* Three opposition parties fail to block sale
* Govt holds firm, says Saudi Arabia key to regional peace
By Eric Kelsey and Sabine Siebold
BERLIN, July 8 German Chancellor Angela Merkel's conservatives on Friday thwarted a parliamentary manoeuvre by the opposition that would have halted a secret multi-billion euro tank deal with Saudi Arabia.
The vote just before parliament's summer recess was seen as test of the chancellor's control over her coalition.
The government has faced sharp criticism from opposition lawmakers and even within its own ranks after media reports -- confirmed to Reuters by Saudi security sources -- said Berlin had agreed to sell 200 Leopard 2 tanks to Saudi Arabia.
Opponents say the deal contravenes the country's export guidelines for military hardware and the tanks could be used to suppress human rights and bolster the ruling royal family in the world's largest oil exporter.
"They are failing a historic situation (in the Middle East)," opposition Social Democratic leader Sigmar Gabriel told parliament. "Germany and Europe must support the democratic movement and not feudal dynasties."
The Germany government cannot acknowledge the deal because exports of military equipment are confidential and disclosure is punishable by a fine or jail.
"Confidentiality protects Germany's relations with potential trade partners and their interests," Merkel spokesman Steffen Seibert said before the vote.
Germany's three opposition parties -- the Social Democrats, Greens and Left party -- each put forward bills that would have prevented tanks from being exported to Saudi Arabia and, in effect, forcing the government to officially disclose the deal.
Selling armaments abroad is a sensitive issue in Germany due to its Nazi past, as well as the role arms makers such as Krupp played in feeding 19th and 20th century wars with exports to both sides of conflicts.
Germany has imposed strict rules on arms exporters, barring them from selling weapons to countries in crisis zones, with questionable human rights records or engaged in armed conflicts.
"It's known that we have differences over human rights with Saudi Arabia -- that's very clear," Seibert said. "Even so, they play a constructive role in the Middle East peace process."
Without addressing the tank deal explicitly, the government has said arms exports to Saudi Arabia help strengthen the Gulf country as a counterweight to Iran in the region.
Media reports also said Israel and the United States were briefed on the deal and voiced no concerns.
"Two hundred tanks for Saudi Arabia has no effect on Israel's security interests," former Israeli ambassador to Germany Shimon Stein told German paper Rheinische Post in a preview of its Saturday edition.
The 2A7+ Leopard tanks said to comprise the Saudi orders are made by Krauss-Maffei Wegmann and Rheinmetall and viewed as among the most effective battle tanks in the world.
In spite of self-imposed restrictions, Germany's arms exports have doubled in the last decade and the country is now the world's third-largest weapons exporter behind the United States and Russia.
(Editing by Mark Trevelyan)