Saudi prince defends US accounts as Saudi govt transfers

RIYADH, June 12 (Reuters) Saudi Prince Bandar bin Sultan, facing accusations he personally received 1 billion pounds (2 billion dollars) under a British arms deal, said today the funds were transfers between official Saudi bank accounts.

Britain's Guardian newspaper reported last week that Prince Bandar, a former ambassador to Washington, received secret payments into US bank accounts for facilitating the al-Yamamah oil-for-arms deals, in which Britain's BAE Systems sold aircraft and equipment to Saudi Arabia.

''These articles have given readers the impression that these funds were transferred by BAE as secret commissions as part of financial and administrative corruption during my work as the ambassador,'' Prince Bandar said in a rare statement published on the Saudi state news agency SPA.

''The allegations of the Guardian are not only as far from the truth and reality as can be, but they also represent a zenith in fabrication,'' he said.

A spokeswoman for the British newspaper declined to respond to the comments.

He said all the funds mentioned by the Guardian originated from Saudi government accounts in the kingdom and were transferred into official Saudi accounts in the United States.

''The funds the newspaper referred to were from the accounts of the government of the Kingdom of Saudi Arabia and have been transferred to other Saudi government accounts in the United States and not to my personal accounts,'' Prince Bandar said.

''Although all the transactions between relevant parties are confidential as they are government dealings... any sane person cannot believe that transfers that are subject to the regulations of the American and British banking systems could be kept secret or ... away from the knowledge of the relevant governments.'' He denied any link between the account and BAE.

''Additionally these accounts by no means belong to the British aerospace firm,'' he said. ''The aforementioned accounts are audited and reviewed annually by the Ministry of Finance in the Kingdom of Saudi Arabia.'' INQUIRY DROPPED In December last year Britain's Serious Fraud Office dropped an inquiry 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 has said that 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 BBC said yesterday that Britain's Ministry of Defence had authorised secret payments to Bandar.

The ministry said in response to the allegations made by the Panorama television programme that: ''Commenting on these allegations could involve disclosing confidential information about al-Yamamah, which in turn could cause precisely the damage that ending the investigation was designed to prevent.'' It added: ''That does not mean that we accept that the allegations made by BBC Panorama are accurate.'' BAE Systems has denied any wrongdoing in the defence contract, which was originally struck by Prime Minister Margaret Thatcher's government in the mid-1980s.

''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 said last week.

REUTERS GP BST2207