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Last Updated: Friday, 15 December 2006, 09:36 GMT
Security threats and economic fears
By Robert Peston
BBC business editor

Saudi man watching market trading screen
Businesses have feared that Saudi deals could be at risk

The investigation into allegations of corruption in Saudi arms deals may have been going on for two and a half years.

But the Serious Fraud Office was really getting stuck into it.

Until, that is, the SFO was given information about a specific threat to British security from the breakdown of relations with Saudi Arabia.

It won't say what that was.

But the director of the SFO, Robert Wardle, had no doubt that it was real.

So although there have been plenty of allegations that the inquiry has been stopped because of a threat to the profits and jobs of British companies, especially BAE, the SFO is insisting to me that it was not motivated by those factors.

On the other hand, I am in no doubt that Tony Blair was extremely concerned about the impact on BAE and other exporters, such as Rolls Royce, of a possible commercial boycott by Saudi.

For him at least - and he was consulted by the Attorney General, Lord Goldsmith, ahead of this decision - the impact on the British economy was a material factor.

Prospects for prosecution

For those searching for conspiracies, there is one other important fact.

The SFO says it was its own decision to pull the investigation. It was not forced to do so by the Attorney, though the Attorney General does have the power to do this.

However there is a difference of opinion between the Attorney and the SFO on what the prospects were for a successful prosecution.

Lord Goldsmith indicated yesterday that he thought it was really unlikely there would ever be a successful prosecution, even if the SFO had been given the go-ahead to continue the probe for 18 months and delve into Swiss bank accounts connected to the Saudis.

By contrast, the SFO was - and remains - more confident that it would have put together a credible case for prosecution.

Which is why criticisms like those of the Liberal Democrats will resonate.

And, as I say, it was national security considerations that persuaded the SFO to pull the plug.

So is BAE out of the woods completely on this probe?

Not completely.

Although the Saudi aspect of the investigation is over, investigations are continuing into BAE activities in Romania, Chile, the Czech Republic, South Africa and Tanzania.

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