Does Khashoggi's Death Change the Foreign Investment Landscape?
Saudi Arabia’s foreign relationships, particularly in the West, are coming under intense pressure in the wake of the murder of journalist Jamal Khashoggi. Following his murder,foreign companies havebecome increasingly reluctant to do new business with Saudi Crown Prince Mohammed bin Salman, and money is fleeing the kingdom.
Khashoggi’s death has spurred talks of how the foreign investment landscape will change and to what extent the US-Saudi relationship will be derailed. As US-Saudi relations suffer, will Saudi money begin to flow more into the Asia-Pacific region?
The questions surrounding Saudi Arabia’s role in the death Khashoggicould mean the end for the relationship between Saudi Arabia and the US. However, President Donald Trump has made it quite clear that he places a high value on our relationship with Saudi Arabia. In a recent interview with FOX, Trump quickly silenced the idea of cutting off arms sales to Saudi Arabia due to Khashoggi’s death under mysterious circumstances. Shared security concerns over Iran continue to override the public relations disaster caused by Khashoggi’s death. Trump stated that Saudi arms sales were helping the USeconomy in an “immense fashion” and that cutting them off would be detrimental for our country and economic stability.
The Question of Increase in Potential Trade
In 2017, Malaysia’s Prime Minister, Najib Razak, announced that Saudi Arabia was going to invest$7bn in an oil refinery in the country. And last March, China and Saudi Arabia signed a slew of deals, reportedly worth $65 billion. While there has been a recent increase in potential trade and cooperation between the two regions, the US and Saudi Arabia have a deeply entrenched economic relationship.Saudi Arabia exports over $13 billion in oil to the US, and the US exports to them $1 billion in motor vehicles and $3.2 billion in military weapons.
In the past two years, the Saudi government has laid out what they call “Vision 2030” to transform Saudi Arabia’s economy, weaning it away from dependence on oil revenues and instead focusing on the growth of their private sector.The much trumpeted “Vision 2030” has called for over $200 billion worth of new ventures between the US and Saudi. On the off chance that the US House of Representatives undermine the president’s wishes and takes an aggressive stance against Saudi Arabia,Trump has made it clear that the House would be jeopardizing these mutual benefits and potentially “millions” of jobs.
Commercial real estate is another binding factor between the US and Saudi Arabia. In 2018, it is reported that an estimated $178 million of capital flowed from Saudi Arabia into commercial real estatethe US, and this number hardly tells the full story. Foreign investment in real estate continues to be a challenge to track due to the complex structures used by large institutions and high net worth investors in the US. Most likely, the numbers are actuallysignificantly larger, and the numbers that are currently reported do not accurately depict thehuge inflow of capital.
Political Memory Is Short
Something to consider when considering whether Saudi will take their funds to Southeast Asia, or elsewhere, is that political memory is quite short. This means that things can and will be overlooked. This tragedy will be put into perspective in terms of magnitude, and nothing can compare to the magnitude of 9/11, not even the death of Jamal Khashoggi. Therefore, by putting Jamal Khashoggi’s death into perspective, this may just be beyond the scope of the US-Saudi political memory.
Status Quo Is Likely
While Saudi Arabia has already increased business with China and other Southeast Asian countries over the past few years, the region is unlikely to match US weapons productions and sophistication capabilities.While diversification of relationships makes sense for a country that has been challenged with human rights issues, Saudi Arabia is still a developing country looking for stability over volatility. Therefore, the country will likely think twice before allocating their funds elsewhere due to the 90 plus year-long “special relationship” with the US.
With talks of Saudi Arabia shifting to Asia making a bit of noise, the more likely scenario will look more like the status quo. It can even be argued that the Saudi missteps from the Khashoggi fiasco will reinforce its dependence on America for both security and trade. Either way, the global response to Khashoggi’s killing, which has Riyadh on the defensive, has opened a window of questions on the foreign investment landscape. It remains to be seen whether or not Saudi Arabia will have to majorly change its course.