The Eurofighter, or Typhoon, is a twin-engine combat aircraft which has been designed "by committee". Its planning stems back to 1979, but it first went onto the drawing board in Germany in 1986. The company Eurofighter Jagdflugzeug GmbH was formed in that year, and designers from different European aerospace companies joined to design the plane.

Germany, Spain, the United Kingdom and Italy were involved in the plane's design, and they are all involved in manufacturing specific parts, though each of the four component companies can assemble an entire fighter. The British company in the consortium is BAE Systems. Based in Farnborough, Hampshire, BAE emerged after a merger of British Aerospace (BAe) and Marconi Electronic Systems in 1999. BAE is the fourth largest defense contractor in the world.

The most lucrative order for Eurofighters from BAE Systems came from the Saudis, which was signed on August 18, 2006. The deal to manufacture and sell 72 Eurofighter jets to the Saudis stems back to the Al Yamamah ("the dove") contract first negotiated under the aegis of Margaret Thatcher two decades ago. The Al Yamamah contracts have been part of the biggest defense sales deal ever made, with weaponry sold to Saudi Arabia and paid for with 600,000 barrels of oil per day. The August contract would have added an extra £10,000,000,000 ($19.75 billion) to the Al Yamamah deals.

Everything was proceeding well until November 30 last year, when the Telegraph newspaper revealed that the Saudis had suspended the deal for Eurofighters, on account of an investigation by Britain's Serious Fraud Office (SFO) into the deal. This investigation was examining a "slush fund" of £20 million ($39.5 million) which was apparently set up by BAE to give perks to some members of the Saudi royal family. Eight people had been arrested during the investigation and subsequently released.

The investigation had been going on for three years, and it was felt that only Lord Goldsmith, the Attorney General (who runs the SFO) could resolve the impasse. The Saudis were getting alarmed that SFO officers wanted to find details of the bank accounts of some Saudi royal family members in Switzerland.

Two days later, it was announced that the Saudis were openly blackmailing the British government. They gave an ultimatum - stop the SFO fraud investigation within 10 days, or the 72-plane contract would be cancelled. They were threatening to take their business to France, to buy 36 Rafale jets.

Lord Goldsmith said earlier on November 20: "I am not commenting on any investigations. But I would not stop a prosecution on political grounds." On November 29, his spokesman had repeated this claim.

By December 3, the French were brazenly seeking to exploit the situation for their own gain, with President Jacques Chirac bringing forward a planned visit to Riyadh. Members of parliament whose constituents included workers who could possibly lose their jobs were openly voicing their concerns in parliament. A lobbying campaign about these job losses had apparently been stage managed by Lord Bell.

On December 14 the Serious Fraud Office announced that it had dropped its inquiry. Since 2001's Anti-terrorism, Crime and Security Act, it has been illegal to engage a third party to provide "sweeteners" to a company. This law came into effect in 2002, and had been urged by the Organization for Economic Co-Operation and Development (OECD). However, it was claimed that some of the SFO's investigations had involved incidents going back to the 1990s, when such deals were legal.

Lord Goldsmith, as head of the SFO, spoke in the House of Lords on the issue. He said: "This afternoon, the Serious Fraud Office has announced that it is discontinuing this investigation. Its statement says: "The Director of the Serious Fraud Office has decided to discontinue the investigation into the affairs of BAe Systems plc as far as they relate to the Al Yamamah defence contract. This decision has been taken following representations that have been made both to the Attorney General and the Director concerning the need to safeguard national and international security. It has been necessary to balance the need to maintain the rule of law against the wider public interest. No weight has been given to commercial interests or to the national economic interest."

Goldsmith added: "In addition I have, as is normal practice in any sensitive case, obtained the views of the Prime Minister and the Foreign and Defense Secretaries as to the public interest considerations raised by this investigation. They have expressed the clear view that continuation of the investigation would cause serious damage to UK/Saudi security, intelligence and diplomatic co-operation, which is likely to have seriously negative consequences for the United Kingdom public interest in terms of both national security and our highest priority foreign policy objectives in the Middle East. The heads of four security and intelligence agencies and our ambassador to Saudi Arabia share this assessment."

Such a statement, implicating the involvement of Tony Blair in the SFO's decision, was bound to raise questions. The emphasis on the possible loss of 50,000 jobs immediately changed, and the focus became Tony Blair. Was he caving in to Saudi blackmail? Was there really no commercial reason for abandoning the inquiry into apparent corruption?

The Saudi deal was resumed, and for the workers at BAE Systems, there was a sense of relief, made better by news that shares in BAE systems had shot up by 7% immediately after the announcement that the inquiry had ended. Tony Blair, whose reputation was already tarnished by other suggestions of malpractice, was to be scrutinized further.

Within a few days of Goldsmith's report to the House of Lords, it was announced that two pressure groups had gone to solicitors Leigh Day & Co to legally challenge the government's decision to abandon the SFO inquiry.

On December 17 the Independent on Sunday revealed that Robert Wardle, the head of the SFO, had claimed that he held a "different view" from Lord Goldsmith, the Attorney General. Detectives who had been involved with the SFO inquiry were said to be "furious", and claims were made that the police officers investigating the "slush fund" had been bugged. An individual assisting the SFO said: "I was told by detectives that the probe was being bugged. They had reached this conclusion because highly confidential information on the inquiry had been reaching outside parties."

According to the terms of international law, it is forbidden for countries to use commercial considerations to prevent firms from facing anti-corruption prosecutions. The original figure claimed for the amount of money in the slush fund had shot up threefold, from £20 million to £60 million ($118.5 million).

With Tony Blair placed under the spotlight, the Saudi foreign minister, Prince Saud Al-Faisal, dismissed reports of corruption in the Al Yamamah deals as "baseless". He said: "Old stories are repeated now and then in order to create some kind of suspicion not only about the deal but also bilateral relations".

The Saudi ambassador to Britain, Prince Mohammed bin Nawaf Al Saud, wrote on December 17: "Following weeks of speculation, and a three-year enquiry into events that happened 20 years ago, the British Serious Fraud Office (SFO) investigation into BAE Systems came to an end last week. In those three years we have seen wars and natural disasters devastate many areas of our world: we have witnessed the bloody invasion of Iraq. We have watched in horror an illegal wall being built across Palestinian territories by Israel. And we have fought an international battle against the evil of terrorism: bombs have reaped a heavy toll on both our capital cities."

He claimed that in the time that the SFO had been digging into claims of corruption, Saudi Arabia had its first "transparent elections to local councils" and had made progress. He quoted Prince Saud Al Faisal who had claimed of the SFO inquiry: "This is no way to deal between two friendly countries."

On December 17, Robert Wardle of the SFO claimed that the investigations had been yielding results before being stymied.

On Tuesday, January 17, it was revealed in the Guardian newspaper that Goldsmith's claims were being contradicted by officials from MI5 (homeland security intelligence) and MI6 (offshore security intelligence). There had been no threat of the Saudis refusing to share intelligence about terrorism. The head of MI6, John Scarlett, refused to sign a government dossier which condoned Goldsmith's perspective on the issue. This dossier was to be presented to the Organization for Economic Co-Operation and Development's anti-corruption unit. The 36-nation OECD had a meeting in Paris last week, and had requested an explanation from the UK government.

Tony Blair, who had endorsed the abandonment of the SFO inquiry, once again came under the spotlight. The Foreign and Commonwealth Office released a statement on the night of January 17. A spokesman said: "The claim that there were no national security considerations behind the decision to halt the SFO inquiry was wrong."

When in need of an excuse to avoid telling the truth, invoking national security is a convenient tool of obfuscation. And in this instance, the FCO spokesman dutifully obliged. He continued: "We are not prepared to go into any detail about intelligence issues but to confirm that SIS (Secret Intelligence Service), in common with other UK agencies and departments, were consulted in preparing the Government's response to the OECD and was content with the outcome. This drafting process reflects routine government practice and, contrary to the Guardian article, SIS shared the concerns with others within Government over the possible consequences for the public interest of the Serious Fraud Office investigation."

Blair made a speech, in which he stated: "I am not aware of any unhappiness and I really would not believe what you read in parts of the press about this where I suspect that they have a particular view... Had we proceeded with this investigation, it would have significantly materially damaged our relationship with Saudi Arabia. That relationship is of vital importance for us fighting terrorism, including here in this country." Blair said the decision to abandon the SFO inquiry had been made based upon "the judgment of the entire system", implicating all elements were in agreement, including the dissenting voices of MI6.

In an attempt to save the government's face, the Attorney General said that the SFO was still investigating the activities of BAE in Romania, Chile, the Czech Republic, South Africa and Tanzania, which legal sources had claimed in December had been making strong progress.

The head of the Liberal Democrat party, Sir Menzies Campbell, had written to Goldsmith, demanding answers. The Attorney General had written back, stating: "It would be quite wrong to suppose any particular company is beyond the law." Various other members of parliament have been adding to the pressure on Goldsmith and Blair to reveal information.

A South African newspaper, the Mail & Guardian, has claimed that a letter from June 2006 from the SFO has suggested that the CEO of BAE Systems, Mike Turner, and three other senior figures in the company were being investigated for corruption.

On Friday, the OECD added its voice of disapproval, with its secretary, Angel Gurria, saying "appropriate action" would be taken. The OECD expressed "serious concerns" about the affair.

Since 1999, BAE Systems has been operating under the jurisdiction of the US Foreign and Corrupt Practices Act. In the latter half of 2001, the company paid for trips and hotels in America worth more than £1.1 million ($2.17 million), the Telegraph claimed. These trips and sojourns in hotels, including Caesar's Palace in Las Vegas, the New York Plaza hotel, the Ritz Carlton Tysons Corner hotel in Washington, and the Beverly Hills Hilton, were for senior Saudi officials.

The Saudi embassy in London, confronted with these findings, was suitably evasive. A spokesman said that the Saudi government does not condone fraudulent actions, but said: "We cannot rewrite the past, but we must look together towards the future."

That future could involve hearings in the House of Representatives, and possible investigation by the US Department of Justice.

Within all of this intrigue, Tony Blair has not come out smelling of roses. He appears to have tried to whitewash the whole affair, in the hope that it will just go away. But Blair is already under scrutiny over another scandal, involving the alleged granting of positions in the House of Lords to those who supply Blair's party with enough cash.

On December 14, Tony Blair was questioned by police over the issue of granting peerages, the first time a serving prime minister has faced police inquiries. On Friday, one of Blair's closest advisers, Ruth Turner, was arrested. Yesterday it was revealed that police had to hack into the computers at No 10, Downing Street, as part of their inquiry into the "honors for cash" inquiry. But that's another story.