« side note on the slaughter | Main | MGI watch: Deyang »

May 23, 2008


Chris Williams

I wonder where the other 40 billion appeared in BAe's accounts? Did anyone at BAe perhaps break s.17 pt.2 of the 1968 Theft Act (1968 c.60) 'in furnishing information for any purpose produces or makes use of any account, or any such record or document as aforesaid, which to his knowledge is or may be misleading, false or deceptive in a material particular'?

Tom Griffin

The allegations about the oil payments have been around for a while. The former Astra chairman Gerald James mentions them in his book 'In the Public Interest'. His source was a partially blacked out corporate memo that had been sent to Jeff Rooker MP, which suggested that some of the money found its way to the Conservative Party.

Memos can be forged I suppose, and if the Americans only need to prove bribery at the Saudi end, perhaps that's sufficient explanation why the whole thing won't bear close scrutiny, but it's interesting nonetheless.


I'm struggling to work out the practicals of this. He seems to say that there was an unaccounted gap between the value of the AY contract and the actual selling price of the oil payments, that BAE captured this but somehow didn't account for it, and that this money was then somehow extracted from the company without anyone noticing.

Now, this requires one of the following: that the Saudis paid in oil at a below-market price and BAE gained by selling at the world price, and that this trading margin was somehow hidden - but since when do the Saudis *give away oil*? And further, BAE would have had to book the gain.

Alternatively, the AY oil payments were assessed on the basis of the oil price when the contract was signed, which was a historic low, and BAE benefited from the difference. That sounds more like it. However, the stock market treated BAE as a sort of quasi-oil stock during the big years of AY, precisely because they knew a large chunk of their margins was dependent on the oil price; which implies it was being accounted for and included in the bottom line.

Although, none of this applies if it wasn't BAE who made the money. If you wanted to do this, surely rather than selling the oil straight onto the market, thus making obvious the price you were receiving for it, wouldn't you find somebody you could trust and resell it to them at the lower price, so *they* accumulate the money?

Didn't a good proportion of late-80s Tory funders trade oil, come to think of it?

Tom Griffin

Very interesting article in the Standard by Chris Blackhurst a couple of months ago has a few more details of the oil payments:

In exchange for the Tornado aircraft and other pieces of military hardware, the Saudis supplied oil to Shell and BP. The oil companies paid for the oil via an account at the Bank of England which was then used to pay BAE. There was nothing wrong with that but allegations surfaced that BAE and the Saudis had used middlemen who rewarded some of those in Whitehall and close to the Thatcher government for their efforts.


I think we knew that. AFAIK the AY deal was structured as a government-to-government transaction, so the actual contracts were signed by the MOD and the Saudis. MOD provided weapons and other things to Saudi Arabia and oil was shipped for sale. BAE made the weapons and billed MOD. Oil was sold and BAE received cash. One of the details of the corruption story is that the bribes were in all probability included in the costs BAE billed the Ministry of Defence for, so the Saudi government was paying for its own corruption.

One of the details in Harper's latest screed is that the oil shipments "fluctuated with the oil price", which rules out the scenario in which it was always booked in at the 1985 price.

David Habakkuk

According to a story by Stephen Fidler in the FT last July, the account at the BOE into which the money from oil sales was paid was controlled by the Saudis -- at least initially. Some or all of the payments out of it, he says, were routed through DESO at the MoD. So the relevant gap is between the amount paid in to this Saudi-controlled account, and the amount out to BAE.

What his sources have been telling Harper -- and these are CIA and Treasury people -- is that this was a device devised, not simply to keep Saudi princes in the style to which they were accustomed, but to make possible the funding of covert operations. Initially, these would primarily have been the supply of arms to the muhajedin in Afghanistan. But if the gap is anything like as large as Harper suggests, a massive amount of money must have been available for such operations since the Afghan War ended.

What makes his claims more plausible to me is that Fidler suggests that Al-Yamamah was 'used, with the help of the British government, as a secret tool of Saudi foreign policy.'

But Fidler's story would seem to imply rather more than it clearly states. If in fact all of the payments out of the BOE account came through DESO -- which Fidler suggests may have been the case -- then it would follow that DESO was not simply an organisation for marketing weaponry, but also an organisation for funding covert operations.

So one would then not have simply a secret Saudi foreign policy -- but a secret Saudi/British foreign policy -- and most likely, a secret Saudi/British/US foreign policy.

It is worth noting the date: the letter from King Fahd stating his intent to buy 48 Tornados and 30 Hawk trainers was sent in August 1985, just as President Reagan was authorising the sale of arms to Iran. At this time, important figures in the Reagan Administration were fascinated by covert operations -- and profoundly frustrated by constraints from Congress.

What Harper is claiming -- and clearly what senior Treasury and CIA people think -- is that behind the corruption story is a much larger story about the subversion of constitutional government by enthusiasts for covert operations.

Fidler's story is at:


I have covered aspects of this is in more detail in a long response to 'Harper' which Colonel Lang posted -- unfortunately Typepad seems sometimes to take it into its head capriciously to eliminate paragraphing.

The comments to this entry are closed.

friends blogs


Blog powered by Typepad

my former home