World Economy

US Hiding Saudi Bond Data

US Hiding Saudi Bond DataUS Hiding Saudi Bond Data

It’s a secret of the vast US Treasury market, a holdover from an age of oil shortages and mighty petrodollars: Just how much of America’s debt does Saudi Arabia own?

But now that question–unanswered since the 1970s, under an unusual blackout by the US Treasury Department–has come to the fore as Saudi Arabia is pressured by plunging oil prices and costly wars in the Middle East, Bloomberg reported.

In the past year alone, Saudi Arabia burned through about $100 billion of foreign-exchange reserves to plug its biggest budget shortfall in a quarter-century. For the first time, it’s also considering selling a piece of its crown jewel–state oil company Saudi Aramco. The signs of strain are prompting concern over Saudi Arabia’s outsize position in the world’s largest and most important bond market.

A big risk is that Saudi Arabia is selling some of its treasury holdings, believed to be among the largest in the world, to raise needed dollars. Or could it be buying, looking for a port in the latest financial storm? As a matter of policy, the treasury has never disclosed the holdings of Saudi Arabia, long a key ally in the volatile Middle East, and instead groups it with 14 other mostly OPEC nations including Kuwait, the United Arab Emirates and Nigeria. For more than a hundred other countries, from China to the Vatican, the treasury provides a detailed breakdown of how much US debt each holds.

While that position is consistent with the International Investment and Trade in Services Survey Act, which governs disclosures of investments made by foreign persons and governments, and shields individuals in countries where treasuries are narrowly held, it hasn’t kept the treasury from disclosing figures for a whole host of other countries–large and small.

They range from the $3 million stake held by the island nation of the Seychelles, to the $69.7 billion investment from the oil-producing economy of Norway, and those of China and Japan, which are both in excess of $1 trillion.

Representatives for the Saudi Arabian Monetary Agency, known as SAMA, and the nation’s finance ministry declined to comment.

SAMA’s own figures show reserve assets held in foreign securities have fallen by a record $108 billion in 2015. The Saudi central bank, which doesn’t disclose separate figures for treasuries, owned $423 billion in overseas securities as of November.

Figures from SAMA suggest Saudi Arabia might be reallocating some of its reserves into short-term, liquid assets to help the finance ministry meet budget commitments and defend its 30-year-old currency peg of 3.75 riyals to the dollar.