Tuesday, January 29, 2008; 6:34 PM
LONDON -- Britain's head of overseas intelligence warned that Saudi Arabia likely would stop sharing vital information on terrorism if prosecutors pursued an investigation into alleged corruption in an arms deal, lawmakers disclosed Tuesday.
Ministers were told the inquiry into the BAE Systems PLC arms deal with Saudi Arabia could lead to a withdrawal of Saudi assistance on counterterrorism, according to the annual report of the Intelligence and Security committee. The committee scrutinizes the work of Britain's intelligence and security agencies.
Britain's Serious Fraud Office in December 2006 ended the inquiry into allegations that BAE Systems ran a $118.9 million "slush fund" offering sweeteners to Saudi Arabian officials in return for lucrative arms contracts.
BAE has denied the accusations. Prince Bandar bin Sultan, a former ambassador to the United States and now head of Saudi Arabia's National Security Council, has also denied that he profited from the deal.
MI6, Britain's overseas intelligence service, believed Saudi Arabia likely would end information-sharing with Britain if investigators continued the inquiry, former Attorney General Peter Goldsmith told the committee. MI6 raised objections to the prosecution before Britain's Serious Fraud Office decided to end the case, he said.
"All relevant agencies were clear about the crucial importance of U.K.-Saudi co-operation in the fight against terrorism and the damage to U.K. interests _ and, potentially, U.K. lives _ if that co-operation were withdrawn," Goldsmith said.
Then-Prime Minister Tony Blair explained the decision to drop the case by insisting Saudi Arabia had privately threatened to end intelligence ties if it continued. Saudi officials did not make the threat publicly _ arrousing some public skepticism over the scrapping of the inquiry.
The head of MI6, John Scarlett, told the committee that antagonizing Saudi Arabia risked losing vital intelligence.
"There were threats made to the existence of the co-operation (and) there was reason to take those threats seriously," he said. "Saudi Arabia is an absolutely key country ... they have turned themselves into a very important and powerful player in the world counterterrorism campaign."
After the inquiry was dropped, Saudi Arabia signed a $8.7 billion agreement with Britain to buy 72 Eurofighter Typhoon jets from BAE.