The Serious Fraud Office revealed on Thursday that it had dropped the long-running probe after advice from the government's legal counsel that it would damage security and relations between the two countries.
"Our relationship with Saudi Arabia is vitally important for our country, in terms of counterterrorism, in terms of the broader Middle East, in terms of helping in respect of Israel/Palestine, and that strategic interest comes first," Blair told reporters at a European Union summit in Brussels.
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The SFO was investigating allegations that BAE ran a 60 million pound (US$110 million; €90 million) "slush fund" offering sweeteners to officials from Saudi Arabia in return for lucrative contracts as part of the Al-Yamamah arms deal in the 1980s.
Opposition lawmakers said dropping the probe, which follows media reports earlier this month that the Saudi government had given Britain 10 days to halt the SFO inquiry or lose a 10 billion pound (US$19.6 million; €14.9 million) contract to buy fighter jets, undermines Britain's business reputation.
"Coming straight after a threat from the Saudis to withdraw from future business, this completely undermines the U.K.'s reputation on good governance," said Liberal Democrat lawmaker Norman Lamb. "How on earth can we lecture the developing world on good governance when we interfere with and block a criminal investigation in this way?"
http://www.iht.com/articles/2006/12/15/business/web.1215blairsaudi.php