SAUDI ARABIA: Arms deal probe stopped over Saudi threat to cease terror help

A British investigation into a controversial arms deal with Saudi Arabia was stopped because Riyadh threatened to withdraw all co-operation on security and intelligence, a newspaper has reported.

Saudi Arabia also threatened to downgrade its embassy in London to a consulate, in addition to its threat to withdraw from a 10-billion-pound deal to purchase 72 Eurofighters jets from British defence manufacturer BAE Systems, the Financial Times said Monday.

Citing people familiar with discussions between Riyadh and London, the FT said that the Saudis made the threat when they found out that Switzerland was preparing to hand British investigators details of bank accounts.

"The reason that matters is that the Saudis are a major source of information on Al-Qaeda," an unidentified insider was quoted as saying by the newspaper.

The request for the information on the bank accounts was part of a three-year investigation by Britain's Serious Fraud Office (SFO) into claims that BAE set up a slush fund for some Saudi royals.

The slush fund was allegedly linked to a 50-billion-pound deal for jet planes and construction of an air base in the 1980s.

Britain's Attorney General announced on Thursday, however, that the inquiry was being dropped.

According to the FT, SFO investigations were expecting to access information on the secret accounts by January, which would determine their next course of action.

The newspaper said that Prime Minister Tony Blair's Downing Street office declined to comment.

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