Utterly fascinating, both that this "special arrangement" has existed and has been kept out of general public awareness throughout all this time.
Brought into context with the otherwise inexplicable tolerance for that regime's egregious human rights abuses, and the "delicateness" with which it was handled during the 9/11 investigations (extended the fact that its key people were allowed to slip out of the country in the immediate aftermath, despite a nation-wide travel ban on everyone else) -- it all starts to make sense.
Not in any tinfoil kind of way. But in a more banal, mundane, "Why do we keep kissing this bloodthirsty, homophobic, misogynist and utterly decrepit regime's ass, for decade after decade?" kind of way.
The U.S. started releasing data on foreign ownership of Treasuries in 1974. Since then, the Treasury’s policy had been to not disclose Saudi holdings, and it grouped them instead with those of 14 other mostly OPEC nations, including Kuwait, Nigeria and the United Arab Emirates, Bloomberg reported in January. The group held $281 billion as of February, down from a record of $298.4 billion in July.
For more than a hundred other countries, from China to the Vatican, the Treasury had provided a detailed monthly breakdown of how much U.S. debt each owns. The figures for March are scheduled for release at 4 p.m. New York time Monday.
The special arrangement was a product of the 1973 oil shock following the Arab embargo. It’s among concessions that U.S. administrations made over the years to maintain America’s strategic relationship with the Saudi royal family and access to the kingdom’s oil reserves.
We seem to have two impulses:
- Hold up a higher standard to nations and feel somehow entitled/obligated to "enforce" it.
- Attribute such deviations from those standards to "culture".
I'm not sure which is worse. Nation-states sort of don't judge other nation-states in that way. The US has been ... innovative in that, and it's been no end of trouble. Why Pearl Harbor? Because the US embargoed Japan after the Rape of Nanking. And that ended well...
Maybe its changed since '73 but the "access to the kingdom's oil reserves" seems hollow, since my understanding is that there is a small army of engineers and workers who rotate in and out of Saudi to maintain the fields and other infrastructure. Second, there is that Dilbert cartoon about the meaning of "fungible" w.r.t oil.
The '73 embargo was at least in part a reaction to the Six-Day War in '67 so it seems typically Kissingerian to pursue a balance of power rapprochement with one of the the seats of opposition to our friendly relations with Israel.
The US also ... sort of "inherited" the British Empire after WWII, and Saudi was very much a part of the actions of those within the Empire. Again, I can't recommend "A Peace To End All Peace" enoughly.
(extended the fact that its key people were allowed to slip out of the country in the immediate aftermath, despite a nation-wide travel ban on everyone else)
The article just claims it's "false" that they flew out before 11:00 A.M. on September 13, 2001 (apparently the end of an "official" ban on air travel) not that it's false that they flew out of the country.
So it happened, just not before that exact date and time.
> It vitiates the claim that somehow these Saudis got special treatment
No, it doesn't, the "special treatment" is documented, it's just that the special treatment wasn't that they flew exactly "before 11:00 A.M. on September 13, 2001." Specifically, FBI lied about the whole issue:
"Instead of just noting that the FAA record showed the travel occurred after U.S. airspace was reopened, the FBI said Sultan and his three companions “had arrived in Lexington from Tampa by car.”
“The four individuals,” the report went on, “had disobeyed the Prince [Ahmed] by traveling by car instead of by jet as the Prince had instructed them.”"
And the very Snopes page seems to state that the pilot of one of the flights ("the bin Laden flight") was in fact an FBI agent?
Hmm - I looked at this episode one point about 8-9 years ago, and looked at some sources that came to light after the 9/11 report, and came to a different conclusion. When I get a chance, I'll give it a closer look.
Kissing their ass suggests they're getting more from the relationship than America which - while certainly not impossible - seems an odd assumption to make.
Yea, 281 billion is just not a lot of money when your talking US debt around ~1.5% federal and a little less if you toss in state and local. In just about any other context that's a lot of money.
This is yet another fascinating step in the disenagement of the US from Saudi Arabia (pity it took so long to happen). Drip by drip stories are emerging which are preparing for it. The Saudi 9/11 pages in the report. Diplomatic spats etc.
It's fascinating to watch such a deal with the devil break down. The long term natural ally for US in the Middle East is Iran. It seems the Washington establishment knows this.
Just because we made a deal with Iran doesn't mean they are our ally, and I'd hardly call them our "natural" ally; their regime is only marginally less bad on human rights than Saudi Arabia. Iran still funds terror groups, much like Saudi Arabia. They are just part of two different tribes and despise one another. Really the U.S. mission should be to do whatever it takes to prevent Saudi Arabia and Iran from going to war. They are already in a proxy war in several locations, Iraq and Syria being the two largest.
I think that's what people in Washington know, has nothing to do with being their ally and everything to do with stopping an implosion. If Iran got a nuke, it's not likely they would give it to a terror group (from what I see) it's just incredibly likely that it will push Saudi Arabia to get one too and then we'll have quite the situation on our hands.
Before the Iranian revolution, Iran under the Shah was the USA's staunchest regional ally. And before that, the British and Russians spent centuries wrestling over influence inside Iran. There are sound geopolitical reasons to court Iranian friendship, and undoubtedly the days of Anglo-Persian cooperation will someday return. Though perhaps after regime change.
Irans's theocratic head of state (currently Khomeini) is elected, when the previous dictator dies, by a "Council of Experts" [1]. This Council recently swung liberal. Khomeini is 87 years old.
> Iran still funds terror groups, much like Saudi Arabia.
The US itself also founds terror groups. The more interesting question is, when was the last time an Iran backed terror group blow up anything in the US or Europe?
The US doesn't fund terror groups so that they will commit acts of terror; it's usually much more complex of a relationship. I don't deny your claim, because it's true, but it has entirely different aims.
Iran is nominally government by the people for the people, including guaranteed Jewish representation in parliament(!) and elections that don't appear to be completely rigged. This makes them a considerably more natural ally in the Middle East than almost any of the other states.
The Jewish population in Iran is down nearly 95% in just the past two decades. And they the Ayatollah makes the real rules, the democratic side is largely for show.
The religious arm in Iran is desperately trying to hold onto power. And sadly they do so with brutality. But talk to any modern Iranian with access to the Internet and they want regime change. The students tried recently and were brutally beat back. But it will change. It's inevitable. The religious side is going to try and be more and more extreme to exert their power until finally they fail. It's going to be a bit brutal, but ultimately it's going to be good news for the Middle East.
I've been hearing it's inevitable for all my life (my family left when I was 1 in 79). Who really knows and can say for sure? What's it going to take for minorities to enjoy freedom there, let alone any kind of regime failure as you alluded to.
The question is, why does the U.S. need an ally in the Middle East? As oil becomes less and less strategically significant, and the Middle East region dries up [1], it will become less and less important. Do we desperately need an ally in Central Africa?
My guess is they will reduce those holdings - they have a large budget deficit they need to cover, before it bankrupts them. Defense and fuel subsidies make a large part of that deficit.
For a country of 30 million people with a lot of sun, I find it crazy they produce most of their electricity with oil and are the 6th largest oil consumer in the world. Much of that is simply wasted through inefficient power plants and AC.
Would do them well to use their foreign reserves (while they still have them) to cover their energy needs by building solar.
But they can't sell anymore! Supply currently exceeding demand. If they put 1 million more barrels of oil a day on the public market, prices go down by Y, making the net gain of that 1 million barrels low (maybe negative, but if not at least close).
So if market has demand for you to sell 10 million barrels of oil a day, but you have capacity to pump 20 million... you found a way to basically have "free" energy by burning some oil.
Yes it shortens the length of your oil reserve and yes it kills the environment, but in the short term it is the best option. Most people/countries make decisions in the short term. So to me it is very logical that the middle east burns oil for electricity, nowhere near a "duh why not use solar" moment.
Not only they burn it in very large quantities, but they subsidise burning it to a degree that ends up as a hole in their budget, eroding foreign currency reserves they've built up previously. And there are huge wastages - old power plants, inefficient AC, oversized cars etc
They are starting to wake up to building solar now though:
I didn't want to mention how price points would shift due to increased supply, but in doing so committed an oversimplification, so you are more correct.
I suspect that they're making the right choice since I'm just some dude on the internet and they've run the numbers. I didn't mean for my comment to sound like I had the answers. There are many unsolved challenges for solar in deserts as well: http://www.nomaddesertsolar.com/the-desert-solar-challenge.h...
The $50 includes transportation, storage and other costs. It's more like "use it for $1 or earn $20". Also, they are selling as much they can right now; so it's not like they are leaving money on the table.
Interesting side note. In a previous life back in the 90's, I worked in the (civilian) nuclear power industry. I came across some old company reports from the 80's for selling nuclear reactors to Saudi Arabia for desalination and not electrical power generation. I asked my boss about it because he was around at the time and he said the Saudis were serious but the numbers just didn't work out. I think the main problem was fouling of the tubes used to boil off the water leaving behind all sorts of dissolved mineral and salt deposits. Chronic cleaning or replacing the tubes killed the economics.
This calls Saudi Arabi's bluff. Just a few weeks ago they threatened to sell all their US treasuries and some speculated that they held much larger ownership in US treasuries.
They claimed to hold up to $750 billion in US treasuries.
http://www.nytimes.com/2016/04/16/world/middleeast/saudi-ara...
> If you think you know something about the value of treasuries in the future there is a fortune for you to make in the financial market.
No, if you actually know something about the value of treasuries in the future, there is a fortune for you to make in the financial market.
If you merely think you know something about the value of treasuries in the future, that's a different story.
But, anyway, the grandparent post wasn't expressing knowing something about the value of treasuries in the future, they were expressing a perception of risk, which is exactly the opposite.
Oh, if you know that risk is going up, you can buy (long term) credit default protection now, and sell it once the market recognizes the risk, too.
(You don't need an actual default for the credit default protection to appreciate in value, just more of a perception that the risk of a default has gone up.)
Buying credit default swaps on US treasuries is like buying suntan lotion in anticipation of a nuclear attack. No counterparty can credibly insure such an event & the money you would make in a cash-up-front variant would be incredibly likely to become worthless.
A CDS can pay the difference if a government decides to pay a fraction of the full value. This has happened in other countries without total financial collapse and could feasibly happen in the US if it has a president that actively wants to negotiate debt down.
You could also purchase PUT options on a bond ETF like TLT where the counter-party will be the OCC, which will have little exposure to the turmoil in the bond market like a bank that would underwrite a CDS.
Oh, I don't suggest holding to maturity. I suggest selling when the market's perception of risk has crept up to the level one feels justified by fundamentals.
> Can you name a safer financial instrument than US debt? Its definitely not fiat currency
I dunno. I mean, US government debt is conceptually subject to both US monetary risks (the same as US dollars) and US government fiscal risks, so US government (dollar-denominated) debt must always be (even if only infinitesimally) less safe than at least one fiat currency, to wit, the US dollar.
Brought into context with the otherwise inexplicable tolerance for that regime's egregious human rights abuses, and the "delicateness" with which it was handled during the 9/11 investigations (extended the fact that its key people were allowed to slip out of the country in the immediate aftermath, despite a nation-wide travel ban on everyone else) -- it all starts to make sense.
Not in any tinfoil kind of way. But in a more banal, mundane, "Why do we keep kissing this bloodthirsty, homophobic, misogynist and utterly decrepit regime's ass, for decade after decade?" kind of way.
The U.S. started releasing data on foreign ownership of Treasuries in 1974. Since then, the Treasury’s policy had been to not disclose Saudi holdings, and it grouped them instead with those of 14 other mostly OPEC nations, including Kuwait, Nigeria and the United Arab Emirates, Bloomberg reported in January. The group held $281 billion as of February, down from a record of $298.4 billion in July.
For more than a hundred other countries, from China to the Vatican, the Treasury had provided a detailed monthly breakdown of how much U.S. debt each owns. The figures for March are scheduled for release at 4 p.m. New York time Monday.
The special arrangement was a product of the 1973 oil shock following the Arab embargo. It’s among concessions that U.S. administrations made over the years to maintain America’s strategic relationship with the Saudi royal family and access to the kingdom’s oil reserves.