Relations Between The United States And Saudi Arabia – Analysis
By Giancarlo Elia Valori*
In the period from 2009 to 2013 when Hillary Clinton was US Secretary of State, Saudi Arabia contributed with at least 10 million US dollars to the Clinton Foundation.
Especially in the phases when, incidentally, Hillary Clinton permitted the sale of advanced weapons to Saudi Arabia
As stated by Prince Regent Mohammed Bin Salman in an interview released in 2016 to the Jordanian news agency “Petra”, Saudi Arabia also paid over 20% of Hillary Clinton’s election campaign.
However, it also subsidized the other candidates to the US Presidency, although to a lesser extent.
In the political campaign for the US Presidency, no foreign investor puts all his/her eggs in the same basket – just to follow a typical US piece of advice.
Moreover, like Russia and other countries, also the Saudi Kingdom has always backed both US presidential candidates financially.
During the electoral campaign, Trump theorized the ban on entry into the USA of tourists and migrants from most Islamic States, including Saudi Arabia. He was also harshly criticized by Prince Muhammad Bin Salman and by the famous Saudi multimillionaire, Al Walid bin Talal, the owner of the Kingdon Holding Company of Riyadh, a huge world financial holding, with packages of personal shares in Coca Cola, AOL, Amazon, Apple until 2005, Pepsi Cola, Fininvest, as well as a 5% shareholding in Rupert Murdoch’s media companies, and many other investments that it is even useless to mention here.
After becoming US President, Trump apologized and made his first trip abroad to Saudi Arabia in May 20-22, 2017. It was there that he placed his hands on an illuminated globe that marked the birthof the Global Center for Combating Terrorism in Riyadh.
Once released from his prison in the Ritz Carlton of Riyadh on January 27, Al Walid bin Talal, the nephew of Saudi King Abdullah, paid a 6 billion dollar fine to the winning faction of the royal family, led by Prince Mohammed Bin Salman.
After finally realizing to what extent the Wahabite Kingdom is important for the US economy, also Trump has relented and seen reason with the Al Saud’s dynasty.
In an interview with Fox News Night TV released on October 19 last, the US President said that he was interested in knowing the truth about the assassination of Saudi journalist Kashoggi – who, indeed, was also resident in the USA – recently occurred in his country’s Consulate in Istanbul. Nevertheless, President Trump has refused to stop all the arms sales to Saudi Arabia for this reason.
At the end of May 2017, during his first trip abroad, precisely to Saudi Arabia, Donald J. Trump also signed a contract for the sale of arms and for other economic transactions with Riyadh – an agreement worth as many as 110 billion US dollars immediately and additional 350 billion dollars over the next ten years, with the political aim of countering Daesh-Isis, in particular.
The purchases include 18 billion dollars for C4 systems (Command, Control, Communications and Computers); 13.5 billion dollars for seven THAAD units (Terminal High Altitude Area Defense), anti-missile defense systems; 6.65 billion dollars for the old Patriot-class anti-missile systems; 25 billion dollars for the recapitalization of the Saudi purchase of the F-35 fighters; 5.8 billion dollars for three KC130J and 20 C130J transport aircraft; 6 billion dollars for 4 coastal battleships and additional 11.5 billion dollars for ships already ordered by Saudi Arabia in 2015 and blocked by former President Obama, although with the interested pressure of his Secretary of State.
Other Saudi investments are aimed at spy planes, fine electronics, troop movement and ground attack vehicles, as well as the purchase of Apache helicopters and M1A2 tanks, and finally for many human and computer-interactive military training programs for all the Saudi Armed Forces.
Clearly Saudi Arabia has turned a blind eye to the technological upgrading of the weapon systems ordered – far more advanced than the level of current purchases – but in view of a strong future bond with the United States.
Saudi official sources also state that until May 2017 the Kingdom suffered over 60 terrorist attacks by Isis-Daesh and Al Qaeda, with over 25 of them over the last two years.
According to the documents of the Saudi Center for Combating Terrorism, over 200 Saudi citizens, including policemen and civilians, have been killed by Islamist terrorism.
It is strange that a deeply Islamic State defines the “sword jihad” as “terrorism”, as if it did not know what the jihad rules and techniques are.
Some terminologies are used only by Western States, which have not yet well understood what is happening in the Islamic religious and political universe.
Furthermore, Saudi Arabia claims to have organized at least 341 air raids against the positions of the self-proclaimed Caliphate in Syria, thus resulting the second counterterrorist power operating in the region after the United States.
Nothing to do, however, with the air raids of the Russian Federation, which the US intelligence services have already counted to thousands.
Reverting to the Saudi Kingdom, the Wahhabi regime has also started to control private donations to the self-proclaimed Caliphate.
A special and semi-secret Counter ISIL Finance Group between Saudi Arabia, the United States and Italy was created in 2015, with a view to countering the financial networks of the Caliphate.
Saudi Arabia alone has also established a Financial Intelligence Unit, which is also member of the Egmont Group, a network of 159 Financial Intelligence Units between EU, “dangerous” countries and Middle East networks.
Moreover, regardless of their being registered in the Kingdom, the Saudi charities can operate only through the Riyadh center of the Saudi Red Crescent and the King Salman Humanitarian Aid. Any autonomous fundraising through mosques and even through the mere charity public centers is forbidden.
Money transfers without a license (accounting for 60% of the total transfers) are also banned, but there are also sanctions against Hezbollah.
Two birds with one stone, of course.
Until September 30, 2017 -that is the end of the last fiscal year available -the United States sold as many as 55.6 billion US dollars of arms worldwide, that is over 33% more than the previous year.
As President Trump has declared openly, he does not want “to stop a 110 billion dollar investment in the United States” – a sum that, however, also includes the 23 billion dollars of Saudi arms purchases, those already granted by the former Obama administration.
At least since 2012, one fifth of all US foreign arms sales has gone to Saudi Arabia.
One third of all arms sales in the world originates from the United States.
Half of US arms sales, however, goes to the whole Middle East and Africa.
With specific reference to the weapon systems, the largest share of US exports is in the aeronautics sector, followed by the missile sector and finally by the ground weapon systems and transport vehicles.
The countries buying more weapons from the USA are Saudi Arabia, Poland, Japan, Romania, Bahrain, Australia, the United Kingdom, the United Arab Emirates, Greece and Singapore.
Reverting to Saudi Arabia, a royal decree of April 22, 2017 appointed Khalid bin Salman Al Saud -the son of the current King and former pilot of fighter aircraft, who demonstrated excellence in dangerous missions against the self-proclaimed Syrian-Iraqi Caliphate – as the new Saudi Ambassador to the United States.
On October 2, 2018, with his usual frankness, President Trump stated that the Saudi Kingdom would collapse in two weeks without the US protection.
It is true and the current Prince and leader of Saudi Arabia knows it all too well. It is not yet certain that the Kingdom will last only two weeks without the United States, but it knows it is at risk.
Hence Prince Muhammad bin Salman is newly recreating the traditional relationship between the United States and Saudi Arabia, in spite of the unfortunate incident of the journalist Khashoggi, by underlining two important factors such as the relevance of the Wahabi Kingdom’s investments for the United States, which are now essential for this country, and the bilateral and strategic relationship with the United States that the Al Saud’s dynasty hopes will become even more stable.
Without America, Saudi Arabia is lost. Without Saudi Arabia the United States would definitely become poorer, and no President can accept this.
This holds true also for Yemen, where, since 2015, the United States has been training, arming and sharing intelligence with the Saudis against the Houthi, the Shiite guerrillas of the seventh Imam, obviously organized by Iran. What if the Saudis were afraid of one thing only, i.e. the uprising of the Shiites who are many in the area of their main oil wells?
It was exactly in 2015, the year when King Salman came to the throne and immediately delegated power to his son Mohammed.
Hence a military exchange on an equal footing between the United States and Saudi Arabia? Let us analyze the oil situation between the two countries more closely. Ultimately this is what really matters. However, we will talk about it at a later stage.
Meanwhile, however, let us see how Saudi Arabia presses the US companies and the economy, not only with the most well-known shareholdings.
At the time of the assassination of journalist Khashoggi in the Saudi Consulate in Istanbul, the Emirates’ Foreign Minister, Sheikh Abdullah Bin Zayed Al Nayhan, immediately expressed his full support for Saudi Arabia.
Even Oman, which had certainly not been a supporter of the Saudi-led anti-Iranian coalition, supported the Kingdom in that harsh situation.
Also the Secretary General of the Gulf Cooperation Council, Abdullatif Al Zayani, supported Saudi Arabia.
Even the Secretary-General of the Arab League, however, has recently expressed his support for Saudi Arabia.
At strategic and economic levels, harshly punishing the Saudi Kingdom for the assassination of journalist Khashoggi in the Saudi Consulate of Istanbul – an assassination which has currently turned out to be premeditated and particularly brutal – leaves no other chance for Prince Muhammad bin Salman than resorting to the usual countermoves.
Some Saudi leaders have openly mentioned the “oil weapon”, which would be used as a hefty club against European oil consumers, and not as it happened after the Kippur war of October 6-25, 1973 – when someone, namely ENI, escaped the grip of the Saudi-led OPEC.
If the oil price increased, also the US economy would suffer inflationary pressures and pressure on interest rates. This would greatly slow the US economic growth down – and the EU one even more.
Europeans should not believe they can use the Russian oil and gas to counteract the rise in Saudi and Sunni OPEC prices.
Russia fully agrees with OPEC and will not give up a general increase in the oil barrel and natural gas prices.
Certainly the increase in the oil barrel price, which is supposed to reach approximately 90 US dollars by next year, would favor the sale of shale oil and natural gas – a production which has doubled in the United States, but with a shorter price cycle: higher prices generate greater supply, which inevitably leads to a subsequent lowering of the oil barrel price.
The less Iranian oil on the market, the greater tension for the price increase – not to mention the reduction of the Russian and OPEC supply and the almost cessation of extraction in Venezuela for the well-known internal political reasons.
All this happens while the demand for oil and gas is increasing rapidly all over the world.
Combining the restriction to the Saudi and Sunni OPEC production with the growth of US production, it is certain that the growth of the North American supply has significantly reduced the Saudi power to exert pressure. In fact, Saudi Arabia can raise prices only in a way not stimulating a further growth of the extractive production in the United States.
Hence the “oil war” that Prince Mohammed bin Salman has in mind – if it were to start – would lead to a great energy crisis, stronger in Europe than in the United States.
Naturally the weak and now demented European Union has said nothing serious in this phase.
If Europe thinks President Trump can pull its chestnuts out of the fire, it is completely wrong.
The US President does not like Europe at all. He will soon put an end to the German trade surplus and he can scarcely bear NATO. Even Israel, however, has no regard for this EU and not even Russia takes it too seriously.
In this framework of isolation, Europe does not even pursue its most immediate interests.
Every day it only deals with pseudo-economic matters and quarrels with its South that some German economists would already like to leave to the fate of a “Southern” Euro to be separated from the “Northern” Euro.
We will see how the monetary competition between the two “Euros” will be structured – a competition which could be fatal for the Northern and Southern versions of the unsuccessful European monetary union.
A currency that would like to be global, but without the characteristics of a lender of last resort it makes us laugh. Nevertheless, the EU leaders still believe in it.
The economy is made up of geopolitics and global strategy, not the other way round.
The old neoclassical handbooks which are read in Strasbourg and Brussels are now antiques.
If the United States or other countries were to apply sanctions on Saudi Arabia, Prince Mohammed Bin Salman – who is in a hurry to relinquish the too oil-led economy which, however, made the huge fortunes of his country – would have very good cards to play.
Certainly, since 2015 Saudi Arabia has had public budgets in the red. For the first time in its financial history it has issued public debt securities. Probably it has also problems of slow depletion of some wells, in addition to the insecurity generated by the essential fact that their maximum extraction area has a very strong Shiite minority, on which Iran is constantly operating – from Bahrain and from Oman, which turns a blind eye.
The Public Investment Fund of Saudi Arabia (PIF)is a sovereign fund which largely operates in the United States, in Europe and in Asia.
The aforementioned Sovereign Fund of Riyadh has a 5% shareholding of Tesla, as well as other stakes in Tesla’s direct competitor, namely Lucid Motors. It has invested 3.5 billion dollars in Uber, the global leader of unlicensed taxis, as well as 20 billion dollars in a US infrastructure fund managed by Blackstone. PIF has built three new cities on the Red Sea coast and invested 45 billion dollars in the Soft Bank. Furthermore, the Prince Regent – who directly leads PIF – said he wanted to invest additional 170 billion dollars over the next three to four years.
However, Saudi Arabia has also other geoeconomic weapons in its hands: in the United States, PIF owns 70% of Sabic, a large plastics-producing company. There are also the Saudi Telecom Company and the Saudi Electricity, with significant shareholdings in the sector in North America. There is also the aforementioned Blackstone Fund for Infrastructure, as well as a 45% shareholding of the National Commercial Bank, the Saudi Arabian Mining Company, the Entertainment Investment Company and the Fund of Funds.
PIF has also Saudi investments in Europe: the main ones are in Krups, Siemens, Arcelor Mittal and in many other sectors and small and medium-size enterprises.
PIF has also operations in place, of a size comparable to those in the USA, China, Pakistan, Russia, Ukraine and the Philippines.
In South Africa, the Saudi government is negotiating with the Denel arms factory for cooperation with the Kingdom’s defense industries.
According to the Saudi press sources, the country would already have in mind at least 30 major operations to harshly respond to the possible US sanctions for the Khashoggi case.
They would not be oil sanctions, but rather financial, banking and industrial sanctions.
A “Samson” operation is also planned, with a fast and very significant reduction in oil production, capable of making the oil barrel price jump up to an incredible level of 400 US dollars.
Prince Mohammed bin Salman could also block the purchases of weapons already planned in the USA – and it is worth recalling that the Saudi Kingdom is the second largest importer of weapons in the world.
The Prince Regent has also invested significantly in the Silicon Valley industries, which he is integrating into the Saudi Giga Projects.
Finally, the Saudi investment line could head to countries such as China, Russia and India, instead of the USA and the EU.
Egypt, too, would soon participate in this game, with currently unpredictable consequences in the Maghreb region, and especially in Libya – where Egypt is the major supporter of General Khalifa Haftar – as well as in the United Arab Emirates.
A transition from the West to the East that would probably be the tombstone of Western economic and financial development.
It would also create a structural financial crisis in the United States, which could partly retaliate by unleashing a harsh trade war precisely with the European Union.
About the author:
*Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “La Centrale Finanziaria Generale Spa”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group and member of the Ayan-Holding Board. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title of “Honorable” of the Académie des Sciences de l’Institut de France.
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This article was published by Modern Diplomacy
