Crown Prince Mohammed bin Salman’s crackdown on corruption in Saudi Arabia has reportedly continued on Wednesday with further arrests – and some $800 billion in combined assets on the line.
Reuters quotes sources familiar with the investigation who said the crackdown was expanded after the dramatic series of arrests over the weekend, which put dozens of officials, businessmen, and even members of the royal family into various forms of detention (some of them quite unusual and luxurious).
In addition to the new arrests, investigators questioned some persons of interest about their financial arrangements in telephone interviews. The total number of targets for the crackdown is said to be in the “hundreds,” with about 60 detained so far, while over 1,700 bank accounts have been frozen.
The UK Daily Mail cites reports that one of the new detainees is Naser bin Aqeel al-Tayyar, founder of one of Saudi Arabia’s largest travel companies.
Reuters notes that many of the new arrests are individuals with connections to the late Crown Prince Sultan bin Abdulaziz, which will certainly fuel speculation that current Crown Prince bin Salman is consolidating power or heading off a coup in addition to cleaning up corruption. Also of interest is that some of the frozen bank accounts belong to Prince Mohammed bin Nayef, who was Crown Prince until MBS abruptly took the title in June. The original Saudi storyline that Nayef cheerfully accepted his demotion and was looking forward to a comfortable retirement has not aged well.
The Financial Times quotes anti-corruption committee member Khalid al-Mehaisen saying the suspects have been under investigation for three years. He also warned that his committee has the power to “reveal the bank details of the accused, freeze their assets and funds, and take other appropriate measures.”
This may be a logical precaution when the suspects rank among the world’s greatest flight risks and might not be above attempting to overthrow the government pressing charges against them, but it also made the Saudi stock market nervous enough to drop a full percentage point in half an hour of trading on Wednesday. The Saudi government has given assurances that companies owned by suspects in the investigation will not be disrupted.
The Financial Times mentions that Prince Alwaleed bin Talal’s Kingdom Holding company, which manages $12.5 billion in assets, took an especially severe beating on the stock market, obliging the company to assure investors it has the “full confidence” of the Saudi government. Unfortunately, sources within the company seemed far less sanguine about its future, as did many investors connected to Prince Alwaleed’s ventures.
“Firms might delay investment plans as they wait to see if they will get caught up in the allegations. Foreign investment may also be deterred given the rise in uncertainty and the fact that many rely on partnerships with firms owned by those being detained,” Jason Tuvey of Capital Economics told the FT.
The Wall Street Journal counts $800 billion in assets that may be at stake if the Saudi government follows through on plans to nationalize “wealth acquired through corruption.” It is speculated that assets held abroad may be difficult for the government to seize.
The New York Times offers a taste of how complex Saudi financial relationships can be:
A major Saudi investment firm founded by one of the king’s sons, and now chaired by another, owns a significant stake in a conglomerate that does extensive government business, including in a shipbuilding partnership with a French defense contractor. A smaller firm founded by another of his sons says it invests in health care, telecommunications, education and other regulated or state-funded fields.
The Times goes on to explain that Saudi royal finances have been extremely opaque until now because there are virtually no disclosure or conflict-of-interest laws binding the royal family. As a result, no one really knows how they afford impulse buys like Crown Prince Mohammed bin Salman’s $500 million yacht.
This has had the dual effect of making corruption both pervasive and pernicious, a crime that could be invoked at any time by the clique in power to neutralize its enemies. In the New York Times piece, Katherine Dixon of Transparency International grimly compares the Saudi crackdown to politically-motivated anti-corruption housecleanings in China and Russia, while Nathan J. Brown of George Washington University sums up Saudi government ethics as the royals being able to “do what they want and make it legal later.”
Few details of the charges have leaked as of yet. The NYT mentions the blatant example of a Saudi businessman absconding with millions of dollars allocated for sewage systems in the city of Jidda, which subsequently found itself underwater with over a hundred fatalities; a social media campaign accusing former military chief Prince Mutaib bin Abdullah of misappropriating funds meant for the national guard; and reports that Prince Mutaib’s brother Turki bin Abdullah will be charged with overpaying his own companies for a subway construction project in Riyadh.
The point gleaned from these tangled accounts of Saudi finance is that very little distinction has existed until now between public funds and royal piggy banks. That sort of lax environment is incompatible with Crown Prince bin Salman’s “Saudi 2030” vision of a transformed economy diversified into foreign investments to reduce its dependency on oil. It probably also has the Crown Prince feeling nervous as he contemplates a regional showdown with Iran because so much Saudi graft involves arms deals and military contracts.
There might not be a gentle way to cleanse and tighten such a system, but the international community swiftly notified MBS that human rights and the rule of law had to be respected. While U.S. President Donald Trump has been openly supportive of his anti-corruption efforts, Reuters reports the State Department has also notified Crown Prince bin Salman that prosecutions must be “fair and transparent.” Human Rights Watch called on the Saudi government to “immediately reveal the legal and evidentiary basis for each person’s detention and make certain that each person detained can exercise their due process rights.”