LONDON (AFP) -- The probe into a giant British-Saudi arms deal was scrapped after London's ambassador in Riyadh warned that it risked British lives, according to confidential papers published in a newspaper Thursday.

Weeks later, the Serious Fraud Office's two-year investigation into the so-called Al-Yamamah deal was dropped. Britain's SFO had been probing allegations that defense firm BAE had set up a secret slush fund for Saudi royals in order to secure continued business, dating back to the deal signed in 1985. On November 30, 2006, Sir Sherard Cowper-Coles, then the British ambassador to Saudi Arabia, warned the SFO that Riyadh's cooperation on counter-terrorism was being put at risk by the probe. The SFO investigation closed on December 14 last year, with then prime minister Tony Blair citing counter-terrorism grounds and its potential to harm Britain's interests. Cowper-Coles's warning to SFO director Robert Wardle came to light in confidential papers obtained by the Daily Mail newspaper under the Freedom of Information Act. The papers were drawn up on Wardle's behalf by the Treasury Solicitor's Department, which provides legal services to government departments and public bodies. They disclose a meeting between Wardle and Cowper-Coles. "During this meeting (Wardle) received direct confirmation from the ambassador that the threats to national and international security were very grave indeed," the papers read. "As he put it, British lives on British streets were at risk." The pair had two further meetings, at which Cowper-Coles described the danger of Saudi Arabia withdrawing its cooperation on counter-terrorism as "real and acute." "He expressed the view that the Saudi Arabians were not bluffing and there was a real threat to UK lives," the papers read. They also said while Wardle considered the views of Blair, then foreign secretary Margaret Beckett and Defense Secretary Des Browne, the SFO chief "independently" decided to end the probe. BAE and Saudi Arabia's Prince Bandar bin Sultan, a former ambassador to the United States, deny accusations that BAE secretly paid the prince hundreds of millions of pounds to grease Britain's biggest weapons deal. The U.S. Justice Department has launched its own investigation into BAE Systems' dealings with Saudi Arabia and compliance with anti-corruption laws