Taxpayers’ money used to underwrite massive arms deal with shaky Saudi government.
Hundreds of millions of pounds of taxpayers’ money is being put at risk in huge new arms sales to the shaky regime in Saudi Arabia, the Guardian can disclose.
Government financial guarantees against the collapse of the Saudi ruling family have already been secretly given to the giant arms firm BAE Systems.
BAE is currently negotiating fresh contracts for weapons, advanced avionics and refurbished planes with a regime that is regularly accused of corruption on a massive scale.
Although the government refuses to disclose the size of the new arms deals, they are reported to be worth up to $4.5bn (£2.7bn).
Taxpayer guarantees for BAE were signed on September 1, with the backing of the defence secretary, Geoff Hoon, by the government’s export credits guarantee department (ECGD).
BAE is refusing to comply with the ECGD’s own anti-corruption measures and yet has been able to use its political muscle to force through risk insurance that will protect its profits. The firm has refused to hand over documents detailing the secret commissions it is paying, believed to benefit figures connected with the Saudi royal family.
Companies are normally required to disclose the identity of agents and the size of their commissions for the ECGD to satisfy itself that Whitehall is not misusing taxpayers’ money.
The ECGD was refused copies of the documents identifying middlemen and commissions despite agreeing to visit BAE’s headquarters in August to obtain the papers.
The ECGD told the Guardian yesterday that BAE had subsequently removed all references to agents’ commissions and then resubmitted the contract documents. “BAE submitted new proposals whereby no agents’ commission was to be paid under the project,” the organisation said.
Susan Hawley, of the Corner House group, which campaigns against corruption, said last night: “We find it astonishing that the commission has magically disappeared. ECGD must be either naive or wilfully blind to think this commission has simply vanished.
“BAE is a magnet for corruption allegations wherever it operates. It is shocking that the ECGD have given cover on this project before previous allegations have been properly investigated and resolved.”
Taxpayer support for this fresh instalment of the long-running and controversial Al Yamamah deals with Saudi Arabia was signed behind the public’s back in autumn only days before “slush fund” allegations about BAE were exposed in the Guardian.
The Serious Fraud Office is currently studying the allegations that BAE has for years been running a £20m slush fund designed to bribe influential Saudis with prostitutes, yachts, cars and houses.
The Saudi regime is currently under fire not only for corruption but also for torturing wrongly imprisoned Britons. It is also coming under increasing attacks from al-Qaida fundamentalists. If the regime falls in the future and the country defaults on arms payments, the British taxpayer will be left to pick up BAE’s bills.
Peter Kilfoyle, the former Labour defence minister, said: “It seems very, very unwise for us to pledge our money on what seems to be an increasingly shaky regime. . . This seems to be a triumph of optimism over reality.”
In a similar scandal in the past, the ECGD lost £650m of taxpayers’ money by giving guarantees to Saddam Hussein on the instructions of the Thatcher government. In the 70s, huge tank contracts backed by the Labour government were obtained in Iran by bribing the shah and intermediaries, only for the deals to collapse with the fall of the regime.
The Ministry of Defence maintained its reputation for secrecy over the deals when asked the size and nature of the contracts now being supported by the taxpayer. It replied: “Everything to do with Al Yamamah is confidential.”
According to Middle East defence sources, BAE has been negotiating to upgrade the fleet of Tornado warplanes it sold to the Saudi regime under the original highly lucrative Al Yamamah deals which began in 1985.
The RAF is currently refitting its own Tornados with modernised avionics and “smart” weapons systems. These are the kinds of upgrades BAE now wants to sell to the Saudis.
In a statement to the Guardian, the company said: “BAE Systems gives information to ECGD in accordance with the procedures they have laid down for the provision of ECGD cover. In all cases where ECGD cover has been put into effect, BAE Systems has provided ECGD all required information.”
Rob Evans and David Leigh, The Guardian, November 27, 2003