A Saudi prince received millions of pounds for his own use as part of Britain's largest arms deal, the British Broadcasting Corporation said.
In a program to be broadcast on Monday, the BBC reports that the payments went to Prince Bandar bin Sultan, who negotiated the 40 billion-pound (60 billion euro; $80 billion) Al-Yamamah arms deal to sell 100 warplanes in 1985, when Margaret Thatcher was prime minister.
BAE Systems, the prime contractor, has denied that it ever violated British law in relation to the contract. Prince Bandar refused to comment, the BBC said in a statement Wednesday.
Prime Minister Tony Blair has taken responsibility for calling off an investigation by the Serious Fraud Office into allegations that BAE Systems ran a 60 million-pound (90 million; $120 million) "slush fund" offering sweeteners to Saudi officials in return for contracts as part of the Al-Yamamah deal.
The British decision has been criticized by the Organization for Economic Cooperation and Development, and the United States also lodged a formal complaint with Britain about the case.
Speaking at the G-8 summit in Heiligendamm, Germany, Blair refused to comment on the allegations raised in the BBC report, but repeated his long-standing defense of his government's actions.
"This investigation, if it had it gone ahead, would have involved the most serious allegations in investigations being made into 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 incidentally would have led anywhere except to the complete wreckage of a vital strategic relationship for our country," Blair said. "Quite apart from the fact that we would have lost thousands, thousands of British jobs."
News reports claimed that the Saudi government had told Britain to drop the probe or lose a 10 billion pound (15 billion euro; $20-billion) contract to buy Typhoon Eurofighter jets, a deal that would supersede the Al-Yamamah agreement.
The BBC report says that up to 120 million pounds (180 million euros; $240 million) a year was sent by BAE from the U.K. to two Saudi embassy accounts in Washington. There was no distinction between the accounts of the embassy and official government accounts, the BBC said.
"The BBC's Panorama program has established that these accounts were actually a conduit to Prince Bandar. ... The purpose of one of the accounts was to pay the expenses of the prince's private Airbus."
Bandar resigned as his country's ambassador to Washington two years ago after 22 years in the post. He is a son of Prince Sultan, the Saudi defense minister, and was educated in Britain and the United States.
He now heads Saudi Arabia's National Security Council.
Roger Berry, who chairs a House of Commons committee which reviews arms deals, said Thursday that "these matters need to be properly investigated."
"It's bad for British business, apart from anything else, if allegations of bribery popping around aren't investigated," Berry told BBC radio.
Al-Yamamah, meaning "the dove," was the name given to an agreement under which BAE supplied Tornado fighter jets and other military equipment to Saudi Arabia, which paid the British government with oil. The full extent of the deal was never revealed but it was widely believed to be Britain's largest-ever export agreement.