Category Archives: Saudi Arabia

+++ (BBG) Saudis Shoot Down Missiles, Drones as Mideast Tensions Flare

(BBG) Saudi Arabia said it intercepted ballistic missiles and shot down drones sent from Yemen, in the latest attack by pro-Iranian rebels that showed improved military capabilities more than three years into the conflict.

One missile was intercepted over Riyadh, with loud blasts heard in the night sky above the Saudi capital on Wednesday. Two other missiles were intercepted over the southern areas of Jazan and Najran, authorities said. The Saudi-led coalition fighting the Houthis in Yemen said it also downed a drone targeting an airport in the southwestern province of Abha and another in Jazan.

The missiles were fired just hours after President Donald Trump confirmed the U.S. would strike Syrian President Bashar al-Assad, whose forces are backed by Russia and Iran, over a suspected chemical weapons attack. The State Department said the Houthi attacks on Saudi population centers were “fueled by the Iranian regime’s dangerous proliferation of weapons and destabilizing activities in the region.”

“It’s hard to see the timing of the latest Houthi strike on Saudi Arabia as purely coincidental,” said Hani Sabra, founder of Advisory, a New York-based consultancy. The attack is probably an Iranian message to embarrass Saudi Crown Prince Mohammed bin Salman, who is wrapping up a foreign tour to world capitals and has repeatedly accused Iran of seeking to destabilize the kingdom, he said.

The Houthis have been aiming their ballistic missiles at major Saudi cities and targets more regularly in the past few months than any other period in the three-year war. The kingdom and its allies accuse Iran of arming the Houthis, a charge Tehran denies.

Iranian Message?

“The Houthis have indeed been stepping up their attacks on their northern neighbor, but with regional tension sharply escalating, particularly as a result of recent Syria-related developments, Iran, through the Houthis, probably wanted to send Crown Prince Mohammed bin Salman a message,” Sabra said.

A missile fired in December was aimed at the main royal palace during a cabinet session headed by King Salman. Last month, Saudi defenses intercepted seven ballistic missiles fired at Riyadh and other cities by the Houthis, the biggest such barrage since the war began in March 2015.

The Houthis, who have repeatedly targeted the kingdom in retaliation for its offensive inside Yemen, said Wednesday’s attack on Riyadh was directed at the defense ministry.

Increasing Risks

“The Houthis’ capabilities have improved — with outside assistance — over the course of the conflict, and it is reasonable to expect that they will continue to do so for the duration of the conflict,” said Allison Wood, an analyst with Control Risks. And while Saudi Arabia has one of the world’s best defense systems, the risk of a missile or a drone hitting targets “at some point” will increase with more regular attacks, he said.

Saudi Arabia and its allies have been able to recover areas in southern Yemen from the Houthis, but the rebels still control the capital Sana’a and territories in the north.

The conflict has caused a humanitarian disaster with thousands of civilian deaths, disease, hunger and displacement.

+++ V.V.I. (BBG) Saudi Crown Prince Says Israel Has Right to State: Atlantic

(Bloomberg) — Saudi Crown Prince Mohammed Bin Salman said
in interview published in The Atlantic that he believed both
Israelis and Palestinians have right to their own land, but that
a peace agreement is needed to assure stability.
* “We have religious concerns about the fate of the holy mosque
in Jerusalem and about the rights of the Palestinian people.
This is what we have. We don’t have any objection against any
other people”
* “There are a lot of interests we share with Israel and if
there is peace, there would be a lot of interest between Israel
and the Gulf Cooperation Council countries and countries like
Egypt and Jordan”
* Said Saudi government does not finance terrorist groups
** “Yes, there are people from Saudi Arabia who financed
terrorist groups. This is against Saudi law”
* Bin Salman hopes to be friendly with Qatar again; said one
problem in relationship is that they have not been letting the
country use the financial system to collect money from Saudis to
give to extremist organizations
** “We hope they learn fast. It depends on them”
* On Iran’s supreme leader: he’s “trying to conquer the world.
He believes he owns the world. They are both evil guys. He is
the Hitler of the Middle East”
* On Yemen: there are “bad decisions and worse decisions”
** “Our campaign is focused on helping the legitimate government
and bringing stability”
* Bin Salman says he wants to “move on” from guardianship
customs for women and “figure out a way to treat this that
doesn’t harm families and doesn’t harm the culture”
** “Saudis don’t want to lose their identity but we want to be
part of the global culture”
* NOTE: Earlier, A Wild Ride Behind the Scenes as Saudi Crown
Prince Does America

(Reuters) Saudi crown prince says Israelis have right to their own land

(Reuters) Saudi Arabia’s crown prince said Israelis are entitled to live peacefully on their own land in an interview published on Monday in U.S. magazine The Atlantic, another public sign of ties between Riyadh and Tel Aviv appearing to grow closer.

Asked if he believes the Jewish people have a right to a nation-state in at least part of their ancestral homeland, Mohammed bin Salman was quoted as saying:

“I believe the Palestinians and the Israelis have the right to have their own land. But we have to have a peace agreement to assure the stability for everyone and to have normal relations.”

Saudi Arabia – birthplace of Islam and home to its holiest shrines – does not recognize Israel. It has maintained for years that normalizing relations hinges on Israeli withdrawal from Arab lands captured in the 1967 Middle East war, territory Palestinians seek for a future state.

“We have religious concerns about the fate of the holy mosque in Jerusalem and about the rights of the Palestinian people. This is what we have. We don’t have any objection against any other people,” said Prince Mohammed who is touring the United States to drum up investments and support for his efforts to contain Iranian influence.

Increased tension between Tehran and Riyadh has fueled speculation that shared interests may push Saudi Arabia and Israel to work together against what they see as a common Iranian threat.

“There are a lot of interests we share with Israel and if there is peace, there would be a lot of interest between Israel and the Gulf Cooperation Council countries”, Prince Mohammed added.

Saudi Arabia opened its airspace for the first time to a commercial flight to Israel last month, which an Israeli official hailed as historic following two years of efforts.

In November, an Israeli cabinet member disclosed covert contacts with Saudi Arabia, a rare acknowledgment of long-rumored secret dealings which Riyadh still denies.

Saudi Arabia condemned U.S. President Donald Trump’s move to recognize Jerusalem as the capital of Israel last year, but Arab officials told Reuters at the time that Riyadh appears to be on board with a broader U.S. strategy for an Israeli-Palestinian peace plan still in its early phases of development.

(BN) Saudi Crown Prince Goes to Washington With a Reputation at Stake

…No wonder…

(Bloomberg) — Saudi Arabia’s crown prince, Mohammed bin
Salman, arrives in Washington on a grand tour of the U.S. this
week seeking to burnish his credentials as a decisive reformer
to do business with.
With reports of brutality at home, delays to his plans to
transform the economy and a deepening proxy conflict with Iran
in neighboring Yemen, the prince’s charm offensive to the
American capitals of government, finance and entertainment has
taken on more urgency.
The 32-year-old prince will meet Donald Trump on March 20,
his first trip to the U.S. since taking over as de facto leader
of the world’s largest oil exporter. The aim is to strengthen
their bond after he rolled out the red carpet for the U.S.
president last May in Riyadh. On that visit, both sides played
up their mutual interests in containing Iran, tackling Islamic
extremists and enhancing business ties.
Since then, things have changed. Prince Mohammed locked up
dozens of the Saudi business elite in November for about three
months in a declared crackdown on corruption. The kingdom is
also likely to delay the sale of a stake in oil giant Aramco
until next year. Cuts to government subsidies are proving
trickier and there’s uncertainty about how the country’s ultra-
conservatives are reacting to social changes.
Prince Mohammed “will try to convince the U.S. business
community that the anti-corruption campaign is not a threat to
commercial operations in Saudi Arabia,” said Hani Sabra, founder
of New York-based Alef Advisory. “He will play up his social
reform agenda to try to repair the image of Saudi Arabia in the
U.S. He will advance the narrative that he’s the steward that
will take the country in a more liberal direction.”
The White House said the visit will strengthen ties between
the U.S. and Saudi Arabia. Prince Mohammed will also dine with
National Security Adviser H.R. McMaster to discuss $35 billion
of business deals, Iran’s threat to their interests and the
humanitarian crisis in Yemen, according to a National Security
Council spokesperson.
There are also companies the Saudis are courting to help
shift their economy away from oil. Planned meetings include the
heads of Apple Inc. and Google as well as top movie executives
on a tour with likely stops in New York, Boston, Los Angeles,
San Francisco and Houston, according to person familiar with the
itinerary. They spoke on condition of anonymity because the
plans aren’t final.
Saudi officials and those at Apple and Google parent
Alphabet Inc., which is in talks with Aramco to jointly build a
technology hub in the kingdom, declined to comment.Ritz Report
Prince Mohammed received a boost to his narrative last week
when Goldman Sachs Group Inc., an erstwhile adviser to companies
and governments in the Middle East, said it would deploy its own
money in Saudi Arabia for the first time.
The image of a place to do business, though, took a hit
earlier this month.
The New York Timesreported on March 11 that 17 of those
detained at the Ritz as part of the purge were hospitalized for
physical abuse and one later died. Others were stripped of their
wealth without due process. The Saudi government has denied that
any torture occurred during their detention.
The U.S. is just the latest stop for Prince Mohammed. But
his handshakes with the Egyptian leadership and dinner with the
British monarchy in recent weeks haven’t obscured setbacks in
his foreign policy.
The Saudi-led coalition is bogged down in a three-year old
war in Yemen. The push last June to isolate Qatar has gone
nowhere, indeed the natural gas producer even managed to improve
ties with the U.S. albeit under the outgoing Secretary of State
Rex Tillerson.
Yemen loomed large on his trip this month to the U.K. In
London, about 100 protesters carried signs near 10 Downing
Street denouncing Saudi Arabia’s military action. “Do Not
Welcome Killers” was written next to a picture of Prince
His foreign policy “will raise questions among senior
officials of the Trump administration and other governments
about his ability to achieve his goals,” said James M. Dorsey, a
Middle East specialist at Singapore’s Nanyang Technological
University. “The New York Times report will also likely make
foreign investors even more hesitant than they have been since
the November purge.”
The public relations machine is in full swing. Ahead of the
prince’s visit to the U.K., Saudi Arabia advertised around
London with placards declaring “he is creating a new, vibrant
Saudi Arabia.”
He can also count on the support of liberal Saudis who like
the social changes he is bringing about: the right for women to
drive, movie theaters and more entertainment.
The enthusiasm for change was on display at a gallery in
London, where Saudis in western attire and their European fans
sipped fresh juices and surveyed work from some of the kingdom’s
leading artists.
“We are trying to give the viewer a picture more whole
about Saudi Arabia,” Raneem Zaki Farsi, the curator of the
exhibition, said as musicians played classical Arabic music. “We
created a narrative through the art works that gives the viewer
more aspects about the kingdom. This is just the beginning.”
There was also a financial dividend, one the Saudi
government will be keen to advance further in the U.S. It signed
about $2.1 billion in deals with Britain, including one between
Aramco and Royal Dutch Shell Plc. The kingdom also signed a
memorandum of intent with the British government to purchase
fighter jets.
The key now for the crown prince is to cement his
relationship with the Trump administration and bring that
message home, said Paul Pillar, a former CIA officer who’s know
a professor at Georgetown University.
“Most Saudis realize that continued support from, and close
relations with, the U.S. are in Saudi interests,” he said. “A
demonstrated adeptness in handling the relationship with
Washington can cancel out some other policy setbacks, either
foreign or domestic.”

(GB) Alwaleed sells Damascus hotel stake to Assad-linked businessman – report

Sold out of his own free will…?
I wouldn’t bet one cent on it.


(GB)The deal is said to have taken place while the businessman was still detained under Saudi’s anti-corruption drive.

Saudi billionaire Prince Alwaleed bin Talal has reportedly sold his stake in the Four Season hotel in Damascus to a Syrian businessman linked to President Bashar al-Assad.

The Financial Times cited sources as confirming the sale, which was completed while Alwaleed was still detained as part of Saudi’s Arabia’s November anti-corruption drive.

The buyer was Samer Foz, a businessman with close ties to Assad’s inner circle, according to the publication.

Alwaleed was released from Riyadh’s opulent Ritz-Carlton hotel, used as a luxury prison for those detained in the corruption purge, at the end of January.

He is reported to have handed over assets in exchange for his freedom, like hundreds of other businessmen, royals and government officials that were detained, but has denied any settlement took place.

The billionaire’s investment firm, Kingdom Holding, had been divesting its stakes in hotels long before Alwaleed’s detention.

Reports in January suggested it also sold its stake in the Four Seasons Beirut for $100-$115m including debt and was in the process of a similar deal for its stake in Beirut’s Movenpick hotel.

Sources told the FT that the Damascus Four Seasons transaction generated a larger sum than the one in Beirut.

However, it said the deal could stir controversy given the sensitivity of dealing with the Syrian regime.

Foz is said to have businesses across the Middle East ranging from a water company to transport, cement and contracting, investments in hotels and a gold mine in Turkey.

He uses Dubai as a business hub, according to the publication.

(CNBC) Saudi king shakes up military leadership; names new generation to economic, security roles


  • Saudi Arabia’s King Salman announced a reshuffling of military leadership and made new appointments to economic and security roles.
  • The military changes were seen as a sign of frustration with the war in Yemen, but the Saudi government said the changes were part of a normal rotation.
  • The appointments also included the rare naming of a woman to a deputy minister role.

Saudi Arabia's King Salman

Yuri Kadobnov | Reuters

Saudi Arabia’s King Salman, in a series of late-night decrees, replaced top military leaders, promoted others and assigned new younger officials in economic and security roles, according to the Saudi Press Agency.

The king terminated both the commander of air defenses and the military chief of staff and assigned new leaders to the air defense and land forces. The decree said the changes were made on the recommendation of the minister of defense, who is the Crown Prince Mohammed bin Salman.

“These appointments were part of a normal rotation in line with the new Ministry of Defense development plan. While some senior officers who had reached retirement age left the service, others were promoted or moved to newly created positions,” the Saudi Arabian government said in a statement to NBC News.

But some analysts saw the military changes as the result of frustration with the three-year-old war in Yemen against the Iran-backed Houthis. The crown prince was the architect of the war.

“The answer is Yemen, but whether it means there’s going to be a change in Yemen policy or whether they’re going to bang their heads against the same brick wall, I don’t know,” said Simon Henderson, Washington Institute director, Gulf and Energy Policy Program.

A series of other decrees were also issued, assigning some mayoral posts and a new undersecretary of the Ministry of Interior for security affairs. In a rare move, a woman, Tamadur bint Youssef al-Ramah was named deputy minister of labor.

Prince Turki bin Talal was named deputy governor of Asir province. The prince is the brother of Prince Alwaleed Bin Talal, who was arrested in the government’s anti-corruption sweep.

The new appointments were seen by some analysts as an effort to promote younger officials, who would be loyal to the crown prince and promote his Vision 2030. Vision 2030 is a wide-ranging program that is aimed at transforming the kingdom economically and socially and making it less dependent on oil.

“It’s a generational revolution in Saudi Arabia where his base of support is decidedly millennial,” said Helima Croft, head of global commodities strategy at RBC.

Croft said the crown prince is crafting a new power base and has growing support among everyday Saudis.

P.O. (BBG) Saudi Wealth Remains Hidden as Government Pursues $100 Billion

…That’s what it’s called…
…Regardless of the eventual ilegal acts or not of the detained, to arrest someone and ask for money to release that person is extortion and a crime in itself.
…There is no way around it.
…The reputational damage is behond any calculation, and will not go away as long as people remember.
And will last at least one generation.
Francisco (Abouaf) de Curiel Marques Pereira

(BBG) When the Riyadh Ritz-Carlton starts accepting guest bookings next month, it will be the end of the luxury hotel’s stint as a prison for Saudi Arabian princes, billionaires and dignitaries accused of corruption. It also closes the door on a rare glimpse into the enduring mystery of private wealth in the oil-rich kingdom.

The Bloomberg Billionaires Index, a daily ranking of the world’s 500 richest people, has documented 15 individuals with a combined net worth of $63 billion from Saudi Arabia, a nation of 32 million. In Canada, which has a population of 36 million, the index has counted 31 with a combined $171 billion. In Singapore, a city-state of only 5.6 million people, the index tallies 14 with $85 billion.

The government’s goal of recouping up to $100 billion from the princes and businessmen detained in the purge suggests there may be a lot more wealth hidden in Saudi Arabia. The amount is about equal to the funds it says has been drained from state coffers through corruption.

“Personal wealth is extremely private there,” said Marcus Chenevix, an analyst at investment research firm TS Lombard in London. “It’s no one’s business.”

There are two Saudi royals on the Bloomberg index: Prince Alwaleed bin Talal, who owns publicly traded investment group Kingdom Holding, and Prince Sultan bin Mohammed Al Kabeer, chairman of the country’s biggest dairy company, whose sons were among a group of princes arrested for staging an alleged unlawful protest earlier this month.

Prince Miteb bin Abdullah, former head of the National Guard, paid more than $1 billion for his release three weeks after the November purge. His name wasn’t on any of the world’s wealth rankings at the time. Alwaleed, a backer of Twitter Inc. and Citigroup Inc., could be on the hook for $6 billion.

Crown Prince Mohammed bin Salman, the man behind the crackdown, has been linked to some lavish spending of his own, reportedly dropping more than $1.2 billion on personal assets that include a mansion bought in 2015, a yacht and a Leonardo Da Vinci painting that sold for $450 million, 12 days after he began the purge.

Royal Revenue

Tracking the nation’s billionaires is unusually difficult because financial disclosures are scant. Take the royal family. Thousands of members have probably been receiving stipends from oil in some form since it was first discovered in the 1930s. The income stream could represent a cumulative windfall of more than $260 billion, according to Bloomberg calculations. The payments aren’t detailed in the Saudi budget and are likely doled out before being distributed to the Saudi Arabian Oil Co., say experts, making it virtually untraceable.

Other common avenues of royal self-enrichment have included acting as agents or silent partners for foreign companies, or trading property, where their advantage lies in easy access to the government’s land bank. A leaked 1996 cable published on Wikileaks detailed some of the more nefarious tactics, like defaulting on bank loans and managing “off-budget” state programs.

The true extent of Saudi wealth may even be a mystery to the government itself, which imposes no taxes on income or wealth, so has no reason to assess the personal finances of its citizens. Identifying royals who’ve amassed the kind of wealth that would put them among the world’s richest people is possible only if they break out with a business that’s public or otherwise discloses financials, a rarity for closely held Saudi companies.

“In most societies, wealth gets exposed because people want to expose who’s behind it,” said TS Lombard’s Chenevix. “But if the politicians are the wealthy, if wealth and power are the same thing, that political pressure doesn’t exist.”

(BBG) Alwaleed’s Kingdom Gains Most Since 2014 After Prince Is Freed

(Bloomberg) — Kingdom Holding Co. surged after its
chairman, Prince Alwaleed bin Talal, was released from the Ritz-
Carlton in Riyadh, which served as a prison for billionaires and
princes since the nation started its anti-corruption campaign in
The shares gained 10 percent, the most since November 2014
and the maximum allowed in a day. The billionaire, who also owns
stakes in Citigroup Inc. and Twitter Inc., returned home on
Saturday after reaching a settlement with authorities, a senior
government official said on condition of anonymity. He will
remain at the helm of his company, the official said.
Read More: Saudi Frees Billionaires Including Alwaleed as
Ritz Jail Empties
His departure from the hotel, along with other prominent
Saudi businessmen, marks the end of the first phase of Crown
Prince Mohammed Bin Salman’s anti-corruption campaign. Hundreds
of suspects were arrested or summoned for questioning, including
some of the country’s richest men. The government expects to
reap more than $100 billion from settlements with detainees in
exchange for their freedom.
The shares rose to 10.04 riyals as of 10:52 a.m. in Riyadh,
but they are still more than 2 percent below the level before
the prince was arrested. The Tadawul All Share Index was little
Clothing retailer Fawaz Abdulaziz Al Hokair & Co. also
advanced after billionaire Fawaz Alhokair was also released from
detention. The stock advanced as much as 8.1 percent, the most
since November, before paring its gain to 6.6 percent.

+++ (BBG) Saudis Alarm Their Friends More Than Foes in Mideast Power Plays

(BBG) Trending on Saudi social media last week was a clip of Crown Prince Mohammed Bin Salman promising to go on the offensive against his country’s biggest rival and take the fight “inside Iran.”

The eight-month-old TV interview had taken on a new significance: Violent protests were spreading across Iran. It’s not clear whether Saudi Arabia helped stir them up, as the Islamic Republic’s leaders claimed. What is clear is that the de facto Saudi ruler has made several regional moves against Iran — and has yet to score a win.

If the prince’s enemies aren’t sweating it much, his allies are showing signs of alarm. From the Arab Sunni world, the natural sphere of Saudi influence, to the U.S. and Europe, diplomats have dissociated themselves from the kingdom’s ventures or come out against them.

That made 2017 a mixed year for the leader known as MBS. At home, he shunted rivals aside, cementing an unprecedented rapid rise to power. But in Yemen, Qatar and Lebanon, regional countries where the Saudis seek leadership and perceive a challenge from Iran, his initiatives have foundered.

“MBS approaches domestic and regional politics in a similar, bold fashion,” said Hani Sabra, founder of New York-based Alef Advisory. “Domestically, this has worked well for him. He’s outmaneuvered many influential relatives.” Abroad, the approach “is creating and intensifying risks,” he said.

Ragtag Enemy

The risk from the war in Yemen has been brought home to Saudi cities. The Houthi rebels, said by the Saudis to have Iranian backing, have fired two missiles at Riyadh since November. While causing little damage, they served as a reminder that after almost three years of bombardment, the enemy — mostly ragtag fighters wearing sandals and carrying AK-47s — hasn’t been subdued.

The Saudis haven’t found it easy to draft their allies into that fight. Egypt, for example, heavily dependent on Saudi cash, showed little enthusiasm for sending its soldiers to Yemen — or for Prince Mohammed’s wider plan to combat Iran.

In Lebanon, the prince’s intervention was political, not military. The unexpected resignation of Prime Minister Saad Hariri during a visit to Riyadh in November was seen as a Saudi bid to weaken Iran’s Lebanese ally, Hezbollah. Hariri, a Saudi client, had been governing in coalition with the Shiite militia; now he denounced it as a mortal threat.

The power-play backfired. Hariri ended up returning to his job, and even Lebanese Sunnis were critical of strong-arm Saudi tactics. Allies in Europe and the U.S. weren’t happy either. French President Emmanuel Macron intervened directly on Hariri’s behalf. Secretary of State Rex Tillerson, in an unusual rebuke, said Saudi Arabia should “think through the consequences” of its actions.

Tillerson cited Yemen, Lebanon — and Qatar, the target of a Saudi-led economic embargo since June. The measure was intended to punish the Gulf monarchy for offenses including its cordial ties with Iran.

Those relations have only deepened under the boycott; meanwhile Kuwait and Oman, fellow members of the club of Gulf monarchies, have expressed unease at the assertive new style of Saudi leadership. And Turkey, a powerful Sunni country once close to the Saudis, has taken Qatar’s side, using the dispute as a chance to forge closer military and commercial ties.

‘Mideast’s Hitler’

Prince Mohammed, who’s called Iran’s supreme leader “the new Hitler of the Middle East,” has been emboldened by the alliance he’s forged with U.S. President Donald Trump, based on shared antagonism toward Iran.

Yet the Saudi leader runs the risk of overplaying his hand, especially if he tries to use the Iranian protests as an opportunity to weaken the regime in Tehran, according James Dorsey, a Middle East specialist at Singapore’s Nanyang Technological University.

“Iran would no doubt want to avoid a direct confrontation,” but it has the ability to retaliate through proxies in Lebanon and Iraq, and to foment unrest among Shiites in Bahrain and inside Saudi Arabia itself, Dorsey said.

Also, the Saudi pushback is dependent on U.S. efforts to contain Iran, he said — “an increasingly risky strategy” given that Trump has little international support. After recognizing Jerusalem as Israel’s capital, and with a series of deadlines looming that may lead Washington further away from the global consensus on the Iran nuclear deal, the U.S. is becoming isolated.

Checkbook Diplomacy

Domestically, Prince Mohammed has had more success advancing his agenda. He argues that a drastic economic overhaul is essential to end decades of oil dependence.

As well as securing his own position as undisputed heir to his father King Salman’s throne, the prince has launched an anti-corruption campaign, detaining dozens of elite businessmen. He has relaxed some of the kingdom’s strict religious rules and outlined plans to sell state assets, bolster private industry and trim public spending.

Similar motives may underlie the new foreign policy. Prince Mohammed is scrapping a tradition of “checkbook” diplomacy that didn’t get results, according to Ali Shihabi, executive director of the Arabia Foundation in Washington, who’s close to the Saudi government.

“Saudi leaders funneled billions in aid to friends, many of whom used that money to bankroll their own agendas,” Shihabi said in an e-mail. In the face of rapidly growing threats, he said, “the king and the crown prince concluded that Saudi Arabia could no longer rely on outdated policies.”

‘Doesn’t Care’

But the near-absolute power that Prince Mohammed enjoys in the kingdom doesn’t extend beyond its borders. He may not be sensitive to the different approach required in foreign policy, according to Sabra.

“MBS is either not acutely aware of, or doesn’t care about the details of the domestic conditions in the region’s other states,” he said. “This is often at the root of the problems.”

Arab strongmen of the past have found out the hard way that domestic success — consolidation of power and wealth, marginalization of enemies — didn’t allow them to reshape the Middle East the way they hoped.

Egypt’s Gamal Abdel Nasser was unable to win a war in Yemen, and then suffered a shattering defeat at Israel’s hands in 1967. Saddam Hussein ruled Iraq for decades; his ventures abroad, including the 1980 attack on Iran and the 1990 invasion of Kuwait, ended in bloody failure.

Prince Mohammed, who’s 32, may be attempting to differentiate himself from previous Saudi leaders and from his 81-year-old father, according to Paul Pillar, a former CIA officer who’s now a professor at Georgetown University.

“MBS probably feels urgency to make a mark — to show that he is in charge, and to show that he is not a young pushover,” Pillar said. “This implies a greater need than other leaders might have to take risks. Greater risks means more opportunities for failure.”

+++ (BBG) Aramco Joins Saudi Companies Boosting Pay After Royal Orders

(BBG) Menacorp’s Nabil Al Rantisi discusses Saudi Arabian companies boosting pay for “eligible employees.”

Saudi Arabian Oil Co. and some of the kingdom’s biggest companies said they’ll pay Saudi staff more money, matching a royal order that extended handouts to government workers to ease public discontent over rising prices.

Aramco, preparing for what could be the world’s largest initial public offering, will pay “eligible employees” an extra 1,000 riyals ($267) a month for one year beginning in January, it said in response to questions from Bloomberg. The payments will be for workers inside the kingdom who make 20,000 riyals a month or less, according to two people familiar with the decision.

People who belong to the apprenticeship and college degree program will get an extra 10 percent of their monthly stipend over the same period, the company said.

The decision may not go down well with investors as Saudi Arabia seeks to sell as much as 5 percent of the company. The share sale is part of Crown Prince Mohammed bin Salman’s plan to set up the world’s biggest sovereign wealth fund and reduce the economy’s reliance on hydrocarbons.

Investors considering the IPO “will look at efficiency and cost control” to achieve the best possible returns, said Tariq Qaqish, managing director of the asset-management division at Mena Corp. Financial Services LLC in Dubai. If Aramco wants to attract long-term investors, its management should watch key performance indicators closely, he said.

Aramco joins some of the kingdom’s largest companies in the decision to temporarily boost wages after King Salman decided to pay Saudi civil servants an extra 1,000 riyals a month to ease the burden of austerity. Saudi Basic Industries Co.Al Rajhi Bank and National Commercial Bank announced similar measures, according to Saudi-owned Al-Arabiya television. Samba Financial GroupSaudi Research and Marketing GroupSaudi Electricity Co. and the local stock exchange are among other companies giving allowances to employees.

“There is a financial impact on the company for sure but this won’t be significant because Aramco’s profit margin is one of the highest in the industry due to the low cost base it has,” said Mazen al-Sudairi, head of research at Al Rajhi Capital Co. “The Saudi government relies heavily on Aramco and oil income for the foreseeable future and maintaining the profitability of the company is still a priority for the government.”

The allowances follow complaints from Saudis on social media and television about rising prices after the government introduced a 5 percent value-added tax and a substantial increase to gasoline prices and electricity tariffs, all on Jan. 1. The measures were part of Prince Mohammed’s plan to raise non-oil revenue and repair public finances strained by low oil prices, but they stirred grumbling and frustration among citizens in a state built on an exchange of government largess for political loyalty.

In response, royal decrees issued early Saturday restored an annual pay raise for Saudi civil servants and ordered a 5,000-riyal bonus for soldiers fighting in the kingdom’s war in Yemen. On his Twitter account, royal court adviser Saud Al Qahtani said the measures will cost the government more than 50 billion riyals and called for private sector companies to respond in turn.

Read More: Saudi Arabia Arrests 11 Princes Protesting Over Utility Bills

The handouts show how the kingdom’s rulers are struggling to find a balance between the need to avoid unrest and take the difficult steps needed to reduce what policy makers and economists see as an unsustainable reliance on oil revenue.

Mohamed Abu Basha, an economist at Cairo-based investment bank EFG-Hermes, estimates that the measures could add as much as 0.5 percentage point to non-oil gross domestic product growth. The payments will “nearly negate 2018’s planned fiscal consolidation” barring an unexpected increase in oil prices, he said.

“The move is definitely positive for 2018 GDP growth outlook but clearly at the expense of fiscal discipline,” he said. “It also confirms worries that authorities will use any fiscal room created by rising oil prices to defer fiscal reforms.”

(BBG) In Saudi Crackdown, There’s More Than Alwaleed’s Empire At Stake

(BBGIn the increasingly drawn-out case of Prince Alwaleed bin Talal, the public face of the Saudi royal family to many foreign executives and investors, there’s more at stake than taking over his global business empire and talks on a settlement have hit an impasse.

In Saudi Crackdown, There's More Than Alwaleed's Empire At Stake

Saudi Prince Mohammed bin Salman is about to enter a crucial few months that will show his true motives

Almost two months into it, Saudi Arabia’s crackdown on corruption is yielding at least some of the $100 billion the kingdom is targeting. Dozens of former officials and businessmen have exchanged part of their wealth for freedom.

But in the increasingly drawn-out case of Prince Alwaleed bin Talal, the public face of the Saudi royal family to many foreign executives and investors, there’s more at stake than taking over his global business empire and talks on a settlement have hit an impasse.

The Saudi crown prince, Mohammed bin Salman, is about to enter a crucial few months that will show his true motives and the scope of his power.

How the case unfolds will help investors and diplomats answer a question puzzling them since the nightly raids of Nov. 4: Whether the purge is an effort to root out graft before selling shares in the country’s oil giant, or simply a shakedown to boost state coffers while he asserts himself at home and abroad.

People with knowledge of the matter say Alwaleed is balking at demands that could see him relinquish control of Kingdom Holding Co. He also is resisting any suggestion of wrongdoing because of the impact it would have on his reputation, they said. The prince owns the vast majority of the $9 billion conglomerate, which has stakes in household names from Citigroup Inc. to Twitter.

“The Alwaleed case will define the crackdown to western investors,” said Emily Hawthorne, Middle East and North Africa analyst at Texas-based advisory firm Stratfor. The longer Alwaleed remains behind closed doors, the more the government “appears the unreasonable actor,” she said.

The crushing of opponents fits into a pattern of what Arab and Western diplomats describe as an aggressive policy that is unsettling even some of Saudi Arabia’s allies.

Alwaleed and other remaining suspects are held at the Ritz-Carlton in Riyadh, a palatial hotel that hosted U.S. President Donald Trump in May. No official charges have been made public against any of the detainees, who numbered 159 at a count earlier this month.

The 62-year-old nephew of King Salman used his royal wealth to invest in industries from banking to aviation, hospitality and real estate. The Wall Street Journal reported this month that authorities are demanding at least $6 billion to settle his case. His net worth has declined by about $2 billion to $18 billion since his detention, according to data compiled by Bloomberg.

Prince Miteb, son of the late King Abdullah and the former head of the powerful National Guard Corps, was released after paying the equivalent of more than $1 billion, a senior Saudi official said last month.

“Prince Alwaleed is powerful and well connected, but this may not end well given that he is in a battle with an even more powerful group,” said Paul Sullivan, a Middle East specialist at Georgetown University in Washington. The purge is “a harsh way to show that some of the old ways of doing business are over to a great degree,” he said.

Kingdom Holding said in a Nov. 6 statement it had the full confidence of the Saudi government. Officials at the company didn’t respond to a request for further comment when contacted by email. The government’s Center for International Communication said it can’t comment due to Saudi laws protecting an individual’s right to privacy.

The 32-year-old crown prince ditched the traditional Saudi decision-making process that moved at a glacial pace, but preserved consensus among the royals. His domestic efforts have been more successful than his foreign ones.

He plunged Saudi Arabia into a costly war against pro-Iranian rebels in Yemen and led efforts to isolate neighboring Qatar. While pro-Saudi forces are gradually gaining ground in Yemen, rebel missiles have reached Riyadh twice in the past two months. The standoff with Qatar has gone nowhere.

The kingdom was also widely blamed for orchestrating the shock resignation of Lebanese Prime Minister Saad Hariri from Riyadh in November, a claim that Saudi officials denied. It sparked outrage in Lebanon, a chilly reaction from Egypt and the U.S., and a French intervention that helped Hariri remain in office.

At home, the prince, known among journalists and diplomats as MBS, cemented his power by sidelining senior princes. Security forces rounded up government critics before a decision to lift a ban on women driving in September. He is also spearheading an ambitious plan to overhaul an economy too reliant on petrodollars, with the sale of a small stake in monopoly oil producer Saudi Aramco in 2018 underpinning it.

“We have reason to be more optimistic about his domestic projects than his foreign ones,” Hawthorne said. “He has carefully consolidated power domestically whereas each of his foreign forays have so far mostly struck out.”

Prince Mohammed’s supporters say he has no option other than to move fast and act decisively to end the economy’s unsustainable oil addiction and prevent Shiite-ruled Iran from dominating the Middle East.

The corruption probe had to take place without delay so investors “know it’s a level playing field,” Commerce and Investment Minister Majid Al-Qasabi said in an interview on Dec. 13 in Riyadh. “We can’t tolerate the perception that you have to corrupt officials to get into a business in Saudi Arabia,” he said. Asked about Alwaleed, the minister said the billionaire prince was “negotiating his settlement.”

For decades, prominent businessmen benefited from close ties with royal princes to win major contracts and help international companies gain a foothold in the country.

In a secret 1996 cable published by WikiLeaks, a U.S. diplomat in Riyadh reported that a handful of the most senior princes enriched themselves by skimming from “off-budget” programs that received 12.5 percent of the country’s oil revenues. The diplomat said some royals used their power to confiscate land and resell it at a profit to the government.

“Saudi Arabia has an economic and political system based on the privileged position of the royal family,” said Paul Pillar, a former CIA officer who is now an academic. “MBS’s moves have taken a form that can best be described as a shakedown. And, of course, his political ambition and what appears to be a drive for absolute power cannot be separated from any of this.”

+++ (BBG) Saudi Billionaires Said to Move Funds to Escape Asset Freeze

(BBG) Wealthy Saudis are moving assets out of the region to avoid the risk of getting caught up in what authorities call a crackdown on corruption, according to people with knowledge of the matter.

Some Saudi billionaires and millionaires are selling investments in neighboring Gulf Cooperation Council countries and turning them into cash or liquid holdings overseas, the people said. They spoke on condition of anonymity because of the sensitivity of the matter. In Saudi Arabia, some are in talks with banks and asset managers to move money outside the country, the people said.

Based on investigations over the past three years, authorities estimate that at least $100 billion has been misused “through systematic corruption and embezzlement over several decades,” Attorney General Sheikh Saud Al Mojeb said in a statement on Thursday. A total of 208 individuals have been called in for questioning so far and seven have been released without charge, he said.

Until the surprise arrests of dozens of people last weekend, Saudi Arabia’s elite was the darling of Deutsche Bank AG, UBS Group AG, Credit Suisse Group AG and other global banks seeking to manage their wealth. They now find themselves on the run in the face of a campaign that has targeted some of the kingdom’s most prominent princes, billionaires and officials.

“There is no doubt that many offshore investors are reassessing their view of the Gulf as a stable and predictable place to do business,” said Philippe Dauba-Pantanacce, a London-based senior economist and geopolitical strategist at Standard Chartered Bank. “There is a growing perception that governance is becoming increasingly arbitrary or at least less rule-based.”

UAE Freezes

The central bank asked lenders in the kingdom to freeze the accounts of dozens of individuals who aren’t under arrest, as well as the assets of those being detained, people familiar with the matter said.

In addition, the United Arab Emirates central bank asked financial institutions to provide information on the accounts of 19 Saudi citizens, people familiar with the matter said Thursday. The regulator asked to be informed of any accounts, deposits, investments, financial instruments, credit facilities, safe deposit boxes or financial transfers linked to the people, according to a circular seen by Bloomberg.

FX Reserves

While efforts to curb corruption are welcome, the “speed and breadth of the crackdown has stirred fear among investors,” said Jason Tuvey, London-based Middle East economist at Capital Economics. “There’s the added concern here that the political uncertainty leads to a period of capital outflows that forces SAMA to burn through its foreign-exchange reserves at a faster pace,” he said, referring to the Saudi Arabian Monetary Authority, as the central bank is known.

The arrests have prompted investors from within the region to sell. The selloff across the GCC has cost stocks $17.6 billion as of Wednesday, dragging the collective market capitalization for bourses in the region to $900 billion, according to data compiled by Bloomberg. Gulf investors sold a net $92.5 million of Dubai stocks on Tuesday, the most since February. The benchmark Tadawul All Share Index closed up 0.3 percent in Riyadh.

The crackdown started after King Salman formed an anti-corruption commission on Saturday, headed by his son and heir, Crown Prince Mohammed Bin Salman. Among those detained was Prince Miteb Bin Abdullah. He was also removed from his post as head of the powerful National Guard, a move that reinforced speculation the king was preparing to hand over power to his son. Prince Alwaleed bin Talal, the world’s 61st-richest person, also was arrested.

Economic Struggle

Mohammed bin Salman

Photographer: Simon Dawson/Bloomberg

The purge is affecting some of Saudi Arabia’s richest families. For decades, they benefited from a close relationship with the country’s rulers, which helped them win major contracts and partner with international companies seeking a foothold in the Arab world’s biggest economy.

Read More: Saudi Tensions Prompt Gulf Investors to Dump Region’s Stocks

It also comes at a time when the economy is struggling to cope with the slump in oil prices: Unemployment among Saudis is rising and non-oil gross domestic product is barely expanding. The government has raised tens of billions of dollars from international bond markets and has drawn down on central bank reserves to finance a budget deficit that reached about 15 percent of gross domestic product in 2015.

The shift in assets is “unsurprising given a true corruption cleanup would go much further than the events of the weekend,” said Emad Mostaque, London-based co-chief investment officer of emerging-markets hedge fund Capricorn Fund Managers Ltd. The central bank “has strong systems in place to track flows and excellent relationships with major banks globally so any assets moved offshore could be frozen and returned if from corruption.”

Some of the country’s wealthy are worried that shifting assets outside Saudi Arabia may draw suspicion and are instead focusing on their GCC holdings, two people with knowledge of the matter said.

Transformation Plan

Saudi Arabia is also in the midst of implementing a transformation aimed at weaning the economy off oil. The government plans to create the world’s largest sovereign fund and sell hundreds of state assets, including Saudi Arabian Oil Co., as well as stakes in the stock exchange, soccer teams and flour mills.

Concerns of a renewed confrontation between Saudi Arabia and Iran is also prompting investors to dump stocks in the region. Lebanese Prime Minister Saad Hariri resigned on Saturday, announcing his decision from Saudi Arabia and blaming Iran and the Hezbollah militants it backs for the his decision.

Kuwait’s SE Price Index has lost 4.4 percent, while Dubai’s DFM General Index fell 4.8 percent. All measures in the region are down for the week with the exception of Oman’s MSM30 Index, which rose 0.3 percent.

“A lot of GCC money is already sitting outside the GCC region, especially in Paris, Geneva, Zurich and Asia,” said Sergey Dergachev, who helps oversee about $14 billion in assets as a senior money manager at Union Investment Privatfonds GmbH in Frankfurt. “Those centers should remain beneficiaries if more money moves out.”

(Economist) Saudi Arabia’s unprecedented shake-up

(Economist) Muhammad bin Salman has made himself the sole face of Saudi policy

EVEN by standards of recent palace intrigues, it was a dizzying Saturday in Saudi Arabia. On November 4th the kingdom announced that scores of people had been held in a massive anti-corruption sweep. The best-known figure was Prince Alwaleed bin Talal, a billionaire businessman and investor who owns big chunks of American firms such as Citigroup and News Corporation. But the detainees also include ten other princes; dozens of current and former ministers; the chairman of the Saudi Binladin Group, a construction conglomerate; and the owner of MBC, the largest satellite network in the Middle East. Some are reportedly being held in Riyadh’s opulent Ritz-Carlton, which told paying guests to leave and stopped accepting new bookings. Private jets were grounded in a bid to stop wealthy businessmen from leaving the kingdom.

Even more significant is the separate move to sack several ministers, notably Prince Mutaib bin Abdullah, the commander of the National Guard, consolidating the power of the young crown prince, Muhammad bin Salman (often known as MBS), the hugely ambitious son of King Salman.

To call all of this unprecedented would be an understatement. For decades, Saudi kings tried to forge consensus within the sprawling royal family. Change was incremental and power was divided, particularly among members of the so-called Sudairi Seven branch—the sons of King Abdulaziz, the founder of the state, and his favourite wife, Hussa bint Ahmed Al Sudairi.

Power among the brothers has long been balanced delicately. One Sudairi, Prince Sultan, served as defence minister for 48 years. Another, Prince Nayef, and later his son Muhammad, controlled the interior ministry for more than four decades. And since 1963 the National Guard was the preserve of Prince (later King) Abdullah and his clan.

All three positions are now under the control of MBS. The crown prince became defence minister just hours after his father (also a Sudairi) ascended the throne in 2015. In June the ruling duo sacked the interior minister, Muhammad bin Nayef, the former crown prince, and placed him under house arrest. On Saturday they finished the job by sidelining Prince Mutaib, the second son of the late King Abdullah, who had once been mooted as a possible future king.

The shake-up of the top economic and military posts officially bore the name of the fading monarch. But real power rests with his son. Just 32, he has gathered unprecedented power and is attempting to ram through an ambitious social and economic agenda to modernise the country and wean it off oil.

In September police rounded up dozens of critics, from Muslim clerics to human-rights activists. Then the king abruptly decreed that women would be allowed to drive next year, ending a decades-long ban. A few weeks later MBS wooed investors at a glitzy conference in Riyadh, where he spoke of the need for “moderate Islam” and announced plans for a $500bn economic zone, called Neom, which would be staffed largely by robots. He has a long list of other economic and cultural reforms, from opening cinemas to offering part of Aramco, the state-owned oil giant, in an IPO.

The domestic turmoil comes at an already fraught moment for Saudi Arabia. A ruinous two-and-a-half-year war in Yemen, meant to crush Houthi rebels who ousted the government in 2015, has plunged that country into a humanitarian crisis. Though the Houthis have lost territory, they still control Sana’a, the capital, and most of northern Yemen. As the Saudi shake-up began on Saturday night, they fired a ballistic missile at Riyadh. (It was intercepted.) Just as unsuccessful is the five-month-old blockade of Qatar, which was meant to force the gas-rich emirate to drop its support for Islamist groups.

Meanwhile Saudi Arabia’s arch-rival, Iran, is gaining influence across the region. Indeed, Saturday’s wild news started with the resignation of Saad Hariri, Lebanon’s pro-Saudi prime minister. Mr Hariri announced the move from Riyadh, blaming Iran’s malign influence on his country and saying he feared being assassinated, as his father, a previous prime minister, was in 2005.

Many ask themselves whether the Saudi palace purges are a sign of strength, or reflect nervousness about internal resistance to MBS’s wrenching changes. Few believe the official talk of a clamp-down on corruption. In many ways, the latest arrests seem unnecessary. Aside from Prince Mutaib, the blacklisted officials are a weak lot. Though Prince Waleed is rich, brash and outspoken, he is also an outsider, a prince with little influence on Saudi policy.

Still, the arrests send a message to other would-be critics. MBS, more than any other leader in decades, has fashioned himself the sole face of Saudi policy. If his ambitious plans falter, Saudis will know whom to blame.

(BBG) Saudi Arabia Just Announced Plans to Build a Mega City That Will Cost $500 Billion

(BBG) Saudi Crown Prince Mohammed bin Salman announced plans to build a new city on the Red Sea coast, promising a lifestyle not available in today’s Saudi Arabia as he seeks to remake the kingdom in a time of dwindling resources.

The prince said the city project, to be called “NEOM,” will operate independently from the “existing governmental framework” with investors consulted at every step during development. The project will be backed by more than $500 billion from the Saudi government, its sovereign wealth fund and local and international investors, according to a statement released on Tuesday at an international business conference in Riyadh.

Mohammed bin Salman on Oct. 24.

Photographer: Fayez Nureldine/AFP via Getty Images

The new project will likely surprise investors still trying to take stock of a series of major announcements made by the prince during his meteoric rise to power as he seeks to prepare Saudi Arabia for the post-oil era. In less than two years, he’s revealed plans to sell a stake in oil giant Saudi Aramco and create the world’s largest sovereign wealth fund, and has ended a long-standing ban on female drivers.

The prince, 32, made a rare public appearance at the conference to promote the project, telling the bankers and economic policy makers in attendance that the kingdom is moving to a “new generation of cities.” NEOM will be powered by clean energy, he said, and will have no room “for anything traditional.”

Click here for a fact sheet on the project

It will likely be met with the same mixture of optimism and doubt that has greeted his previous headline-grabbing announcements. His supporters can be expected to cheer what they see as a bold drive to transform the kingdom, while others will point to past failed attempts to overhaul the Saudi economy that also included industrial cities in the desert.

International Connections

The ambitious plan includes a bridge spanning the Red Sea, connecting the proposed city to Egypt and the rest of Africa. Some 10,000 square miles (25,900 square kilometers) have been allocated for the development of the urban area that will stretch into Jordan and Egypt.

Klaus Kleinfeld, the former chairman and chief executive officer of Siemens AG and Alcoa Inc., was appointed to lead the development of NEOM. SoftBank Group Corp.’sVision Fund on Tuesday signed an initial agreement with the kingdom’s wealth fund to buy a “significant” stake in state-controlled Saudi Electricity Co., and will provide energy for the new city. Saudi Arabia this year agreed to become a cornerstone investor in the Vision Fund.

The project “seems to be broadly modeled on the ‘free zone’ concept pioneered in Dubai, where such zones are not only exempt from tariffs but also have their own regulations and laws, hence operating separately from the rest of government,” said Steffen Hertog, a professor at the London School of Economics and longtime Saudi-watcher. “In Dubai, this has worked well, but attempts to copy it have done less well in the region.”

Conservative Clerics

A promotional video released on Tuesday features a lifestyle so far unavailable in Saudi cities. It showed women free to jog in leotards in public spaces, working alongside men and playing instruments in a musical ensemble. The one woman wearing a hijab had her head covered with a patterned pink scarf.

The kingdom has already announced a plan to transform hundreds of kilometers of Red Sea coast into a semi-autonomous world-class tourism destination and governed by laws “on par with international standards.”

Read More: Saudi Arabia Unveils Plans to Draw Tourists to Red Sea Beaches

The unveiling of the new project comes as Saudi officials, almost two years into the latest reform drive, are still grappling with how to speed up change without crippling the economy and clashing with the kingdom’s conservative religious establishment.

The world’s biggest oil exporter wants to overhaul the economy while creating enough wealth to avoid the risk of social unrest. Similar efforts over the past three decades have floundered, with plans losing steam as soon as crude prices recovered. Some landmark projects, such as a $10 billion financial district in Riyadh, are struggling to take off.

Details Needed

“Saudi Arabia has announced a number of mega-projects recently, but what investors will ultimately look for is greater details, progress with plans and initial investment,” said Monica Malik, chief economist of Abu Dhabi Commercial Bank. And while the planned, more liberal, regulatory framework for the city “could be positive for streamlining investment,” it didn’t gain traction with previous economic cities developed in the kingdom, she said.

Read More: The Remaking of Saudi Arabia: This Time It Can’t Afford to Fail

Prince Mohammed, who became heir to the throne this summer after his older cousin was removed from office, has vowed not to repeat past mistakes, insisting that his Vision 2030 will proceed regardless of oil prices. His government has cut subsidies, slashed spending to trim the budget deficit and it plans to introduce value-added taxation next year to raise non-oil revenue.

Hertog said investors will want to see whether “circumventing some of the slow mainline bureaucracy and general social restrictions in Saudi Arabia in a special zone” can work. “If this is to be an international hub, it needs to offer something better than Dubai, which is a high bar to cross,” he said.

The crown prince indicated he understood the challenge. “Dreaming is easy, achieving it is difficult,” he said.

(BBG) Saudis May Raise Domestic Gasoline Prices by 80%


A man fills his vehicle with gas near the city of Qassim, north west of Riyadh, Saudi Arabia.

Photographer: Simon Dawson/Bloomberg

Saudi Arabia is considering a plan to phase out subsidies for gasoline and jet fuel in November at the latest, as the world’s biggest oil exporter pushes a program to curtail spending after a global slump in prices.

The government would boost gasoline to parity with varying international prices under the plan, according to a person with knowledge of the matter. At current levels, this could result in a hike of about 80 percent for octane-91 grade gasoline to about 1.35 riyals per liter (0.36 cents), the person said on condition of anonymity. The government plans to delay increases in other energy prices until early 2018, the person said.

Authorities are expected to make a final decision on the plan in September or October, the person said. The Saudi finance, economy and energy ministries didn’t immediately respond to requests for comment.

Energy-subsidy reform is a key part of Saudi Arabia’s plan to overhaul the economy, along with the sale of stakes in state-owned entities, including the world’s biggest crude exporter known as Saudi Aramco. The kingdom raised fuel prices in December 2015 and announced plans for further increases. Authorities have also announced plans for a cash transfer program that would start before further subsidy cuts to help Saudis cope with the impact as the economy struggles with the worst slowdown since the global financial crisis.

“It is important for the Saudi government to cut subsidies in order to ease pressures on budget deficit,” Tariq Qaqish, managing director of the asset management division at Mena Corp. Financial Services LLC in Dubai, said by email. “Not only the transportation and logistics sectors will be affected significantly, any company that is involved in production and needs to transfer their end products to consumers will be affected.”

Political Sensitivity

The kingdom’s benchmark Tadawul All Share Index climbed 0.3 percent at 12:57 a.m. in Riyadh on Monday. The transportation index fell 0.7 percent, the most in a month.

Removing energy subsidies is politically sensitive in the six-nation Gulf Cooperation Council, where many nationals have grown accustomed to generous state benefits and handouts. The slump in revenue from oil exports have left governments with few options as they grapple with rising budget deficits.

Saudi Arabia’s budget gap soared to more than 15 percent of economic output in 2015 before authorities unveiled a plan to transform the economy and balance the budget by 2020.

The neighboring United Arab Emirates became the first country in the oil-rich region to remove subsidies on transport fuel when it began linking gasoline and diesel prices to global oil markets in August 2015.

Gasoline and jet fuel would undergo immediate, one-time increases under the Saudi plan, while the government would raise prices of other fuels gradually between 2018 and 2021, the person said.

Diesel, Heavy Fuel

The government may put a ceiling on increases in diesel and heavy fuel oil to limit any negative impact on the economy, as both fuels are used for power generation and industrial activities, the person said. Electricity rates would rise gradually as power providers passed on at least some of the increase in fuel prices, the person said.

Benchmark Brent crude has lost about 2 percent this year and was trading at $55.63 a barrel on Monday at 11:22 a.m. in London.

“The government is taking its first step in removing subsidies for some fuel,” said John Sfakianakis, director of economics research at Gulf Research Center. “And over the long term, the economy will become a more efficient user of energy in general, and gasoline in particular.”

(Reuters) Addiction and intrigue: Inside the Saudi palace coup

(Reuters) On Tuesday June 21 Mohammed bin Nayef, a powerful figure in Saudi Arabia’s security apparatus for the past two decades and the next in line to the throne, was summoned to meet King Salman bin Abdulaziz on the fourth floor of the royal palace in Mecca.

There, according to a source close to MbN, as he is known, the king ordered him to step aside in favor of the king’s favorite son, Mohammed bin Salman. The reason: an addiction to painkilling drugs was clouding MbN’s judgment.

    “The king came to meet MbN and they were alone in the room. He told him: ‘I want you to step down, you didn’t listen to the advice to get treatment for your addiction which dangerously affects your decisions’,” said the source close to MbN.

The new details about the extraordinary meeting between the king and MbN that touched off the de facto palace coup help to explain the events that are reshaping the leadership of the world’s biggest oil exporting nation.

Reuters could not independently confirm MbN’s addiction issues.

A senior Saudi official said the account was totally “unfounded and untrue in addition to being nonsense”.

“The story depicted here is a complete fantasy worthy of Hollywood,” the official said in a statement to Reuters, which did not refer to MbN’s alleged use of drugs.

The official said MbN had been removed in the national interest and had not experienced any “pressure or disrespect”. Reasons for his dismissal were “confidential”.

Sources with knowledge of the situation said however that the king was determined to elevate his son to be heir to the throne and used MbN’s drug problem as a pretext to push him aside.

Three royal insiders, four Arab officials with links to the ruling house of Saud, and diplomats in the region, told Reuters that MbN was surprised to be ordered to step aside.

    “It was a big shock to MbN,” said a Saudi political source close to MbN. “It was a coup. He wasn’t prepared.”

The sources said MbN did not expect to be usurped by the often impulsive Mohammed bin Salman, who MbN considered to have made a number of policy blunders, such as his handling of the Yemen conflict and cutting financial benefits to civil servants.

    The high-stakes power grab has placed sweeping powers in the hands of the 32-year-old Mohammed bin Salman, also known as MbS, and appears designed to speed his accession to the throne.

    Should he get the job, the young prince will preside over a kingdom facing tough times from depressed oil prices, the conflict in Yemen, rivalry with an emboldened Iran and a major diplomatic crisis in the Gulf.

The source close to MbN acknowledged that he had health issues, which were aggravated after an al Qaeda attacker tried to blow himself up in front of him in his palace in 2009. The health issues were corroborated by three other sources in Saudi Arabia and Arab official sources with links to the royal family.

An Arab source with close Saudi links also provided a similar account of the meeting at which King Salman asked MbN to step down because of his alleged drug addiction.

    These sources said MbN had shrapnel in his body that could not be removed and he depended on drugs such as morphine to alleviate the pain. One source said MbN had been treated in clinics in Switzerland on three occasions in recent years. Reuters was unable to confirm this independently.

A Palace Coup

The King moved ahead of a meeting of the Political and Security Council. The meeting was due to start at 11 pm, but a few hours before that, MbN received what he viewed as a routine phone call from Mohammed bin Salman. According to the source close to MbN, Mohammed bin Salman told MbN that the king wanted to see him.

    In the hours that followed the meeting in which MbN was dismissed, the House of Saud’s Allegiance Council, comprising the ruling family’s senior members, were informed of a letter written in the name of the king.

    Drafted by palace advisers to MbS, it said MbN had a medical condition – drug addiction – and “we have been trying for over two years to persuade him to seek treatment but to no avail”.

“Because of this dangerous situation we see that he should be relieved of his position and that Mohammed bin Salman be appointed in his place,” the Saudi source close to MbN quoted excerpts of the letter as saying.

FILE PHOTO: Crown Prince Muhammad bin Nayef of Saudi Arabia confers with a member of his delegation during a high-level meeting on addressing large movements of refugees and migrants at the United Nations General Assembly in Manhattan, New York, U.S., September 19, 2016.Lucas Jackson/File Photo

The letter was read over the phone to members of the Allegiance Council, while MbN was kept isolated in a room all night, his mobile phone removed, and cut off from contact with his aides. His bodyguards from elite paramilitary interior ministry units were also replaced.

    Envoys were sent to council members to get their signatures. All but three of 34 signed. The coup had worked.

    Calls by council members who backed MbN’s removal were recorded and played to him by a palace adviser to demonstrate the strength of the forces against him and to discourage any urge the 57-year-old crown prince might have to resist.

    According to two Saudi sources with links to the royal house, only three members of the council opposed his overthrow: Ahmed bin Abdulaziz, a former interior minister, Abdulaziz bin Abdallah, a representative of the family of late king Abdallah, and Prince Mohammad bin Saad, a former deputy governor of Riyadh. The three could not immediately be reached for comment.

At dawn MbN gave up. He told a palace adviser that he was ready to see the king. The meeting was short. MbN agreed to step down and signed a document to that effect.

    When MbN left the king’s quarters, he was surprised to see MbS waiting for him, the adviser said. MbN was embraced and kissed by MbS while television cameras rolled.

    Soon afterward a pre-written statement was released announcing the king’s decision to make his son the next crown prince. This was the clip that would play on all Saudi and Gulf media over the coming hours and days.

House Arrest

    MbN remains under house arrest to keep him out of circulation following his overthrow, with no visitors allowed except close family members. He is not taking calls, the source close to MbN said. In the past week he was only granted permission to visit his elderly mother with the new guards assigned to him.

The senior Saudi official said, however, that MbN had received guests, including the king and the new crown prince.

    The source close to MbN said he would like to take his family to Switzerland or London but the king and MbS had decided that he must stay. “He wasn’t given any choice.”

    The White House and CIA declined to comment. A senior administration official said Washington knew that MbS was the favorite of the king but “beyond that it’s very opaque”.

   The elevation of MbS had been predicted by some Saudi and Western officials, but it came much sooner than expected with a rushed exit for MbN.

    Since King Salman’s accession, there had been clear indications that MbS was favored over MbN, setting the stage for the younger prince to eclipse the formal heir to the throne.

    MbS was given unprecedented power by his ailing 81-year-old father, which he used to reorder the top jobs in the political, oil, security, security and intelligence sectors, often without the knowledge of MbN, according to diplomats and Saudi political and security sources.

    Since Salman took the helm just over two years ago, MbS has placed his men in key positions. MbS has been interfering in MbN’s interior ministry, appointing, promoting and firing officers without informing him.

The succession quarrel, the sources said, began in 2105 when MbN’s personal court was disbanded and merged with the court of the king, preventing MbN from bestowing independent patronage and cultivating support. This was followed by the sacking of Saad al-Jabri, MbN’s security adviser.

    When Donald Trump entered the White House, MbS cultivated contacts in Washington to offset the strong support that MbN had in the U.S. security and intelligence establishment because of his successes against al Qaeda.

    The source close to MbN told Reuters the putsch went ahead after MbS struck up a strong relationship with Trump’s son-in-law and adviser, Jared Kushner. A spokesman for Kushner did not respond to a request for comment.

  With MbS’s sudden ascent, there is now speculation among diplomats and Saudi and Arab officials that King Salman is poised to abdicate in favor of his son.

    Quoting a witness at the palace, one Saudi source said King Salman this month pre-recorded a statement in which he announces the transfer of the throne to his son. The announcement could be broadcast at any time, perhaps as soon as September.

+++ V.V.I. (BBG) The Rise of a Prince Ends Doubts Over Saudi Arabia’s Direction

(BBG) Mohammed bin Salman’s elevation as Saudi heir also has international ramifications.

Saudi Crown Prince Mohammed bin Salman.


With the anointment of Prince Mohammed bin Salman as heir to the Saudi throne, any doubts over the continuation of policies that have shaken up the Middle East have gone.

Western diplomats already referred to the 31-year-old as “Mr. Everything,” because of his control over most aspects of domestic, foreign and defense affairs. His elevation ends a behind-the-scenes struggle for power and answers the question of what would happen to his plans for Saudi Arabia when King Salman, now 81, dies or steps aside.

The most ambitious of these, Vision 2030, seeks to recalibrate the economy to end the country’s near-total dependence on oil revenue. But internationally, there are also ramifications.

Last month, the prince again raised the stakes in the regional rivalry with Iran, saying that dialog was “impossible” as they fight a proxy war in Yemen. He also led a multi-nation effort to isolate neighboring Qatar, causing a rift among fellow members of the Gulf Cooperation Council. That also looks set to turn into another long and potentially fruitless test of wills as Iran and Turkey come to Qatar’s aid.

“The switch offers him the legitimacy and consensus of becoming the next king and that will validate his vision, his plans and his policies,” said Sami Nader, head of the Beirut-based Levant Institute for Strategic Affairs. “There were a lot of question marks about the future of Saudi Arabia and the transition. Now this debate has ended.”

U.S. President Donald Trump speaks with Mohammed bin Salman in Washington, D.C., U.S., on Tuesday, March 14, 2017.

Widely known as MBS, he was made crown prince just after dawn in Riyadh, displacing his older cousin, Mohammed bin Nayef, who was also stripped of his post as interior minister in charge of domestic security forces and counter-terrorism policy.

The move was neither a shock nor a coup, and it means he could be running the kingdom for decades to come. What’s more, his tough approach to the intractable problems of the Middle East would appear to mesh well with U.S. President Donald Trump, who visited Saudi Arabia last month.

Trump called the new crown prince Wednesday to offer congratulations on his elevation, the White House said in a statement. Trump and the prince “committed to close cooperation to advance our shared goals of security, stability, and prosperity across the Middle East and beyond,” according to the statement.

Prince Mohammed also has come to know Trump’s daughter Ivanka and her husband Jared Kushner, having dined together twice, once in Washington and once in Riyadh.

What Next?

The problem is what comes next. On Tuesday, the U.S. Department of State questioned Saudi Arabia’s justification at striking out at Qatar by cutting it off from diplomatic and transport links.

The bombing campaign in Yemen aimed at destroying the rebel Houthi forces that Saudi Arabia sees as proxies for Iran, meanwhile, appears to have no end in sight. Two years later, it has become bogged down, bloody and increasingly unpopular.

“On the foreign policy side he’s also embroiled Saudi Arabia in Yemen and Qatar without an exit strategy,” said James Dorsey, senior fellow for the Middle East and North Africa at Singapore’s Nanyang Technological University. These aren’t changes of direction for Saudi Arabia, but “what he has done is to stretch up a notch and put some very sharp edges on it, and at this point those are backfiring.”

Why King Salman chose this time to change the line of succession remains unclear. There have been rumors about his health and alleged plans to abdicate almost from the moment he became king, in January 2015. The amount of power he placed in the hands of his relatively inexperienced son had rankled older members of the royal family. And religious conservatives were always going to resist efforts at gradual liberalization in one of the world’s most repressive societies.

King Salman in Riyadh on Wednesday, April 5, 2017.

MBS’s plans require tearing up the social contract that’s kept the family in power since his grandfather, Ibn Saud, founded the kingdom in 1932. It was one of state largesse in exchange for obedience to an austere autocracy.

That said, there’s a strong desire for change among many Saudis. Official statistics show that half the population is under 25. He remains popular among the young, even though some Saudis are becoming unhappy as subsidies and public sector jobs are withdrawn, according to Dorsey.

That means his controversial plans for selling off parts of the state energy behemoth Saudi Aramco and other aspects of Vision 2030 are also likely to move forward, according to Ayham Kamel, director for the Middle East and North Africa at the Eurasia Group, in London.

“Investors had doubts that Vision 2030 is real or that the man behind it would actually be the ruler of Saudi Arabia. Those doubts will largely evaporate after this,” he said. Still, with power will come the responsibility for what goes wrong, said Kamel, and “that part is going to be fundamentally different.”

(Economist) A family feud: Saudi Arabia cuts off Qatar

(Economist) The kingdom is raising tensions with its immediate neighbours as well as with Iran and Yemen.

SAUDI ARABIA and its satellites have repeatedly put their neighbour Qatar on notice, but never as severely as this. In 2014, they temporarily recalled their ambassadors from the tiny, rich Gulf statelet: but on June 5th, Saudi Arabia, the UAE and Bahrain announced they were not only severing diplomatic relations with Qatar, but their air, sea and land links too—meaning that Qatar’s only land border is to be closed. Panic buying is already reported in Qatari shops. Qataris must leave Saudi Arabia within days, and will henceforth be denied entry. For good measure the ambitious young Saudi defence minister and deputy crown prince, Muhammad bin Salman, expelled Qatar’s 1,000-strong force from the coalition he leads against rebels in Yemen.

Qatar is the world’s second-largest exporter of natural gas and will host the football World Cup in 2022, and it has sought to exert influence across the region. Saudi news outlets say the measures are reprisals for Qatar’s support for terrorism, including al-Qaeda. That said, other Gulf states, including Saudi Arabia and Kuwait, have also had to fend off claims that they—or their citizens—have helped to fund jihadists.

There are broader and older grievances at play, rooted in geopolitics and the place of Islam in politics. For decades, Saudi and Emirati officials have blamed Qatar, which protrudes like a sore thumb from the western Gulf, for breaking ranks with the Saudi-dominated six-nation Gulf Co-operation Council (GCC).

Qatar is one of three GCC states that still maintains cordial relations with Iran (Kuwait and Oman are the other two). Its emir, Tamim bin Hamad Al Thani, was quoted expressing reservations about Saudi Arabia’s increasingly belligerent posture against Iran. Qatar also sponsors and provides sanctuary to the Muslim Brotherhood, particularly irking the UAE, which deems the Brotherhood a terrorist group. And it also funds and hosts Al Jazeera, a broadcaster that offers a platform to Arab dissidents everywhere but in Qatar, and which fanned the flames of revolution and armed revolt during the Arab Spring.

For all their ambition, the Al Thanis have little appetite for confrontation. Qatar’s foreign ministry has meekly expressed “deep regret” at the severing of ties. In recent years Qatar has scaled back its public support for the Brotherhood. As tensions mounted in recent days it ejected senior members of the Palestinian branch of the Brotherhood, Hamas, and repatriated a dissident wanted in Saudi Arabia. It has disclaimed a headline criticising Saudi Arabia’s stance on Iran, and described the quote attributed to the emir as “fake news”.

But the isolation is unlikely to end soon. Saudi Arabia has yet to define its demands for restoring ties, and Qatar can expect little solace from other Arab states. Most of them are likely to welcome Qatar’s comeuppance. Egypt’s president and his fellow generals still fume at Al Jazeera for opposing their overthrow of the Brotherhood’s elected president in 2013; so Egypt quickly joined Saudi Arabia in cutting its links with Qatar. Yemen’s Saudi-supported government, and the UAE-backed authority in eastern Libya also declared they are following suit.

Historically, Qatar looked overseas for protection against Saudi bullying. The British kept the Saudis from extending their rule to its coastal protectorates in the 1920s. More recently, Qatar has reached out to an unlikely assembly of Israel, Iran, Turkey and America for support. Of late, though, its alliances have seemed to fray. Israel has deepened its security relationship with Qatar’s rivals, the UAE, and to a lesser extent, Saudi Arabia.

American support may also be less certain. Qatar hosts the largest American base in the Middle East, al-Udeid. Located on the road to the Saudi border, Qataris have long viewed it as their best defence against invasion by land. But many Qataris now fear that America under Donald Trump might be less a regional referee than a Saudi cheerleader. Last month Mr Trump chose Riyadh, the Saudi capital, as the first foreign destination of his presidency, and in return was greeted with Saudi pomp and arms contracts. His foreign policy advisers are reckoned to maintain close ties with Muhammad bin Zayed, the UAE’s de facto ruler, who has been urging America to move its forces there from Qatar for years.

Qatar could look to Turkey, which shares its favourable view of the Muslim Brotherhood and opened a base in the sheikhdom last year. Given his troubles at home, though, Recep Tayyip Erdogan, the Turkish president, might shy from a confrontation with the Al Sauds. That leaves Iran. The two countries jointly manage South Pars, the world’s largest gasfield. In addition, says a cleric close to Iran’s Supreme Leader, Ayatollah Ali Khamenei, Iran has a defence pact with Qatar which commits it to the latter’s defence in the event of a Saudi attack. Already, Iranian officials have offered to send food shipments across the Gulf. Saudi Arabia’s impetuous actions risk further driving Qatar into the arms of Iran, and increasing the danger of armed confrontation with Shia state. In response to nervousness about both outcomes, oil and gas prices are rising.

+++ (BBG) Saudis Said to Boost U.S. Ties With $40 Billion Investment

…Money talks…

(BBG) Saudi Arabia is preparing to cement ties with President Donald Trump by committing to unprecedented investments in the U.S.

The kingdom’s sovereign wealth fund is set to announce plans to deploy as much as $40 billion into U.S. infrastructure, according to people familiar with the matter. The investment may be unveiled as early as next week to coincide with Trump’s visit to the kingdom, said the people, asking not to be identified as the information is private. No final decisions have been made and the announcement may still be delayed, they said.

Saudi Arabia is eager to reset relations with the new U.S. administration after feeling shunned by President Barack Obama, who crafted the 2015 nuclear deal with their Shiite rival Iran. The kingdom claimed a “historic turning point” in bilateral relations after President Trump met Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman in the White House earlier this year. On May 19, Trump will make his first foreign trip since taking office, visiting Saudi Arabia and Jerusalem before heading to Europe.

A White House official, speaking on condition of anonymity, confirmed that the plans were in the works and that Trump’s son-in-law and senior adviser, Jared Kushner, had played a critical role in the discussions. A representative for Saudi Arabia’s Public Investment Fund declined to comment. The Ministry of Finance didn’t immediately respond to requests for comment.

Trump in March offered his support for developing a new U.S.-Saudi program in energy, industry, infrastructure and technology that could be valued at more than $200 billion in direct and indirect investments within the next four years, according to the White House. The president has said he intends to push for$1 trillion in U.S. infrastructure investments over the next decade, with $200 billion coming from taxpayers and the rest from the private sector.

Making a Megafund

Saudi Arabia is planning to expand its sovereign wealth fund into the world’s largest as part of its attempts to diversify away from oil after prices slumped. The kingdom will transfer ownership of Saudi Arabian Oil Co. to the PIF, as well as the proceeds from the oil company’s initial public offering. The fund could eventually control more than $2 trillion, Bin Salman has said.

Since last year, the PIF has funneled about $50 billion of the kingdom’s reserves into investments abroad, almost all of it into technology. It has said it will commit as much as $45 billion to partner with SoftBank Group Corp. to set up a new $100 billion vehicle to invest in global technology. The fund also invested $3.5 billion in Uber Technologies Inc. last June.

Still, the Saudi government’s economic reforms have caused push back at home as residents complained about slashed government spending and the suspension of some allowances for state employees. Bin Salman said this month that 50 percent to 70 percent of income from its initial public offering of Saudi Aramco, what may be the largest-ever listing, will be used on domestic investments.

(CNBC) Saudi Arabia and China just hit the ‘next level’ for strategic collaboration, Saudi CEO says


Saudi Arabia open for serious business: SABIC CEO

A days-old agreement between a major Saudi company and one ofChina’s largest enterprises represents “the next level” of strategic collaboration between the two countries, according to the Saudi firm’s CEO.

Saudi Basic Industries Corporation (SABIC), a manufacturing company involved in chemicals and more, signed an agreement Thursday with Chinese state-owned Sinopec Group for new joint projects and potentially increased investment in an existing joint venture. Speaking with CNBC on Saturday morning at the China Development Forum in Beijing, SABIC CEO Yousef Abdullah Al-Benyan explained that deal.

“I think it does not really represent a shift (in how Saudi businesses approach China), but it brings it to the next level of strategic collaborations between — you know Saudi Arabia and China — and specifically SABIC and Sinopec,” he said.

One of the key components of the deal, he explained, is a desire to expand the two firms’ technological and innovative collaborations. Benyan called that dimension “very important” because of Chinese politicians’ desire to “move from low product productions to mid- and high-end through technology innovations.”

“I think we would like to capture that to be part of this growth in China,” he said. “And at the same time, Sinopec has also found SABIC is a very good gateway to go into the Kingdom of Saudi Arabia in terms of investment and opportunity.”

Benyan said that now is a good time for Chinese companies to be looking at investing in Saudi Arabia because of his government’s “Saudi Vision 2030” plan to diversify its economy.

“They have been very clear that they want to improve the business environments in Saudi Arabia. They want to open up for serious business to come, they are changing their regulations, they are bringing more incentive programs, they have been more strong on governance and transparency,” he said. “And I think this will attract a lot of people to take an opportunity, to take this really 2030 vision and really grow with it as well.”

In fact, Benyan said he “would not be surprised” if Chinese investors became involved in other Saudi businesses. That includes energy firms like oil giant Saudi Aramco, but it could also be seen in the construction or health-care sectors, he explained.

“I think there are so many opportunities that I would not be surprised seeing more Chinese companies coming to the kingdom.”

Turning to oil, a major input for SABIC’s business, Benyan said price stability is key.

“Of course the higher is better for us, but we need to have a stable crude oil price because — not only for us in terms of input for cost — but also for the output and for our customers,” he said.

Benyan said he sees 2017 as “very positive in terms of really stabilizing” crude prices, and that he could see barrel prices roughly between $50 or $60.