World Economy
0

Erratic Saudi Policies Blocking Investments

MBS has put the Middle East on a collision course. He is increasingly seen as an autocrat who cannot tolerate any dissent or criticism
US President Donald Trump (R) and MBS in Washington on March 14.US President Donald Trump (R) and MBS in Washington on March 14.

Since the ascension to the throne of King Salman bin Abdul-Aziz al Saud in 2015 and the rise of his son Mohammed bin Salman (aka MBS), first as defense minister and then as crown prince, the kingdom’s foreign policy has faced difficult choices in a fraught region.

With rare exceptions, the Saudis have lurched from one poor decision to the next; the Canada caper is the latest. The erratic diplomacy is hurting the kingdom, Al-Monitor reported.

The first tough decision of the new leadership is still their worst, to intervene in the Yemeni civil war. The Saudi bombing of a school bus this week is symptomatic of the Saudi coalition’s difficulties in avoiding civilian casualties in launching airstrikes against targets in a poor, backward country.

The blockade of Qatar was also intended to produce a quick Saudi victory. Some reliable evidence suggest that they were planning a military invasion of Qatar but US Secretary of State Rex Tillerson vetoed the plan (probably without President Donald Trump’s knowledge).

Indeed, the international business community has come to a very different conclusion about the country’s policies, especially in the wake of MBS’s shakedown of his own people last fall to pay for his expensive adventures. Hundreds were detained without charge, and then forced to turn over their assets to the government.  Foreign direct investment in the kingdom dropped 80% from over $7 billion in 2016 to $1.4 billion in 2017, according to the United Nations, and down from over $12 billion when King Abdullah was still on the throne.

Jordan and Oman each attracted more foreign investment last year than Saudi Arabia. The number of companies also fell significantly. Concerns about the rule of law and arbitrary detention are also encouraging capital flight.

  Expensive Quagmires

Foreign investment is crucial to Saudi Arabia’s ambition to diversify the economy and create new cities; Vision 2030 needs robust foreign investment. It was entirely predictable that the erratic policies of the royal palace would discourage investors who value stability and predictability—open-ended wars and feuds do not encourage confidence in decision-making.

The Saudis ended up in open-ended and expensive quagmires in Yemen and Qatar with no strategy to achieve success. Fortunately for Riyadh, the usual leader of the international community, America, under Donald Trump is largely oblivious to the damage done.

MBS has put the Middle East on a collision course. His most notable success abroad may well be the wooing and capture of Trump and his son-in-law, Jared Kushner.

The palace’s biggest success has been in courting a president who does not care about human rights, humanitarian catastrophes or regional stability. The relationship was cemented by Trump’s visit to Riyadh last year and MBS’s trip to the United States this year.

Congress, on the other hand, is turning against the kingdom, as is the press and the public. MBS is increasingly seen as an autocrat who can’t tolerate any dissent, rather than as a modernizer opening up the country. Criticism and dissent is not tolerated, even if it is the dissenting opinion of women who fought for the right to drive in the only country in the world that ever made driving a gender-based issue.

The Saudi decision to expel the Canadian ambassador from Riyadh, freeze trade ties and withdraw 15,000 Saudis from Canadian schools and hospitals in response to the Canadian foreign minister protesting the detention of female critics is another poor call by the Saudi leadership.

  Role in 9/11

Conspiracy theorists have long claimed that the Saudi government was either deliberately blind to the al-Qaeda 9/11 plot, or, worse, complicit in it. The evidence and multiple investigations do not support such theories. But they remain persistent and at least one points a finger at one of the king’s sons, who died under allegedly suspicious circumstances. That theory is laid out in a book titled “Secrets of the Kingdom.”

The entire spat is certain to further discourage investment in Saudi Arabia. It is very much like a similar tangle with Sweden last year. Prime Minister Justin Trudeau of Canada is standing strong in his position, as he should. He should go further and suspend Canada’s $12 billion arms deal for infantry fighting vehicles with the kingdom until the war in Yemen ends.

That would get the Saudis’ attention. America should stand with its friend and ally and suspend its own arms supplies to the kingdom until it stops the war.

Add new comment

Read our comment policy before posting your viewpoints

Financialtribune.com