24 August 2002
Analysts say wealthy Saudis worried about the potential for terrorism-related lawsuits in the United States are pulling billions of dollars in investments out of the country. A report in the Financial Times of London this week that Saudi investors had already pulled tens of billions of dollars out of American accounts helped drive down the dollar against the Euro.
Wealthy Saudis, including members of the royal family, have hundreds of billions of dollars invested in the United States in everything from equities to real estate. But since the September 11 attacks on the United States in which 15 of the hijackers were from Saudi Arabia, analysts now say Saudis are worried their billions could be frozen, or seized as part of lawsuits stemming from last year's attacks.
Just last week, several members of the Saudi royal family were among those named by relatives of 9/11 victims in a multi-trillion dollar civil lawsuit seeking compensation. And, a new law known as the Patriot Act now gives the U.S. government broad powers to investigate and seize foreign bank accounts to deter possible money laundering.
With the euro now offering an attractive alternative to the dollar, a senior member of the Saudi Arabian Monetary Agency tells the country's Arab News newspaper, wealthy Saudis recently withdrew some 200 billion dollars from American investments.
Khaled al-Maeena is the paper's editor in chief. "I personally know people who [have] average investment in the states of $10-15 million. I think some of these people are selling their property, not that they want to do it, but because they are afraid that if something happens, they [the U.S.] will seize the assets of all Saudis pending finalization of the case. So people are a bit worried. I think they are investing more in Europe and Far Eastern markets," he said.
Former U.S. Assistant Secretary of Defense Frank Gaffney points out that Saudi holdings in the United States have come under scrutiny before.
"There have been Saudi families associated with charitable organizations in the United States that have been placed under investigation or even raided in federal investigations of entities that are suspected of having financial ties to terrorist organizations including those of al-Qaida," Mr. Gaffney said.
Youssef Ibrahim, a former New York Times Middle East correspondent and now at the Council on Foreign Relations, believes Saudis are only doing what any sound investor would.
"The climate between us and Saudi Arabia has been poisoned since September 11. If you are a Saudi investor who has anything from $500,000 to two billion dollars here, you would have to be literally out of your mind not to be concerned," Mr. Ibrahim said.
Big investment houses which handle Saudi accounts are reluctant to comment. Gerald Butt is the Gulf editor at the Middle East Economic Survey in Cyprus.
"There is a mood within Saudi Arabia of disquiet not to say anger at the way they feel they're being portrayed and viewed in the United States. Within the royal family, as in Saudi Arabia as a whole, there is a debate going on. There are those within the family who believe that there should be a radial reassessment of the kingdom's ties the United States," Mr. Butt said.
Helping to fuel this exodus of cash have been a series of news reports critical of the kingdom's cooperation in the war on terrorism. Again, Youssef Ibrahim. "All it takes is for a judge to say, it demands the freezing of Saudi assets. We have frozen assets before. We have frozen Iran's assets," Mr. Ibrahim said.
Earlier this month, an analyst for the Rand Corporation who was briefing U.S. defense officials, said the United States should consider seizing Saudi assets if Riyadh does not end its alleged ties to terrorism. U.S. officials said the briefing reflected only the analyst's opinion and not U.S. policy. But Gerald Butt of the Middle East Economic Survey calls the Rand report just one of many factors prompting Saudi Arabia to re-evaluate its overall economic and political relationship with the United States.
"The leaked Rand Corporation briefing to that Pentagon group the other day certainly increased the feeling of irritation and anger in some Saudi circles. But it's been building up ever since September 11, the involvement of Saudi nationals in the bombings in the United States, the perceived anti-Saudi media campaign in the United States media and generally a feeling that the United States has not been an honest broker in the Middle East, Arab Israeli conflict," Mr. Butt said.
Saudi Prince al-Walid bin Talal a nephew of King Fahd and one of the royal family's largest investors in the United States, denies there has been a massive capital flight out of the country. He's the same prince who offered to give New York City $10 million a month after last September's attacks, money that was rejected by then-Mayor Rudy Giuliani after the prince said the United States should re-examine its policies in the Middle East in light of the terrorist attacks.