Blair's concern at BAE fraud probe

Amid uproar at the abandonment of the Serious Fraud Office (SFO) inquiry into the Al Yamamah contract from the 1980s, the then prime minister insisted at the time the decision was taken on security grounds - not commercial interests.

But a newly-released letter from Mr Blair to Lord Goldsmith, then attorney general, shows that he also highlighted the "critical difficulties" that the investigation could cause negotiations over the sale of Typhoon aircraft to the Saudis.

The letter, dated December 8, 2006, has been released to the High Court during a legal action brought by anti-corruption campaigners Corner House and the Campaign Against the Arms Trade.

Six days after the letter was written, Lord Goldsmith announced to the House of Lords that the SFO probe into allegations of kickbacks to Saudi princes was being suspended.

Lord Goldsmith said the investigation was putting at risk diplomatic co-operation between Britain and Saudi Arabia with implications for UK security. There had been recent reports, however, that Saudi Arabia had threatened to pull out of a potential new order for Typhoons.

Mr Blair subsequently pointed out that thousands of jobs would have been on the line if the inquiry had gone ahead - but insisted that the decision had been made because of security considerations.

In his letter to Lord Goldsmith, Mr Blair acknowledged that his intervention in such a case was unusual but said he would be failing in his duty if he did not point out the security issues at stake. He added that the OECD Convention on Combating Bribery prohibited consideration of the national economic interest but went on to mention the Typhoon contract.

"As you know, I strongly support our commitment to the Convention and am proud of this Government's record on putting bribery issues on to the agenda and into law," he wrote. "While this letter is not primarily concerned with the serious damage being done to our bilateral relationship by the investigation, it is of course of concern to me, not least because of the critical difficulties present to the negotiations over the Typhoon contract."

In September, by which time Mr Blair had resigned as prime minister, the Ministry of Defence announced a £4.43 billion deal to sell 72 Typhoon aircraft to Saudi Arabia. The contract safeguarded thousands of jobs in the North West, where the planes will be partly built by BAE Systems. The overall deal is expected to be worth in the region of £20 billion once ongoing support and training are taken into account.