The US justice department has launched a corruption probe into Britain's BAE Systems, posing a challenge for Gordon Brown, who succeeds Tony Blair as prime minister today.

BAE, Europe's biggest military contractor, said yesterday that the probe would include its dealings with Saudi Arabia under a state-to-state deal that led to Britain's biggest export deal, worth an estimated £43 billion (R616.5 billion) and stretching back to the 1980s. 

BAE has denied making wrongful payments in its dealings with Saudi Arabia. Diplomatic experts said the probe was unlikely to threaten British-Saudi relations, and could even see them close ranks.

Mustafa Alani at the Gulf Research Centre in Dubai said the view in the Arab world was that the US was trying to block technology sales to the region by non-American countries. - Reuters

With acknowledgements to Business Report.