BRUSSELS- The 28 member states of the European Union all backed a decision on Thursday to reject a proposal from the EU executive to add Saudi Arabia to a blacklist of countries suspected of being lax on terrorist financing and money laundering.
The decision comes after pressure from Riyadh and other listed jurisdictions not to be blacklisted.
EU states said in a statement the unanimous decision was taken because the European Commission's proposed list was not established in a transparent process that encouraged countries to take action while also respected their right to be heard.
The decision will force the European Commission to prepare a new list.
"I'm disappointed, but I hope I don't look like somebody who is giving up," the EU commissioner in charge of the listing, Vera Jourova, said on Thursday.
The process had been conducted in a transparent manner and followed EU states' commitments to act against money laundering and terrorism financing, she said.
The Commission had published last month a provisional blacklist with 23 jurisdictions, including the four U.S. territories of American Samoa, U.S. Virgin Islands, Puerto Rico and Guam, in a move that Washington said was "flawed".
Among other listed countries were Nigeria, Panama, Libya, the Bahamas, Iran, Pakistan, North Korea and Afghanistan.
In a hearing in the EU Parliament, Jourova this week said she was subjected to heavy lobbying by some countries affected by the decision, citing Saudi Arabia, the United States and Panama.
She raised doubts about the motivations of EU states for blocking the list, and said she will consult them again before a new list could be prepared.
EU officials told Reuters that oil-exporting Saudi Arabia, which is also a major buyer of EU weapons and other goods, had threatened EU countries to cut contracts. Saudi King Salman wrote to all EU leaders to reverse the Commission's decision.
EU lawmakers from the main groupings, including conservatives and socialists, criticised the EU states' decision to block the list.
"If we start playing political games with those lists, the EU loses all credibility," said Markus Ferber, who leads the centre-right grouping in the economic committee of the EU assembly.
"Putting the country that brought us the Panama Papers onto the money laundering blacklist is long overdue. Increasing the pressure is the only language countries like Panama and Saudi Arabia understand," he added.
(Reporting by Francesco Guarascio and Alastair Macdonald; Editing by Angus MacSwan) ((firstname.lastname@example.org;))