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Proper cooruption! Al-Yamamah: BAe and the Saudi Royal Family

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posted on Dec, 19 2006 @ 05:41 PM
Signed in 1988, the Al-Yamamah arms deal was the biggest ever arms contract in British history. Almost from the start there were rumours of enormous kickbacks to Saudi royals... and then of course there were the reports that Mark Thatcher had made a killing as an "intermediary" on the deal.

What a lucky thing, to be born a PM's son.

And of course, on the day that the report into Di's death was released, the news that all investigation into the deal by the SFO (known to some as the Serious Farce Office) has been scuppered. Why? Because, if it ain't, the Saudis won't buy the Eurofighter.

This article has more details.

Instead of buying arms to protect their country, it was the commissions to members of the royal family and to their counterparts on the this side which mattered. As we saw when Saddam invaded Kuwait in 1990, the Saudis paid the Americans and their partners in the coalition to protect them and eject Saddam from Kuwait. Coming on top of arms deals like Yamama this means the Saudis pay for protection twice.

The bribes and commissions on Yamama II were realized in three ways. There were outright cash payments, a simple percentage of what the Saudis pay British Aerospace. Then there was the barter part of the deal. The Saudis shipped 400,000 barrels of oil to Rotterdam. The proceeds from selling the oil were remitted to BAe but not before the value of the oil was understated or the value of the military hardware was overstated. He differential was used to pay the royal agents.

The third way of realizing commission was on the offset part of the deal. By Saudi law 40 per cent of all armament contracts must be placed with Saudi companies. As there were no Saudi companies capable of making any of the hardware or providing any of the services needed, British Aerospace is supposed to have created two maintenance companies to perform this part of the work.

The only part of the maintenance companies which was Saudi was the chairman who was a member of the royal family. The 5000 mechanics and technicians who worked under him were seconded to the Saudi companies by British Aerospace. Being Saudi the companies escaped the scrutiny of the various anti-fraud laws of other countries. This in turn made it possible for the Saudi companies to realize vast commissions.

A conservative estimate of how much commission has been realized, pegging at a mere 10 per cent of the volume of Yamama II business transacted, produces the staggering sum of £4.3 billion, 10 per cent of £43 billion. However, indications are the total figure is much higher. Press reports allege £680 million worth of commission was paid on the Tornado part of the deal alone.

The corruption continues...

[edit on 19-12-2006 by rich23]

posted on Dec, 20 2006 @ 03:25 AM
Yes, it's true - major arms sale to Saudi Arabia involves kick backs and bribes.

Well well well. who would have thought it?

The simple truth is that sales of goods to many Middle East and Far Eastern territories are secured on the back of "special commissions". The goods don't have to be hugely sensitive armaments or even of massive value but this is how business is done.

Nobody has to like it but we do have to face reality, if UK businesses want to trade in these territories then we have to work their way - otherwise somebody else will.

Now, if someone like Mark Thatcher got rich by exploiting his position as the PM's son then that is a problem and should have been dealt with at the time and if public funds are misappropriated then that is a problem too but the outcry which would have resulted from the loss of jobs in the aerospace industry if the UK had not won this order would have been deafening, and rightly so.

We have a simple choice, we can sell goods to these country's or we can be self rightious and terribly pleased witn ourselves that we played the whole deal with a straight bat - and lost the deal. It ain't pretty but it's life.

[edit on 20-12-2006 by timeless test]

posted on Dec, 20 2006 @ 04:19 AM
You're absolutely right, of course. I do like your posts, they're always pragmatic and sensible.

I do have a problem with the sheer scale if the bribes in this case, though.

And there is a problem about dealing with corrupt regimes. We're supposed to be a country that abides by the "rule of law". How do you reconcile the two? Do you just ignore the inconsistency? And if you do, isn't that just an abscess in the body politic? Where do you draw the line? Here's a good one:

Why is it ok to give enormous kickbacks to the Saudi Royals, yet take a dim view if Mark Thatcher getting his little piggy nose in the trough?

It seems it's hard to make an honest living in a corrupt world.

posted on Dec, 20 2006 @ 04:47 AM

Originally posted by rich23
And there is a problem about dealing with corrupt regimes [...] How do you reconcile the two? Do you just ignore the inconsistency?

Yes,of course there's an inconsistency - life is full of them and we all have to make compromises to deal with them. In an ideal world I would love to be able to refuse to deal with the Saudis where a corrupt, repressive and hugely unpopular regime masquerades as the acceptable face of middle eastern politics. However, I also have to eat and as someone who has to sell goods to them, (amongst others), to stay in business I have to draw my own personal line somewhere and fortunately I don't sell arms or dual use items these days so it's not the problem it might have been once upon a time.

Why is it ok to give enormous kickbacks to the Saudi Royals, yet take a dim view if Mark Thatcher getting his little piggy nose in the trough?

I don't really have a problem with answering this one to be honest. Mark Thatcher was a UK citizen and subject to UK law. If he used his, (entirely fortuitous), position to make money on the back of the hard work of BAe and its employees simply because of his name then I find that unacceptable. Far worse, did he use his position to gain access to influence either in Saudi or the UK to feather his own nest? Either way it's unacceptable.

However, if BAe won business by reducing the net revenue from the deal to that level which the customer was prepared to pay then that's business - at some stage anyone would have to ask what is that money going to be used for and there are those who may take a more moral stance than me and that's OK as long as they're not going to complain if they're out of a job later.

It seems it's hard to make an honest living in a corrupt world.

Never was a truer word spoken.

posted on Dec, 20 2006 @ 08:56 AM
Thanks TT, good answer as always. Interesting tidbits about your current and previous lines of work, too.

I suppose it's a pity that they couldn't just quietly restrict the investigation into how Thatcher got his commission, but I suspect the deal is so convoluted that would be utterly impractical.

And... I can't get away from it. The sheer scale of the monies involved bothers the hell out of me. The hospitals you could build, the doctors and nurses you could pay, the arts you could fund, the people you could feed.

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