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The Arabian Connection: The UK Arms Trade to Saudi Arabia

Written and researched for CAAT by Chrissie Hirst
ISBN: 0 9506922 5 5


HISTORY or How The Sales Started
The Kingdom of Saudi Arabia | Impact Oil | New Economy, Old Polity
US Arms Connection | UK and 1965-1985 | Al Yamamah Negotiations
Al Yamamah I | Doubts Problems   |  Continued Concerns
Al Yamamah II - Second Dove | Crisis Revival | Boom Years
ANALYSIS or Why It Wasn't A Good Idea
Benefits and Costs: Saudi Arabia | Benefits and Costs: UK
Stable Friendly Power? - a. Stability - b. Human Rights - c. Corruption
National Audit Office Report | The Culture of Secrecy


For the last fourteen years, sales to the Kingdom of Saudi Arabia, a country with an indigenous population of only 12.6 million, have been the mainstay of the UK's arms trade. From 1992-94 the UK's arms sales to Saudi Arabia were 75 per cent of its total arms exports (House of Commons Defence Committee, 1999). These surprising figures are the result of the Al Yamamah deals, the huge UK arms sales initiated in 1986 and 1988 which are the subject of this briefing. These deals require analysis and questioning because of the vast amounts of money and weaponry involved and because so little information about the transactions is available. "Staggering in [their] sheer size and complexity", the sales to Saudi Arabia have had significant impact on the UK arms industry, successive UK governments, the armament of the Middle East, and the kingdom itself (Financial Times, 9.7.88).

History or How the Sales Started

  The Kingdom of Saudi Arabia [top]

The conqueror and first king of the area now recognised as Saudi Arabia was Ibn Saud, who ruled the united Saudi Arabia from 1932 to 1953 and was the father of the present ruler, King Fahd, the fourth of his sons to rule. The Al Saud or House of Saud dynasty traces its origins to the mid-eighteenth century, when Mohammad bin Saud, a tribal leader in the central Arabian region of Nejd, allied himself with Mohammad bin Abd al-Wahhab, a revivalist teacher, to promote what they believed to be the pure Islamic religion. Throughout many political vicissitudes the partnership between the Al Saud and the Wahhabi doctrine has been preserved. The original bond has been cemented by marriages in every generation with the Al as-Shaikh (the Wahhabi family of the shaikh or teacher) and the partnership remains substantially unchanged today.

Powered by the religious energy of the Wahhabi, the Saudi emirate of Al-Diriya extended its rule and at its peak at the end of the eighteenth century controlled nearly all the Arabian peninsula. Crushed by Egypt between 1811 and 1818, the dynasty re-established itself at the new capital of Riyadh in the 1830s. Its former power was not restored, however, and by the 1880s it was losing control even of the Nejd to a rival clan. By the end of the century, the Saudi emir was a refugee in Kuwait. It was this man's formidable son, Abd al-Aziz bin Abd al-Rahman Al Saud, commonly known as Ibn Saud, who restored the family's fortunes and founded the modern Kingdom of Saudi Arabia.

In 1902, at the age of 22, Ibn Saud recaptured Riyadh with a small band of followers and during the next decade gradually extended his rule over the whole of the Nejd and beyond. Crucially, in 1913 he conquered the district known as al-Hasa on the shores of the Persian Gulf between Qatar and Bahrain, gaining rich oases, access to the sea, and, though no one guessed this, vast petroleum resources. He also acquired a substantial population belonging to the Shi'a branch of Islam, which still forms a distinct community within the predominantly Sunni Muslim population.

The extension of Ibn Saud's control was permitted by the British authorities, who welcomed the emergence of an Arabian power independent of the Ottoman Empire, so long as it did not threaten their control of the Gulf and the Indian Ocean coast. This Ibn Saud was careful not to do, for he recognised British favour as being vital to his success. During and after the First World War he played a very skilful hand, declining to join the British sponsored Arab revolt against the Turks but profiting from its success. In contrast, the Sherif Hussein, ruler of the Hejaz in western Arabia, did agree to lead the revolt and ended his life in exile. Though Hussein's sons Feisal and Abdullah were installed as king of Iraq and emir of Transjordan respectively, he was denied the control of Syria and Palestine that he had been led to expect, and his disgruntlement made him appear a danger to the new British dominance of the Middle East. The British therefore sanctioned, if they did not encourage, the conquest of the Hejaz by the Saudis in 1924-5. For a time the Hejaz was governed separately from the Nejd, but in 1932 Ibn Saud felt secure enough to declare the united Kingdom of Saudi Arabia.

Possession of the Hejaz gave Saudi Arabia a greatly enhanced status as guardian of the great shrines of Mecca and Medina, the most holy places of Islam: it was Ibn Saud's ability to keep the pilgrimage routes open that first won him acknowledgement and respect from other Muslim nations. These routes were also a major new source of income, however, pilgrimage receipts fell off sharply during the world depression of the early 1930s; the Saudi government was thus particularly receptive to those who offered it an entirely new kind of wealth.

  The Impact of Oil [top]

By the 1930s the production of oil in Iran and Iraq was well established, but the geologists of the Anglo-Persian Oil Company believed that there was no usable oil on the western side of the Gulf. Geologists from the United States thought otherwise, and the Saudi government was probably glad to deal with people who were not linked to the dominant regional power. A concession covering most of eastern Saudi Arabia was granted in 1933 to the Standard Oil Company of California (SOCAL, now known as Chevron) in return for an immediate payment of $50,000 in gold. The first successful drilling was carried out in 1938. SOCAL then merged with Texaco, which had been brought in to handle transport and marketing, to form the American-Arabian Oil Company (ARAMCO) which was later joined by two other US 'majors', Exxon and Mobil. These developments signalled both a new economic era for Saudi Arabia and a new political alignment.

Oil operations were suspended during the Second World War, but during the following decades they produced a flood of money, reaching unheard of levels in the 1970s. Oil revenues were $5m in 1945, $334m in 1960, by which time they were 80 per cent of the country's total income, and $1,945m in 1970. Then came the Arab-Israeli war of 1973 and the first use of the 'oil weapon' as Arab states placed an embargo on the export of oil to the US. The embargo was sustained for six months only, but its results revealed the true economic power of Saudi Arabia and other oil producers, who achieved fourfold price increases. The kingdom's revenues from oil went from $4.35bn in 1973 to $36bn in 1978 and reached the astonishing figure of $116bn in 1981. Prices might have gone even higher if Saudi Arabia's King Feisal, who controlled 30 per cent of the overall production of the Organisation of Oil-Producing Countries (OPEC) and 38 per cent of the non-Communist world's exploitable oil reserves, had not used his influence for moderation in these crazy years. Even so, 1973-82 is known as the 'oil decade', during which the real threat to the kingdom was seen by many as lying in the very oil itself. The population was then about 4 million, and if the old were excluded, there were "only about 250,000 adult male literate Saudis trying to manage a society driven headlong by oil revenues of about $1 billion a week" (Iseman 1979). Saudi leaders themselves urged the US to use oil more wisely, to find alternative reserves or energy sources and commentators noted that, "It is America's continuing inability to devolve a rational effective energy policy ... that casts the darkest shadow over the Saudi future" (Iseman 1979). Yet the remarkable thing about Saudi Arabia is not how much has changed, but how little.

  New Economy, Old Polity [top]

The institutions of the pre-petroleum era remain substantially intact. The kingdom is still run along extremely conservative lines, with religion playing a huge part in the day to day affairs of the state. As recently as 1992 a decree issued by King Fahd re-stated the fundamentals of the Saudi system: the Quran and the Sunna of the Prophet are the constitution; all God's wealth is the property of the state; all acts that harm the state's security are prohibited (Vassiliev 1998, p466).

The king traditionally meets the religious leaders, the ulema, every week to discuss political matters and requires their agreement for any major policy decision. The Al Saud have tended to argue in favour of changes towards a more secular society and have been resisted by the ulema, most notably over the introduction of radio, television and girls' education: significantly, the Al Saud have never disagreed with the ulema, whose support confers legitimacy, over anything which their critics consider of real importance. The legal system in the kingdom is based on the Shariah or Islamic law, and the severe penalties which it demands have led to accusations of human rights abuses.

The system of government is dynastic. The king has absolute control over the secular state, but on matters pertaining to religion he must refer to the ulema. The chain of command and accountability reaches down through the other members of the royal family to the minor princes and emirs in local government. While in the early eighties there was some government reform, the main substance of the new legislation was only to increase the already considerable autonomy of the governors. A Consultative Council of Ministers was established in 1993 in response to pleas for reform - at present it has made little difference to the absolute power of the king.

The objective of the Saudi government over the last twenty years has been to allow Saudi citizens to live their lives in the traditional way while helping them to take advantage of the oil boom: the Saudi people enjoy subsidised food, water, telephones, electricity, free health care and free or heavily subsidised housing. However, strains have begun to show in the old system, and the network of loyalties seems to be breaking down. Slowly, Western 'national' consciousness has begun to emerge, and the middle classes are becoming more critical of the ruling system. There are endemic tensions between the royal family and the ulema, and between modernisers and traditionalists. The problem is that the strengths of the traditional system are no longer relevant to the middle classes (the senior ministry officials, rich business community and few professionals), who are educated in the West and have most contact with visiting Westerners. The middle classes have many criticisms of the ruling system, believing it too oppressive, too influenced by the ulema, too close to the US, and too willing to squander the country's wealth by producing oil at an unreasonably fast rate. They are demanding more freedom of speech and journalism, more political freedom and more freedom for women who at present are not allowed to work or drive cars. The often very large commissions and shares of ministerial budgets taken legally by some of the princes also lead to criticism of the royal family itself. "The Saudi business and professional classes... resent the princes' profits and feel that some of them have abused their position. In response to the wave of criticism it seems that instructions have gone out to some of the younger and more aggressive princes... to scale down their activities" (Michael Field, Financial Times, 21.9.82).

Although the majority of critics would like to see the kingdom liberalised there is a minority who would like to see a 'true' Islamic government. This is hard for the government to address. The conservative nature of the kingdom as a whole means a balance must be struck. Prince Saud bin Abdel-Mohsin bin Abdel-Aziz, the Deputy Governor of Jeddah and Mecca, observed that the Al Saud could not "force the modernisation of society simply because a minority of western educated citizens wanted it modernised... we cannot disregard the views of the ordinary people even if they seem to want to obstruct development. We can't do what they did in Iran... We have to have one foot here and one foot there and be a good acrobat" (Field, Financial Times, 12.8.82). Any real reform of the Saudi system of government is as unlikely as any demonstration or even debate by ordinary citizens; it is mainly academics or journalists who have been imprisoned for criticism of the government. Political dissent is not tolerated, there is no outlet for public criticism and no critical press articles pass censorship. Serious discussion with princes on such matters is limited to a few individuals within the governing elite. The royal family keep a tight grip on absolute power and any whisper of opposition is quickly silenced. The first and only human rights group to be set up in Saudi Arabia, the Committee for the Defence of Legitimate Rights in May 1993, was swiftly suppressed (Amnesty International Report 1994).

  The US Arms Connection [top]

During the Second World War I Saudi remained cannily neutral, postponing his declaration of war on Germany until March 1945, in time to join the United Nations. Shortly before this, a historic meeting between Ibn Saud and President Roosevelt in Alexandria signalled the beginning of a 'special relationship', whereby Saudi oil would flow to the US in return for US technology – and protection. However piqued the British oil companies may have been at the loss of such a valuable prize, the UK government, whose forces were exhausted by the war, was not displeased by an arrangement that helped to tie the US to the defence of the Middle East (Louis 1984, pp173-93). Increasingly, what the Saudis wanted to buy from the West, and also what the West wanted to sell them, was military equipment. The motives on both sides were complex.

Notwithstanding the frictions caused by US support for the state of Israel, the US-Saudi relationship deepened over the following decades. As oil became the chief motive force of the world economy and US domestic output reached and passed its peak, the kingdom's seemingly inexhaustible, low-cost supplies made it a key player in world affairs. Saud bin Abd al-Aziz, who became king on Ibn Saud's death in 1953, flirted for a time with Gamal Abdel Nasser and pan-Arab politics. Perhaps for this reason, as well as for undoubted personal deficiencies, he was deposed in 1964 by a family council and replaced by Feisal, his half-brother. Feisal was the first senior prince to have spent part of his adolescence in the West and had a basically pro-US stance. However, he felt that the West's incessant demands for more and more oil deserved a reciprocal political gesture in the Arab-Israeli situation, and this was not forthcoming. Saudi anger and disappointment at the massive US arms lift to Israel in 1973 led to the kingdom playing a central role in the oil boycott of 1973-4. Despite Saudi Arabia's technical reliance on the US, its first allegiance was and is to Arab allies, and the Palestine issue has great, in this case overriding, emotional force. Since the issue is also overriding for the US, there is a basic conflict between the two countries. Yet there is also an even more compelling coincidence of interests. The Saudis need superpower protection while the US needs cheap oil – for its allies in Europe and Japan and increasingly for itself – and also a powerful conservative ally in the Middle East. These conflicting pressures had a profound influence on the developing arms trade.

The Saudi authorities have made clear their support for the Palestinian cause, as the defence minister Prince Sultan explained to The Guardian (30.9.85), "We know the source of the injustice in the Middle East. It is Israel... If justice is not available countries will be obliged to acquire that justice by whatever means are available. When the kingdom of Saudi Arabia arms itself it arms the Arab nation". Overall, however, it may be "the Arab nation" that the Al Saud fear most, as Arab nationalism, predominantly Nasser's anti-traditionalist brand at that time, threatens all traditional monarchies. Saudi Arabia also had, and still has, long-running border disputes with its neighbours, Yemen and Iran. The first sizeable arms imports from the West, in 1965, were prompted by the civil war in Yemen, in which radical anti-Western Arab forces led by Gamal Abdel Nasser opposed conservative forces headed by Saudi Arabia.

There was international concern when regional unrest threatened Saudi Arabia's invaluable oil production. The revolution in Shi'ite Iran in 1979 caused turmoil throughout the region, including a rebellion in the Hejaz which culminated in the seizure of the Great Mosque in Mecca by revolutionaries and serious unrest among the Shi'ite population of Saudi Arabia's Eastern Province and Bahrain. Although the US had already supplied Saudi Arabia with large numbers of F-15 fighters in 1978, the instability sparked by the Iranian revolution prompted the Administration to provide the kingdom with an air defence system worth $1,640m less than a year later. US support continued when the Iran-Iraq war broke out, with the kingdom receiving 5 AWACS surveillance aircraft and sidewinder missiles ($400m) in 1981.

The holes in Saudi Arabia's air defences were made embarrassingly obvious by two incidents in 1982. A defecting Iranian pilot penetrated Saudi airspace undetected, and "a few months later a C-130 lumbered in with half a dozen passengers" (Financial Times, 25.4.83). It seemed clear that Saudi Arabia's pipelines and refineries were vulnerable: the Americans supplied the kingdom with F-5 reconnaissance and trainer aircraft ($350m) in 1982 and the two countries, despite reservations, signed a military treaty, forming a Joint Military Council in February 1982. In 1983, KC-707 tanker aircraft were sold to Saudi Arabia for $2,400m.

At the Islamic Organisation Conference in May 1984, Iran reaffirmed its commitment to try and stop any oil leaving the Gulf while its own exports were blocked, ordering the other Gulf nations to remain neutral or "be forced to put up with the consequences" (Guardian, 25.5.84). The vast 'Peace Shield' command, control and communications system was sold to Saudi Arabia in 1984.

However, despite US sales and support, there had been reservations on both sides when the US-Saudi military treaty was signed. A Joint Military Committee was formed only with congressional reluctance and Israeli displeasure. Saudi Arabia, and other Arab countries involved in similar arrangements with the US, still refused to have US bases on their soil, and so a US presence in the Gulf remained dependent upon Arab, mainly Saudi, goodwill.

The strong Israeli lobby in the US administration had always objected to sales which might be used against Israel and US export legislation caused strains despite Saudi efforts to comply with it (Foreign Corrupt Practices Act 1977, Export Administration Act 1977; Financial Times, 12.4.82). In 1978 an $8bn sale of radar surveillance planes and enhancements for the F-15s only just passed through Congress in spite of the defensive nature of the equipment and the humiliating restrictions made on Saudi Arabia's use of the aircraft. The deal became a real test of friendship between the countries. All subsequent US arms sales to Saudi Arabia were made in the teeth of Israeli and congressional opposition and it became increasingly difficult to push deals through. In 1985 it became clear that President Reagan would have serious problems securing the transfer of additional F-15 fighters that Saudi Arabia urgently required. However, the concerns which had restrained the US Congress did not appear to worry the UK, which stepped eagerly into the gap as an alternative arms supplier to Saudi Arabia.

  UK Arms and Saudi Arabia, 1965-1985 [top]

Saudi Arabia emerged from the Second World War as a quasi-protectorate of the US, and for the next two decades the UK took little part in its affairs. In fact, in 1956 Saudi Arabia broke off diplomatic relations with the UK because of its role in the Suez Crisis and a dispute over the Buraimi oasis on the border between the kingdom and Abu Dhabi. However relations were resumed in 1963 when the Buraimi affair was referred to the UN, and in 1965 the UK played the major part in the first big arms shipment from the West. It was to supply British Aircraft Corporation (BAC) Lightning and Strikemaster aircraft, with radar and other equipment, for $280m, while the US would send surface-to-air missiles worth $70m.

For both the US and the UK the motive for these deliveries was strategic rather than economic. The UK aircraft industry secured little benefit as the money from the sales was used to purchase more advanced US planes. But in 1966 the appointment of a government arms salesman signalled that it was now UK policy to exploit its armaments capabilities for economic gain. As a result, "the British-US accord over arms supplies did not last long. In the 1970s the lucrative Saudi arms market led to fierce competition between the military-industrial companies of both countries" (Vassiliev 1998, p380). The UK secured new contracts for air defence equipment in 1970 and 1973, together with an important commitment to the training of the Saudi Air Force. However, by the end of the decade the Americans clearly had the upper hand.

The UK was not content to let the US arms supply monopoly lie uncontested, and was at pains to ensure that it was seen by Saudi Arabia to be ready and willing to take the US's place should the need arise. Even during the Falklands-Malvinas War in June 1982, the enthronement of King Fahd was attended by both the Foreign Secretary and the Duke of Edinburgh, showing that Saudi-UK relations were a priority for Mrs Thatcher. The diplomacy obviously worked as the UK was becoming more involved with Saudi military supply.

Saudi Arabia, however, made it clear that such deals depended on good relations, which in turn depended on favourable movement in UK foreign policy. The kingdom was at pains to prove that it was not a soft rich country whose dependence on foreign arms supplies would make it a mere pawn of the West. In 1982 King Fahd made a proactive move towards an Arab-Israeli solution by proposing a peace plan which for the first time recognised Israel's right to exist provided certain conditions were met. Sir John Wilton's report on the Fahd Plan to the House of Commons on 31 March 1982 proves that the UK government was well aware of Saudi Arabia's economic power and how its loyalties could change in volatile times. The Wilton report described Saudi Arabia as a stabilising force, which to a large extent it was, but warned against complacency: at the moment the Saudis were anti-Communist, yet, like the Syrians, they might be pushed into revising their policies and turning to the Soviet Union if neither the UK nor the US put effective pressure on Israel. Supplying Saudi Arabia with weapons would show the UK's support of an Arab state which was publicly and financially committed to the Palestinian cause, and therefore indirectly of the Palestinians. This support would be a guarantee of oil.

The Saudi government kept up the pressure. Following the Israeli invasion of Lebanon in 1982, Crown Prince Fahd pledged to Yasser Arafat, leader of the Palestinian Liberation Organisation (PLO), that Saudi Arabia would back Lebanon and the Palestinians "with all our material, military and diplomatic resources". He also assured President Assad of Syria that Saudi Arabia, "places all its capabilities at the service of our brothers in Syria and Lebanon in the face of Israeli aggression" (Guardian, 11.5.82). Despite the kingdom's open support for a cause which the UK made a point of publicly denouncing, on 4 August 1982 the MoD announced that a cooperation programme with the Royal Saudi Air Force had been extended, and in September contracted to improve the military communications network for the National Guard.

The UK's refusal in early December 1982 to allow the Arab League Mission to talk with the Prime Minister or Foreign Minister in London unless the PLO renounced terrorism and recognised Israel's right to exist, left Saudi Arabia "unhappy", implying that contracts might move elsewhere (Daily Telegraph, 9.12.82). The construction deal Saudi Arabia signed with France on 26 January 1983 may have been a signal to the British that the Saudis were prepared to look elsewhere if they did not cooperate. Although there was no immediate public shift in the UK's policy on Palestine, the warning was obviously heeded.

In 1984 the situation in the Gulf flared up as Iraqi planes bombed tankers carrying Iranian oil, including ones which were Saudi-registered. Saudi Arabia apologised that ships sailing under the Saudi flag had been helping Iran to export oil. However, on 23 May 1984 King Fahd announced that he had "taken all necessary defensive measures" as Iran and Iraq reaffirmed their determination to continue attacking tankers in the Gulf. On 6 June 1984 an Iranian plane was shot down in a dogfight over Saudi waters, the first act of Saudi defiance.

It was during this troubled time that the Al Yamamah deal was conceived.

  The Al Yamamah Negotiations [top]

In 1985, US-Saudi differences proved too much for a proposed F-15 deal, and Mrs Thatcher, with the blessing of President Reagan, eagerly stepped in to fill the gap with UK Tornados. Knowing that there were problems with the US deal, the Defence Secretary Michael Heseltine had held talks in Riyadh as early as February 1984 with his opposite number Prince Sultan, who told the press that the UK had offered Saudi Arabia "all the weapons it has" (Guardian, 1.2.84) . What it most desirably had was the new Tornado plane, which could be considered a substitute for the F-15. There was a snag however: the Tornado had been developed by a consortium including German and Italian companies as well as British Aerospace, and Germany had hitherto refused to sell the aircraft outside the NATO alliance or indeed any arms to "regions of unrest". However, Germany had to make an exception for Saudi Arabia, to which it owed $7bn, and acquiesced provided that the planes came out of the UK's allocation.

However, at the end of 1984 and in early 1985, France, which had just pulled off a record deal for the supply of missiles, was to all appearances about to clinch the fighter contract as well. The Dassault Mirage 2000, which had been sold to Greece, India and Abu Dhabi, was to be the F-15 substitute and had the advantage of being 25-30 per cent cheaper than the Tornado (Flight, 8.12.84). Crown Prince Abdullah had an apparently fruitful meeting with President Mitterand in February 1985 and in March the deal was said to be near completion (Flight, 16.2.85; Financial Times, 12.3.85). However, at that time the Saudis were still hopeful of F-15s, which, though expensive, were marginally better than the Mirages, and they may have been using the French negotiations to force the US's hand (Flight, 22.4.85). If so, the manoeuvre did not work. By April it was clear that F-15 s would not be forthcoming (Financial Times, 22.4.85). The matter then remained in limbo for several months until, on 9 September, the UK government triumphantly announced a 'memorandum of understanding' between Defence Ministers Michael Heseltine and Prince Sultan bin Abd al-Aziz concerning the sale of military aircraft worth an estimated £4bn (Times, 27.9.85). Mrs Thatcher had already interrupted a rare holiday in July to meet Prince Sultan's son, Prince Bandar, in Salzburg to initial a less formal agreement (Observer, 10.5.92).

A French spokesman said that the UK deal was "unexpected, incomprehensible and catastrophic" and that "this brutal change [was] of a political nature" (Observer, 19.3.89). In this he was certainly right. If the US administration was not able to sell planes itself, it would prefer the Saudi deal to go to its loyal UK ally, which had been cooperative over the attack on Libya, rather than to the French, whose relations with Washington were chronically uneasy. It has also been suggested that, from the Saudi point of view, there were tactical considerations. The Mirage is basically an interceptor, and it had been hoped to complement it with a strike version of the F-15. This being denied, Saudi Arabia fell back on the multi-role Tornado, which came in both interceptor and strike versions. Either way, this great success for the UK arms industry was achieved by courtesy of the US. An 'aviation official' was quoted as saying that "the American Jewish lobby has done us a favour" (Times, 18.9.85). By preventing the Administration from supplying Saudi Arabia, Israeli pressure groups had, ironically, helped the UK clinch the deal.

Reaction was sharp. On 24 September 1985 the acting Israeli foreign minister, Moshe Arens, condemned the UK decision to sell arms to Jordan and Saudi Arabia (two countries still in a state of war with Israel). Arens expressed his "deep displeasure" at the Prime Minister's decision to invite two PLO delegates to London, which was, as he said, a "significant deviation from past British policy" (Times, 30.9.85) – a deviation which may in fact have clinched the deal. Two weeks later Mrs Thatcher was petitioned by 51 US congressmen urging her to drop the recently concluded deal on the grounds that it would accelerate the Middle East arms race (Financial Times, 14.10.85).

  Al Yamamah I [top]

The UK-Saudi contract was finally signed on 9 February 1986 and was given the name Al Yamamah, ' the Dove'. It was now valued at £5bn, for which sum Saudi Arabia would receive 72 Tornados, 30 Hawk advanced trainers and 30 Swiss licensed Pilatus PC-9 trainers (Flight, 22.2.86). So eager was the UK government that it promised the kingdom the first planes off the production line - the RAF was forced to wait. It is significant that only 24 of the Tornados were interceptor-fighters, the other 48 were of the strike variant, which meant that the package could hardly be seen as defensive. The Hawks too could have a ground-attack role. And, though there were restrictions on the resale of the planes, there were none on their use or deployment. Israeli nervousness was thus understandable.

Saudi Arabia had called on the other Gulf countries to coordinate air defence in the face of Iran's rising power early in 1982, and so the deal seemed to be leading on to other contracts: orders worth £270m from Jordan and £345m from Oman were discussed, and there was an expected order for Tornados from Kuwait. These deals, however, were later abandoned.

The precise terms of Al Yamamah were not disclosed, then or later. It was, nevertheless, understood that all or most of the payment would be in oil. In other words Al Yamamah was a barter deal, which would have been contrary to international trade rules if exceptions were not made for military sales.

The deal was government-to-government, with the main beneficiary, the recently privatised British Aerospace Company (BAe), in the background to the negotiations. It is evident that the UK government had pulled out all the stops to gain the contract. Whitehall let it be known that the Prime Minister had conducted a "personal sales campaign" (Jane's Defence Weekly, 21.9.85), and Michael Heseltine told the press on 26 September that "one cannot overstate the Prime Minister's contribution". The News of the World, which hailed "Maggie's Bonanza" (29.9.85) was clearly not far from the mark – though a large part was also played by British Aerospace's dedicated salesman, Dick Evans, who has since been rewarded with a knighthood and chairmanship of the company.

  Doubts and Problems [top]

Not all commentators were so enthusiastic. Initial uneasiness was about the means by which the bonanza had been earned. Allegations of corruption were made within weeks of the signing of the memorandum of understanding. The Guardian published a leading article under the headline "Bribes of £600m in jets deal" on the 21st October. The previous day, Labour's front bench defence spokesman, Mr Denzil Davies, had called on the government to confirm or deny reports that it was to pay secret commissions of between £300-600m to secure the deal with Saudi Arabia. The MoD "refused to comment, although officials said negotiations were still going on" (Guardian, 21.10.85). The Guardian cited Arab sources, who alleged that the commission would be shared between two or three leading members of the royal family, two relatives by marriage of King Fahd and a business agent.

There were additional doubts over Saudi Arabia's ability to pay. In the early '80s the oil price had collapsed, and Saudi Arabia's oil revenues fell from a peak of $116bn in 1981 to $24bn in 1985. With no sign that either OPEC or non-OPEC producers were preparing to curb production, a further decline seemed inevitable. The Financial Times noted on 29th November 1985 that the country had been in a "deepening depression since mid-1983". Two UK building contractors, John Laing and Wimpey, had just been forced to pull out of Saudi contracts due to non-payment, abandoning projects and flying their staff home. Saudi Arabia's financial situation is never fully publicised, but even from the barest figures made public, Western economists knew that it was already running a current account deficit of $25bn, mainly because of high military spending. It seemed imprudent, to say the least, to enter into a huge new arms commitment.

The expedient of paying in oil rather than cash also came under fire. The Saudi oil minister, Sheikh Yamani, was criticised by OPEC in November 1985 for considering a barter deal of a kind which it had previously outlawed (Times, 9.11.85). There was "surprise" at Yamani's subsequent remarks that oil would "most probably" not feature in the deal, and speculation that this could mean the contract would be reopened and that France might have another chance before it was officially signed. Yamani, however, was clearly speaking without authority and was shortly to lose his job.

In February 1986, the UK committed itself to a contract even bigger than expected despite serious questions over the kingdom's ability to pay and more important questions over the sense of sending even more arms to the Middle East and Saudi Arabia's trustworthiness as an ally. The Guardian's article on the 18th February 1986 expressed the doubts of commentators:

"none of the details are available. Here we are, with the largest arms sale ever in the history of the country, and yet very basic information, like the size of the deal, is only known in general terms. We have no notion of the price of the oil which we are buying to pay for these planes. We have no idea over what period the oil will be delivered. It is not clear whether the production will be in addition to Saudi Arabia's existing output and so we can make no assessment of the impact on the oil markets. "

On the same day, The Financial Times published an article claiming that the deal would be "paid for almost entirely in oil", and that the recent fall in prices would mean that BP and Shell would need to drastically increase their lifting of crude oil. Saudi officials said that the oil to pay for Al Yamamah would come from Saudi Arabia's existing OPEC quota, which was 4.35m barrels per day - but Saudi Arabia was at that time already over-producing at 4.6m barrels per day. The lack of information over the Al Yamamah deal added more uncertainty to the already unstable oil markets. On 19 February 1986, The Financial Times predicted that the oil barter would result in low prices for North Sea oil: the North Sea had previously been "the basic source of oil supplies for the big [UK] companies, while OPEC output was used only as a top-up", "but as more and more Saudi crude becomes the staple for companies like BP and Shell... the result is very sharp falls in North Sea prices at times of weak demand".

As BP and Shell were now committed to Saudi Arabia they could not shop around for oil at lower prices, such as those offered by Nigeria and the UAE, meaning that the Saudis benefited more from the barter than the UK companies and oil producers. In another analysis in The Guardian, 27th February 1986, the oil barter was again criticised: a sudden collapse in oil prices, such as the oil-dependent Gulf countries were now experiencing, would push them into recession, with ominous political consequences. However, Saudi Arabia was well aware that the Al Yamamah deal (and any future deals structured in this way) meant that western countries would become more dependent on the kingdom for oil, and so be more likely to support it in whatever ways would ensure their oil supply.

These broadsheet articles of early 1986 present basic economic arguments which the UK government must have been aware of, and indicate the general feeling of commentators, who were sceptical of the worth of the deal despite the jobs it secured in the short term. The papers' doubts appeared to be confirmed on 10 March, when King Fahd, with "tears in his eyes", announced that the budget would be postponed for five months due to the sharp falls in the price of oil, which he said had resulted in "extremely critical circumstances" (Guardian, 15.7.86). Again, despite open warnings of financial and economic problems, the UK continued to do everything possible to salvage the deal. In May, Saudi Arabia had been forced to ask for a complete renegotiation; the UK government revised the repayment scheme to allow the entire contract to be paid in oil, and further permitted the Saudis to pay for the contract over a "substantially longer period than was originally envisaged" (Jane's Defence Weekly, 14.5.86). In addition, to compensate for the virtual halving of the price of crude oil the volume of payments had to be almost doubled. By June there were more dramatic warnings in the papers. The Observer ran an article on the 22nd June under the headline "Saudi Deals in Danger". It noted that "the defence secretary, Mr George Younger, attempted to close the deal during a recent visit to Riyadh", but that "this was unsuccessful because the fundamentals of the agreement are now altered". It described the Saudi economic situation as a "virtual freeze" and reported that "some oil industry experts believe the whole deal is now untenable", concluding with the news that "Whitehall sources conceded that the Saudis could withdraw from the project". The UK had begun to demand some payment in cash, as the oil price was so uncertain that they could not risk being saddled with bartered oil. The oil companies BP and Shell, which were to receive the oil, sell it on the market and hand the proceeds to the UK government for distribution to the arms contractors, were also unhappy. They had traditional concerns about their commercial independence from governments, and feared that the additional allotment would be hard to dispose of.

In spite of all this, the UK government obviously felt that the deal was worth fighting for, and accepted the oil barter arrangements. The Saudi government was equally determined to go through with it. The Saudi military budget for 1986 was $17.3bn or 21 per cent of gross domestic product. Yet, in addition to the huge UK deal, Saudi Arabia invited bids in December 1986 for a $1.4bn submarine deal involving at least eight vessels with bases and training facilities. And even more ambitious plans were being framed.

  Continued US Concerns [top]

In May 1986 the US President suffered a historic defeat on arms sales to Saudi Arabia. Following an adverse Senate vote of 73 to 22, the House of Representatives voted by 352 to 62 against his request to sell $354m worth of missiles. This was well above the two-thirds majority, thus making it impossible for Reagan to override the vote with the presidential veto. The main reason for this was not so much campaigning by the Israeli lobby (which according to The New York Times, a usually pro-Israeli paper, would not have opposed the sale, The Guardian, 8.5.86), but the general feeling in the US that Saudi Arabia had not helped the peace process. In addition there were concerns over Saudi Arabia's public support for Libya after the US air strike, the possibility of the weapons falling into terrorist hands, and the question of whether Saudi Arabia really needed the weapons.

By the end of the year yet another issue had emerged: the implication of Saudi Arabia in the complex and covert operations that came to be known as 'Iran-Contra' or 'Irangate' because of the political repercussions for the Reagan Administration.

The Saudi government initially funded Iranian counter-revolutionary groups, not only because of the strategic and ideological threat posed to them by Khomeini's Shi'ite Iran but also to secure US approval for the transfer of AWACS surveillance planes in 1981. This was part of an arrangement drawn up by King Fahd, top Saudi officials and the Reagan administration, whereby Saudi Arabia put millions of dollars into 'resistance' movements favoured by the US, for example in Angola and Afghanistan (Guardian, 1.12.86; Financial Times 5.2.87).

Colonel Oliver North, a US official involved in these negotiations, now devised a new scheme: sophisticated weaponry would be covertly supplied, not to the opposition, but to the Iranian government, in return for the release of US hostages held by pro-Iranian guerrillas in Lebanon. Deeply involved in this plan, along with retired Israeli and US generals and French, German and Iranian businessmen, was the celebrated Saudi businessman Adnan Kashoggi. Son of a trusted Turkish physician to Ibn Saud, Kashoggi had become invaluable to Saudi royals in their dealings with the West.

According to Swiss and US sources, one of the companies that organised the deal, Hyde Park Holdings, was allegedly linked with Mohammed Said Ayas, who ran the financial affairs of Prince Mohammed bin Fahd Al Saud and was a "close family friend" of Jonathan Aitken (Harding, Leigh and Pallister 1997). It has been suggested that the Al Saud were aware of the shipments to Iran, even if they did not sanction them directly - as "a well-placed Reagan Administration source" quoted by The Guardian (1.12.86) put it, "Adnan Kashoggi does not raise up to $100m for arms dealings without the backing of the Saudi government". The paper concluded that "the Saudis may emerge as having been as important middlemen as the Israelis."

The Saudi connection crops up again in the second phase of this scandal: the diversion of the funds accruing from the Iran arms sales to fund the Contra rebels in Nicaragua, after Congress had banned official US military aid. Links are alleged between Prince Bandar bin Sultan, Saudi ambassador to the US, retired US General Secord, formerly the Pentagon's Saudi expert, and Colonel North, organiser of support for the Contras. Some sources contend that Prince Bandar and even King Fahd himself committed funds to the Contras well before the Iran deals were made, paying as much as $2m a month in 1985.

By such interventions, which were designed to win the favour of certain sections of the US administration, the Saudis managed to incur the deep displeasure of Congress, which in May 1987, after incriminating details of the affair had come out, again postponed the sale of F-15s. Congress was also critical of Saudi Arabia's failure to use its existing F-15s to intercept the Iraqi Mirage which fired on the USS Stark earlier that month, killing 37 US sailors.

While Congress condemned Saudi Arabia, the Administration was trying to gain the kingdom's support for an increased US military presence in the Gulf; in particular it wanted Saudi AWACS planes to extend their range beyond the Saudi border to the southern end of the Gulf, and to let the US use their bases for the protection of shipping. However, Saudi cooperation was increasingly difficult after the US failure to deliver arms. By August, tension was becoming acute in the Gulf and the US was forced to yield at least partially to Saudi demands. A proposed $1bn arms package met the expected opposition from the Israeli lobby but Saudi help was so essential that Congress could hardly oppose the sale, accepting the argument that a well-equipped Saudi Arabia meant less risk for US forces. Even so, it took considerable negotiation before Congress agreed to permit the sale of a squadron of F-15s as replacements to keep the Saudi air force at its current strength, and the badly needed Maverick anti-tank missile had to be dropped from the package (Guardian, 19.3.88, quoting the Washington Post).

In view of all the controversy and uncertainty, it is not surprising that Saudi Arabia continued playing the powers off against one another, achieving the best deals from countries too anxious of losing Saudi Arabia's allegiance to deny its demands or to criticise its policies to any great extent. In February 1987 Prince Feisal, the eldest son of King Fahd, and the Saudi oil minister, Hisham Nezar, visited the Soviet Union, which Saudi Arabia had regarded for years as the centre of atheism: "Senior government officials and Western diplomats in the Saudi capital say disillusionment with the US Administration has reached unprecedented levels and that one result has been to encourage Saudi leaders to reassess their attitude towards Moscow" (Observer, 15.3.87).

Another and stronger signal of Saudi Arabia's 'independence' was sent in March 1988 when it was revealed that the kingdom had bought intermediate range missiles from China, 'East Wind' or CSS-2 missiles, capable of reaching any part of the Middle East with a conventional or nuclear warhead. Negotiation with China had begun in 1985 after the first refusal of F-15s. The US was assured that "Saudi Arabia does not have, nor does it intend to acquire, any nuclear capability". The government of China also stated categorically that it would not export nuclear weapons to any government, and also that it had secured Saudi commitments not to transfer the missiles to a third country, not to be the first to use such missiles and to use them for defence only. Although the US saw China as a counterweight to the USSR in the global balance and was loathe to criticise either Beijing or Riyadh publicly, the Administration was nevertheless concerned by arms sales to the Gulf, and issued a statement saying that "the acquisition of such a system is not in the interests of peace and stability in the region." Congressional reaction was sharper. 50 US senators and 187 members of the House of Representatives signed a letter of protest: "Our government must make unequivocal its absolute opposition to the presence of Chinese missiles, which represents a new and grave threat to the peace of the region" (Independent, 2.4.88). They also demanded that the Administration should "reconsider" a proposal to sell Saudi Arabia a further $450m worth of equipment for its AWACS fleet. Since these planes supplied essential intelligence for the US fleet protecting US and Kuwaiti tankers in the Gulf, this demand was a serious embarrassment.

Within weeks of the publication of the Chinese purchase the US Ambassador to Saudi Arabia was withdrawn, almost certainly at King Fahd's request. Clearly Saudi Arabia was demonstrating to the US that it did not depend on them – however, its actions were making it less, not more, likely that it would get the US weapons that it wanted. As before, the beneficiaries were European, particularly UK, arms salesmen. In February 1987, when the dust from Irangate had barely settled and their finances were still under pressure, the Saudis reopened competition to buy a new fleet of battle tanks, and discussed the possibility of buying submarines from the UK firm Vickers Shipbuilding and Engineering. In June 1988 France won a £250m contract to supply helicopters. Then came Al Yamamah II.

  Al Yamamah II - the Second Dove [top]

The essential background to this extraordinary deal consisted, as before, of Saudi Arabia's perceived military requirements and its uneasy relationship with the US.

Al Yamamah II came at the time of a general escalation in the Middle East arms race, involving not only the traditional suppliers such as the US, the Soviet Union, France and the UK, but relative newcomers such as China, Argentina, Brazil and North Korea. Though it was widely recognised that the increased flow of arms into the region would heighten the risk of fresh conflicts breaking out, either between Israel and the Arab states, or between the Arab states themselves, no Western government was prepared to be the first to curb such lucrative trade. As far as the UK government was concerned, it was seen as desirable that the West should supply military equipment to what were described as the 'moderate' Arab states such as Saudi Arabia. These were perceived as bastions against the spread of Muslim fundamentalism and communist influence in the region. 'If we don't sell arms, others will', was, and is, how the Whitehall view of the arms trade can be summed up (Financial Times, 9.7.88). Michael Heseltine confirmed this analysis in a statement made in March 1989: "it is of considerable significance that the Saudis should have a continuing relationship with this country. They want the kit and they are going to get it from somewhere. So why shouldn't we sell it?" (Observer, 19.3.89).

The UK government had avoided publicising any details of the agreement - which may be another reason for Saudi Arabia choosing to buy from the UK. The UK also placed no restrictions on use or deployment of weaponry. With the UK as its arms supplier, Saudi Arabia could now afford to be more critical of US policy, and, as the kingdom now owned large amounts of UK weaponry, further UK deals would be likely in order to maintain the uniformity of its forces' equipment.

Military spending accounted for up to a third of the 1988 Saudi budget and had been spared most of the recent budget cuts; in 1987-8, well over $15bn was spent on building military facilities and buying arms and there were still heavy financial commitments to existing programmes. Saudi expenditure on France's FFr14bn 'Al Sawari' contract to supply frigates, support vessels, helicopters and training was decreasing as the deal came near to completion. The major modernisation of the National Guard was also at an advanced stage, the bulk of payment already having been made. However, the US 'Peace Shield' integrated air defence project was still costly, as was the £5bn UK Al Yamamah programme. By 1988 the Saudis had received 50 of the 72 Tornados scheduled in Al Yamamah I, but falling oil prices had repeatedly disrupted the barter arrangement. A major new project of strategic significance was a network of oil storage caverns, which was expected to be commissioned from Swedish construction groups (Financial Times, 13.4.88).

Despite Saudi Arabia's already huge investment in its defences, military escalation in the area led the government to increase its arms 'requirements'. There was still a significant threat from both Iran and Iraq. There were unresolved border difficulties with Yemen. There had been an extra defence burden since the completion of the Bahrain causeway which made the island state virtually a part of the kingdom - recently revived Iranian claims to Bahrain posed an extra challenge to Saudi security. Lastly, Israel remained a constant concern as its warplanes regularly made unauthorised flights over Saudi territory and its politicians made only thinly veiled threats to destroy Saudi Arabia's new Chinese missiles. In addition, Saudi Arabia's small and mostly unskilled population meant that it could not compete with its neighbours in the size of its armed forces. Up to 1987, the manpower gap had been partly filled by 10,500 Pakistani troops but for political reasons that arrangement had been discontinued. There were plans to replace them with Saudi soldiers but this would take time, and there were simply not enough Saudi nationals available. The government consequently felt bound to rely disproportionately on high technology armament for its security. It was thus still in the market for submarines, minehunters, tanks and aircraft. And, as we have seen, it was becoming increasingly difficult for Saudi Arabia to get such things from the US.

On 5 July 1988 the Defence Secretary, Mr George Younger, and Prince Sultan bin Abd al-Aziz signed a "formal understanding" which came to be known as Al Yamamah II.

The 1986 deal had been the biggest in the history of the UK arms trade, yet it needs to be kept in perspective. The orders added up to roughly $8bn, with deliveries expected to be spread over some six years. But in the decade 1978-87 Saudi Arabia concluded arms agreements with the US worth $31bn, and in the same period France, which had failed with fighter aircraft but had done well with warships, missiles and artillery, had sold Saudi Arabia some $10bn worth of arms (Flight, 22.10.88). The second phase of Al Yamamah, however, was described as "the arms sale of the century", "the biggest [UK] sale ever of anything, to anyone", "staggering both by its sheer size and complexity" (Financial Times, 9.7.88). It was valued at not less than £10bn, or approximately $16bn. These figures referred to the initial list of orders; but much higher sums, ranging up to £50bn, were predicted for the longer term.

The main items in the initial list were 40-50 more BAe Tornados, up to 60 BAe Hawks (including some of the single-seater 200 version, for which Saudi Arabia was the first customer), one, or perhaps two, air bases to be constructed by BAe, a few small BAe jets for communication purposes, more than 80 helicopters from Westland, including some of the Black Hawks built under US licence, and 6 Vosper Thorneycroft minehunters.

  Crisis and Revival [top]

There was a crucial difference between Al Yamamah I and Al Yamamah II. Whereas the 1986 agreement provided for a reasonably firm set of orders, that of 1988 was not much more than a shopping list of items which the Saudis could activate at their pleasure, and it was not long before there were grave doubts as to whether anything much in the way of orders would actually be forthcoming.

In spite of the Iran-Iraq ceasefire at the end of 1988, which relieved tension in the Gulf region, and notwithstanding continuing financial difficulties, Saudi Arabia's military spending showed no remission. A third of the annual budget continued to be appropriated by defence, £8.5bn for 1989/90 (Financial Times, 13.12.89). In June 1989 Saudi Arabia confirmed a deal with France to purchase £1.6bn worth of naval equipment. In November Raytheon of the US won a three year $469m contract to provide services, training and technical support to the Hawk air-defence programme. An armed forces review in early 1990 resulted in a proposal to more than double the size of the armed forces and make massive improvements in air defence and anti-tank capabilities. However, UK sales to Saudi Arabia were slack. By October 1989 only one of the six Vosper minehunters, and none of the Westland helicopters, had been officially ordered. More importantly, there was no sign of the token cash payment of £200m that was supposed to cement the second deal. There was also an unspecified backlog on payments for previous deliveries. A Whitehall spokesman commented: "We don't want to push the Saudis on this, but we are becoming worried about their resolve on the latest deal" (Sunday Telegraph, 22.10.89). A month later the UK government was suggesting a £2bn bank loan to help orders. To avoid Saudi embarrassment, the loan would take the form of export credit to the arms companies rather than a sovereign loan; a quarter of the money would come from Saudi banks and institutions, the rest from the UK with perhaps £1bn provided by the Export Credits Guarantee Department. This pressure had the desired effect; as the Financial Times commented (14.12.89), "there could be no mistake about Saudi Arabia's sense of injured pride". BAe and other UK companies received a much needed cash payment of £2bn in December (Jane's Defence Weekly, 23.12.89), and a Saudi official stated on 13 December that "contacts between the governments ended with Saudi Arabia paying its full commitment to these projects without the need for borrowing... the Kingdom wants to reiterate its ability to cover on time all payments of all projects it signed with the British and other governments" (Financial Times, 14.12.89).

As a result, the then Defence Minister Alan Clark was able to assure Parliament that the MoD had made no payments to BAe or other companies to make good the deficit on Al Yamamah (Hansard, 20.12.89, col 250). However, BAe was reportedly still trying to secure a further £2bn funding facility, more than half of it from the ECGD, which would act as a buffer against fluctuations in crude oil prices (Jane's Defence Weekly, 25.11.89).

The cash payment from Saudi Arabia cleared the slate to an extent, but the prospects of future orders from the 'shopping list' remained obscure, worsening further in the course of 1990 as Saudi Arabia apparently turned elsewhere. In the first half of the year there were sizeable orders for French tank turrets, upgraded surface-to-air missiles and frigates (Defence, May 1990; Flight, 19.6.90). Much more seriously, in June the Bush administration announced plans for a $4bn deal, which it said was necessary for Saudi Arabia's defence and would not change the military balance in the Middle East (Financial Times, 7.6.90). A month later a formal Saudi order for 163 M1-A1 and 62 MI-A2 tanks met with little opposition in Congress. This effectively ended hopes for the sale of UK Challengers, which Vickers and the UK government had been pressing for outside the frame of Al Yamamah (Times, 6.4.90). In August it was announced that the US Administration would override Congress to sell the kingdom 24 more F-15s.

By this time the prospects for the Tornado were looking distinctly bleak. Projected orders from Jordan, Oman and Malaysia had all vanished, and there were reports that the 48 planes scheduled under Al Yamamah II would also be abandoned. Saudi Arabia seemed likely to buy additional Hawks and helicopters but not to the same value of the lost orders. The Tornado software was inferior to the F-15's, its radar assessment was a full four seconds slower and its performance in the Gulf War had been patchy. Early on in the fighting several RAF planes had been lost, but the Tornado was said to have proved effective later as a high-level bomber. Nevertheless in October the MoD scrapped a planned mid-life update after frontline service of only three years – a tacit admission that the plane was not worth modernising. It is true that the Saudis professed to be delighted with the performance of its Tornados and assured the UK that the deal was safe. "The Al Yamamah project", said Prince Bandar, ambassador to the US and son of the defence minister, "is one of the most successful ever done by the Saudi military" (Sunday Times, 30.9.90). BAe, however, had to admit that no official contract had been signed for the second batch (Independent, 19.9.90): since the RAF order was to be halved, this meant that the production line would have to stop early in 1992, with disastrous consequences for the company.

After Iraq's invasion of Kuwait in August 1990 there were hopes that the crisis jump in oil prices would encourage Saudi Arabia to speed up procurement under Al Yamamah II, but instead it turned to the US where arms sales to the kingdom were reaching incredible proportions. Congress' traditional reluctance to upset Israel was briefly set aside, and in September the Pentagon announced the sale of $21bn worth of weaponry to Saudi Arabia - Patriot missiles, Apache helicopters, the latest M1 tanks, Bradley armoured fighting vehicles and, most significantly, F-15 fighters . "Everything except the kitchen sink", complained Congressman Mel Levine, who led the opposition to the sales (Guardian, 17.9.90). The package was seen as a great relief to the US arms industry as it would more than compensate for the threatened cuts in the Pentagon's procurement budget following the end of the Cold War.

Israeli protests did have some effect however, and in November the planned sale was revised. There would be an immediate $7bn package of tanks, armoured vehicles, helicopters and missiles, which pro-Israeli members of Congress said they would not oppose, but the second tranche of $14bn, covering the F-15s among other things, was not to be submitted until early in 1991 – by which time opposition was growing, not least because the rationale for such a sale remained unclear.

In May 1991, after Iraq's defeat, the US announced a Middle East Arms Control Initiative, and at the London summit the seven leading industrial countries promised to curb their arms sales. Yet US sales to the Middle East and North Africa remained enormous. In July 1991 the White House announced sales of nearly $4bn to Saudi Arabia, Turkey, Egypt, Oman, Morocco and the United Arab Emirates. This led to charges that Bush was not serious about reducing arms sales to developing countries, but the Administration insisted that it would continue to meet the 'legitimate' needs of friends in the region. Thus encouraged, the Saudis confirmed in November that they would be going ahead with the proposal to buy no fewer than 72 F-15s worth over $5bn. The Bush administration, however, said that it would not permit the sale for "several months" (Times, 8.11.91). A senior executive of McDonnell Douglas pointed out, "If we are not allowed to meet this demand, others will" (Guardian, 7.11.91).

Thus little was altered by the Gulf crisis. Saudi Arabia was still intent on buying more arms and its financial circumstances were still uncertain; the only change was that both these pressures had increased. Saudi Arabia's desire for arms was intensified by the embarrassment of having US troops take responsibility for the crisis, and its war debts meant that the kingdom's financial problems had worsened. It continued to play the Western states against one another, and they for their part did not seem to have changed their policies on arms exports, despite the much heralded Arms Control Initiative arranged after the Gulf War. Saudi Arabia continued to order large amounts of weaponry and then have problems paying for it; there continued to be corruption scandals, security scares and pressure on western governments to abide by their own rules on arms control.

Saudi spending in the 1992 budget was a record SR181bn (£20bn) – 27 per cent higher than the last budget of 1990 (the 1991 budget was not published due to the Gulf war). King Fahd said that the war debt would be balanced by borrowing SR30bn from foreign and domestic sources (Financial Times, 31.1.92). Saudi Arabia, which ten years earlier had balances of $100bn, had only $5-10bn left in financial reserves as a result of 10 years of deficit financing and Gulf War costs. Robert Mabro, director of the Oxford Institute for Energy Studies, said that the Saudis "don't have much in the way of liquid reserves in the sense of money on tap", adding that since 1985 Saudi Arabia had made every effort to ensure that the rest of OPEC did not see them as a 'backstop' always willing to support the oil price (Independent, 27.2.92). The other 12 members of OPEC had tried to persuade Saudi Arabia to reduce output by more than 500,000 barrels per day - but the kingdom refused to go below an output of 8m barrels per day. Oil prices were therefore falling, with disastrous results for other producers. Saudi oil exports, however, were budgeted to earn $32bn in 1992, which would be enough to keep the domestic economy buoyant. Even so, a deficit of $8bn was still expected.

As a result, by December Saudi Arabia was having to delay plans to buy US tanks, missile systems and possibly fighter aircraft due to cash shortages. Saudi Arabia and the US were trying to preserve the sale of F-15 aircraft, and several schemes were being considered, including increased oil production which would be bitterly opposed by OPEC. A $200m payment for initial long-lead funding and a letter of intent were also needed from Saudi Arabia before the F-15 sale could proceed. A September order for 150 M1A2 tanks had been 'suspended', but the deliveries of 315 M1A2s and about 200 Bradley Fighting vehicles ordered previously began as scheduled. A 1991 $3.3bn order for 14 Patriot fire units and associated weaponry remained unsettled. The initial delivery of 12 Apache helicopters was delayed seven months until January, and a $600m support package including maintenance repair and simulation facilities was also held up. The Peace Shield project, however, remained unaffected.

Meanwhile, with the Tornado and other projects remaining stalled throughout 1991, the UK was becoming desperate. British Aerospace was by now in dire straits. Its chairman resigned after the failure of a share rights issue, and in hindsight it is commonly believed that it could have been snapped up by its great rival GEC. There was great relief when on 4 April 1992 the Saudis came up with a £1.5bn down payment, at last triggering the second phase of Al Yamamah (Independent, 6.4.92). This paved the way for Saudi Arabia to begin ordering items on their 'shopping list', and meant that the BAe Tornado production line could be kept open. Salvation came when the line had been within weeks of closing.

However, the problems with Al Yamamah II were far from over, as there were "still no definite orders" (Engineer, 9.4.92). There were concerns that the Black Hawk order had been pushed down the list of priorities, and the position on the six minehunters was unclear, so far only three had been ordered. Despite the initial cash payment, the rest of Al Yamamah II was to be paid for in oil, and there were rumours that the amount might have to be increased from 500,000 to 700,000 barrels per day. Saudi Arabia was forced to shelve its plans to build a £10bn military airbase at Sulayil. This followed an internal audit on BAe by the state owned Royal Bank of Saudi Arabia, which was believed to have advised the royal family against sinking any more money into BAe. This seriously jeopardised BAe and helped to "intensify the mood of financial crisis" (Observer, 23.8.92).

The UK and Saudi governments tried to calm the nerves. In October Prime Minister John Major stated that "there is no doubt that the Saudi commitment to Al Yamamah remains as strong as it has been for many years. That has been stressed to the Secretary of State for Defence and directly to me by the king" (Hansard, 27.10.92, col 866). On 29 October 1992 the Saudi Press Agency reported an official statement from Riyadh: "No other deal reached by the kingdom with any other country will influence the Yamamah agreement. There have recently been contacts between King Fahd and the UK Prime Minister John Major to affirm the mentioned commitment." In fact Mr Major made two trips to convince King Fahd of the Tornado's merits and to gently remind him of the UK's Gulf War contribution. Mr Rifkind, the Defence Secretary, and Mr Heseltine, President of the Board of Trade, also joined the "pilgrimage" (Daily Telegraph, 30.1.93). Probably more important was a path-breaking visit in January 1993 by the newly appointed Minister for Defence Procurement, Jonathan Aitken, a long-standing friend and business associate of the King's son Prince Mohammed bin Fahd (Sunday Business, 1.6.97, see below, section III.iii.c - 'Corruption'). Soon afterwards the King and Prime Minister signed a firm agreement, giving final approval for the order of 48 Tornados. This saved an estimated 19,000 jobs associated with Tornado production and apparently broke the procedural logjam which had delayed other items on the shopping list, such as the 88 Black Hawk helicopters and the 3 remaining Vosper minehunters (Engineer, 4.2.93).

  The Boom Years [top]

So British Aerospace was saved, and Al Yamamah II gained much needed momentum. By 1998, when the Tornado contract was completed, a total of 110 Tornado planes had been delivered, together with 90 Hawk and 50 Pilatus trainers. Since payment was mainly in price volatile oil, the exact sums received by BAe are hard to establish, but it is thought that from 1993 through 1998 the company was getting between one and two billion pounds a year from this source, which more than any other tided it over a crucial gap before the arrival of the Eurofighter – and it is important to note that for most of this period the future of that plane was in grave doubt.

The Hawk is a versatile and successful aircraft that has found a variety of buyers. However, apart from the air forces of the three manufacturing countries, the Royal Saudi Air Force has been the Tornado's only customer. An expert has recently remarked: "Not even the Tornado's greatest fans could deny any linkage between the Saudi sales and US restrictions on F-15 exports" (Jane's International Defence Review, June 1999).

During the crucial period of the early '90s US-Saudi relations were noticeably cool. Americans resented the unimpressive performance of the Saudi armed forces during the Gulf War, which was supposedly fought for their benefit; the military results of the weaponry lavished upon them had been extremely disappointing. In addition, it was disclosed in April 1992 that Saudi Arabia had rejected another proposal to pre-position ground equipment for use by US troops in the event of another conflict – which seemed not unlikely as both Syria and Iran were reportedly building up tank forces. The Pentagon pre-positioning was to be the cornerstone of post-war US-Saudi relations, but the Saudis consistently opposed it for fear that it would lead to a permanent US ground presence.

Further damage to US-Saudi relations was caused by suspicions that Saudi Arabia had passed on information about its Patriot anti-missile system to China. Both Israel and Saudi Arabia had been supplied with Patriots, and both had weapons agreements with China, but US investigators cleared Israel of blame for the leak. The US government also alleged that US military equipment sold to Saudi Arabia had been illegally passed to Iraq during the Iran-Iraq war (Guardian, 21.4.92; Independent, 22.4.92) (see section III.iii.a 'Stability').

There was also widespread feeling in the West that there was already far too much weaponry in the Middle East. In October 1991 the Permanent Members of the Security Council (the US, Russia, China, the UK and France) agreed to inform each other "as a matter of priority" about seven categories of arms transfers to the region before delivery, and to avoid transfers that would "increase tension in [the] region or contribute to regional instability" (Guardian, 28.5.92).

Accordingly, in April 1992, 237 members of the US House of Representatives signed a letter addressed to President Bush by Congressman Mel Levine opposing the F-15 sale to Saudi Arabia, declaring the sale to be "incompatible with any meaningful arms control policy" and representing "a significant escalation of the regional arms race". They pointed out that the Administration's approach to Middle East arms sales made it hard to ask Russia to refrain from selling tanks and warplanes to Iran (May 1992 Arms Fax, Council for a Liveable World).

In the following month John Major received a letter from five US congressmen, urging him to stop the sale of further Tornado aircraft to Saudi Arabia. He replied blandly in July that the sale "in no way infringes the [Permanent Five Security Council] guidelines" which his government intended to "observe scrupulously" (Goldring, BASIC, 12.8.92).

It seems appropriate here to refer to the testimony given to subcommittees of the House Foreign Affairs Committee on 23 September 1992 by Dr Natalie Goldring, of the British American Security Information Council (BASIC). Dr Goldring made the point that the continuing Saudi-Yemeni border quarrel over respective rights to an oil field that spans their disputed border is similar to the dispute that served as the proximate cause of the Iraq-Kuwait war. She argued that the F-15 sale, and therefore also the Tornado sale

"is likely to accelerate the regional arms race, as Israel uses the sale as a justification for receiving more weapons from the US. President Bush has pledged to uphold Israel's qualitative edge, virtually guaranteeing that this sale will be followed by a compensating sale for Israel, which will result in yet another escalation of the regional arms race... According to the Arms Control Association, the US has announced $32.3bn in sales to the Middle East since Saddam Hussein's invasion of Kuwait."

Almost $20bn of these sales were announced after the declaration of the President's Middle East Arms Control Initiative in May 1991, whose principles, Dr Goldring believes, are violated by the UK sale of Tornados to Saudi Arabia.

In spite of the Middle East Arms Control Initiative, Saudi Arabia obtained Tornados and, eventually, additional F-15s. In 1998 the Royal Saudi Air Force possessed 110 Tornados and 167 F-15s, 72 of which were the latest variant and were in the process of delivery. In addition there were 80 of the smaller and older F-5s as well as US Early Warning planes, transports, tanker aircraft and helicopters. It is highly unlikely that Saudi Arabia has sufficient capacity to fly so many machines in combat.

Analysis or Why It Wasn't a Good Idea

  Benefits and Costs: Saudi Arabia [top]

For the people and state of Saudi Arabia the Al Yamamah deals were undoubtedly a bad idea. While it is reasonable for the kingdom to have sufficient military force to deter territorial incursions and protect its oil production and exportation, the amount of expensive weaponry that Saudi Arabia has amassed far exceeds these requirements. It would be hard to think of a worse way of spending Saudi Arabia's oil wealth than to squander it on second-rate warplanes in numbers which the kingdom could not use even if the occasion was to arise. One US arms salesman is quoted as saying that "The Saudis can't use and don't need what they buy" – adding hastily that his own wares were the exception to this generalisation (Vitalis 1997; cf Aburish 1994, pp181-91). Indeed, the aspiration of the ruling group to make this small country a military power is fundamentally misconceived. No amount of sophisticated arms purchases could make it an effective rival of Iran, Iraq or Israel. Saudi Arabia simply does not have a large enough population, even if all were willing to serve and had sufficient technical education, to rival the manpower reserves of these larger states. Although Saudi Arabia has embarked on a drive to recruit and train more Saudis for its armed forces, much of Saudi Arabia's advanced equipment, purchased at such expense, can only be operated by foreign nationals. If a real threat to its oilfields were to develop, the Western powers would be obliged to commit their own forces to its defence, as they did in 1990-1. The folly of the arms build-up was indeed so obvious that critics have plausibly attributed it, not to any military need, but to the income from commission payments received by members of the ruling elite and their representatives. These are generally more lavish and more easily concealed on government-to-government military, rather than civilian, contracts.

The war against Iraq caused a sharp rise in the world price of oil, but the effect was short-lived and easily offset by the payments Saudi Arabia had to make to its protectors in return for the defeat of Saddam Hussein. During the rest of the 1990s Saudi Arabia's oil output was sustained at around 8 million barrels per day, only a little below the peak levels of 1976-81. However, the price of Saudi oil over the next ten years, apart from a brief flurry at the end of 1996, stabilised at $16-18 per barrel, far lower than the $26 of the boom years. In spite of some budgetary economies, deficits became regular and in some years amounted to 10 per cent of the gross national product. 'Defence' continued to absorb 30-33 per cent of the entire budget, and 10-16 per cent of the national income. The 1998 figure, 15.7 per cent, was one of the highest in the world; per capita expenditure, at $1,173, was exceeded only by Israel, Kuwait, Qatar and Singapore (IISS, 'The Military Balance 1999/2000'). In 1999 Saudi Arabia "remained by far the largest national market for arms" in the world (IISS, 'The Military Balance 1999/2000').

The appetite of the Saudi military for costly new equipment did not abate. Acute cash flow problems had blocked potential orders of 750 US Abrams tanks and £1bn of naval helicopters from the UK firm Westland (outside the Al Yamamah II framework). Iran's acquisition of Russian submarines, however, caused Saudi Arabia to increase the French Al Sawari order from two to three anti-submarine frigates, a purchase costing $3.5bn. By the beginning of 1997 Saudi Arabia owed the US $13bn for past sales (Jane's Defence Weekly, 26.2.97). Despite this, in 1997 the kingdom was said to be on the verge of a new $20bn deal for 100 Lockheed F-16 fighters to replace its fleet of older F-5s, in addition to the 72 Tornado strike planes already on order under Al Yamamah (Independent, 31.1.97). High military spending continued in spite of financial constraints and Saudi Arabia's arms imports in 1997 amounted to one fifth of the world total. The 1998 share was only slightly less (IISS, 'The Military Balance 1999/2000').

In 1998 the oil price collapsed, at one point falling below $10 per barrel, with disastrous effects on the Saudi economy. Oil revenue fell from $43bn in 1997 to under $30bn in 1998; gross domestic product declined by a massive 11 per cent, and was expected to fall further in 1999; the budget deficit rose to over $12bn (Jane's Defence Weekly, 18.8.99). The budget military allocation, including the National Guard, fell from roughly $22bn in 1998 to $17bn in 1999 and virtually all current procurement programmes were shelved or delayed. The amount of oil allocated to Al Yamamah was "slashed" by a third, and BAe publicly denied rumours that Saudi Arabia had frozen the deals, maintaining that the cuts reflected the move from delivery to maintenance services as the Tornado programme neared completion (Daily Telegraph, 24.2.99; Times, 19.2.99). There was, however, some anxiety about payment. The Saudis themselves announced that Al Yamamah was being "rescheduled" and the UK government admitted in April 1999 that "adjustments" were being made to Al Yamamah "in response to prevailing economic conditions" (Financial Times, 25.2.99; Hansard, 12.4.99). By then Saudi Arabia and other oil producers were taking remedial action; an organised cut of about 10 per cent in production was largely responsible for a rise of over 100 per cent in the price of oil, which by September had reached $22 per barrel. As a result the Defence Minister Prince Sultan was able to deny that its arms contracts with the UK and France had been frozen, and to declare robustly that the kingdom "will not hesitate and will never stop developing its armed forces" (Jane's Defence Weekly, 22.9.99). Regardless of the fluctuations in the price of oil, the military drain on the country's resources was becoming increasingly onerous.

Like most recent purchasers of Western arms, Saudi Arabia has tried to recoup part of its outlay in three different ways: reciprocal purchases, technically counter-trade or barter; local participation in the manufacture of the arms; and capital investment by the vendor country. As we have seen, Al Yamamah was basically a barter deal, the arms being paid for mostly in oil. Offsets, or re-investment into the 'buyer' country by the vendor, were more problematic. Saudi industry was only capable of limited participation in sophisticated arms production and opportunities for worthwhile investment in other sectors remain hard to find.

The Memorandums of Understanding for Al Yamamah, unlike the US Peace Shield programme, do not include binding commitments for re-investment in Saudi Arabia, simply requiring "the British government to pursue a 'best endeavours' approach" (Matthews 1996). Despite this, ambitious proposals for compensatory investment were set out: an offset target of 25 per cent of the UK technical contract value of Al Yamamah I, "a figure generally accepted to be in the region of £1bn", was to be met within 10 years (Financial Times, 13.12.89). The Al Yamamah offset programme allows UK companies from any sector to invest in civil or military initiatives which contribute to technology transfer and the development of Saudi manufacturing industry. This approach is far more flexible than the comparable Peace Shield programme, which was effectively limited to military related offsets. UK investors are also offered a range of incentives by the Saudi government: soft loans from the Saudi Industrial Development Fund to cover 50 per cent of project costs; tariff exemption on imported equipment and materials; low cost utilities and corporate tax exemption for up to 10 years. Yet in spite of these incentives and the flexible nature of the offset agreement, "there is no disguising the fact that the Al Yamamah offset programme has only achieved limited success" (Matthews 1996).

"Although UK officials ... [stated] ... that the £1bn figure does not amount to a contractual obligation, that is how it is regarded by the Saudi government" (Financial Times, 13.12.89). The MoD and BAe did their best to implement the 'obligation', jointly setting up an Offset Office to advise and encourage potential investors. BAe also offered to guarantee Saudi government loans of up to £6.25m to participating companies (Times, 17.7.97). But investors faced "notoriously difficult business conditions" most of the more attractive openings had already been used for Peace Shield offsets and, while the involvement of the two governments promised businessmen an "inside track", they feared that it also meant additional bureaucracy and patronage (Jane's Defence Weekly, 6.5.95).

The offset programme for Al Yamamah I effectively started in 1989, when terms and conditions were finally agreed. In 1998, the UK government put the sum total of offset investment at £450m, less than half the target figure of £1bn (Hansard, 2.4.98, col 557/8). Interestingly, in 1996, independent research in Saudi found that UK contractors had achieved an even lower level of reinvestment, only 8 per cent of their total obligation (Middle East Executive Reports, January 1999).

It is currently estimated that the Al Yamamah I offset programme has resulted in no more than 300 jobs for indigenous Saudis, and no offset programme has yet been agreed for Al Yamamah II (Private Correspondence with Ron Matthews, Cranfield University, March 2000). The Saudi government would have done far more for the kingdom's development if it had put its money directly into productive investment and not spent it on accumulating military hardware. "Viewed from almost any angle, defence offsets have had only a marginal impact on the development of the Saudi nation" (Matthews 1996).

  Benefits and Costs: the UK [top]

It is commonly assumed that, whatever the ethical arguments against the UK's arms trade, the economic benefits are self-evident; military industry provides the UK with a large volume of mostly 'high-tech' and well-paid jobs, and increases GNP. In addition, it is maintained that exports enable the suppliers of the UK's armed forces to achieve economies of scale, maintaining longer production runs and thus lowering the unit cost of the equipment needed for our security. However, recent academic research calls these assumptions into question, finding that military exports result in very little economic benefit or saving for the UK. Economic benefits which are, at best, unclear provide little justification for unethical export policies.

With the end of the cold war the arms market went through a period of steep decline. However, it "now seems to have stabilised but at a much lower level" than that achieved during the late eighties (Dunne 1999, p1).

The UK defence industry has moved from strategic justification to economic justification for its existence. It is, however, a declining employer and is heavily subsidised... The economics of maintaining the capability have meant a push for arms exports, but there is excessive use of offsets and other measures. This makes it a difficult market and it is also not a growing market. The UK's pride at gaining an increasing share of a declining / static market does seem somewhat misplaced. (Dunne 1999, p2)

Even during the boom years arms and aerospace exports never reached more than 4.5 per cent of the UK's total exports of goods - since 1996 these have not exceeded 2 per cent (Dunne 1999, p5). In 1997/98 military exports accounted for the employment of an estimated 130,000 workers, 65,000 directly and the rest indirectly. Those workers whose jobs directly depend on military exports represented under 0.3 per cent of total employment (MoD, 'UK Defence Statistics', 1999). Exports to Saudi Arabia have comprised the vast majority of the UK's military exports (75 per cent 1992 to 1994, and 41 per cent in 1998; UK government, 1998 'Strategic Export Controls Annual Report'), and so the rather unimpressive figures above would be drastically reduced without the Al Yamamah contract which serves "to provide a rather flattering impression of the UK's overall performance" (Cooper 1997, p134). The 'economies of scale' argument is also found to have little weight.

It has been estimated that exports reduce the MoD's research and development costs by £40m and the MoD's procurement overheads by £163m. As the equivalent of two per cent of current UK expenditure on military equipment, the estimated total saving of £203m is hardly overwhelming (House of Commons Defence Committee, 1999). More to the point is that the £203m saving that military exports provide is less than half the cost of promoting these exports (House of Commons Defence Committee 1999). £431m a year is spent on the promotion of UK arms exports, including the maintenance of various official bodies which encourage and facilitate such exports, such as the Defence Exports Services Organisation (DESO) and the Export Credits Guarantee Department (ECGD): what profits there are from the arms trade must be considered against these significant costs to the taxpayer (House of Commons Defence Committee 1999). As Paul Dunne concludes, "clearly the industry is not as important to the economy as one might think", or rather, as one is led to believe (Dunne 1999, p5).

The Al Yamamah contract, like many others, involves large elements of offset, barter and export credit, all of which also detract from the net profit the UK gains from the deals.

  • Offsets provide little immediate benefit to the UK economy and can be considered a long-term disinvestment as jobs are transferred abroad: for example, the offset arrangement for a maintenance repair facility in Saudi Arabia may well take the arms industry jobs from the UK that the government is so anxious to retain. Re-investment in Saudi Arabia has proved difficult and expensive for the UK firms involved, who have still not been able to meet the offset target set in 1989.
  • Barter or countertrade is an important feature of Al Yamamah. The government's official position, as a member of GATT and the OECD, would be to discourage barter, it being a system of bilateralism, price-fixing and reciprocity, yet this is precisely what Al Yamamah entails.
  • The Export Credits Guarantee Department (ECGD) is a part of the DTI, set up "to help exporters of UK goods and services to win business, and UK firms to invest overseas, by providing guarantees, insurance and reinsurance against loss" (ECGD Mission Statement). In the period 1998/9, arms deals comprised 52 per cent of the ECGD portfolio, with a total value of £1bn of new guaranteed business to the kingdom, orders to Saudi Arabia dominated the defence sector cover (ECGD Annual Report and Trading Accounts 1998/9). The ECGD has been described by The Guardian as the "notorious government body that subsidises the arms trade", and the paper quotes a ministerial source as saying that the ECGD "is where the real filth in the arms trade is to be found" (Guardian, 28.2.00). Recent academic research has established that on average over the last ten years the ECGD has cost the UK taxpayer £228m per annum (House of Commons Defence Committee, 24.3.99). As Treasury official Robin Fellgatt states "an arms sale on credit if someone does not pay up is of no economic benefit, quite the reverse". The government's desire to retain the Saudi market even seems to take precedence over profiting from this market: "There has been concern in the Treasury for some time that on occasions the people in the DESO in the Ministry of Defence had pursued arms export orders without taking as much notice as we would have wanted of some of the other economic and financial considerations" (Koorey 1995, p51).

It is also necessary to consider the 'opportunity cost' to the UK of subsidising the arms trade. With equivalent investment in other sectors or social programmes, many more productive jobs could have been created which would not supply a market subject to the political vagaries, moral concerns, and dubious profit margins of the arms trade. Unfortunately, even when the arms market dramatically contracted in the early nineties, the government's enforced "rationalisation in response to declining demand saw no real conversion to civil production" (Dunne 1999, p2). Dunne considers that, despite the UK government's reluctance to recognise the ill-health of its arms industry, the view is gaining ground within the military establishment that the technological gap between the US and its allies is now so wide as to be unbridgeable and that it therefore makes no sense for the UK or even Europe to maintain a large capacity for arms production, when better and cheaper equipment can usually be procured from the US (Dunne 1999, p2).

For the last decade and more, Saudi Arabia has been by far the largest customer for UK arms, yet its contribution to the UK economy should not be exaggerated. Apart from British Aerospace and its subcontractors, UK arms companies have gained little from the Al Yamamah project. Of the six Vosper minehunters included in the 1988 agreement only three have actually been ordered. Nothing has come of the Westland helicopter deal, or of the proposed order for frigates and howitzers. In 1995 a long-awaited order for the trainer aircraft scheduled in Al Yamamah II was finally placed: 20 Hawks and 20 PC9s. However, the Hawks were of the older Mk65 variety and, though the Saudis still professed a desire for the newer 100 and 200 models, they never committed themselves to a firm order (Flight, 21-27.9.95). Rolls Royce supplied engines for the Hawks but not, to its chagrin, for the Tornados, which are powered by the General Electric Company of the US. At one time, professing themselves unhappy with the performance of the Abrams tank in desert conditions, the Saudis held out the prospect of orders for either the French Leclerc or the UK Challenger 2 (Observer, 2.2.95), but these did not materialise. The Saudi Army has continued to be equipped mainly by the US and, to a lesser extent, France. In 1998, the Saudi Navy had four French and four US frigates, nine US missile craft, three German torpedo craft, seventeen US patrol craft and four US mine-hunters – only two mine-hunters were supplied by the UK (IISS, 'The Military Balance 1998/99').

To date, Al Yamamah has not come anywhere near the grandiose predictions made for it in 1988. Its achievement has amounted to little more than this: the UK found a market for Tornados, a plane which no other non-European air force has seen fit to purchase. Although the contract played a vital part in supporting the industry over the following decade, it is now tailing off and there seems little likelihood of further Al Yamamah-sized deals. There remains the possibility of follow-up orders for the Tornado's successor, the Eurofighter Typhoon. This, however, is receding fast, not only because of Saudi Arabia's financial problems but also because of fierce competition from the latest versions of Lockheed's F-16. The case of the United Arab Emirates, which have retained a much healthier bank balance than Saudi Arabia and were anxious to buy F-16s, is instructive. They demanded that the planes should be equipped with highly sophisticated and secret missile-guidance equipment, which the Pentagon was very reluctant to release even to NATO allies, let alone an Arab state. The Emirates then flirted with the idea of ordering Typhoons instead, whereupon the Pentagon was overruled and the equipment sanctioned. It is highly likely that, if Saudi Arabia does decide that it needs more and newer warplanes, this scenario will be repeated.

Despite the lack of future orders and past and current profits, the Al Yamamah contract remains the UK's main source of arms contracts. The UK's "overwhelming reliance" on Saudi contracts in the early nineties resulted in a "condition of dependency" which has repeatedly undermined the independence of its government (Cooper 1997, p149 & p134). UK government policy has frequently been dictated by the need to retain the Saudi market, often eroding public accountability and the integrity of government institutions (list of examples given in Cooper 1997, pp150-52). Corruption and human rights issues are ignored in the rush to export. The non-publication of the National Audit Office Report into Al Yamamah and the UK government's treatment of the Saudi dissident Mohammed al Mas'ari are prime examples of such conduct (see sections III.iii.b&c).

The UK government's almost unconditional supply of vast amounts of weaponry to Saudi Arabia also poses a potential strategic threat. As we have seen, the Middle East Arms Control Initiative that followed the Gulf War has not resulted in any meaningful arms control: in 1998, despite the low oil prices of the previous years, the Middle East remained "by far the largest market" for complete weapons systems; Saudi Arabia "remained by far the largest national market for arms" (IISS, 'The Military Balance 1999/2000'). The UK government has continued to export arms, regardless of their negative impact on the regional stability of the Middle East. Arms to Iraq is the prime example of short-sighted profit-making. Less well known is the fact that Saudi Arabia, along with Jordan, operated as a buyer for Iraq, has covertly supported various revolutionary movements with arms and money (as mentioned earlier, section II.xii. 'Boom Years') and has allegedly attempted to acquire a nuclear capability through funding the Iraqi programme.

Thus, in considering whether it is safe to supply Saudi Arabia with arms, the government must consider not only the stability of the kingdom itself, but also the threat posed by various potential end-users. The next three sections present strategic, moral and ethical arguments, in addition to the economic ones raised above, against the supply of arms to Saudi Arabia.

  A Stable and Friendly Power?

a. Stability [top]

Even the keenest supporters of the arms trade concede that there are times and places where it may not be right or prudent to export instruments of war. The most obvious risk is that the weaponry may be turned against the UK or its allies. Since the revolution of 1979 Iran has more than once come close to confrontation with the West, and its forces would have had the advantage of weapons sold to them by the US and the UK in the days of the Shah. The scandal of arms for Iraq is a notorious example, and there is much evidence that Saudi Arabia re-routed UK equipment to Iraq with, according to Neil Cooper, the "sanction" of the UK government (Cooper 1997, p153). The US government formally confirmed in 1992 that US military equipment sold to Saudi Arabia was later illegally passed on to Iraq during the Iran-Iraq war, and that in 1991 other equipment was transferred to Bangladesh and Syria (Guardian, 21.4.92). With such a history of diverting arms supplies, Saudi Arabia's reliability as an end-user must be questioned, especially as the kingdom is under no legal obligation to give details of end-users for equipment supplied under Al Yamamah, a contract with Crown Status (Financial Times, 20.1.94). The fact that Saudi Arabia has on many occasions secretly funded resistance or revolutionary movements increases the likelihood that equipment may be passed on: Saudi Arabia made a "major commitment to covert support of the Reagan Administration's foreign policy objectives... sending petrodollars to the Third World to stoke the fires of anti-communist rebellion", and in the 1980s donated over $20bn to the hard-line Islamic Taliban movement in Afganistan (Middle East Report, 11.12.88; Middle East International, 21.8.98).

Documents produced by a previously high-ranking Saudi official, Mohammed Khilewi, detail the kingdom's efforts to acquire a nuclear capability. These efforts were kept completely secret from its allies (which suggests that, despite Saudi assurances to the contrary, the nuclear potential of the Chinese 'East Wind' missiles may indeed have been a reason for their purchase in 1988). Khilewi originally began collecting files after his internal protests at high levels of corruption were suppressed. He is now in hiding with his family in the US following a number of assassination attempts. The Saudi government's anger is understandable: Khilewi's documents expose Saudi funding for the Pakistan bomb project in the 1970s, Saudi Arabia's partnership with Iraq in the late 1980s in a project that was to provide nuclear weapons for both countries, and Saudi dealings with Russian middlemen over the purchase of nuclear material to supply the Iraq project (Times, 24.7.94). There have also been recent rumours that Saudi Arabia is again attempting to acquire nuclear weapons, despite its status as a signatory of the Nuclear Non-Proliferation Treaty (Guardian, 4.8.99).

Saudi Arabia's reliability as an ally is called into question by all of the above. In the 1991 Gulf War, UK and US forces faced an army equipped by their own military industries. Not only did Saudi Arabia help supply Iraq with this equipment, the kingdom also helped to fund Iraq's nuclear programme. Although the Saudi-Iraqi nuclear partnership collapsed with the invasion of Kuwait, it was Saudi money which helped create the serious danger that Iraq's nuclear capability now poses – a danger which Saudi Arabia's Western allies are now having great problems controlling.

Another worrying development is that in the process of expanding its forces, Saudi Arabia seems to be shifting from "traditional defence-orientated" weapons and equipment to those with more aggressive functions. The Royal Saudi Air Force (RSAF) in particular is "receiving greater offensive capabilities under the airforce modernisation programme", capabilities which will be all the more dangerous in unfriendly hands (Jane's Defence Weekly, 18.8.99).

A question which must be asked is whether the UK weapons exported to Saudi Arabia may be at risk of being turned on their makers.

Saudi Arabia is threatened territorially by ongoing low-level border disputes with Yemen and Iran. Prince Sultan officially congratulated Yemen's president, Ali Abdullah Salih, after his recent re-election. However, this is no guarantee of good relations in the future and the border issues remain unresolved. As recently as July 1998, 39 Yemenis were killed and nine injured when Saudi and Yemeni forces clashed: over 1,600 km of land-border and several small islands are disputed (Middle East International, 5.6.98). A more dramatic reconciliation has taken place between Saudi Arabia and Iran. Since the deaths of nearly 400 Iranians in clashes with Saudi security forces twelve years ago there have been few contacts between the two countries. Iranian President Khatami's "ground-breaking" state visit to Saudi Arabia in May 1999 has been hailed as an "outstanding success", and is the first visit of a high-ranking Iranian official since the 1979 Iranian Revolution. Khatami was greeted with embraces from Saudi princes and encouraging words from King Fahd, "The door is wide open to develop and strengthen relations between the two countries in the interests of the two peoples and the Muslim world" (BBC News Room, 17.5.99). Much of the discussion during the visit centred on oil and economic cooperation which has proved a unifying factor. However, despite the undoubted successes of the visit, the main areas of dispute between the two countries remain: the deployment of US troops on Saudi soil, grumbling territorial issues and Iran's political radicalism which has influenced Saudi Arabia's Shi'a minority in the past.

The substantial Shi'a Muslim minority in Saudi Arabia presents a potential internal threat. The Shi'a are a Muslim sect, distinct from the mainstream Sunni, predominant in Iran and generally in the minority in other Middle Eastern countries. As minorities, and given the example of radical Iranian politics, the Shi'a can be inclined toward social and political radicalism. The attitude of the Sunni majority in Saudi Arabia is generally good-natured; they have traditionally lived with the Shi'a in reasonable harmony and there are many Sunni-Shi'a social organisations and business partnerships. Hostility comes from the kingdom's ulema who believe the Shi'a to be 'bad' Muslims due to the fundamental theological differences between the two denominations. In the past the Shi'a have suffered economic discrimination, but many now have good jobs with the oil companies or small businesses and their situation has generally improved. However, they still suffer some official discrimination, being largely excluded from the army and the civil service. They are allowed their own mosques but not their own courts, though the authorities do acknowledge the differences in religious law.

The Shi'a live almost entirely in two oases, Qatif and Hasa, in the Eastern province, far from the centre of power but close to the oil-wells and pipelines. In November 1973 there were very severe riots in Qatif which caused speculation in the West that the Shi'a might one day sabotage oil installations. The younger generation are certainly more politically active than their elders and were greatly stirred by the Iranian revolution. It was they who instigated further riots in Qatif in November 1979 and February 1980, in which 21 lives were lost. After the riots the Deputy Minister of the Interior, followed by the king himself, visited the Eastern province to hear Shi'a grievances and to promise improvements in their material conditions if they cooperated with the state. There are now many more amenities in Shi'a areas, as health, transport and educational infrastructures have been updated. This has assuaged discontent and there have been no more violent incidents. With the waning of the radical impulse from Iran and the success of Khatami's recent visit, it seems unlikely that the Saudi system will be subverted by the Shi'a but they do remain a potential source of instability within the kingdom.

More serious threats are posed to Saudi Arabia's stability by, on the one hand, conservative fundamentalists within the Sunni clergy and their supporters, and on the other by the liberal intelligentsia created by the need for Western professional skills and the inescapable cultural influence of the West. Though their aims are diametrically opposed, both groups challenge the absolute monarchy and demand the freedom to express dissent. In May 1993, a group of religious conservatives attempted to set up Saudi Arabia's first human rights group - the Committee for the Defence of Legitimate Rights (CDLR). This was quickly suppressed by the Saudi authorities, but one of its founders, Mohammed al Mas'ari fled to Britain and continued to disseminate anti-Al Saud propaganda which greatly perturbed the Saudi government (see section III.iii.b 'Human Rights'). Despite the suppression of the CDLR, the following year saw a new outburst of Islamic opposition. Many dissidents, including poets, clerics and teachers, critical of arms deals and alliances with the amoral West, were detained. The UK government expressed confidence in the regime's basic stability, but Washington was worried enough to send a team of high-level security specialists to Riyadh (Times, 7.10.94; Independent, 15.10.94).

So far, however, there seems little prospect that these internal threats could lead to either an Islamic or a democratic insurrection against the monarchy. The ties between the royal house and the leading family of religious elders, the Al as-Shaikh, remain close. The huge size of the royal family ensures that Saudi Arabia does not have a fragile 'one-bullet regime', such as Iran's Pahlevi dynasty. A military coup directed by some unknown officer is improbable; the air force is dominated by princes and the land forces are drawn from conservative areas and tribes. A civilian revolt against such a tightly controlled regime is hard to imagine and in any case the middle class, such as it is, is unlikely to rebel against the system that dispenses its wealth.

The Al Saud themselves have far more to gain from maintaining the system than from allowing internal rivalries to disrupt it. A movement of 'free princes' did emerge in the 1950s but this petered out with no effect. The leader of this movement, Prince Talal, a brother of King Fahd, continues to call for modernisation, more rights for women and decreased spending on arms. He is unlikely to be successful, but could pave the way for future reforms. The problem of succession is dealt with by collective decisions which arrange transitions for many years to come. King Saud (1953-64) was gradually removed from power in favour of his half-brother Feisal, who was already the acknowledged Crown Prince. When Feisal was murdered in 1975 by an apparently deranged relative, the throne passed smoothly to his brother the Crown Prince Khalid, and on Khalid's death in 1982 to his brother Fahd. Yet another brother, Abdullah, has become Crown Prince, and he has effectively carried on the government since the already ailing Fahd suffered a stroke at the beginning of 1996. One lurking problem concerns the so-called 'Sudairi Seven', the sons of Ibn Saud's most influential wife, who came from a powerful Nejdi clan. All previous kings have been Sudairis and Abdullah would be the first son of Ibn Saud by a different wife to rule. There have been rumours that there may be attempts to exclude Abdullah from the succession (Jane's Defence Weekly, 10.7.96), but this would be extremely difficult and unlikely given his now assertive role in government. Abdullah is also the commander of the National Guard, a largely bedouin force that is stationed near the capital and other key cities, and he has been busily expanding its numbers and fire-power.

These dynastic matters are of some importance because many people's hopes and fears ride on the accession to full power of Crown Prince Abdullah, who is reputed to be both more austere and less pro-Western than his brothers. However, he is not likely to have the time to push through really radical reforms, even if he were disposed to do so. Abdullah's accepted successor would be the powerful Minister of Defence, Prince Sultan. But Fahd, Abdullah and Sultan are all in their seventies and the time is coming when power must pass to the grandchildren of Ibn Saud. Things may then become more complex. Many believe that the real key to Saudi Arabia's future lies in this 'new generation' of rulers. The royal radical, Prince Talal, has summed up the situation neatly, "So far there have been no problems... but our problems are with the grandsons and we demanded and still demand a mechanism for the second generation. If there will be a struggle, it will be among the second generation" (BBC News Room, 6.6.99).

Perhaps the most serious threat to stability in Saudi Arabia is not the social factors discussed so far, but an economic one: oil. The drops in oil price to $13 a barrel in 1998 highlighted Saudi Arabia's precarious dependency on the export that provides 90 per cent of its income (Middle East International, 4.9.98). At a summit in December 1998, Crown Prince Abdullah announced to other Gulf leaders that the boom days of easy oil money are gone and will not return. Saudi Arabia's new leader is facing the problem head on, and has proposed cutbacks that would significantly change the lifestyle of his subjects: "We must all get used to a different way of life, which does not stand on total dependence on the state" (BBC News Room, 19.1.99). In early 1999 oil prices reached their lowest level for 12 years and predictions were pessimistic. The kingdom announced an 'austerity budget' which cut government spending by 16 per cent - cuts which directly affected the Saudi people as officials urged them to reduce their consumption of the basic services provided by the state.

At the time of writing, the oil price has dramatically increased, assuaging the effects of the 'austerity budget'. However, these high prices are not expected to continue. "Oil may have reached $30 a barrel, but few in the industry think it will stay that high for long": analysts and futures traders are predicting drops of as much as $10 a barrel in the near future and fear that disagreement over tactics to manage the recent peak could lead to damaging splits within OPEC (Business Week, 28.2.00). Saudi Arabia is already producing at half a million barrels above the OPEC quota set for the kingdom in March 1998 and there are concerns that over-production may trigger a price collapse (Business Week, 28.2.00). Similar measures to those in the 1999 budget will have to be implemented in the event of future slumps and these may have the effect of encouraging criticism and dissent within a population accustomed to high government subsidies. Commentators describe the "delicate politico-economic balance" which keeps the Al Saud in power: a significant period of low oil prices could put this balance in jeopardy, feeding various dissenting bodies within the kingdom (BBC News Room, 19.1.99). Stability may depend on the Saudi government's ability to keep its spending down and preserve its oil reserves as a cushion against the effects of the volatile oil market.

It is unlikely that there will be a drastic change in Saudi Arabia's political arrangements or its position in world affairs in the near future but, beyond this, predictions become uncertain. In order to ensure its future stability, Saudi Arabia must take steps to address its "serious economic and social problems" (The Economist, 'World in 2000', 1999). It is, however, unclear what steps the kingdom could or will take to reduce its dangerous dependence on oil and to counteract the nascent opposition to the existing system of monarchical rule. What can be expected is a gradual growth in the influence of the professional and managerial class and a gradual curbing of the culture of authoritarian extravagance and corruption in which the arms trade has so far flourished. If there were to be a prolonged fall in the price of oil, however, the political consequences could be wholly unpredictable and UK-supplied arms might well fall into the hands of enemies of the UK.

b. Human Rights [top]

Another argument which is commonly considered as weighing against the sale of arms is the poor human rights record of the recipient state: it is not difficult to show that the Saudi regime is illiberal and intolerant and that its judicial and penal practices are inconsistent with Western principles.

The practice of any religion other than Islam is forbidden. Dissent in any form is heavily punished and crimes are met with the full rigour of the Shari'a (Islamic law), and sometimes beyond it. In 1969 300 army officers accused of treason were thrown to their deaths from aeroplanes. In 1978 Saudi police massacred 50 Algerian Muslims, including women and children, on a pilgrimage to Mecca, apparently for trading in alcohol. In 1979 63 people were executed for allegedly taking part in an attack on the Great Mosque in Mecca (BIPAC 1983). In 1987 nearly 400 Iranian pilgrims were killed during clashes with Saudi security forces while demonstrating outside the Great Mosque (Amnesty International Report 1988).

In 1996 Amnesty International noted a sharp increase in executions, at least 192 having been carried out in the preceding year, as well as many floggings and amputations. In 1998, at least 29 people were known to have been executed "after grossly unfair trials conducted in secret and without legal assistance" (Amnesty International Report 1999). "Scores of people were arrested as suspected political and religious opponents of the government" and hundreds of political prisoners arrested in previous years remain held without trial and possibly without charge (Amnesty International Report 1999).

The judicial system does not require that a defendant facing the death penalty be represented by defence lawyers and allows confessions made under torture to be the sole evidence given at a trial. There are also inadequate translation facilities during trials so that foreigners are at more of a disadvantage even if they are allowed a defence lawyer. Amnesty's 1997 'Behind Closed Doors' report condemned the Saudi courts as "blatantly unfair from start to finish" and described torture as an "institutionalised practice" perpetrated by the security forces "simply because they can get away with it"; the 1999 report details the "persistent pattern of gross human rights violations in the country".

The Saudi authorities have not responded to Amnesty International's pleas or enquiries. They have provided no explanation for the lack of legal representation or for the use of confessions made under duress. Since 1996 there has been a slight fall in the number of executions but over 80 were carried out in the first eight months of 1999.

Whatever the truth of the affair of the UK nurses (Deborah Parry and Lucille McLauchlin) in 1996-8, the manner of their trial and the brutality of the sentences caused great concern in the UK. The Independent reported that BAe "was the biggest contributor to the 'blood money' fund" of £730,000 which averted the sentencing and so prevented disastrous damage to the image of its best customer and the prices of its shares (Independent, 4.10.97). The UK government itself showed clear signs of bias over the case of Mohammed al Mas'ari, a Saudi dissident who had established the Committee for the Defence of Legitimate Rights (CDLR) in Saudi Arabia and who consequently fled the kingdom after imprisonment and torture. Mas'ari's London-based distribution of anti-Al Saud propaganda caused the kingdom to pressure the UK government to stop his activities (Sunday Times, 3.12.95). John Major was requested a number of times by the Saudi government to have Mas'ari removed, and the then Foreign Secretary, Douglas Hurd, made an unprecedented statement in which he condemned the "malevolent propaganda" of Arab exiles who "abuse" UK hospitality (Sunday Times, 3.12.95; Guardian, 15.4.95). Following complaints that Saudi Arabia was freezing arms deals because of UK inaction, Michael Howard, the then Home Secretary, indicated in January 1996 that the government was expelling Mas'ari because his presence was jeopardising arms deals (Sunday Times, 3.12.95; Independent, 6.1.96; Observer 7.1.96). A Home Office spokesman stated that Mas'ari had "been told that his stay here had been refused without substantive consideration on the grounds that there was a safe country to which he can be sent". Michael Howard had refused Mas'ari's application without going into the details of the case, and the spokesman confirmed that he "was not aware that this is a terribly common occurrence" (Independent, 4.1.96). Mas'ari won an appeal against the deportation order before the Immigration Appellate Authority: the chief adjudicator, Judge Pearl, stated that an attempt had been made to circumvent the UN Convention on Refugees for "diplomatic and trade reasons" (Times, 6.3.96).

The Labour government has continued to export arms to Saudi Arabia, making it clear that neither the previous nor the present UK government treat human rights abuses per se as a valid reason for refraining from arms sales. In answer to a parliamentary question in 1995, Mr Hanley, the then Secretary of State for Foreign and Commonwealth Affairs, declared that "Her Majesty's Government have no plans to link the UK's trade and defence policies with Saudi Arabia's performance in the area of respect for religious liberty" (Hansard, 4.12.95, col 79). As Neil Cooper comments, "the emphasis given to human rights considerations in UK defence exports is rather low; indeed, it has been estimated that 68 per cent of UK arms transfers are to regimes with poor records on human rights" (Cooper 1997, p155). The only caveat is that the weapons should not be likely to be used for repressive purposes. A clear breach of this requirement was the attempt by British Aerospace (BAe) to sell electric shock batons to Saudi Arabia in 1993, brought to the public eye in January 1995 by a Channel 4 'Dispatches' documentary. BAe has dismissed this as an aberration by a relatively junior employee, and it is unlikely to be repeated. The government, however, subsequently had to pay £55,000 in libel damages to the producer of the program after ministers at the DTI suggested that allegations were contrived (Cooper 1997, p155).

In the eyes of the UK government, the argument that arms sales of any kind lend moral and political support to unpleasant regimes is not deemed to have weight, even in the context of an 'ethical' foreign policy.

c. Corruption [top]

The UK government's claim that its foreign policy is formulated in an ethical context is undermined by its past actions which have shown little respect for any moral or ethical concerns. The example of the Mas'ari case shows the Saudi government's disregard for human rights and the extent of the corruption which has spread throughout the higher levels of the military industry and government.

In January 1996 The Guardian published a leaked memo which revealed a campaign to silence Mas'ari by the arms companies, MI6, the Foreign Office (FO) and the Ministry of Defence (MoD). The Guardian published the text of the memo, written by the chief executive of Vickers, Sir Colin Chandler, who not only suggested in it that the government should try to "offset some of the Saudi criticism of us" by inviting President Saddam's son-in-law to the UK and then "[feed] some of the intelligence back to the Kingdom", but also discussed the possibility that the Saudis might "stifle" Mas'ari through "direct intervention" (Observer, 7.1.96; Guardian, 6.1.96). The Dominican Republic was bribed by a 300 per cent increase in aid from the UK government to take Mas'ari on his expected deportation. The MP George Galloway, among others, fought against the government's deportation order and organised the 'Mas'ari Must Stay' campaign. Mr Galloway publicly condemned the government's behaviour, alleging under protection of parliamentary privilege that Mas'ari's "case crystallises the corrupt and infectious nature of our relationship with that mediaeval, absolutist, royal dictatorship... the illness... reaches to the commanding heights of the military industrial complex, into the inner sanctum of the Cabinet and even into the family home of a former Prime Minister of this country, the Baroness Thatcher" (Hansard, 24.1.96, col 453-462).

Corruption is not reserved for high-profile 'one-offs' – it seems more than likely that it has played an important role in Al Yamamah from the very beginning.

It is common knowledge that large contracts cannot be won from Saudi Arabia without payments which can be described as bribes or commissions. In many Middle Eastern countries it is customary and often legal for a foreign exporter to pay commission to a local agent or sponsor. Saudi Arabia has laws governing this practice of commercial agency as do other Arab countries. However, Saudi law does not permit commission or brokerage fees on arms imports or other public sector contracts (Royal Decree No. M/14, 1977; Council of Minister's Resolution No.1275, 17.9.75). Despite this, it seems that there is a well established system of 'deal-fixing' by intermediaries who illegally collect large commission payments for their services in arranging military contracts. As Anthony Sampson, a seasoned arms trade commentator, has said, "Commissions are an essential part of the system" (Times, 12.10.94).

'The system' has been well documented by Said Aburish, who notes that, "intermediaries have even become identified with the arms trade because that is where commissions are larger" (Aburish 1994, pp192-208). Aburish describes the system, whereby the initial intermediary arranges for a sponsor, usually a member of the royal family, to favour the interests of the client company over those of others in return for commission which is then shared between the initial 'fixer' and his sponsor.

It is extremely unlikely that Al Yamamah was not arranged in accordance with this accepted practice, and the enduring rumours of bribery and scandal that have dogged the deals support the suggestion that, contrary to both UK and Saudi law, commissions were paid at various stages in the deal's lifetime.

Only weeks after the first Al Yamamah agreement was officially concluded in 1985, The Guardian led with an article headlined "Bribes of £600m in jets deal" (Guardian, 21.10.85). In 1989, Alan Roberts, the then Labour Defence Spokesman, said that he was "quite confident that commissions have been paid in the Saudi deal" and demanded an official investigation (Independent, 27.4.89).

In 1991, the Black Hawk helicopter scandal seemed to confirm Roberts' suspicions. In 1985 the US helicopter firm Sikorski, or rather its parent United Technologies, managed to acquire a controlling interest in the UK company Westland, which it allowed to build its Black Hawks under licence. In October 1991, Thomas Dooley, a retired US Army lieutenant-colonel and former military attache in Saudi Arabia, filed a suit against his current employers, the Sikorski company, as well as United Technologies and Westland, complaining that he had been unjustly demoted for threatening to blow the whistle on corrupt and illegal dealings. He alleged first that, though Black Hawks were normally unarmed and had been approved by Congress for export to the Middle East on that basis, those to be built by Westland for sale to Saudi Arabia were to be equipped with TOW anti-tank missiles (Flight International, 16-22.10.91). His other allegation, reported in The Independent, was that to secure an order for as many as 90 helicopters (both Black Hawks and Westland's own EH101s) bribes had been paid to two Saudi Arabian princes (Independent, 8.8.92).

Westland argued that the case had no substance, being "founded largely on events which never actually occurred". It stated that there had been "no Westland helicopter sales to Saudi Arabia, no Westland arming of any helicopters and no Westland bribes", and that, accordingly, "Dooley's action against Westland plc and Westland helicopters is almost entirely hypothetical" (Independent, 8.8.92). Although 80 Westland helicopters were included in the Al Yamamah shopping list, none were actually ordered. It has recently been reported by The Guardian that, since the Dooley case in May 1995, Westland agreed to pay a Saudi agent 9.5 per cent commission on a deal potentially worth $50m (Guardian, 5.3.99). Again, however, the deal fell through.

Allegations of corruption persisted and it became clear in 1994 that it was not just Saudi intermediaries who profited from the commissions system, as accusations of bribery were now directed against employees of UK companies.

The Guardian published an article in which Sir Colin Southgate, Chairman of Thorn EMI, "admitted to paying huge commissions" of 25 per cent on a £40m Saudi arms deal in which more than 40,000 fuse assemblies for Tornado bombers were ordered by the RSAF in 1990 and delivered through BAe in 1991 (Guardian, 14.11.94). Granada TV broadcast a 'World In Action' programme on 14.11.94 which identified UK and Saudi businessmen who were paid over £10m for helping to organise the fuse assembly deal, and who claimed that the MoD not only gave its approval to this, but also claimed £2m of the profits as payment for helping to design the fuses (Guardian, 14.11.94). The Guardian quoted John Hoakes, former managing director of Thorn's defence systems division, as saying that "Commissions make the world go round. There's nothing illegal about them. I don't know of a [Saudi] royal who'll get out of bed for less than 5 per cent". The Guardian reported that when Hoakes was told that Saudi law prohibited commission on defence contracts, he replied "Then they got a big problem with Al Yamamah" (Guardian, 14.11.94).

It was also in 1994 that scandal erupted around the former Prime Minister's son, Mark Thatcher, much of it based on allegations made by the Saudi dissident, Mohammed Khilewi (Independent, 10.10.94; Guardian, 14.10.94; Sunday Telegraph, 16.10.94). As Anthony Sampson commented at the time, "with the huge sums at stake, it would be surprising if some money did not find its way to the British side... To reward the son of the British Prime Minister - even if he gave no help - would be as natural as rewarding the King's son" (Times, 12.10.94). In October 1994 Mr Tam Dalyell, Labour MP for Linlithgow, submitted documents to officials in the House of Commons, a US intelligence report and an internal British Aircraft Corporation memo, which he claimed proved that Mark Thatcher was involved in Al Yamamah (Financial Times, 19.10.94). The all-party Public Accounts Committee, however, decided not to investigate the allegations that Mark Thatcher received commission payments of £12m from Al Yamamah as this was outside their remit of issues concerning taxpayers' money (Financial Times, 20.10.94).

The allegations continued. In December 1996, Sunday Business suggested that one of the reasons behind the Saudi company Aramco's replacement of BP and Shell as oil exporters in Al Yamamah was an attempt by the Saudi government to save money on commission payments to the companies, which were estimated at $30m/£18m per year (Sunday Business, 1.12.96). In 1997, the Panamanian company, Aerospace Engineering Design Corporation, whose ultimate ownership is unclear but which, according to The Financial Times, is understood to have links with the Al Saud, served a writ against Rolls Royce, alleging that the company had paid only £23m of an agreed £100m commission on part of Al Yamamah. Aerospace Engineering Design Corporation claimed that it had acted as Rolls Royce's agent throughout the Al Yamamah negotiations and that Rolls Royce had agreed to pay it 8-15 per cent commission on the sale of engines for Al Yamamah planes. Rolls Royce declined to give details of exports value or commissions policy, saying only that it intended to "vigorously" defend itself. The action was subsequently withdrawn pending a settlement (Financial Times, 20.12.97; Private Eye, 9.1.98).

Ever since the first Al Yamamah agreement was concluded the media has repeatedly made allegations of corruption. In spite of all this media coverage and the many demands by politicians and the public for transparency, the government has only launched one investigation into the deals, an internal inquiry, the findings of which were suppressed.

  The National Audit Office Report [top]

In successive articles in the spring of 1989 by its executive editor, Adam Raphael, The Observer alleged that huge commissions, of up to 30 per cent, were paid to rulers and middlemen, and that bribes were paid to "British citizens with close contacts to the government" (Observer, 19.3.89, 30.4.89). The Observer "Tornado Rip-Off" allegations related specifically not to Al Yamamah but to a parallel and already cancelled £800m order for Tornados from the government of Jordan. Related to this was the controversy over the Tornado deals in Germany, which was refusing to finance the deal in proportion to its share in the planes' manufacture, at least partly because of doubts over corrupt payments (Observer, 19.3.89). These doubts were prompted by an anonymous letter from London to the German Foreign Office, alleging that Tornados, which cost the RAF £26m and the Luftwaffe £26.5m each, were being sold to Jordan for at least £40m. It was alleged that there was a similar discrepancy in the Al Yamamah deal, and that this was largely due to illicit commission payments. The then head of DESO, Sir Colin Chandler, maintained that the discrepancy was a matter of more expensive support services (Observer, 19.3.89). Whatever the truth of the matter, Jordan pulled out of the deal and the rumours surrounding this sale, coupled with the persistent allegations of corruption over the Al Yamamah deal, prompted an investigation by the National Audit Office (NAO).

The NAO investigation took three years, and in March 1992 the House of Commons Public Accounts Committee (PAC) agreed not to publish its findings. The chairman, Labour MP Robert Sheldon, refusing to disclose the report even to the Committee members, simply assured them that there was "no evidence of fraud or corruption". It seems clear that the inquiry had proceeded within narrow limits: Sheldon acquitted the MoD alone of having made improper payments, finding that "the deal complied with Treasury approval and the rules of government accounting" and that "there was no misuse of public money" (Independent, 12.3.92, 24.6.97). However, the NAO only investigated the MoD; as Sheldon states, "We were not able to follow money outside the department once it is paid to the contractors, so we do not know what was done with it" (Independent, 24.6.97). Sheldon made it quite clear that the reason the report was not published was the "highly sensitive situation regarding jobs in the defence industry" (Independent, 12.3.92). Later he was even more specific: "The Saudis would have been upset" (Independent, 23.6.97).

The PAC decided not to publish the NAO report, despite the fact that most of its members were not even allowed to read it. Sheldon invited a Conservative member, Sir Michael Shaw, to read the report and to join him in interviewing Sir Michael Quinlan, Permanent Secretary at the MoD, and Sir John Bourne, head of the NAO. Bourne had found himself in the unusual position of investigating a contract negotiated by his own former department in 1985, when he was Deputy Under-Secretary for Defence Procurement and so responsible for arms exports. It seems clear that this presented a clash of interests, but the NAO said that he had not been involved in the discussions at the time.

The non-publication of the NAO report meant that it was impossible to dismiss charges that commissions had been paid. Members of the PAC were not happy. As Labour MP Alan Williams said, "quite a few of us [on the Committee] had misgivings about the suppression" (Observer, 10.5.92). Dr Kim Howells, MP for Pontypridd, said that the situation was "most unsatisfactory. If we can't see the report, and it goes right to the heart of the problem, what does the PAC exist for?" (Observer, 10.5.92). A former member of the PAC, Jeff Rooker, who had pressed for the investigation in 1989, said that he was "astonished" by the decision; "the committee is supposed to be independent of political considerations such as jobs". His colleague Dale Campbell-Savours, who had served on the committee for eleven years, was "convinced that payments had been made" (Independent, 12.3.92).

Martin O'Neill, the then Labour Defence Spokesman, pledged at the time that a Labour government would re-open the inquiry (Independent, 12.3.93), and even Sheldon himself has now agreed that the report should be published and the PAC given wider powers (Independent, 23.6.97). Despite these statements, the present government has maintained its predecessor's refusal to release the NAO report, despite pressure from CAAT and other organisations. The Defence Minister Lord Gilbert told the House of Lords that publication was not possible because the report "refers to matters which are confidential between the Governments of the United Kingdom and Saudi Arabia" (Hansard, 7.4.98, WA124). In a letter to Gisela Stuart MP, dated 20.4.98, he elaborated slightly: "information... which would harm the conduct of international relations ... is exempt from disclosure".

  The Culture of Secrecy [top]

The NAO investigation has only contributed to the secrecy and rumour surrounding Al Yamamah. In 1982 The Financial Times noted that the Foreign Corrupt Practices Act was putting a strain on the US-Saudi arms trade (Financial Times, 12.4.82). In 1988 The Economist commented that, after US congressional hearings, intrusive reporters and Freedom of Information Act, Saudi Arabia was finding British secrecy in general, and the Official Secrets Act in particular, a welcome change (The Economist, 16.7.88). As David Trigger, former British Manufacture and Research Company (BMARC) executive, testified to George Carman QC, "The Al Yamamah contract is a very complicated one that has an involvement with the Government, BAe and other people, and it would be very difficult to put a figure on commission. Commission was obviously paid but my understanding is that all my work connected with that contract is governed by the Official Secrets Act" (Guardian, 23.6.97).

The official position has been restated by successive governments. In May 1992 the then Minister for Defence Procurement, Jonathan Aitken, assured the Commons: "My Department has not employed business agents in connection with Al Yamamah contracts" (Hansard, 19.7.92, col 84). In 1994, the then Minister for Defence Procurement, Roger Freeman, reaffirmed this: "No commissions were paid, and no agents or middle men were involved" (Financial Times, 19.10.94). In 1998 the Labour Minister for Defence Procurement, John Spellar, again stated that the government had paid no commissions, but acknowledged that he could not speak for the Al Yamamah contractors as, "any use of agents by companies associated with Al Yamamah is a matter for those companies" (Hansard, 16.3.98, col 446).

There is, however, no proof available to substantiate any of these official statements. Such blanket denials of any irregularity are hard to believe considering the persistent rumours of corruption that surround Al Yamamah, the government's refusal to publish the findings of its own NAO investigation, and the fact that one of the key ministers involved in Al Yamamah, the now infamous Jonathan Aitken, has been convicted for perjury.

The real nature of the Arabian connection emerged as a by-product of the libel action brought by Jonathan Aitken, MP, against The Guardian newspaper and Granada TV in 1997. When the Conservatives came to power in 1979, Aitken had been a high-flying and well-connected young politician. During Mrs Thatcher's reign his political career made no headway, but his business career prospered greatly. He had made friends with a Lebanese-Saudi businessman, Mohammed Said Ayas, who was the factotum of a powerful Saudi prince, Mohammed bin Fahd, son of the future King Fahd and governor of the Eastern Province. The prince put him in charge of the London arm of his trading company Al-Bilad, and when Aitken joined TV-AM, helped him by investing in the station. Aitken was forced to resign as a director of TV-AM when it was discovered he had broken regulations by concealing the £2.1m illegal Saudi investment (Sunday Business, 1.6.97). The Sunday Business reported that when John Major appointed Aitken Minister for Defence Procurement in 1992, he would have known that Aitken had been forced to resign and also "ministerial vetting would have told him that the MP enjoyed good business relations with Saudi princes" (Sunday Business, 1.6.97). The Guardian and World in Action alleged that Aitken's business relationship with Said Ayas and Prince Mohammed continued after this appointment, and even later when Aitken became Chief Secretary to the Treasury. In particular it was claimed that in September 1993 he had a secret meeting in Paris with Ayas and Prince Mohammed, who had paid his bill at the Ritz hotel. Since this would have been a clear breach of the rules of ministerial conduct, Aitken brought an action for libel. The case collapsed when detective work by The Guardian proved that he had lied on oath about the bill, and he was subsequently imprisoned for perjury (Harding, Leigh and Pallister 1997).

The Guardian and Granada journalists were rightly jubilant over their exposure, but in insisting that Aitken was "a liar and con-man" they belittle their own achievement. The real scandal is that a man who for many years was in effect a servant of foreign royalty, was appointed to ministerial office. Moreover, Aitken was made minister in charge of the UK arms trade, of which the family of his former employer was the most important customer. It is more than likely that the UK government was well aware of Aitken's real Arabian connections and that Aitken's influence with Prince Mohammed, and indirectly with his father the king, was instrumental, if not decisive, in saving the Al Yamamah contract in January 1993.

The argument of public service has been put about by Aitken and his friends, and there are suggestions that he was a long-time MI6 'asset' who, at the time of his trial, was president of 'Le Cercle', a far-right grouping of intelligence people and parliamentarians. Perhaps fearing that if he is seen as a promoter of the arms trade Aitken's misdeeds would gain a patriotic aura, The Guardian dismisses these suggestions, saying that 'Le Cercle' is not influential and that Aitken's Paris visit was private and unauthorised. In doing this, however, The Guardian leaves unchallenged the central premise that the arms trade is in the national interest. The paper failed to use the Aitken trial as an opportunity to question the very basis of the UK's arms trade, the culture of which attracts and creates the 'Aitkens' of the business: The Guardian prosecuted the symptom and not the cause.

The continuing culture of secrecy and 'unaccountability' in which Al Yamamah and Aitken flourished will continue to produce similar deals and similar politicians. The recent scandal in Germany has implicated the highly respected ex-Chancellor Mr Helmut Kohl, who has admitted to accepting up to DM2m in commissions in the 1990s (Independent, 11.1.00). There is an urgent need for greater transparency and control over arms exports in order to protect the government's integrity, the taxpayer and the people at risk from the weapons themselves.

Conclusion [top]

The bulk of the UK arms trade to Saudi Arabia, Al Yamamah, came about because of US congressional reluctance to supply the kingdom. The UK had no qualms and eagerly stepped into the gap.

Ethical and security considerations should have prevented the UK government from taking such a step. By supplying Saudi Arabia the UK is endorsing its brutal regime and diminishing the importance of human rights and political freedom. There is also a great deal of evidence to suggest that Saudi Arabia is far from a reliable end-user of UK weapons. Saudi Arabia has secretly funded resistance movements around the world, often at the behest of certain elements in the US Administration in return for arms packages, and strong evidence suggests that Saudi Arabia diverted arms to Iraq via Jordan and funded the Iraqi nuclear programme in order to acquire its own nuclear capability, despite signing the Nuclear Non-Proliferation Treaty in 1988.

The Middle East in general is a volatile area and the UK cannot be certain that the weapons that it has lavished on Saudi Arabia will not be turned against the UK itself. Despite the lessons of the Gulf War and the Middle East Arms Control Initiative which followed it, the UK has continued to supply an already 'arms-saturated' kingdom: such behaviour does indeed seem "more likely to diminish the UK's military security in the long run than reinforce it" (Cooper 1997, p149).

Economic analysis also provides little to defend the Al Yamamah deals. Despite the dubious profit margins and the UK's dangerous over-reliance on the Saudi market, the Al Yamamah contracts are still portrayed as an economic godsend: expert research reveals that this is not the case, and that at best "the economic profits are unclear" or "questionable" and "may even be negative" (Dunne 1999, p8; Cooper 1997, p149). Even if the profits for the UK were substantial, to see weapons of destruction as a trading commodity is "a serious error of judgement" (Koorey 1995, p98).

When the lack of any real economic benefit is considered, the motivation behind the deals becomes suspect. Neil Cooper, in his thorough analysis of the UK arms trade, maintains that "there is much to suggest that the initial Al Yamamah agreement was less a function of either price competitiveness or equipment performance than it was of other considerations" (Cooper 1997, p135). The "other considerations" are the persistent reports of corruption which have dogged Al Yamamah from its inception as the pet project of Reagan and Thatcher. Scandal over the arming of the 'contras', the Iraqi nuclear partnership, the customs regulations breaches, the numerous allegations of bribery and government corruption, including the non-publication of the NAO report and the infamous Aitken case, all surround Al Yamamah.

This briefing, having examined the evidence available and consulted the work of respected academics and economists, concludes that it is clear no one has profited by the UK arms sales to Saudi Arabia except the middlemen. Lavishing such huge amounts of weaponry on the kingdom has returned no significant economic profit - it has weakened the security of both countries and undermined our government's integrity. The campaign for the publication of the NAO report into Al Yamamah continues, and perhaps as the deals wind down this may be forthcoming, though as yet there is no sign of such a move. More importantly, it is to be hoped that more responsible decision-making will end arms sales in general, but more specifically to a kingdom "not yet in crisis but facing serious economic and social problems" (The Economist, 'World in 2000', 1999).

References [top]

This paper is based primarily on CAAT's files, supplemented by the following works:

Aburish, Said K., 'The Rise, Corruption and Coming Fall of the House of Saud', London, 1994
Amnesty International, 'Amnesty International Report', 1994, 1996, 1997, 1999
BIPAC, 'Human Rights in Saudi Arabia', May 1983
Cooper, Neil, 'The Business of Death, Britain's Arms Trade at Home and Abroad', Tauris Academic Studies, London, 1997
Dunne, Paul, 'The Globalisation of Arms Production and Trade: implications for the UK Economy', transcript of CAAT lecture, 1999
Field, Michael, 'Saudi Arabia under Fahd', The Financial Times, series of articles Aug-Sept 1982
Goldring, Natalie, 'Testimony before the Sub-committee on Arms Control, International Security and Science, and the Sub-committee on Europe and the Middle East of the House Foreign Affairs Committee', British American Security Information Council (BASIC), 23.9.92
Harding, Luke, David Leigh and David Pallister, 'The Liar: The Fall of Jonathan Aitken', London, 1997
Hiro, Dilip, 'Dictionary of the Middle East', McMillan, London, 1996
House of Commons Defence Committee, 2nd Report, 'The Appointment of the New Head of Defence Export Services', 24.3.99
Iseman, Peter, "Saudi Arabia: A Family Owned Store", 'The Plain Dealer', 12.2.79
Koorey, Stephanie L.K., 'The motives behind the British government's arms sales to Saudi Arabia', MA dissertation, University of Bradford, 1995
Louis, W.R., 'The British Empire in the Middle East, 1945-1951', Oxford, 1984
Mansfield, Peter, 'A History of the Middle East', Penguin, London, 1992
Matthews, Ron, 'Saudi Arabia's Defence Offset Programmes: Progress, Policy and Performance', Defence and Peace Economics, Vol 7, pp233-251, 1996
Middle East Economic Digest (monthly)
Vassiliev, Alexei, 'The History of Saudi Arabia', London, 1998
Vitalis, Robert, 'The closing of the Arabian oil frontier and the future of Saudi-American relations' , Middle East Review, July-September 1997
Wilton, Sir John, 'Saudi Peace Initiative', House of Commons, 31.3.82

The paper is a study of the UK arms trade and of Saudi Arabia only in relation to that trade. There is a general information file on Saudi Arabia and a chronology of events and arms deals relating to Saudi Arabia, in the CAAT library. The Council for the Advancement of Arab-British Understanding (CAABU) and the staff of the Middle East International journal have been extremely helpful during the research of this briefing and are a further source of information for those interested. There is extensive literature on the country, which can be pursued in the bibliographies to the works of Aburish and Vassiliev noted above; specific arms trade references can be found in the bibliography of Stephanie Koorey's MA thesis.

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