* Mohammed bin Salman on first official trip as crown prince
* May defends Saudi ties in parliament amid oppositioncriticism
* Britain and Saudi Arabia set 65 bln pound trade target
* Anti-war protesters gather outside May's office (Adds details of meeting with May)
By William James
LONDON, March 7 (Reuters) - Prime Minister Theresa Maydefended Britain's links to security ally Saudi Arabia onWednesday as Crown Prince Mohammed bin Salman met QueenElizabeth for lunch on a high-profile visit that drew protestsover Riyadh's human rights record.
A fiery exchange in parliament between May and oppositionleader Jeremy Corbyn underlined tension in Britain over PrinceMohammed's trip, which was aimed at building a broader economicpartnership between the two countries, but has sparked angerabout alleged human rights abuses and the war in Yemen.
"The link that we have with Saudi Arabia is historic, it isan important one, and it has saved the lives of potentiallyhundreds of people in this country," May said, pausing heranswer briefly as opposition lawmakers cried "Shame!". She wasalluding to intelligence-sharing on Islamist militant suspects.
The debate took place as Prince Mohammed lunched with theBritish monarch on the first leg of a trip packed with displaysof diplomatic affection designed to help widen long-standingdefence ties into a more far-reaching partnership.
May later met Prince Mohammed at her Downing Street office,extending a warm diplomatic welcome to the conservativekingdom's heir apparent and agreeing a 65 billion pound ($90.29billion) trade and investment target.
Britain is looking for trading partners as it exits theEuropean Union, and energy powerhouse Saudi Arabia needs toconvince sceptical investors about its domestic reforms.
"This is a significant boost for UK prosperity and a cleardemonstration of the strong international confidence in oureconomy as we prepare to leave the European Union," aspokeswoman from May's office said after the meeting.
But demonstrators gathered outside May's office amid a heavypolice presence to protest at both countries' role in Yemen,where war has killed around 10,000 people. A Saudi-led coalitionintervened militarily in Yemen in 2015 and critics say Riyadhhas been using British-supplied weapons in devastating strikes.
"I don't believe that someone like Mohammed bin Salmanshould be welcomed in Britain," said Hassan Yassine, a25-year-old customer service worker from London. "It isdefinitely not ethical, bearing in mind what is going on inYemen every single day, every single second, even as we speak."
Corbyn said British military advisers were "directing thewar" in Yemen. May's spokesman said British personnel had norole in carrying out coalition air strikes, and were notinvolved in Saudi targeting decisions.
STRATEGIC PARTNERSHIP
Police said a man was arrested on suspicion of criminaldamage after an egg was thrown at a police vehicle as binSalman's motorcade arrived in Downing Street.
Wednesday's first official engagement was a trip toBuckingham Palace to see Queen Elizabeth - a rare honour usuallyreserved for heads of state.
The Saudi delegation then met May at her offices to launch aUK-Saudi Strategic Partnership Council.
The meeting set out the mutual trade and investment target,which would include direct investment in Britain and new Saudipublic procurement with British companies. This would be spreadacross sectors including finance, education, healthcare,renewable energy and defence, May's office said.
Britain is vying to land the stock market listing of stateoil firm Saudi Aramco, but no decision is expected this week.
"We would like the Aramco share option to be issued in theUnited Kingdom and we will continue to suggest the City would bethe best place for it," junior foreign office minister AlistairBurt told parliament.
Later this month Prince Mohammed visits the United States,which also wants the lucrative listing, although sources saidboth countries might miss out. officials were privately delighted at the decisionby Prince Mohammed, 32, to choose Britain as the major Westerndestination on his first foreign trip since becoming heir to theSaudi throne last year.
The British government is keen to develop a two-way tradeand investment relationship, eyeing both an expanded market inSaudi Arabia for service sector exports, and attracting Saudicash to finance domestic projects.
For his part, Saudi Arabia's ambitious heir wants to showthat "shock" reforms have made his country a better place toinvest and a more tolerant society. posted online showed London taxis displayingadvertising graphics welcoming Prince Mohammed, and electronicbillboards around the capital promoted pro-Saudi messages withthe hashtag #anewsaudiarabia.
Business deals are possible with British defence group BAESystems BAES.L and European weapons maker MBDA, and initialagreements could be concluded on gas exploration, petrochemicalsand other industries, according to British and Saudi sources.
ROYAL TREATMENT
The three-day visit will include a second Royal audience -dinner with the Prince Charles and Prince William on Wednesday -and a prestigious visit to May's country residence on Thursday. prime minister intends to use the private dinner atChequers, a 16th-century manor house 40 miles (60 km) northwestof London, to further press her concerns over the humanitariancrisis in Yemen, her spokesman said.
The Saudi-led coalition is fighting the Iran-allied Houthimovement in Yemen in a campaign to restore its internationallyrecognised government, generating what the United Nations saidin January is the world's worst humanitarian crisis. are protesting against Britain for licensing4.6 billion pounds of weapons sales to Saudi Arabia since 2015.
May said all arms sales were strictly regulated, that SaudiArabia's involvement in the conflict was backed by the U.N.Security Council and her government supported it.
"The prime minister and crown prince agreed on theimportance of full and unfettered humanitarian and commercialaccess, including through the ports, and that a politicalsolution was ultimately the only way to end the conflict andhumanitarian suffering in Yemen," the statement from May'soffice said.($1 = 0.7199 pounds) (additional reporting by Hesham Hajali editing by MarkHeinrich)