Madrid said on Friday it was working "to defend" a lucrative warship contract with Saudi Arabia amid reports the deal is in trouble after the Socialist government blocked the sale of 400 bombs to Riyadh, which is involved in the bloody Yemen conflict.
Spain's defence ministry said Tuesday it intended to cancel a 2015 deal to sell the laser-guided bombs to Saudi Arabia, which is leading a coalition fighting rebels in Yemen, where nearly 10,000 have been killed.
The ministry said it planned to return the 9.2 million euros (10.6 million) already paid by the Saudis for the arms under a deal signed by the previous conservative government.
A report in online daily El Independiente said that Riyadh now planned to cancel a 1.8-billion-euro contract with Spain to build five Corvette warships.
This has created huge concern in shipyards of Spanish company Navantia in the southern region of Andalusia, where thousands of jobs are at stake.
"The government is working to maintain good relations with Saudi Arabia and to defend the contracts for the construction of five Corvettes in Navantia's shipyards," government spokeswoman Isabel Celaa told reporters.