THE head of the Serious Fraud Office has said he agrees with the view that ministers succumbed to “blackmail” by the Saudi government by dropping the criminal inquiry into allegations of corruption involving its royal family.

Robert Wardle, the SFO’s respected director, said his inquiry into a £60m slush fund run by BAE Systems was scrapped in the face of “obvious pressure” from the Saudis, who had threatened to ditch a £10 billion arms deal and sever diplomatic and intelligence ties.

Wardle said he felt “further investigation was justified”, effectively undermining claims by No 10 and his boss Lord Goldsmith, the attorney-general. Asked if the Saudi pressure amounted to blackmail, he replied: “Of course it is . . . I think if that (inquiry) happened the Saudis simply weren’t going to have anything to do with us. Call it blackmail, call it what you will.”

The move to end the criminal investigation was announced by Goldsmith last week. Opposition MPs and pressure groups said Britain was behaving like a “banana republic” in caving in, and campaign groups are taking legal advice about seeking a judicial review.

Although the decision was supposed to be one for the attorney-general, it has emerged No 10 sought the opinion of the Foreign Office and the Ministry of Defence on the implications of scrapping the deal for Britain’s relations with Saudi Arabia and passed this to Goldsmith.

Ministers said last night Downing Street would have known what the departments’ answer would be — that losing the deal could jeopardise Saudi help for Britain in the war on terror.

This has led to claims Tony Blair was effectively trying to “fix” Goldsmith’s opinion.

One senior minister said yesterday: “Ultimately this was a decision for the attorney-general, who is always very meticulous. But as you would expect, the prime minister and Downing Street were in the lead.”

The row followed an SFO investigation into whether bribes were paid by BAE employees to prominent Saudis to maintain the Al-Yamamah deal, Britain’s biggest-ever arms sale.

As revealed by The Sunday Times last month, the Saudis were infuriated when they learnt the SFO had obtained data from bank accounts in Switzerland last summer that suggested millions of pounds in secret commissions had been paid to middlemen.

Wardle said the decision to drop the case had been his: “It was my decision . . . He (Goldsmith) thought it would be a difficult one to get home (to trial) anyway. We felt further investigation was justified but . . . would cause damage.”

In subsequent remarks Wardle partly qualified his remarks. He said “blackmail” was “using an expression that is slightly wrong. I think if that (the inquiry) happened, the Saudis simply weren’t going to have anything to do with us. Call it blackmail, call it what you will. But you know they just didn’t want that to happen.”

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