Saudi Arabia threatened to withdraw all intelligence aid to the UK unless investigation into Bandar's billions was halted.

Lord Goldsmith not only knew of the £1 billion deal between Prince Bandar of Saudi Arabia and BAE but it now transpires that he ordered British investigators to hide what they knew from international anti-bribery watchdogs.

And the reason that they did so is little short of disgraceful.

The Guardian has established that the attorney-general warned colleagues last year that "government complicity" in the payment of the sums was in danger of being revealed if the SFO probe was allowed to continue.

The abandonment of the inquiry caused an outcry which provoked the world's anti-corruption watchdog, the OECD, to launch its own investigation into the circumstances behind the decision.

But when OECD representatives sought to learn more about the background to the move at private meetings in January and March they were not given full disclosure by British officials, according to sources.

One insider with knowledge of the discussions said :"When the British officials gave their briefing they gave some details of the allegations, but it now transpires, not all of them."

A source close to the OECD added: "We suspected that the British were holding some secret back."

During the confidential meetings the UK continued to argue that "national security" was the reason that they halted their investigation, rather than the worry that the continuing investigation would reveal government complicity in an act of corruption.

Last night, a spokesman for Lord Goldsmith said full evidence had not been given to international panel members of the OECD anti-bribery working party at their meetings in order to protect "national security". He said: "The risk of causing such damage to national security had a bearing on the information voluntarily provided to the OECD".

He added: "We have not revealed information which could itself jeopardise our national security. For these purposes the OECD was effectively a public forum, as is illustrated by the fact that you claim to know what [the government] told them."

It is notable that, whilst Lord Goldsmith continued to argue that "national security" was at stake, that Blair's defence made no attempt to argue that this was the case. Indeed, Blair was attempting to take us down a different route altogether.

"I'm not going to comment on the individual allegations and a lot of this relates to things that go back to the 1980s," he (Blair) said. "This investigation, if it had gone ahead, would have involved the most serious allegations and investigation being made of the Saudi royal family and my job is to give advice as to whether that is a sensible thing in circumstances where I don't believe the investigation would have led to anywhere except to the complete wreckage of a vital interest to our country. We would have lost thousands, thousands of British jobs."

So Blair's defence is actually more frightening. Blair appears to be arguing that certain people are above the law simply because of the ramifications that would come from pursuing them. The Saudi royal family, if investigation of serious allegations had been made, according to Blair could have cost the British economy "thousands, thousands of British jobs".

Now, obviously, we have no way of knowing whether or not Blair is being truthful when he says this, but let's accept him at his word. Even if we knew that the UK economy would lose "thousands and thousands" of jobs, is that still a valid reason not to pursue someone if they have committed a crime? In this case the charge is that a form of bribery has taken place. But suppose the charge was more serious, let's say murder. Would Blair's defence still hold? Or are there crimes that are worth pursuing even if it involves the country losing "thousands and thousands" of jobs?

Blair's argument is that some people - because of the damage they could wreak - are not worth pursuing, but I wonder to what scale of crime that this logic would extend to?

Indeed, Blair's logic was so bizarre that Downing Street offered later to "clarify".

Mr Blair's official spokesman said: "In terms of the allegations, we are not going to comment on it. It is a matter for others, not for us. It is a fact that there are implications for jobs but it is not the reason why we reached the decision we did ... the attorney general looked at this case and decided a successful prosecution was unlikely. The prime minister offered, as is his duty, his assessment of the threat to national security."

So Downing Street quickly withdrew from Blair's "thousands and thousands" of jobs argument and attempted to steer us all back to what was, at that point, the ill defined and totally secret "national security" argument.

And then Jack Straw, in a final attempt to convince us that this was, indeed, about "national security", dropped the bombshell:

Yesterday Mr Straw clashed with David Howarth, the Lib Dem MP for Cambridge, during heated exchanges in the Commons. Mr Howarth told MPs: "The government called off the inquiry for reasons of national security but it now turns out that the threat to national security was the threat of withdrawal of cooperation from the very same quarter that was subject to investigation for corruption. Isn't it simply shameful and dishonourable to give way to that sort of pressure?"

Mr Straw replied: "The world is not perfect ... the government faces a choice of seeing cooperation on national security being withdrawn, and it rightly made the judgement. We face some very serious terrorist threats. We vitally need cooperation as we have received, from among others, the Kingdom of Saudi Arabia, and the prime minister was absolutely right in not seeking to jeopardise that."

So, according to Straw's version, the Saudi Arabians threatened to withdraw from co-operating in intelligence matters with the UK unless all investigations into this possible crime were dropped. The Saudi Arabians? The country which had fifteen of it's young men fly planes into the Twin Towers is now in a position to threaten to withdraw intelligence aid to country's threatened by al-Qaeda?

Am I living in some parallel universe? Since when did a country that had fifteen of it's citizens take part in the world's worst terrorist atrocity get to, effectively, threaten other country's security - by withdrawing intelligence co-operation - unless they ceased investigating them for possible crimes?

The more the government attempts to defend their decision, the more horrific becomes the reality.

At a time when Bush and Blair claim to be exporting democracy, the despotic Saudi Arabian regime - a regime that enjoys free access to the leaders of both country's - is allowed the threaten another country unless investigations are dropped into crimes that they may have committed? I repeat: Am I living in a parallel universe here?

Instead of exporting democracy, the Al-Yamamah deal shows that Britain has been financially and militarily supporting the despotic Saudi Arabian regime.

George Monbiot sums it up best:

This makes a mockery of successive governments' claims to be supporting democracy around the world, and ensures our security is now entangled with that of the Saudi princes. Al-Qaida's primary complaint is directed against the Saudi monarchy and the western support it receives. Like the war in Iraq, like Blair's support for Israel's invasion of Lebanon and his uneven treatment of Israel and Palestine, this deal helps ensure Britain is a primary target for terrorism: not because our government acted on principle, but because it acted without it. Blair has invoked all the strategic threats from which he claims to defend us.

And therein lies the rub. Bin Laden's primary complaint is that we support Israel's actions against the Palestinians and that we support corrupt regimes such as Saudi Arabia.

This is the proof, not only that we do this, but that the Saudi's are effectively threatening us with al-Qaeda if we withdraw support from them.

This is not only short-sighted on our part, it's a bloody obscenity.

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