This fall’s Congressional docket has featured two measures dealing with the U.S.-Saudi Arabia relationship. On September 21, the Congress approved a $1.15B arms deal with Saudi Arabia, consisting primarily of M1 Abrams tanks. However, 27 Senators voted against the deal, indicating displeasure with either the U.S.-Saudi Arabia relationship, displeasure with Saudi conduct of its intervention in Yemen, or both.
Second, and more importantly, Congress first passed and then overrode the Presidential veto of the Justice Against Sponsors of Terrorism Act (JASTA), with both houses overwhelmingly voting against the President and for the bill.
This law will now carve out an exception to sovereign immunity for domestic terrorism civil cases beginning with the 9/11 attacks. While the words “Saudi Arabia” appear nowhere in the bill (the bill applies to any “foreign state”), it is widely seen as being aimed primarily at claims against Saudi Arabia for their alleged support of some of the 9/11 hijackers.
In April, Saudi Foreign Minister Adel al-Jubeir is reported to have told U.S. legislators that Saudi Arabia would divest itself of $750B in U.S. assets were JASTA to be passed. This response, though posed as a rational response to move Saudi assets from a country where they would be vulnerable to being frozen, was widely seen as a blackmail threat against the bill. Numerous firms linked to Saudi Arabia are, understandably, concerned.
This divestiture, however, is unlikely for at least three reasons. First, to achieve the desired effect of keeping assets “unfrozen,” divestiture would have to take the nature of a fire sale. Liquidating U.S. assets would then be done at a substantial discount. With oil prices widely expected to remain in the current trading range for some time (though commodity prices are inherently volatile), the Saudis simply cannot afford to sell their assets at a discount, though they may need to slowly draw down U.S. assets to generate cash for expenses, especially social programs.
Second, the Saudis have an ambitious plan, entitled Vision 2030 that seeks to transform Saudi Arabia’s economy from one based solely on oil revenues to a more diverse one that has a knowledge economy and a defense industrial base. The Saudis will need considerable external capital to implement this plan, and not all of it can come from Asia—meaning that the Saudis will need capital from U.S. investment firms, making it difficult for them to simultaneously be divesting their assets in the U.S. Saudi relationships with the U.S. investors are more critical to the Kingdom than ever.
Finally, the Saudis know that they generate considerable goodwill in the United States from their participation in the U.S. economy. To be candid, many major U.S. investment firms with prominent former government officials on their boards take an extremely positive view of the importance of good U.S.-Saudi relations because of the investment of Saudi sovereign wealth, holding companies, and private money in their funds. For the Saudis to divest themselves of these funds, and lower the interest of prominent opinion shapers in the importance of the U.S.-Saudi relationship, would be self-destructive and irrational.
So, large-scale Saudi divestiture from the U.S. economy, despite the real risks of their assets being frozen, remains unlikely, though there may well be a prominent asset or two sold just to make the point and follow through on the threatened action, however nominally.
Nonetheless, it remains unclear that exposing the Saudis to the lower evidentiary standards required of civil cases in in the interest of the United States. And having court cases go against the Saudis at critical diplomatic junctures could make a unified foreign policy difficult (as are similar cases against the Iranians). When civil cases can throw a wild card into sensitive foreign relations, they should be significantly questioned.
The passage of JASTA is now a fait accomplit. But it is far from obvious that this means that passage is in the national interest of the United States. We must be candid and admit that the United States has serious differences with the Kingdom of Saudi Arabia, most notably on human rights and the status of women and alleged “softness” (or worse) on Al Qaeda and other terrorist groups. However, the Kingdom remains one of the major actors in Middle Eastern foreign policy, along with Turkey and Iran. Maintaining close relations with this major power in a critical region is a U.S. national interest, both to be able to impact decision-making (however nominally) and to reinforce internal stability. If the truth of this statement is not self-evident, then conduct a thought experiment and imagine a Saudi Arabia without close ties to the United States, in which there was no U.S. input and which did not have implicit U.S. security guarantees to enhance internal stability.
The United States has a significant interest in stronger diplomatic and security ties with all major players in this volatile region. Implementation of JASTA will be at least a minor, and perhaps major, obstacle to better U.S.-Saudi relations (depending, of course, on the outcome of civil cases). To loop back to the first congressional action, the Saudis remain a major consumer of U.S. defense hardware. And while we may have issues with some usages, it is not as if we hope they find another supplier.
The relationship with Saudi Arabia remains deeply problematic—one cannot honestly say otherwise. However, the answer is not to isolate the Kingdom, but to embrace it and hope to help it through coming transitions. Their system of government and political values are not ours. But only by maintaining close ties can the United States hope to maintain a productive dialogue and exchange with Saudi society. This remains a key national interest.