The Al Yamamah arms deals

Introduction

The Al Yamamah series of arms deals with Saudi Arabia was, and remains, Britain’s biggest arms deal ever concluded, earning the prime contractor, BAE Systems , at least GBP 43 billion in revenue between 1985 and 2007, with further deals still ongoing. In 1985, the UK and Saudi governments signed an initial Memorandum of Understanding, that led to a series of contracts for combat aircraft and a variety of other military equipment and support services over the period 1985-93. A major follow-up deal, Al Salam, was concluded in 2003. Allegations of corruption surfaced almost immediately, but investigations were thwarted until a large cache of documents was leaked in the early 2000s. An investigation by the UK government’s Serious Fraud Office (SFO) uncovered ‘commission’ payments, or bribes, totaling as much as GBP 6 billion paid by BAE Systems to members of the Saudi royal family and others. A key recipient of these payments, including over GBP 1 billion, was Prince Bandar bin Sultan, son of the Saudi Crown Prince. However, the SFO investigation was shut down by the British government in 2006, under heavy pressure from the Saudis.

The discussion below is largely taken from The Shadow World by Andrew Feinstein, and the Guardian’s series of articles The BAE files, mostly by David Leigh and Rob Evans.

Key facts

 Buyer: Saudi Arabia

Seller: UK (British Aerospace, later BAE Systems)

Year of deal: 1985 (Al Yamamah I), 1993 (Al Yamamah II), 2007 (Al Salam)

Equipment sold:

Al Yamamah I: 30 Hawks (1985); 48 Tornado IDS (1986); 102 Sea Eagle anti-ship missiles (1986); 24 Tornado ADV (1986); 560 Skyflash BVRAAM missiles for Tornados (1986); 2 Jetstream light transport ac (1986); 3 Sandown Minehunter ships (1988); 6 Hawker-800 VIP jets (1988); 250 Alarm missiles (1991);

Al Yamamah II: 48 Tornado IDS, including 6 recon version (1993); 20 Hawk 60s (1993);

Al Salam: 24 Typhoon block 20 (2007); Modernization of 84 Tornados (2007); 48 Typhoon block 8 (2008); 350 Storm Shadow missiles for modernized Tornados; 22 Hawk-100 (2012); 22 more Hawk-100s in 2015.

Plus ongoing support services in Saudi Arabia.

Value of deal: GBP 43 billion by 2010.

Sum involved in corruption allegations: Maximum total cited GBP 6 billion. Includes over GBP 1 billion to Prince Bandar bin Sultan

Dramatis Personae

Margaret Thatcher, UK Prime Minister (1979-1990), concluded Memorandum of Understanding (MoU) with Saudi Arabia

Prince Bandar bin Sultan, key negotiator of Al Yamamah deal, Saudi Ambassador to USA (1983-2005), son of Prince Sultan (Minister of Defence of Saudi Arabia 1963-2011). Received GBP 30 million in commission payments every quarter for at least 10 years.

Richard Evans, BAE senior executive, later CEO (1990-98) and Chairman (1998-2004), led BAE team negotiating Al Yamamah.

Prince Turki bin Nasser, Saudi prince, received at least GBP 60 million in bribes and services in kind, including travel, entertainment, etc.

Wafiq Said, Syrian businessman, key BAE agent for Al Yamamah

Tony Winship, Former Royal Air Force (RAF) pilot, BAE agent in Saudi Arabia

Traveller’s World (TW), UK company hired by Winship to provide services for Prince Turki bin Nasser

Robert Wardle, Director of UK Serious Fraud Office (SFO) (2003-2008), conducting investigation into Al Yamamah

Helen Garlick, SFO investigator

Tony Blair, UK Prime Minister (1997-2007) who forced cancellation of SFO Investigation

 The arms deal

 The Al Yamamah deal resulted from the reluctance of the US Congress in the early 1980s to allow sales of major combat aircraft to Saudi Arabia, fearing they may be used against Israel. While Saudi Arabia was initially looking at purchasing French Mirage jets, hard lobbying by the UK government, including Prime Minister Margaret Thatcher, and by British Aerospace (now BAE Systems), led by Dick Evans, led Saudi Arabia to choose the joint UK-French made Tornado instead. The ‘lobbying’ effort included massive bribes offered to key Saudi decision-makers, especially Prince Bandar bin Sultan, son of Defence Minister and Crown Prince Sultan.

The Al Yamamah Memorandum of Understanding was signed by Margaret Thatcher and Prince Bandar in 1985, and swiftly led to numerous large deals, initially worth around 7 billion USD, most notably 72 Tornados, 30 Hawk trainer/light attack aircraft, 3 Sandown Minehunter ships, and an array of missiles and other equipment. This deal was followed by Al Yamamah II in 1993, worth initially 17 billion USD, including 48 more Tornados and 20 Hawks.[1] The deals also included extensive maintenance and support services for the Saudi Air Force, for which BAE continues to employ around 5,000 staff in Saudi Arabia.[2] A third deal, Al Salam, for 72 Eurofighter combat aircraft and other equipment, was signed in 2007, although as yet no corruption allegations have been specifically linked to this deal.[3] All in all, the deals were said to have been worth 43 billion USD in revenue to BAE by 2007.

Saudi Arabia paid for the deal with oil, transferring 300,000 barrels a day to a dedicated UK Ministry of Defence (MOD) account to manage it. The cost was therefore not part of the state budget.

Corruption allegations

Swinging the Al Yamamah deal in favour of BAE, and securing subsequent deals, required massive bribery of key members of the Saudi royal family and other relevant individuals in the Saudi government and military.

Evidence of corruption reached the public domain via information from whistleblowers within BAE, investigative journalism by David Leigh and Rob Evans of the Guardian newspaper, and research in the National Archives by author and activist Nicholas Gilby, who uncovered documents mistakenly released by the British government that revealed some of the corruption around the deals.[4]

In total, the UK SFO and police identified up to GBP 6 billion in corrupt payments. The most prominent recipient was Prince Bandar, who negotiated the deal for the Saudi government, and who, according to legal sources within the SFO investigation, received GBP 30 million per quarter paid into a US bank account for at least 10 years, thus totaling GBP 1.2 billion.

Other revelations concerned ‘slush funds’ of tens to hundreds of millions of pounds, used by BAE to entertain Saudi royals on visits to the UK as well as foreign travel. Prince Turki bin Nasser in particular received at least GBP 60 million worth of such services, including travel, hotels, unlimited restaurant meals, cars, sexual services, and much else. This was organized using a UK travel company, Traveller’s World (TW), whose Managing Director Peter Gardiner was recruited by BAE agent Tony Winship. TW kept detailed accounts of all transactions, which were subsequently accessed by Nicholas Gilby, and detailed in his book Deception in High Places.

BAE used a network of agents and shell companies to carry out these payments. Agents included prolific Syrian arms trader Wafiq Said, who got rich through the deal. Allegedly, Mark Thatcher, son of the Prime Minister, was also an agent, and may have received as much as 17 million USD.[5] Shell companies included Red Diamond Trading, established by BAE in the British Virgin Islands, to handle commission payments for numerous arms deals.

Some of the early commissions were funded by a GBP 600 million, or 32%, increase in the price of the Tornados in 1985, revealed in a telegram from Colin Chandler, then-head of sales for the Ministry of Defense (MOD) sales unit in Riyadh. This was part of a deal with Defence Minister Prince Sultan (Bandar’s father), who had ‘a corrupt interest in all defence contracts’, according to a dispatch from hen UK Ambassador to Saudi Arabia Willie Morris, quoted in a UK House of Commons report.[6]

Investigations and outcomes[7]

Allegations of corruption associated with the Al Yamamah deal surfaced in some Arab press reports within weeks of the deal in 1985. However, the first investigation did not begin until 1989, when the UK government referred the matter to the National Audit Office (NAO). The NAO completed their report in 1992, but it was withheld from the public domain due to the risk that it would offend the Saudis – the only NAO report ever to have been withheld from the public.

Investigative journalists pursued subsequent investigations in the absence of any official investigation. (There was never an investigation in Saudi Arabia). However, revelations by the Guardian newspaper in 2003 that BAE had maintained a GBP 20 million ‘slush fund’ for entertaining Saudi royals – the tip of the iceberg of the corruption allegations – prompted the Serious Fraud Office to commence an investigation in 2004. In parallel, investigations by civil society and media continued, aided by information from corporate whistleblowers connected to the deals, revealing an additional GBP 1.2 billion payments to Prince Bandar.

In 2007, following allegations that a US bank had been used to channel payments to Prince Bandar[8] the US Department of Justice (DOJ) launched an investigation into BAE, which has major subsidiaries in the US.

 In 2006, the Serious Fraud Office investigation was making considerable progress untangling the web of shell companies, agents and overseas bank accounts used by BAE to pay commissions associated with Al Yamamah. The Saudi government began anxiously lobbying to try to stop the investigation. At the time, BAE was negotiating a further deal with Saudi Arabia, the Al Salam deal for Eurofighter aircraft (eventually signed in 2007), and this deal was said to be at serious risk if the investigations continued. Lobbying by the UK government and elements of the media, ostensibly based on concerns for British jobs, failed to convince the SFO to stop. By September 2006, the SFO had discovered that some commission payments may have been made to Swiss bank accounts belonging to Wafiq Said and another intermediary. The SFO put in a formal request to the Swiss authorities for information on these accounts. Following this, BAE and the Saudi government intensified their lobbying effort, until in December 2006, Prime Minister Tony Blair personally intervened by compelling SFO Director Robert Wardle to cancel the investigation. Blair and Attorney General Lord Goldsmith cited threats from the Saudis to break off intelligence cooperation on terrorism with the UK, leading potentially to “blood on the streets” of London, according to the UK government.[9]

The decision to cancel the investigation was highly controversial, and the subject of a judicial review sought by NGOs Campaign Against Arms Trade and Cornerhouse. A High Court judge ruled that the decision to cancel the investigation was illegal, noting that the UK government had not explored any alternative responses to the Saudi threat other than immediately canceling an ongoing criminal investigation. This verdict was upheld in the Court of Appeal, but overturned in the House of Lords, then the UK’s supreme court.

The UK decision was subject to further criticism by the Organization for Economic Cooperation and Development (OECD), as countervening the UK’s commitments under the 2000 OECD Convention on Bribery.

The US DOJ investigation resulted in a plea-bargain in 2010, by which BAE admitted to a lesser charge of false accounting, but not bribery, in relation to both the Al Yamamah case and the sale of Gripen fighters to the Czech Republic and Hungary. They were fined 400 million USD. The judge in the case commented that the company had committed “deception, duplicity and knowing violations of law, I think it’s fair to say, on an enormous scale”.

With the cancellation of the SFO investigation, BAE were subject to no legal consequences in the UK in relation to Al Yamamah, nor was any individual ever prosecuted in the UK, Saudi Arabia, or elsewhere.

Sources

 The Shadow World, Andrew Feinstein, Hamish Hamilton, 2011, chapter 3, 7.

Deception in high places: a history of bribery in Britain’s arms trade, Nicholas Gilby, Pluto Press, 2014, chapters 8-9.

“BAE accused of arms deal slush fund”, Leigh & Evans, The Guardian, 11 September 2003, https://www.theguardian.com/world/2003/sep/11/bae.freedomofinformation

“The secret Whitehall telegram that reveals truth behind controversial Saudi arms deal”, Leigh & Evans, Guardian, 28 October 2006, https://www.theguardian.com/world/2006/oct/28/bae.whitehall

“The Al Yamamah deal”, Leigh & Evans, The Guardian, 7 June 2007, https://www.theguardian.com/world/2007/jun/07/bae15

“Secrets of Al-Yamamah”, David Leigh & Rob Evans, The Guardian, 7 June 2007, https://www.theguardian.com/baefiles/page/0,,2096320,00.html

“BAE accused of secretly paying £1bn to Saudi prince”, David Leigh & Rob Evans, 7 June 2007, https://www.theguardian.com/world/2007/jun/07/bae1

“MoD accused over role in Bandar’s £1bn”, Leigh & Evans, Guardian, 12 June 2007, https://www.theguardian.com/world/2007/jun/12/bae

“BAE bought £75m Airbus for Saudi prince”, Leigh & Evans, The Guardian, 14 June 2007, https://www.theguardian.com/world/2007/jun/15/bae

“BAE agrees price on Typhoon jet deal with Saudi Arabia government”, Rupert Neate, The Guardian, 19 February 2014, https://www.theguardian.com/uk-news/2014/feb/19/bae-typhoon-jet-deal-saudi-prince-charles

“The BAE files”, The Guardian, 1997-2015, https://www.theguardian.com/world/bae

“Al Yamamah documents”, Campaign Against Arms Trade, https://www.caat.org.uk/resources/countries/saudi-arabia/al-yamamah

OECD, “United Kingdom: Phase 2bis, Report on the application of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the 1997 recommendation on Combating Bribery in International Business Transactions”, 16 October 2008, http://www.oecd.org/investment/anti-bribery/anti-briberyconvention/41515077.pdf

[1] SIPRI Arms Transfers Database

[2] BAE Systems Annual Reports

[3] SIPRI Arms Transfers Database

[4] Deception in High Places

[5] The Shadow World

[6] Shadow World

[7] Shadow World, chapter 9

[8] The Shadow World

[9] Shadow World

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