To Western eyes, Saudi Arabia's super-rich royal princes appear a confusing mix of pious Muslims and decadent playboys. But it is their distinctive approach to doing business that is now giving Britain a headache.
Long after midnight, the party is in full swing, the music loud, the whisky and champagne flowing. In the penthouse suite at a five-star London hotel, six attractive young British women in short, tight dresses that leave little to the imagination, sashay between wealthy princes from Saudi Arabia, flirting and laughing more loudly than the Arabs' witticisms merit.
A silver dish of white powder, with matching spoon, is passed around. From time to time, a couple slips out of the suite only to reappear half an hour later and seek new friends. Others do not feel impelled to leave in order to share intimate moments and settle on a sofa or the four-poster in the main bedroom, oblivious of their fellow party-goers.
A British businessman standing by the window overlooking Hyde Park, drinks in the decadent scene, not sure if he has landed in heaven or in hell. "It was my first party with the Saudis, in the early Nineties, and it was a bit of an eye-opener," he recalls. "We'd been to the casino and I watched the princes gamble like there was no tomorrow. The money they threw around was staggering. Then we went upstairs for the party. It was shocking but fascinating."
One woman told him she was paid hundreds to attend and would earn much more by sleeping with one, or more, of the visitors. "She said she would get £2,000 for spending the night with a prince," he says. "The Saudis had their favourites and liked to think they were their girlfriends in London. They don't like to admit they are paying for sex."
Days later, back in their home city of Riyadh, the Saudi princes are on best behaviour. No alcohol, no drugs, no girls. Perhaps the occasional drink, but discreetly, in private, with close friends. They know a flogging awaits those who are caught with as much as a glass of Johnnie Walker by the mutaween, the dreaded religious police, who torture suspects with impunity. This is the country where Sharia law reigns, the Koran is the constitution, women are not allowed to drive and religious zealots hold sway over law and order in a delicate pact with the ruling House of Saud, the extended royal family that fills every government post and has 5,000 princes on its books.
In the capital's notorious Chop Chop Square, in front of sand-coloured buildings and a line of palm trees, the executioner brandishes his sword before swiftly cutting off a thief's right hand. If he offends again, the left hand will follow. On other days the executioner will behead a cuffed and blindfolded drug-dealer, rapist or murderer, watched by a rapt and approving crowd, who laugh and cry "Allah Akbar!" when the blood shoots into the air and cascades down on to their clothes. "Some Saudis think that beheading is too soft a punishment," said one veteran Saudi observer.
This authoritarian country, with its princes who are pious Muslims at home and libertines away, is also the one with which Britain signed its biggest export deal in 1985: the al Yamamah agreement to sell 72 Tornado and 30 Hawk warplanes for £43 billion, mostly paid in oil shipments, over 20 years. The deal, signed by the Saudi defence minister Prince Sultan and Britain's then defence secretary, Michael Heseltine, has been mired in controversy and corruption allegations for years.
The furore has erupted again. This time the claim is that BAE Systems, Britain's biggest arms manufacturer, paid more than £1 billion into two Washington accounts controlled by the former Saudi ambassador to the US, Prince Bandar bin Sultan, the Saudi defence minister's son, over more than a decade. The payments, made on a quarterly basis, were allegedly written into "secret annexes" of the al Yamamah contract for the provision of "support services'', with the full knowledge and approval of the Ministry of Defence.
MPs have demanded an inquiry into whether government ministers were involved in corruption. A criminal investigation by the Serious Fraud Office - which is understood to have discovered the payments but not whether they were illegal - was controversially dropped "in the interests of national security" last year, after Tony Blair warned that the Saudis, vital allies in the war on terror and a stabilising force in the Middle East, would stop sharing anti-terrorist intelligence if the inquiry continued.
Many who have lived and worked in Saudi Arabia or done business with the Gulf state say the claims, to be broadcast by BBC's Panorama tomorrow, show a failure to understand Saudi culture. "It's totally different from ours," says Jonathan Aitken, the former defence minister who took part in key negotiations over the al Yamamah contract in the early 1990s. "The Saudi monarchy is similar to a Tudor monarchy in that servants of the Crown are rewarded for doing their public service faithfully and well. They believe people are entitled to a slice of the action when they help with something like a big contrac
No British minister was told anything about the alleged payments, he says. "But living in the real world there were always going to be some parts of the contract - training, spares and construction, for example - for which agents would receive commission. Sales commission is what makes the world of commerce go round. The big picture is that Saudi Arabia is a crucial ally for intelligence and is a stabilising influence in a volatile region."
Mr Heseltine agrees. "If this is the way the Saudis want arrangements for their procurement programme, an international company would have had no choice but to go along with that. It's massively important to us and the stability of the Middle East that we have those defence interests in Saudi."
Doing business with the Saudis is not like doing business in the West. Deals take longer, typically 18 months to two years, to finalise. "The Saudis like to get to know and trust you," says David Lloyd, a senior consultant for the Middle East Association, who makes regular trips to Saudi Arabia with trade missions. "They like to see your face, look you in the eye and expect to meet the same people each time. They treat you as a guest in their country and set great store by personal relationships with all countries, not just the UK."
The Saudi royals also like to entertain and expect to be entertained in turn. In their home country that will consist of lavish dinners, with the finest food, in elegant surroundings. Abroad they will expect at least the same, but often much more, especially in Western Europe. Mr Aitken, though, says that senior members of the Saudi royal family did not ask for prostitutes or drugs during his time in office. "We took them to see shows like Chicago and then we would get a table at Annabel's," he said. "They were dignified and, on the whole, they did not get up to those squalid antics."
The "whisky and women" were usually demanded by less senior members of the ruling family, says one former diplomat in Riyadh. "There are about 5,000 Saudi princes and a lot of the younger ones, especially, like to do things that many men of their age do. They are very restricted in their country so it's understandable that some go a bit wild when they are over here." Even in Saudi Arabia, he said, there was much discreet drinking, not just among expatriates but also the locals. "Saudi is the only country where I've seen a jeroboam of Chivas Regal. The owner was a Saudi," he said.
Despite its vast oil wealth (it holds 25 per cent of the world's oil reserves), Saudi Arabia is a backward country run by a curious coalition of the large, nepotistic House of Saud and the fundamentalist Wahhabi religious leaders. The Saud family has ruled the desert kingdom since 1932, when King Abdul Aziz Al Saud united warring tribes under Sharia law. It has a historic connection with the Wahhabis, a branch of Islam to which many of the al-Qaeda members involved in the 9/11 attacks belonged, but there have been growing tensions since the accession of King Abdullah, two years ago. The clerics are resisting the king's attempts to liberalise education and give women more freedom.
One of Abdullah's first appointments was to make his nephew Prince Bandar, the Western-friendly "Mr Fixit" and the central figure in the al Yamamah row, his national security adviser. The cigar-smoking prince has been friendly with British prime ministers and US presidents since the days of Margaret Thatcher and Ronald Reagan and is particularly close to George Bush Snr and his son, hence his nickname "Bandar Bush".
Described as charismatic and charming, he glides easily between the West and the Gulf. He trained as a fighter pilot in the US and at RAF Cranwell, but friends say there is no doubt where his true loyalties lie. "The home team is Saudi Arabia," says William Simpson, his biographer and former RAF classmate. The prince has certainly enjoyed the fruits of his al Yamamah labours: he has a personal Airbus, painted in the silver and blue colours of his favourite American football team, the Dallas Cowboys, and landing rights at RAF Brize Norton, close to his 2,000-acre Oxfordshire estate at Glympton.
It was Mrs Thatcher who approached Prince Bandar in December 1984 to ask for his help in winning BAE a new weapons contract. He cleared the deal with the Reagan administration - unable to sell to Riyadh because of pro-Israeli opposition in Congress - then flew to London to meet Charles Powell, Mrs Thatcher's private secretary, and other key officials. In the summer of 1985, he flew to Salzburg, where Mrs Thatcher was on holiday, with a letter from the Saudi king, Fahd, to seal the deal, according to Simpson's book, written with the Prince's co-operation. "I told her specific numbers, shook hands, and the deal was done," he is quoted as saying. The contract, the first instalment of a 20-year deal, was the fourth with BAE since 1967 in which commissions of up to 15 per cent had been passed to Saudi royals with Downing Street's backing, according to British archives.
Two other figures said to have played smaller roles in the deal are Wafic Said, the Syrian-born billionaire, and Mark Thatcher, the Prime Minister's son. Both are said to have acted as advisers. Mr Thatcher has denied that he received up to £12 million as part of the agreement.
The mystery over what was paid to whom and why in the deal has deepened because the Government, BAE and the Serious Fraud Office have declined to comment for "national security" and economic reasons. Mr Blair said the completion of the investigation would have led to the "wreckage of a vital interest to our country" and the loss of "thousands of British jobs".
Prince Bandar insists there were no secret commissions or "backhanders". The payments were in the contract and any money paid from the accounts was "exclusively for purposes approved by the Saudi Arabian ministry of defence and aviation", he says. On another occasion, when asked about payments, he responded more robustly. "So what?" he said. The Saudis had created a successful country from very little and that was a great achievement, he added.
So far, the new allegations have changed nothing, but pressure on the Government is growing. There is concern that BAE will suffer from the termination of the investigation: South Africa is under investigation over a BAE deal and although President Mbeki is co-operating with the SFO, he is furious over the different treatment of his country and is expected to put Britain under pressure to drop the inquiry.
Washington, too, remains suspicious. For years, US defence companies have refused to buy from BAE, because it might fall foul of America's Foreign and Corrupt Practices Act. They are unlikely to feel better about it now.
Meanwhile, the Saudi princes continue to party, albeit more discreetly "They are a bit less flash nowadays," the British businessman said. "But they still like to live it up in London." And still the stories come.
Two months ago, it was claimed that, in 2001, two British actresses were paid tens of thousands of pounds from a slush fund, set up by BAE, to entertain another Saudi prince involved in the al Yamamah deal. And in October, last year, the 24-year-old model girlfriend of a Chelsea footballer was exposed as a former £1,000-an-hour prostitute, paid to take part in orgies and sex shows for rich Arabs.
"They love the capital's nightlife and they love London's women," says one former diplomat. "They are really off the leash when they come over here."
With oil prices high and the Saudi economy booming, it seems the hedonistic London parties are far from over for the desert kingdom's elite.