Job fears kept Saudi report secret

A WHITEHALL report into millions of pounds of commission payments made to secure the Al Yamamah arms contract for British firms was kept secret because of fears that the Saudis would cancel the order.

Mark Thatcher has been accused of taking a commission payment of pounds 12m in the mid-1980s for his role in winning the Al Yamamah contracts, which were the largest government-to-government arms deal.

A senior Westminster source confirmed last night that the Commons' Public Accounts Committee was advised not to publish a report from the National Audit Office into the commission payments made to and by British firms because of fears that the Saudis might react by cancelling part of the pounds 20bn deal.

'There are thousands of British jobs at stake . . . there was a danger.' The report is believed to contain information showing that Saudi officials were taking bribes during the negotiations. It is also understood to disclose which British companies made them.

A former director of British Aerospace, one of the British companies most closely involved in the contract, said yesterday: 'Fairly clearly, as the Malaysia deal (the Pergau dam contract) shows, the payment of commissions begins at the centre of the British system.' Officials still working for British Aerospace fear that Saudi Arabia will react badly to reports in the press about Mark Thatcher's involvement in Al Yamamah. One said: 'They've heard the rumours about Mark Thatcher before. They will carry on as before. But they are sensitive about these things and they won't be pleased. They have no knee-jerk reaction - they won't cancel something just to show their displeasure.'

Sir Anthony Parsons, special adviser on foreign affairs to Margaret Thatcher in the early 1980s, said: 'The allegations about Mark Thatcher will have no effect on the Saudis. The only thing that will have an effect is if the accusations of bribery were made against them.'

The Saudis made no statement yesterday in response to the allegations. David Gore Booth, British Ambassador in Riyadh, said: 'No Saudi has mentioned it to me. The Saudi position will be, I'm sure, that this is a government-to-government contract and that is that.'

It emerged yesterday that the Saudi authorities could cancel the rolling contract if they wished. The Ministry of Defence has refused to disclose the conditions under which the Saudis can terminate Al Yamamah, but other industry sources have indicated that they need give little notice, and that penalty payments are relatively modest. It is thought that arms and materials to the value of around pounds 10bn have already been delivered or are under construction. Orders for a further pounds 3-4bn are thought to be in the pipeline.

Geoffrey Kemp, an expert on Saudi affairs at the Carnegie Endowment in Washington, believes that, unless the allegations point the finger of corruption directly at the Saudis 'they will view the media reports in a broad strategic framework rather than worrying about saving a few pennies'.

'Their strategic concern is to keep sanctions against Saddam Hussein. The last thing they want is to antagonise a Western ally.'