THE SNEAKY SAUDIS
I once transited Saudi Arabia and swore I would never do it again. The Saudi religious gestapo thought the cover on a book I was reading was suggestive and removed it. My previous Saudi experience had been Aramco-employed Saudis and a Saudi prince living high on the hog, but not eating pork, in Houston. The young Saudi prince relied on a close Thai friend of mine to write all his doctoral research papers. I had been all around the Middle East and thought I understood Islam, but I could not comprehend the mania of the Saudis. It is hard to come to grips with people who worry about abstract book covers but are happy to lure a Saudi journalist, such as Jamal Khashoggi, into the Saudi consulate in Istanbul to murder him and then dismember his body with a bone saw.
Moreover, the Saudis are anything but forthcoming. Their commitments are in reality “IBM” or “Inshallah-Bukra-Malesh”—"Tomorrow-God Willing-Never Mind.” Therefore, for anyone to accept an Arab commitment as binding is delusional. We have seen that in many forms and most recently from Saudi Crown Prince Mohammed bin Salman’s (MBS) false “commitment” to President Biden that Saudi Arabia would not cut oil production so the price of oil would remain at its current level. Although the U.S. is the largest producer of crude oil due to the production enhancements of fracture stimulation, the U.S. is also the largest consumer leaving Saudi Arabia and Russia with substantial oil export potential. However, the “IBM” commitment of MBS to keep production up faded away when both Saudi Arabia and Russia announced production reductions which would lead to higher oil prices in the market. The image here shows the two most untrustworthy, significant leaders in the world today shaking hands. One would need a good scrub after that event.
The Saudis also have a very clever way to hold private conversations in public venues by being very careful to protect their facial expressions and lip movements by using their hands or even eyeglasses. Nonetheless, whatever they do say cannot be taken to the bank. Accordingly, their verbal actions may not even be relevant and certainly not binding. Moreover, the Saudis are quite capable of turning on a dime if events develop such as an intelligence rumor that Iran was set to attack Saudi Arabia. Further, the Saudis have said that perhaps an increase in production might be required depending on the impact higher prices could have on the world economy. In the meantime, the U.S. will be drawing on oil reserves from the strategic oil reserve to mitigate any further inflationary impact.
American Ears at Business Forum and Democrats Raise Questions About Mnuchin’s Deals in Persian Gulf. The annual Saudi investment conference, formally known as the Future Investment Initiative, has become a major investor event with the nickname “Davos in the Desert” drawing 5,000 participants this year.
An obvious takeaway is the many conflicts of interest that have arisen from politicians in high places sweet talking the Saudis while they are in office to then profit handsomely when they step down. Former Treasury Secretary Mnuchin under the Trump administration is the most recent blatant example given his 18 visits to four Gulf monarchies during his tenure as well as 27 meetings with sovereign wealth managers. As a result, he raised $500 million in investment funds each from Kuwait and the United Arab Emirates and Qatar, as well as $1 billion from Saudi Arabia. Mnuchin looks smug here at the Investment conference although if his investments turn sour, some of these guys settle disappointing losses with finality.
Another most successful fundraiser is Jared Kushner, Donald Trump’s son-in-law and former adviser. Upon leaving the political environment, he rapidly put together an investment fund and reached a deal for a $2 billion investment from Saudi Arabia’s sovereign wealth fund. Even the amusing former U.S. Energy Secretary, Rick Perry, found a home as a director of the Dallas-based U.S. oil company, Energy Transfer, and was at the conference oozing his charm though at times forgetting his lines.
This commentary is not meant to be political as members of both U.S. political parties readily step down from government service to enter the world of commerce or even go back and forth. Moreover, it is good that public servants have a sound working knowledge of business, finance, and education to improve their skill sets. One political criticism that also applies to both parties is that certain members of various congressional committees seem to freely trade in the shares of companies they are evaluating in their committees.
However, rest assured the Saudis do utilize their vast funds to influence others while hoping to capture a rate of return. I know the director of one of the prominent Arab sovereign wealth funds who has shared some of this background with me. Therefore, in the Arab world, influence is the trump card as opposed to charitable support for the great unwashed out there. Islam prohibits the payment or receipt of interest (riba) as it is deemed to be exploitive. Investment funds seem to fall into a different category even though the investment purpose may be the same.
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