A bribery investigation threatening the future of 50,000 British jobs followed heavy pressure on Tony Blair from George Bush's administration, The Independent on Sunday can reveal.
Saudi Arabia says it will scrap an order with BAE Systems for 72 Eurofighter Typhoons worth around £40bn unless the Serious Fraud Office (SFO) stops probing previous arms deals with the company.
The Arab nation has reportedly set a deadline that expires this week for the investigation to be called off.
Now documents released under US freedom of information laws reveal how the probe followed arm-twisting by the Bush administration.
They show how Britain's most senior defence civil servant was taken to task by the Pentagon over "a longstanding, widespread pattern of bribery allegations involving BAE systems" in July 2002.
Sir Kevin Tebbit, then the top civil servant at the Ministry of Defence, had an uncomfortable meeting with the US Assistant Secretary of State for Economic and Business Affairs, E Anthony Wayne.
Mr Wayne said that, though it had signed up to international anti-bribery agreements, "the UK was slow to take action to correct perceived deficiencies".
He also complained of the "consistent pattern of alleged behaviour, over time" and, in a clear accusation that the British government was aware of the problem, added that: "Press accounts reinforce material from more sensitive sources."
A memo, setting out his "MUST DO" items, declared: "Ask what the British government has done to investigate allegations of bribery by BAE, not only in connection with recent projects, but in connection with older contracts for which bribe payments may still be ongoing ... In the US, this volume of allegations would have triggered a Department of Justice Criminal Division investigation long ago".
The SFO bribery investigation into the giant Al Yamamah arms deal, struck in 1985, started in July 2004 after detectives were shown evidence suggesting kickbacks had been paid. Detectives are reported to be investigating allegations of a £60m "slush fund".
BAE Systems denies any wrongdoing and insists that it does not tolerate "unlawful, dishonest or harmful" behaviour, while the British government maintained that it had tightened up anti-bribery legislation.