The al-Yamamah deal: Britain's biggest ever arms deal

Al-Yamamah is Britain's biggest ever arms deal. The agreement - its name means "the dove" in Arabic - has kept BAE afloat for the last 20 years, bringing around £40bn of revenue.

The first stage of the deal was agreed in 1985 and signed in 1988. Britain agreed to sell 72 Tornado planes, 30 Hawk trainer jets and 30 other trainer planes to Saudi Arabia.

In 1993 the deal was renewed when the Saudis agreed to buy a further batch of 48 Tornadoes. In the third stage of the deal the Saudis are understood to be buying a new fleet of 72 Eurofighter Typhoons for up to £10bn. In July 2005 Tony Blair flew to Riyadh to promote the deal.

Talks were stalling at the time because the Saudis were demanding three favours - one of which was the ending of the Serious Fraud Office investigation. The Ministry of Defence says an initial agreement has already been reached. However there will be months of more negotiations before a final contract is signed.

Over the last two decades BAE [BAE's position] has provided the Saudis with associated hardware, infrastructure and training under the terms of al-Yamamah. It has 4,600 employees in Saudi Arabia who service the planes and provide technical assistance and training.

Al-Yamamah has been controversial for many reasons. Within weeks of the deal being signed in 1985, allegations of corruption surfaced. Those allegations have never gone away; in December 2006 the government terminated the Serious Fraud Office investigation into claims that BAE had paid massive bribes to Saudi royals.

Critics say Britain should not be selling warplanes and military equipment to a regime that is barbaric and undemocratic. They say the British government refrains from criticising the Saudis' appalling human rights abuses in order not to disrupt the arms sales. The Campaign Against the Arms Trade calls it an "endorsement of a country with a history of brutal repression".

Al-Yamamah is technically an agreement between the British and Saudi governments, with BAE as the prime contractor supplying the planes and military equipment. Work is in turn subcontracted to many other firms.

The British government secretly insures BAE's deals with Saudi Arabia. This means that the government will pay BAE £1bn if the Saudi regime collapses and the country cannot pay its debts to the company.

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