|Saudi Arabia vowed to slash '$750 billion' worth of US assets if 9/11 victims' families were allowed to sue it. We'll see.|
Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks...OK, that was the story in April. Fast-forward to the present time and US lawmakers have not taken Saudi threats seriously as the bill passed unopposed through the lower house:
Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.Several outside economists are skeptical that the Saudis will follow through, saying that such a sell-off would be difficult to execute and would end up crippling the kingdom’s economy. But the threat is another sign of the escalating tensions between Saudi Arabia and the United States.
The unopposed House vote Friday to allow families of Sept. 11 victims to sue Saudi Arabia begins a diplomatic nightmare for President Barack Obama.My belief is that the Saudi government did not directly fund the 9/11 attackers. However, that monies it has spent buying off hard-line extremists could have indirectly funded the attacks is not out of question. It would be up to the 9/11 victims suing KSA to demonstrate culpability via a money trail, which appears difficult to establish. What is more immediately interesting though is whether the Saudis merely bluffed about dumping American assets. Treasury records indicate that the country holds $98.3 billion in US Treasuries as of June 2016. Saudi Arabia may hold more though through indirect purchases:
The legislation is sure to antagonize a key U.S. ally in the Middle East which already has tense relations with the administration. While Obama is likely to veto the bill, the House’s passage by voice vote raises the possibility Congress could override him, for the first time in his presidency, and make the measure law. The bill passed the Senate by a voice vote in May.
"The Saudis will see this as a hostile act," said Dennis Ross, Obama’s former Middle East policy coordinator. "You’re bound to see the Obama administration do everything they can to sustain a veto."
The bill would carve out an exception to sovereign immunity -- the legal doctrine which protects foreign governments from lawsuits -- if a plaintiff claims to have suffered injury in the U.S. from state-sponsored terrorism.
Saudi officials have said enactment of the law could lead them to sell off the kingdom’s U.S. Treasury debt and other American assets, which totaled $750 billion, the officials told U.S. lawmakers and others in the government, according to the New York Times. The Saudi government held $117 billion in U.S. Treasury debt in March, according to Treasury figures obtained by Bloomberg. The kingdom may have additional holdings not included in the data on deposit with the New York Federal Reserve Bank, in entities in third countries, or through positions in derivatives.Saudis can also sell off tangible investments in the US, though the stock of FDI of Middle Eastern countries as a whole in the US appears to make $100B a stretch. Moreover, hard assets are not as liquid and take time to sell.
So the questions for Saudi Arabia over the next few days are as follows: First, US lawmakers having called their bluff, will the Saudis really unload hundreds of billions worth of assets? Second, do they really have $750B to unload in US assets? Saudi Arabia officially states that it has $572B in reserves, but it's a dwindling amount as low oil prices take its toll on the nation's coffers. Accelerating the reduction of its rainy-day funds at the current time would seem an unwise move.
I'd say it's the Saudis' own exercise in Trump-style hyperbole, but we needn't wait much longer to see how things pan out.
9/12 UPDATE: Obama intends to veto, to no one's surprise:
President Barack Obama will veto legislation that would allow families of Sept. 11 victims to sue Saudi Arabia, a measure vehemently opposed by the U.S. ally, White House press secretary Josh Earnest said on Monday.
The measure passed both the House and Senate unopposed by voice votes, with the House acting on Friday to send the bill to Obama just ahead of the 15th anniversary of the terrorist attacks. The lack of public opposition suggests Congress could override Obama’s veto for the first time in his presidency and make the measure law.
"The president does intend to veto this legislation," Earnest told reporters on Monday. The administration had opposed the legislation, arguing it would set an international precedent that would expose the U.S. government and American soldiers to legal jeopardy in foreign courts.