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Al-Yamamah: the case for the defence
By Jonathan Guthrie
Financial Times
Published: April 16 2008 18:46
It is hard to feel indignant over rumours that a man fiddles his income tax
if you believe he is a murderer. For this reason, High Court criticism of
the government for quashing a probe into alleged corruption at BAE Systems
has left me cold. The morality of making bombs and guns is monumentally
murky. The way they are sold is an issue of lesser magnitude.
The government has nevertheless taken a beating in the media since judges
ruled that the Serious Fraud Office acted illegally in halting the
investigation into alleged secret commissions to Saudi bigwigs. It is
accused of buckling to pressure from Prince Bandar bin Sultan, who
supposedly threatened that Saudi Arabia would reduce co-operation with the
UK in fighting terrorism.
It is hugely damaging to the governments image that national security
was its overt reason for leaning on the SFO in December 2006. This made it
look as if Tony Blair was buckling to bomb threats, albeit indirect ones.
However, the government was forced in this direction by the law. An
Organisation for Economic Co-operation and Development anti-corruption
agreement signed in 1997 barred the suspension of bribery probes in most
circumstances. The only straw the government could clutch was the right of
the attorney-general to step in on national security grounds. In reality,
keeping Saudi Arabia on side as a military ally and a customer for British
arms loomed as large in its calculations.
Was it worth exposing past dodgy dealings if it cost the UK billions in
weapons contracts and a valuable supporter in the Middle East? The
government reasonably decided that it was not.
Another factor that should temper self-righteous condemnation of the
governments actions is that a chunk of the SFO investigation was historical
in scope. The 43bn arms deal euphemistically called Al-Yamamah, or the
dove was struck in 1985. Viewing the activities of arms salesmen decades
ago through the moral prism of the tree-hugging noughties would not have
been a useful exercise. We all did things we were ashamed of in the 1980s,
as anyone who danced to Duran Duran while dressed as a pirate will testify.
A further complication is that BAE, while notionally a private company,
also has some characteristics of a state body. This was particularly so in
1985, when it had not long been privatised. Margaret Thatcher, then prime
minister, was closely involved in the Al-Yamamah negotiations. For her, the
transaction had the double benefit of underpinning oil supply agreements and
peeving the French. The relationship between the government and the weapons
company is now in theory more hands-off. Labour nevertheless anointed BAE
its national defence industry champion a couple of years ago. Government
must perforce take a greater interest in the trading relationships of a
supplier of jet fighters than of a manufacturer of underpants.
The government will keep pressure for reviving the SFO investigation under
check via the courts and the powers of the attorney-general. This will have
the paradoxical effect of pacifying the Saudis while reinforcing the
assumption among cynics that BAE which denies wrongdoing paid dubious
commissions with the connivance of the authorities.
The apologia given above for the governments actions needs some
qualification. Its case is strongest in seeking to brush the historic
portion of the Al-Yamamah deal under the carpet. But it is harder to defend
its efforts to hush up claims concerning what has gone on since OECD
anti-corruption rules passed into UK law in 2002. Around then, this column
pointed out that many British business people paid bribes abroad, mostly of
a petty kind. Pragmatism trumped probity when it came to speeding up
planning decisions or winning an order. Scale and location mattered. A man
who balked at hiring a yachtful of escort girls for a client in Monaco might
slip a bank note between the pages of an official form in a dusty corner of
Africa.
Now, increasingly, the jig is up for foreign bungs. Our moral universe is
shrinking as a result of globalisation. Better communications mean
malpractice is more likely to be exposed. Customers and shareholders are
inclined to judge what international businesses do in hot countries by cold
country standards. Quiescent authorities in a companys home jurisdiction
are no guarantee of safety to directors who grease palms overseas. Under the
Pax Americana, US authorities will intervene in any case with the remotest
US connection. The details of Al-Yamamah could yet come to light as a
result.
The dilemma faced by globetrotting business people pay a bribe or lose a
sale should therefore arise less often. International companies can do
their bit by agreeing and enforcing common anti-corruption standards. Just
such a move is under way in the famously shady defence industry.
Corruption is bad business because it lumbers weak countries with products
and services whose costs are inflated by bungs. This holds back development,
reducing the appeal of such places as export customers. On a human level,
the whiff of bribery can leave the accused tied up in Laocon-like knots of
disavowal and evasion. This is what has happened to the British government
as a party to Al-Yamamah. Business people should take note. Doing bad stuff
abroad is getting harder. Some day, selling bombs and guns to one-party
states may even raise eyebrows.
http://www.ft.com/cms/s/0/f2ffd16a-0bc8-11dd-9840-0000779fd2ac.html
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