Saudi crown prince’s carefully managed rise hides dark side
By JON GAMBRELL
Sunday, October 14
DUBAI, United Arab Emirates (AP) — In a kingdom once ruled by an ever-aging rotation of elderly monarchs, Saudi Crown Prince Mohammed bin Salman stands out as the youthful face of a youthful nation. But behind the carefully calibrated public-relations campaign pushing images of the smiling prince meeting with the world’s top leaders and business executives lurks a darker side.
Last year, at age 31, Mohammed became the kingdom’s crown prince, next in line to the throne now held by his octogenarian father, King Salman. While pushing for women to drive, he has overseen the arrest of women’s rights activists. While calling for foreign investment, he has imprisoned businessmen, royals and others in a crackdown on corruption that soon resembled a shakedown of the kingdom’s most powerful people.
As Saudi defense minister from the age of 29, he pursued a war in Yemen against Shiite rebels that began a month after he took the helm and wears on today.
What the crown prince chooses next likely will affect the world’s largest oil producer for decades to come. And as the disappearance and feared death of Saudi journalist Jamal Khashoggi in Istanbul may show, the young prince will brook no dissent in reshaping the kingdom in his image.
“I don’t want to waste my time,” he told Time Magazine in a cover story this year. “I am young.”
Khashoggi, a U.S. resident who wrote several columns for The Washington Post critical of Prince Mohammed, disappeared Oct. 2 on a visit to the Saudi consulate in Istanbul. Turkish officials have offered no evidence, but say they fear the writer was killed and dismembered by a Saudi team of 15 men — an operation that, if carried out, would have to have been authorized by the top of the Al Saud monarchy. The kingdom describes the allegation as “baseless,” but has provided no proof that Khashoggi ever left the consulate.
For decades in Saudi Arabia, succession passed down among the dozens of sons of the kingdom’s founder, King Abdul-Aziz. And, over time, the sons have grown older and older upon reaching the throne.
When King Salman took power in January of 2015 and quickly appointed Prince Mohammed as defense minister, it took the kingdom by surprise, especially given the importance of the position and the prince’s age.
He was little-known among the many grandchildren of Saudi Arabia’s patriarch, a young man educated only in the kingdom who stuck close to his father, who previously served as the governor of Riyadh, the Saudi capital.
As defense minister, he entered office facing a crisis in Yemen, the Arab world’s poorest country, which lies south of the kingdom. Shiite rebels known as Houthis had overrun the country’s capital, Sanaa, unseating the deeply unpopular government of Abed Rabbo Mansour Hadi.
When Hadi fled and it appeared the country’s port city of Aden would fall to the rebels, Saudi Arabia launched a coalition war against the Houthis — a conflict that soon became a stalemate.
The United Nations estimates 10,000 people have been killed in Yemen’s conflict, and activists say that number is likely far higher. It has exacerbated what the U.N. calls the world’s worst humanitarian crisis, with hunger and cholera stalking civilians, worsened by the kingdom’s blockade of ports.
Meanwhile, the Saudi-led coalition has faced widespread criticism for its airstrikes hitting clinics and marketplaces, which have killed civilians. The Houthis, as well, have indiscriminately used land mines and arrested political opponents.
The coalition says Iran has funneled weapons to the Houthis ranging from small arms to the ballistic missiles now regularly fired into the kingdom, which Iran denies.
For Prince Mohammed, the conflict remains part of what he sees as an existential struggle between Saudi Arabia and Iran for the future of the Middle East. Asked about Western concerns over civilian casualties, he offers this: “Mistakes happen in all wars.”
“We don’t need to have a new Hezbollah in the Arabian Peninsula. This is a red line not only for Saudi Arabia but for the whole world,” the prince recently told Bloomberg, referring to the Iran-allied Shiite militant group and political party dominant in Lebanon.
The prince also found himself involved in the bizarre resignation-by-television address of Lebanese Prime Minister Saad Hariri, who announced he would step down during a visit to the kingdom in November 2017, fueling suspicion he was coerced into doing so.
Prince Mohammed’s harsh rhetoric extends to likening Iran’s Supreme Leader Ayatollah Ali Khamenei to Nazi Germany’s Adolf Hitler. He’s also hinted Saudi Arabia would be willing to fight Iran in other ways, leading Tehran to link the kingdom to an attack on a military parade in Ahvaz last month that killed at least 24 people and wounded more than 60. Both Arab separatists and the Islamic State group claimed responsibility for the assault.
“We won’t wait for the battle to be in Saudi Arabia,” the prince told the Saudi-owned broadcasting company MBC last year. “Instead, we will work so that the battle is for them in Iran, not in Saudi Arabia.”
His aggressive posture against Iran has won the support of U.S. President Donald Trump and his administration, which pulled out of the Iran nuclear deal struck by President Barack Obama, whom the kingdom deeply distrusted.
Before becoming crown prince, Prince Mohammed visited the White House and forged a close relationship with Trump son-in-law Jared Kushner. The two are believed to be working on the administration’s peace plans for Israel and the Palestinians.
Trump made Riyadh his first stop overseas as president, a visit complete with Arab pageantry and opulence. Behind the scenes, many analysts believe Saudi Arabia, Bahrain, Egypt and the United Arab Emirates saw a greenlight to move ahead with the ongoing boycott of Qatar, a small Arabian Peninsula nation, over a political dispute.
Trump initially seemed to favor the boycott of Qatar, which is home to al-Udeid Air Base, the forward headquarters of the U.S. military’s Central Command.
Trump’s first Secretary of State, Rex Tillerson, sought in vain to pressure the Saudis into resolving the spat and complained privately that the ties between the White House and Prince Mohammed were hurting the effort, officials said at the time. Tillerson’s dismissal in March and the arrival of Mike Pompeo as Trump’s top diplomat markedly reduced the State Department’s heat on Saudi Arabia about the detentions of human rights activists, including women, and the conflict in Yemen.
Despite the mounting civilian casualties in Yemen, Pompeo certified to Congress in September that Saudi Arabia was taking steps to reduce and limit them, drawing severe condemnations from lawmakers and human rights groups.
Saudi Arabia soon embarked on the prince’s ambitious proposal to allow women in the ultraconservative Wahhabi nation to drive. The resulting pictures of women in long black abayas behind the wheel represented a public-relations coup for the image-shaping firms employed by the kingdom, as did footage of women attending soccer matches and movie theaters for the first time in decades.
But before women started their engines, a new crackdown emerged: The kingdom rounded up and imprisoned women’s rights activists, including reportedly grabbing one woman who was in the neighboring United Arab Emirates.
Prince Mohammed has wowed the business world with promises of an initial public offering for the state oil behemoth Saudi Arabian Oil Co., known as Saudi Aramco, suggesting it would have a $2 trillion valuation. Stocks markets around the world have pitched having the IPO on their exchanges, but it has been repeatedly delayed.
The young prince has traveled across the U.S. as part of his business pitch, meeting leaders like former New York Mayor Michael Bloomberg and Amazon billionaire Jeff Bezos, who owns The Washington Post.
Prince Mohammed also hosted a major business summit at Riyadh’s Ritz Carlton, complete with a humanoid robot named Sophia being awarded Saudi citizenship.
Only weeks later, the hotel turned into a luxury prison as part of a mass arrest of businessmen, royals and others orchestrated by Prince Mohammed in a move described as targeting corruption. Those released agreed to sign over some of their assets, however, giving it the feel of a shakedown.
“If I have the power and the king has the power to take action against influential people, then you are already fundamentally strong,” Prince Mohammed told CBS earlier this year.
For now, the anger over Khashoggi’s disappearance appears to have galvanized international criticism of the young prince, about whom the columnist wrote critically for the Post.
Trump, already angry over rising global oil prices, has said he wants answers from Saudi Arabia and suggested Khashoggi’s fiancee could visit the White House.
Prominent American lawmakers also are indignant — though U.S.-Saudi relations have survived even the 15 of the 19 Sept. 11 hijackers being from the kingdom.
The opaqueness of the Al Saud royal family makes it difficult to see what effect the controversy is having on support for Prince Mohammed at home. State television continues to air footage of him attending meetings and greeting officials as if all is normal.
And as the son of the king, analysts say he has the full protection of the throne’s powers.
Once asked if anything could stop him, the prince gave a two-word reply: “Only death.”
Associated Press writer Matthew Lee in Washington contributed to this report.
Follow Jon Gambrell on Twitter at www.twitter.com/jongambrellap . His work can be found at http://apne.ws/2galNpz .
Trump’s business ties to kingdom run long and deep
By BERNARD CONDON, STEPHEN BRAUN and TAMI ABDOLLAH
Saturday, October 13
NEW YORK (AP) — He’s booked hotel rooms and meeting spaces to them, sold an entire floor in one of his buildings to them and, in desperate moments in his career, gotten a billionaire from the country to buy his yacht and New York’s Plaza Hotel overlooking Central Park.
President Donald Trump’s ties to Saudi Arabia run long and deep, and he’s often boasted about his business ties with the kingdom.
“I love the Saudis,” Trump said when announcing his presidential run at Trump Tower in 2015. “Many are in this building.”
Now those ties are under scrutiny as the president faces calls for a tougher response to the kingdom’s government following the disappearance, and possible killing, of one of its biggest critics, journalist and activist Jamal Khashoggi.
“The Saudis are funneling money to him,” said former federal ethics chief Walter Shaub, who is advising a watchdog group suing Trump for foreign government ties to his business. That undermines “confidence that he’s going to do the right thing when it comes to Khashoggi.”
Trump paid his first foreign visit as president to Saudi Arabia last year, praised its new young ruler and boasted of striking a deal to sell $110 billion of U.S. weapons to the kingdom.
But those close ties are in peril as pressure mounts from Congress for the president to find out whether Khashoggi was killed and dismembered after entering a Saudi consulate in Turkey, as Turkish officials have said without proof.
Trump said Friday that he will soon speak with Saudi Arabia’s king about Khashoggi’s disappearance. But he also has said he doesn’t want to scuttle a lucrative arms deal with the kingdom and noted that Khashoggi, a U.S. resident, is not a citizen. For its part, Saudi Arabia has called allegations it killed Khashoggi “baseless.”
The president’s links to Saudi billionaires and princes go back years, and appear to have only deepened.
In 1991, as Trump was teetering on personal bankruptcy and scrambling to raise cash, he sold his 282-foot Trump yacht “Princess” to Saudi billionaire Prince Alwaleed bin-Talal for $20 million, a third less than what he reportedly paid for it.
Four years later, the prince came to his rescue again, joining other investors in a $325 million deal for Trump’s money-losing Plaza Hotel.
In 2001, Trump sold the entire 45th floor of the Trump World Tower across from the United Nations in New York for $12 million, the biggest purchase in that building to that point, according to the brokerage site Streeteasy. The buyer: The Kingdom of Saudi Arabia.
Shortly after he announced his run for president, Trump began laying the groundwork for possible new business in the kingdom. He registered eight companies with names tied to the country, such as “THC Jeddah Hotel Advisor LLC” and “DT Jeddah Technical Services,” according to a 2016 financial disclosure report to the federal government. Jeddah is a major city in the country.
“Saudi Arabia, I get along with all of them. They buy apartments from me. They spend $40 million, $50 million,” Trump told a crowd at an Alabama rally on Aug. 21, 2015, the same day he created four of the entities. “Am I supposed to dislike them? I like them very much.”
The president’s company, the Trump Organization, said shortly after his 2016 election that it had shut down those Saudi companies. The president later pledged to pursue no new foreign deals while in office.
In a statement this week, the company said it has explored business opportunities in many countries but that it does “not have any plans for expansion into Saudi Arabia.”
Since Trump took the oath of office, the Saudi government and lobbying groups for it have been lucrative customers for Trump’s hotels.
A public relations firm working for the kingdom spent nearly $270,000 on lodging and catering at his Washington hotel near the Oval Office through March of last year, according to filings to the Justice Department. A spokesman for the firm told The Wall Street Journal that the Trump hotel payments came as part of a Saudi-backed lobbying campaign against a bill that allowed Americans to sue foreign governments for responsibility in the Sept. 11 terror attacks.
Attorneys general for Maryland and the District of Columbia cited the payments by the Saudi lobbying firm as an example of foreign gifts to the president that could violate the Constitution’s ban on such “emoluments” from foreign interests.
The Saudi government was also a prime customer at the Trump International Hotel in New York early this year, according to a Washington Post report.
The newspaper cited an internal letter from the hotel’s general manager, who wrote that a “last-minute” visit in March by a group from Saudi Arabia accompanying Saudi Crown Prince Mohammed bin Salman had boosted room rentals at the hotel by 13 percent for the first three months of the year, after two years of decline.
Saudi Arabia has also helped on one of Trump’s key policy promises, and helped the president’s friends along the way.
Last year, the kingdom announced plans to invest $20 billion in a private U.S.-focused infrastructure fund managed by Blackstone Group, an investment firm led by CEO Stephen Schwarzman. Blackstone stock rose on the news. Earlier this year, Trump unveiled a $200 billion federal plan to fix the nation’s airports, roads, highways and ports, tapping private companies for help and selling off some government owned infrastructure.
Schwarzman, who celebrated his 70th birthday at the president’s Mar-a-Lago resort in Florida, accompanied Trump on his visit to Saudi Arabia.
Argentina bets 60 percent interest rates – and $50B international bailout – will revive its economy
October 12, 2018
Robert H. Scott III
Professor of Economics & Finance, Monmouth University
Associate Professor of Latin American Politics, Monmouth University
The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
An economy in recession. Pesos fleeing the country. The worst drought in decades. The world’s highest interest rates. The biggest bailout in the history of the International Monetary Fund.
For Argentina, it’s more of the same, as it has suffered through many economic crises in recent decades. And pretty much every time, the catastrophic meltdowns ended with some combination of unsustainable national debt, high unemployment, rising poverty rates, looting, bank runs, capital flight and hyperinflation.
We’ve been following the ebbs and flows of the Argentine economy for two decades and are currently wrapping up a book on economic and fiscal policy in Argentina, Brazil and Chile. We’ve been wondering, could Argentina’s latest crisis turn out differently than the others?
It didn’t have to be this way
It’s not terribly hard for us to pinpoint what went wrong, since we predicted it last summer.
But it didn’t have to happen this way. Only two years ago, Argentina’s leadership had appeared to learn lessons from the past and were governing the economy pretty effectively.
After the country’s last crisis ended in default and massive poverty in 2002, the government was operating under strict financial constraints. Argentina’s leaders had to find ways to support its currency, increase tax revenue, lower poverty and increase employment. And they largely succeeded, which led to a stronger financial sector and peso, Argentina’s currency, for three main reasons.
First, while past governments responded to crises by adopting austerity policies, in 2003 the newly elected President Nestor Kirchner instead increased government spending using pesos (instead of borrowed dollars) to assist the poor, which in turn helped spur consumer spending. This led to less poverty, unemployment and income inequality.
Second, capital controls were implemented to keep pesos in Argentina. This ensured there wouldn’t be another run on the currency.
Finally, and most importantly, the government began using direct deposits to pay salaries and provide benefits, which significantly increased the percentage of the population in the formal banking system. Before then, more than half of citizens didn’t have a bank account or credit card, making it harder for the government to know their true earnings and tax them.
Thanks to the changes, the share in the banking system jumped to 90 percent, leading to record value-added tax collections, the Argentine government’s most important revenue stream. As a result, the country’s tax-to-GDP ratio – which is a measure of how well the government is collecting revenue – soared from an average of around 19 percent in the 1980s and 1990s to 32 percent in 2015, the highest in the region – something unthinkable only a decade prior.
Stoking a crisis
So when Mauricio Macri became president at the end of 2015, there was a foundation of beneficial policies in place that supported the government’s coffers.
He also had some challenges to contend with. Government spending was rising too quickly, while inflation was hitting 30 percent a year. But instead of tightening the reins on spending and pursuing a path of fiscal responsibility, the center-right Macri decided to cut taxes for businesses and borrowed record amounts in dollars to do so – all without reducing government spending. At the same time, he eliminated the capital controls put in place in 2002.
Unsurprisingly, all of this made the country more vulnerable to a crisis, which began in May when a particularly bad drought – the most expensive in Argentina’s history – dried up important export crops, such as soybeans and corn. Argentina is the world’s third-largest exporter of both.
Foreign investors, concerned about the government’s ability to meet its obligations, began dumping short-term central bank debt. Meanwhile Argentines, well-versed in any whiff of economic trouble, began to get rid of their pesos too.
By June, Argentina was seeking help from the International Monetary Fund in the form of a US $50 billion line of credit, which is the most a country has ever received from the institution.
But the injection of credit, as well as the central bank’s decision to hike interest rates to a world-high 60 percent, did little to stem the peso’s slump. The peso is down almost 50 percent in value since April versus the dollar.
Where will it lead
Fast forward to today.
The crisis has eased a bit as the peso stabilizes at just under 40 pesos per dollar – near its worst ever – which cost $15 billion of the IMF’s money to achieve. And the central bank is selling lots of bonds with interest rates over 60 percent to hold it there.
In other words, three months of 60 percent interest rates and billions of IMF cash have proved it’s expensive to wrestle the peso into submission. Even worse, all that borrowed money will need to be paid back, which puts further stress on the economy.
Meanwhile the IMF, which agreed to send over an additional $7 billion, is forecasting a deeper-than-expected recession.
While this does in fact look rather scary, fortunately, there’s room for optimism. And to answer our earlier question, yes, we do believe Argentina is not doomed to follow past crisis missteps and can return to a sustainable path of growth.
It’ll depend, however, on whether Argentina follows through on the IMF’s condition to eliminate the budget deficit by 2019. And whether it adopts other prudent policies such as increasing public revenue by re-instituting export taxes and putting in place currency controls to ensure a stable peso.
This is the approach Macri should have taken in December 2015. Still, it’s better late than never.