed to sell 72 Tornado and 30 Hawk warplanes to Saudi Arabia. The deal was renewed in 1993 when Saudis agreed to buy another batch of 48 Tornado warplanes. In a third stage to the Al-Yamamah agreement, signed last year, Britain is selling up to 72 more planes - called Typhoons - to the Saudis. The agreement, known as "the Dove" in Arabic, has kept BAE afloat for the last 20 years.

Why is it so controversial ?
Within weeks of the deal being signed in 1985, allegations of corruption surfaced. Those allegations have never gone away and are now being investigated by the Serious Fraud Office. Critics say that Britain should not be selling warplanes and military equipment to a regime which is barbaric and undemocratic. They say that the British government refrains from criticising the Saudis' appalling human rights abuses, in order not to upset the arms sales.

What has Mark Thatcher to do with it?It has been alleged that Lady Thatcher's son received secret commissions from the deal.

Read the documents (pdf)
1) Initial "Al-Yamamah" agreement signed by Britain and Saudi Arabia in September 1985 (known formally as a memorandum of understanding).
2) Telegram from Sir Colin Chandler, the then head of MOD's arms sales unit, in January 1986.
3) Briefing prepared by the Ministry of Defence for Margaret Thatcher for the Al-Yamamah deal, September 1985, containing descriptions of key Saudis.
4) Minutes of meeting between then defence secretary Michael Heseltine and Prince Sultan, in September 1985

-------------------------------------------------------------
Giving & taking bribes is common amongst the Saudi ministers. In a BBC Newsnight interview former Defence minister admitted that Britain's arms sales to Saudi Arabia was founded on bribery.

Lord Gilmour who was Minister and then Secretary of State for Defence in the 1970s admits "You either got the business and bribed or you didn't bribe and didn't get the business."

Newsnight sited several confidential government memos, one in particular from the head of defence sales, Harold Hubert, in 1972, speaks of using a company "to provide quasi-government oversight as well as passing on the douceurs".

Newsnight notes the Oxford English Dictionary defines a "douceur" as "a gratuity or 'tip'; a bribe".

Professor Mark Phythian of the University of Wolverhampton, who has written extensively about the trade, said: "I've never seen this expressed so openly before. I'm surprised it got past the censors."

Lord Gilmour said: "In those days you either went along with how the Saudis behaved or what they wanted or you let the US and France have all the business.

Questioned about the legality of 'douceurs' he said: "If you're paying bribes to high up people in the government (of Saudi) the fact that it's illegal in Saudi law doesn't mean very much."

Also former cabinet minister, Jonathan Aitken resigned in dramatic fashion in 1995 after the Guardian and Granada accused him of accepting bribes from Saudi businessmen in connection with arms sales.

Announcing his intention to sue for libel, he was found to have lied under oath about the truth of his stay at the Ritz hotel in Paris. Mr Aitken was forced to exchange the splendour of his Westminster house and extravagant lifestyle for a prison cell.

But bribery happens all over the world. A former German deputy defence minister, Holger Pfahls, had been sentenced to two years and three months in jail for accepting illegal payments. He admitted having received 2m euros (£1.4m; $2.5m) from an arms dealer, but denied lobbying on his behalf. Mr Pfahls insisted that he had done nothing in return for the money from Karlheinz Schreiber, which he had not declared to the tax authorities.

Recommended Reading:
BBC Money Programme 04.10.04: BBC lifts the lid on secret BAe slush fund

BBC News 12.08.05: Jail term for German ex-minister

BBC News 30.04.01: Disgraced Aitken moves out .