50,000 British jobs at risk if vital defence deal is lost
By BENEDICT BROGAN Last updated at 22:00pm on 24th November 2006
www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=418481&in_page_id=1770

The Saudis have threatened to pull out of a GBP 76 billion contract with BAE
Systems to provide new fighter aircraft.

More than 50,000 high-tech jobs could be lost "within days" unless Tony
Blair intervenes to save a vital defence deal with Saudi Arabia, Downing
Street was warned this week.

Ministers have been told to brace themselves for a potential economic
"disaster" in the wake of an explosive behind-the-scenes dispute with one of
Britain's most influential allies.

The Saudis have threatened to pull out of a massive GBP 76 billion contract
with BAE Systems to provide new fighter aircraft unless a long-running
bribes inquiry by the Serious Fraud Office is wound up.

They say they are ready to do business with France instead if the
investigation - into an alleged GBP 60 million "slush fund" set up by BAE
for the benefit of members of the Saudi royal family - is allowed to
continue.

The oil giant has also threatened a cooling of political relations with the
UK by downgrading diplomatic contacts and withholding cooperation in the
fight against al-Qa'eda.

The crisis has been building in Whitehall for days and could inflict severe
damage on one of Britain's most successful manufacturing industries.

BAE Systems has told the Government to prepare for up to 50,000 job losses
involving some of the country's most highly-skilled workforce.

It expects to discover "within days" if a contract to build 72 new
Eurofighter aircraft - the Typhoon - for the desert kingdom is about to be
torn up.

Senior figures from BAE, backed by diplomats and several Cabinet ministers,
have been locked in frantic exchanges this week with Mr Blair and his
advisers over the row.

They are waiting for the outcome of talks between Saudi Arabia and France
which sources claim are poised to produce a rival deal to buy 24 French
Rafale jets - Typhoon's competitor.

If France clinches the contract, it will be seen as a clear sign that Saudi
Arabia is prepared to dump the deal to buy Typhoons that has been in
negotiations for more than a year.

The SFO has been looking into the BAE corruption claims for three years.
Money paid in "kickbacks" has allegedly gone towards buying luxury holidays,
rented apartments in European capitals and even a gold Rolls Royce.

The cash was allegedly paid as a sweetener to secure the landmark
"al-Yamamah" series of defence deals with Saudi Arabia initially brokered by
Margaret Thatcher 20 years ago.

SFO investigators have being trying to get access to Swiss bank accounts
allegedly used by wealthy Saudis to fund lavish lifestyles.

The investigation has infuriated the Saudis, who sources say feel "insulted"
that their reputation is being tarnished by a British agency.

They claim Tony Blair agreed to try to call off the investigation when he
visited Saudi Arabia for secret talks about the Typhoon deal last year.

The Attorney General Lord Goldsmith, the minister responsible for the SFO,
has steadfastly refused to intervene in the case but he is under growing
pressure to use his powers to order the SFO to produce charges or close its
investigation.

Other ministers involved in the case concede privately that the Government
would face a barrage of criticism from MPs if it was seen to be meddling in
the work of independent investigators.

They fear that the SFO is dragging out an inquiry for which there is little
evidence of wrongdoing and putting the British national interest at risk.

A senior BAE Systems executive said: "The Saudis are threatening to go
elsewhere, and you can't blame them. They keep being insulted.

"If they sign this French deal within days, the consequences could be
catastrophic. We are talking about 50,000 jobs."

The Saudi ultimatum was reportedly set out in blunt terms in a 12-page
letter delivered inperson by the country's London ambassador to Jonathan
Powell, Mr Blair's chief of staff.

The company employs 100,000 worldwide, including 4000 in Saudi Arabia. The
new Typhoon contract was vital to the future prospects of its production
site at Warton in Lancashire.

Publicly, the company maintains it has done nothing wrong and there is no
question of any laws being broken. It is cooperating with the SFO.

Sources claim the alleged slush fund is a long-standing arrangement that dos
not involve the use of BAE systems shareholder money.

They claim that contracts with Saudi Arabia are priced to include an extra
commission element that is then paid to Saudis involved in brokering the
deal - in effect money paid by the Saudi government is then channeled back
to Saudi middlemen.

But the company has been hit by the arrest of several current and former
executives, who deny any wrongdoing.

The Saudis "hit the roof" when they discovered in September that the SFO had
persuaded a Swiss magistrate to grant access to secret bank accounts.

The country's ruling royal family reportedly ordered its representative in
London, Prince Mohammed bin Nawaf, to demand explanations from Downing
Street.

Their letter is said to have complained that the SFO investigation amounted
to a breach of the Government's undertaking to keep the detail of the
al-Yamamah deal under wraps.

The ambassador also told Mr Powell that Saudi Arabia would consider breaking
diplomatic ties and ending intelligence cooperation.

But Whitehall sources cautioned that the kingdom depends on intellgience
from MI6 to combat al-qa'eda, which is intent on deposing the ruling royal
family.

And they say that despite posturing on both sides, the Typhoon contract is
too valuable to both British and Saudi interests to be cancelled.