“Stick ’em up you rascals!”
On Friday, FT reported that many of the “suspects” Mohammed bin Salman locked up at the Ritz Carlton in Riyadh have been given the option of surrendering “as much as 70% of their wealth” in order to secure their release from the harsh confines of a 5-star hotel.
“Cough up the cash and you will go home”, one person close to the situation told FT, describing the predicament faced by a long list of royals and businessmen who are apparently going stir crazy after nearly two weeks of detention in one of the finest hotels on the face of the planet.
Clearly, this is outright extortion designed to shore up the Saudi fiscal position. But everyone already knew that, so the FT report came as no surprise. And neither did this bit:
The businessmen in custody are being asked to hand over assets. Settlements for royals are likely to also include pledges of loyalty to Prince Mohammed, the adviser added.
Say what you will, but you’ve got the admire the sheer brazenness of this. One imagines MbS, flanked by a half-dozen people dressed just like him, walking into a hotel room at the Riyadh Ritz and sitting across from one of his “jailed” relatives, who would of course be dressed exactly the same as everyone else in the room:
“Hi cousin, how are the accommodations here?”
“Well, it’s not my palace, but it’ll do I guess considering I’m technically in jail.”
“Fair enough. Ok, here’s the deal. I’m taking three quarters of everything you have. If you fork it over willingly and pledge allegiance to me, then you can leave the hotel.”
“Can I have my Maybach pick me up?”
“Sure, whatever you want as long as we get those assets and that loyalty pledge.”
It’s more complicated than that, but not by much. On Saturday morning, Bloomberg is out with still more details on what may very well be one of the most transparent, well-publicized government shakedown efforts in modern history.
Bloomberg, like FT, says the Saudis plan to recover as much as $100 billion and as little as $50 billion. “Suspects are offered settlements to avoid trial,” an official said adding that “if they accept, talks are then carried out by a special committee to work out the details.”
Apparently, the Saudis are going to say that the settlements are not tied to individuals’ total wealth, but rather to the portion of that wealth MbS figures was acquired illegally. Needless to say, the Saudis will set that number as they see fit. It’s difficult to imagine that’s based on some kind of objective assessment of illegality.
Here’s another interesting bit from Bloomberg’s piece:
The purge has widened to the military. The senior official said 14 retired officers who worked at the Ministry of Defense and two retired National Guard officers had been detained on suspicion of being involved in financial contracts that were deemed corrupt. No active-duty officers have been arrested, he said.
That looks like an effort to intimidate or otherwise get rid of anyone deemed a threat to MbS’ push to control the country’s entire military apparatus. Although Prince Alwaleed bin Talal grabbed all the headlines when news of the purge first hit, the dismissal and detention of Prince Miteb bin Abdullah was the more notable story. The son of the late King Abdullah, his ouster means the Shammar branch of the family will no longer hold any top positions. The National Guard – which he ran until this month – was given its own ministry four years ago and if you read a little bit about the history there, you can kind of start to get an idea of why bin Salman might have wanted to control it too.
It seems the purge of the military is ongoing.
In any event, $100 billion (or even $50 billion if it comes in on the low end) won’t hurt. After all, the Saudis’ foreign reserves have plunged by some $260 billion since August 2014:
That chart looks scary, but do note that they’re not exactly broke; they’re still sitting on $485 billion in foreign reserves.
And while their debt to GDP ratio has exploded over the past several years, it’s still very low relatively speaking:
For his part, Energy and Industry Minister Khalid Al-Falih doesn’t see what the big fucking deal is. “I am in touch with many foreign investors, everybody understands that this is a very limited domestic affair,” Al-Falih told reporters in Bonn on Thursday, adding that the purge will have no impact at all on demand for the Aramco IPO. “The government is simply cleaning house for something that is way overdue.”