This month, President Biden has openly threatened to reconsider the close ties between the United States and Saudi Arabia, but the financial industry appears certain he’s not ready to put his money — or theirs — where his mouth is.
Wall Street leaders are visiting Saudi Arabia this week for an investment conference sponsored by the Saudi government, just two weeks after the White House said it would be reexamining the long-standing U.S.-Saudi alliance.
Top bankers to attend the gathering in Riyadh included JPMorgan CEO Jamie Dimon, Goldman Sachs CEO David Solomon and Blackstone Group CEO Stephen Schwarzman. The trio, whose firms collectively manage about $4.8 trillion in assets, spoke on the same panel at the so-called Future Investment Initiative.
“They will work it through and I’m comfortable folks on both sides are working through [it] and these countries will remain allies going forward,” said Dimon, of the strained ties between the U.S. and Saudi governments.
The Biden administration lost its patience with the Saudi government earlier this month after Saudi officials sided with their Russian counterparts and cut oil production. The White House accused the Saudi Crown Prince Mohammed bin Salman of failing to keep promises made to President Biden over the summer on hiking output to clear global oil markets of high prices, and of helping Russia’s invasion of Ukraine by keeping crude oil prices elevated.
“The White House has indicated it might seek retribution for the Saudi decision, and some Democrats in Congress are making a push to scale back some military and economic ties to the kingdom,” The New York Times reported on October 25.
But attendance at the Future Investment Initiative suggests otherwise. The annual event is a symposium that was established in 2017 by bin Salman, Saudi Arabia’s de facto ruler, as part of an effort to modernize and diversify the country’s oil-dependent economy. Foreign direct investment in Saudi Arabia has increased since the first Future Investment Initiative was held, but the money has mostly been “channeled into oil assets instead of backing ambitious new projects,” according to Bloomberg.
The four largest U.S. banks — JPMorgan, Citigroup, Bank of America and Wells Fargo — have invested over $1 trillion in fossil fuels since 2016. JPMorgan is the most prominent of the four in terms of its exposure to oil and natural gas drilling. A think tank with close ties to the firm said earlier this year that banks’ climate promises shouldn’t be scrutinized by regulators because of “the aspirational nature of external commitments.”
Crude oil extraction isn’t the only reason financiers are headed to Saudi Arabia. The gulf monarchy has outsized importance on global financial markets this year, according to analysts, because it’s flush with oil money as rising energy prices and interest rates shrink the supply of investment capital available to wealth managers.
The Public Investment Fund, the Saudi government’s sovereign wealth fund, manages some $620 billion. All U.S. banks but four have a smaller portfolio. Billions of dollars from the Saudi fund have gone to back risky high profile ventures in the U.S., such as Uber, which has never turned a profit, and WeWork, which tried but failed to take its stock public in 2019 in a spectacular collapse. The Saudi government is also using its oil revenue to construct a futuristic city called Neom, which “has received its fair share of skepticism around feasibility,” as CNBC noted.
Saudi companies have also played an increasingly large role in global financial markets. In 2020, state oil company Aramco publicly listed 1.5 percent of its shares on the Saudi stock market, raising $29 billion in the process in the world’s largest ever initial public offering (IPO). U.S. banks hired to help with the IPO included JPMorgan and Goldman Sachs, who ended up with less prominent roles than they had sought after they rubbed Bin Salman the wrong way by valuing Aramco below $2 trillion.
This year there has been ample opportunity for banks to make money on IPO fees in Saudi Arabia, with 22 companies in the country going public this year, a record for Saudi Arabia. Just before the Future Investment Initiative, JPMorgan announced that it was hiring 20 new bankers at its Saudi-based operations.
But it wasn’t long ago that the bank, and others, downplayed ties to the repressive monarchy. Many bankers declined to attend the Future Investment Initiative for years following the gruesome killing of Washington Post journalist Jamal Khashoggi at the Saudi consulate in Istanbul in 2018. Within weeks of the killing, U.S. intelligence assessments leaked to the media said that bin Salman himself ordered Khashoggi to be dismembered.
The public relations calculus changed this year, however, with the supply of investment capital squeezed by rising interest rates. This year’s conference featured the first appearance by Dimon and other major bank executives since Saudi security forces killed Khashoggi.
President Biden also initially claimed to be horrified by the killing of Khashoggi and vowed to make bin Salman a “pariah” during the 2020 presidential campaign, but has since softened his approach to the Saudi crown prince — at least until the announcement of oil production cuts earlier this month.
Still, the White House doesn’t seem too determined to follow through on its threat to reassess U.S.-Saudi relations, especially if recent history is any indication. The alliance has not been threatened by evidence tying the Saudi state to the 9/11 hijackers, and Biden never seriously considered halting U.S. support for the Saudi-led military campaign in Yemen, despite its numerous atrocities, including the use of mass starvation as a weapon of war. Without U.S. support, the Saudi air force would be unable to conduct operations, including those required to enforce its ongoing blockade of Yemen.
When asked about senior bankers’ trip to Saudi Arabia, White House Press Secretary Karine Jean-Pierre said: “American companies will make their own decisions about their presence and where to invest.”
U.S.-based companies, however, don’t unlikely to “make their own decisions” in a vacuum. Right now, they’re betting that the U.S. government will continue to enable the Saudi monarchy’s reactionary brutality in exchange for U.S. corporations’ access to oil and capital. It’s no surprise Wall Street is shrugging off President Biden’s threats as idle. foreign investment if they face currently shrugging