BAE denies any wrongdoing in UK-Saudi arms deals

LONDON, June 7 (Reuters) Europe's largest defence company, BAE Systems, denied today any wrongdoing in response to media reports that it paid 2 billion dollars) over a decade to a Saudi prince in connection with Britain's biggest-ever arms export contract.

Britain's Guardian newspaper and national broadcaster the BBC said BAE Systems made regular payments to Prince Bandar bin Sultan, a former ambassador to the United States and currently Secretary-General of the Saudi National Security Council, with the knowledge of Britain's Ministry of Defence.

The reports said the payments were channelled through a US bank in Washington controlled by Bandar, a key figure in the Al Yamamah oil-for-arms deals between the UK and Saudi Arabia, the first of which was signed in 1985 and which generated billions of pounds a year in revenue for Britain.

''The Al Yamamah programme is a government-to-government agreement and all such payments made under those agreements were made with the express approval of both the Saudi and the UK governments,'' BAE Systems said in a statement.

Shares in BAE were down 0.7 per cent at 435-1/4 pence at 1317 hrs IST, when the FTSE-100 index was up 0.2 per cent.

Saudi government officials could not be reached for comment.

Britain's Serious Fraud Office dropped an inquiry last December into the Saudi deal, for which BAE has been the prime contractor, providing Tornado fighter jets, Hawk trainer aircraft and other defence equipment along with support and maintenance services.

Prime Minister Tony Blair said at the time pursuing the inquiry would have harmed national security and relations with Saudi Arabia, which he called crucial for counter-terrorism and Middle East peace.

The UK Ministry of Defence said in a statement today, ''The MoD is unable to comment on these allegations since to do so would involve disclosing confidential information about Al Yamamah and that would cause the damage that ending the investigation was designed to prevent.'' BAE Systems said: ''We deny all allegations of wrongdoing in relation to this importantand strategic programme.'' The company added that it would abide by confidentiality obligations imposed by the agreement.

''All the information regarding the Al Yamamah contract in our possession has been made available to the Serious Fraud Office over the last two and a half years and, after an exhaustive investigation, it was concluded, over and above the interests of national security, that there was and is no case to answer,'' BAE said.

The company said there was nothing in the latest media reports that changed that position.

REUTERS GL RAI1454