1 Introduction1
We develop a critical political economy framework to explain U.S. foreign policy toward Saudi Arabia and the Persian Gulf. In doing so, we argue that U.S. policy in the Persian Gulf goes well beyond the geopolitics of “oil for security,” which has been the focus of many scholarly studies. In our framework, U.S. policy can best be understood as protecting the economic and geopolitical interests of a U.S.-Saudi transnational capitalist investment bloc that derives steady profits from the Persian Gulf. This transnational investment bloc intersects and informs the geopolitical strategy of U.S. foreign policymakers in privileging U.S. ties with Saudi Arabia and Gulf Cooperation Council states. The lengthy history of U.S. military expansion in the Persian Gulf has been supported and encouraged by a transnational investment bloc that benefits directly from U.S. foreign policies that enhance the commercial and profit-making opportunities of this bloc. The deepening ties of transnational investors to Saudi Arabia and the Persian Gulf has become a much more important explanation for recent U.S. policies in the region than the standard framing of U.S. policy as “oil for security.” U.S. policies have worked to maintain and increase investment opportunities that favors a U.S.-Saudi transnational investment bloc.
We refer to several groups of U.S.-Saudi investment partnerships as part of an investment bloc due to their mutual geostrategic and economic interests in enhancing the overall investment climate in Saudi Arabia and throughout the Persian Gulf, where profit-making opportunities have expanded over the decades and are increasingly connected to joint ventures both in the Persian Gulf and the U.S. This has provided the economic foundations for a politically powerful investment bloc that has a strong economic interest in maintaining U.S. foreign policies that support Saudi Arabian interests in the region.
As we also discuss, the Saudi Sovereign Wealth funds provide important sources of capital for U.S. commercial and investment banks, as well as sources of support for U.S. financial markets, start-up funds for commercial ventures, and investment funds for an expansion of U.S.-Saudi business projects in the U.S. market. These financial investments link transnational capitalists from Saudi Arabia to the U.S. to the global economy, providing economic incentives for a transnational capitalist investment bloc to favor pro-Saudi policies in the Persian Gulf. We develop an overview of the transnational investment bloc as a political power-broker in helping to shape U.S. foreign policy in the Persian Gulf. Transnational investors that profit from the U.S.-Saudi investment nexus are deeply embedded within think-tanks and interest groups that influence the direction of U.S. policy in the Persian Gulf, including hardline policies toward Iran.
Only when a comprehensive picture of the economic links between U.S. and Saudi Arabia is drawn can we fully grasp the political and security implications of these links for the Persian Gulf and the Middle East. In the remaining sections, we will examine the historical foundations of the transnational investment bloc, followed by an analysis of how various sectors of U.S. capital have operated as part of this investment bloc to influence U.S. foreign policy toward Saudi Arabia and the Persian Gulf.
2 The Historical Foundations of the Transnational Investment Bloc2
As an interwoven network of state and corporate elites, the transnational investment bloc has used its political power to shape U.S. economic and
Transnational investors that profit from the U.S.-Saudi investment nexus are well-organized through such economic bodies as the u.s.-gcc Corporate Cooperation Committee (referred to as the Committee herein), U.S.-Saudi Arabia Business Council (the U.S. has joined the same councils with other gcc members), and Business Initiative. In addition, this investment bloc is deeply embedded within a wider network of think-tanks and interest groups that have influenced the direction of U.S. policy in the Persian Gulf over the past four decades. The last years of the 1970s witnessed a remarkable mobilization of these groups. Their influence consolidated during the Regan administration and their narrative of U.S. “national interests,” “national security,” and “threats” to “U.S. interests” in the Persian Gulf became the political consensus-building strategic wisdom ever since. Together, they have manufactured this image of vitality of U.S.-Saudi Arabia and u.s.-gcc countries for strategic and economic interests of the U.S. as a whole. The goal is to create a barrage of analysis papers and policy recommendations to sell this picture to the White House, Congress, and American public. As a result, the bloc has become hegemonic over time and to a great extent blocks any other policy initiative that endangers its profitability.
3
gcc countries, particularly Saudi Arabia, were placed squarely at the center of the Carter administration’s energy policies extracted directly from the energy recommendations of Trilateral Commission (tc). The tc was the dominant foreign policy-planning organization during the Carter administration. Consisting of largely internationally oriented corporations, intellectuals, and government officials, the tc predominantly represented the leading sectors of transnational capital. It was also closely tied to other similar organizations such as the Brookings Institute and the Council on Foreign Relations. The tc “can be conceived” Richard Falk points out, “as a geoeconomic search for managerial formula” that intended to keep the concentration of wealth in the three centers of global wealth- North America, Japan, and Western Europe- intact, and its vistas “can be understood as the ideological perspective representing the transnational outlook of the multinational corporation [which] seeks to subordinate territorial politics to non-territorial economic goals” (Falk, 1975: 1005). This is the reason why Jeffery Frieden contends that the tc constituted “the executive advisory committee to transnational finance capital” (Frieden, 1980: 69).
The foundation of the Trilateral Commission’s energy policies was based on integrating oil producing countries, and Saudi Arabia in particular, into the international energy and financial markets. The goal was twofold: create a “many-sided structure of cooperation with [oil] producers,” primarily Saudi Arabia, due to its production capacity and more freedom of its petrodollars compared to others like Iran and Venezuela; and stabilize energy prices through a “mutual entanglement” with the Saudis. As a congregation of internationally oriented businesses, the Commission relied on a variety of areas to accomplish these goals. Increasing ties with the Saudis, as planned in the Commission, was through getting them to invest their petrodollars in U.S. banks and Treasury bonds, selling oil in dollars, massive purchases of weapons, hosting a myriad of multinational corporations, and the like (Bird, 1980).
The tc institutionalized the U.S.-Saudi special relationship. Two main organizations in the Trilateral system carried out this task: The U.S-Saudi Joint Commission on Economic Cooperation and the Arabian American Oil Company (aramco). The Joint Commission was created in 1975 at the height of U.S. concerns about international oil and of Saudis’ international influence. It was meant to provide the Saudis with technical and managerial assistance and administer multibillion dollar development projects in the Kingdom. Chaired and administered by the U.S. Treasury Department, the Joint Commission was an opportunity for U.S.-Saudi interests to elevate their partnership beyond
The efforts to hold the special relationship between the U.S. and Saudi Arabia continued more aggressively in the 1980s through The National Council on U.S.-Arab Relations (ncusar) as an organization whose specific focus was U.S. economic and security policy in the Persian Gulf. Founded in 1983, the ncusar serves as the Secretariat of the Committee in Washington D.C which coordinates its public affairs programs and implements its events and activities.3 The founding president and the ceo of the ncusar, John Anthony, has worked closely with the Committee and is well connected to its corporate members- like Burton P. Bacheller from Boeing and then chairman of the Committee- as well as its state members. He has been the only American who has ever attended the gcc ministerial and heads of State summits since the inception of the gcc in 1981. He has access to Department of Commerce through senior officials like Jan H. Kalicki, a counselor to the Department of Commerce and exceptionally active member of the Council on Foreign Relations (cfr). As part of the revolving door between the state and corporate actors, Anthony is also a lifetime member of the cfr since 1986.4
Anthony is the editor of the u.s.-gcc Occasional Paper Series published by the Committee. The sixth paper, written by Anthony himself in 1999, indicates the extent to which the Committee and the ncusar are aware of the u.s.-gcc strategic interests and involvement in the region. Immediately after pointing out the mutual benefits of economic restructuring of the gcc energy sector, and the profitability of deepening the trade and investment ties with the gcc countries for American corporations, the paper links “defense with commerce and commerce with defense.” It explicitly advertises the value
It is not a coincidence that the policy paper emphasizes the value of defense cooperation in securing business prosperity in the region at the same time the governments of the U.S. and the gcc members were weighing the costs and benefits of the Cooperative Defense Initiative proposed by Secretary of Defense, William Cohen, in 1998.5 In fact, the gcc members considered the Initiative extravagant and showed resistance in embarking on the project, notwithstanding the recovery of oil prices which gave them their required budget (Henderson, 2001). The paper rebukes the opposition to the U.S. military expansion in the region by capitalizing on the fear of having another Iraqi invasion of the 1980s and resorts to what-if-isms, asking: “What if the views of those who claim the threats to the member-states to be non-existent, minimal, manageable, or exaggerated happen to be wrong, as has happened twice in the past two decades? How much more expensive might the cost be in the event current deterrence and defense arrangements were absent and another war were to occur? Were armed conflict to recur, given present world financial circumstances, which country or countries would likely be able and willing to assume the multibillion-dollar cost of the massive mobilizations and deployments that would likely be required to end it?” (Anthony,1999: 6).
The Committee and the ncusar have been very effective in promulgating these ideas within the U.S. and gcc governments as well as the American public. In most of the meetings they sponsor, they host gcc’s Secretary Generals and state officials and make sure to invite senior officials from the White House, National Security Council, and Departments of State, Defense, Commerce, and Treasury. They also arrange meetings between gcc officials and U.S. Senators and Representatives and their staffs. They have also delivered these messages to a broader public through the National Press Club, the World Affairs Council,
4 Petrodollars and the Expansion of the Transnational Investment Bloc
The 1970s and the shifting global economy structured U.S.-Arab relations and U.S. geopolitical goals within a petrodollar interdependence that later became solidified in the 2000s petrodollar boom and has persisted up to the present (Wight, 2021). Major Arab states in the Persian Gulf became the agents of “statist globalization” (Harris, 2009) in an effort to integrate their economies into the U.S.-led global capitalist economy. Through these phases, the u.s.-gcc relationship weaned away from one founded on cheap oil for security. Instead, it gravitated toward putting the petrodollars into investments in various sectors, giga-project constructions, energy joint ventures, arms and military service developments, and financing the U.S. empire’s debt. The transnational investment bloc has expanded over the decades through the establishment of economic bodies such as the Arab Bankers Association of North America (abana), u.s.-gcc Corporate Cooperation Committee (the Committee), U.S.- Saudi Arabian Business Council (as well as the same bilateral council established with other gcc countries), and u.s.-gcc Business Initiatives. Over the years, these organizations institutionalized and solidified the economic and political power of the transnational investment bloc by incorporating corporations from diverse sectors of the transnational capital.
In 1983, a group of Arab investors, including Hutham S. Olayan, the head of the Olayan family- one of the major private investors in U.S. capital market (see below)- founded abana. According to the official page of the organization, they founded abana because they “identified the need for an organization to foster professional exchange and promote the business interests of the Arab and Arab-American financial community in the United States.” abana began its life with fourteen financial institutions and forty banking professionals as its inaugural members, but it very quicky became recognized, as the page emphasizes, “as an essential bridge between the financial sectors in North America and the mena region, and it developed a reputation as a unique forum for policy discussions that enhance understanding of the business culture and capital flows between North American and the mena region.” Over the decades, abana has incorporated more actors from diverse sectors in mena and American financial markets such as private banking, asset
Working in close cooperation with abana in thickening the ties between the U.S. and gcc countries in the private sector was the u.s.-gcc Committee. Over the years, the Committee has increasingly integrated major American transnational corporate investors. The members of the Committee with key positions included: at&t (Vice President for Telecommunications), the Boeing Company (Chair), Lockheed Martin (Vice Chair, Vice Chair for Government Relations), Northrop Grumman and Raytheon (Vice President for Aerospace, Defense, and Electronics), Parson Corporation6 (Vice Chair), Mobil Oil Corporation (Vice President for Energy), Fluor and Bechtel (Vice President for Construction). Other corporations, including AlliedSignal Aerospace, General Dynamics Land Systems, General Electric, Exxon Company International, Adams & Associates, Inc, Booz Allen & Hamilton, Inc (management and information technology), Bryan Cave llp (law firm), Eli Lilly & Company (pharmaceutical), fmc Corporation (chemical), Foster Wheeler Corporation (engineering), Lucent Technologies (telecommunication), saic (information technology), and trw (aerospace).
“The Committee’s objective,” as acknowledged in its report under the title of Building Bridges; Business to Business and People to People, “is to enhance American awareness of the innumerable benefits to the United States from increased relations with the six gcc countries. Among the Committee’s programs and activities are public affairs forums that inform American leaders and the public in general about the shared interests and common concerns between the U.S. and the gcc countries.” Over the years, with the help of the ncusar (discussed earlier), the Committee has been very influential in bringing the U.S. and gcc business elites together in different conferences, summits, and seminars. For example, in its 1997 seminars, the Committee addressed, among other topics, “the 1997 International Defense Exhibition in Abu Dhabi; economic offsets in the gcc; comparative methods of international project finance; and Bahrain’s and Kuwait’s economic and political situations. In addition, the Committee co-sponsored the U.S. Mideast Policymakers Conference which brought key public and private sector leaders from more than 14
What has been very instrumental in expanding the transnational investment bloc is the support that the U.S. government has provided for the business ties established by the private sector. It has done so by fortifying its relationships with the gcc countries through establishing bilateral Business Councils with them. The most important of these councils is the U.S.-Saudi Arabian Business Council that was established in 1993 as a spin-off of U.S.-Saudi Arabian Joint Economic Commission (established in 1975). Over the past two decades, according to its official website, “the Council has evolved from an organization focused on disseminating information on trade and investment opportunities to an entity recognized today as the premiere U.S.-based bilateral business promotion organization working with Saudi and American companies.” Today, the Council has a membership base of approximately 250 major American and Saudi companies. The Council’s Board of Director composition mainly consists of senior executives from leading American corporations with powerful economic and political clout. They include, Bechtel, Citigroup, General Electric, ExxonMobil Corporation, Morgan Stanly, and the Boeing Company. The Arab component of the Board of Director is also made of powerful actors such as Saudi Aramco, sabic, Ma`aden, Zamil Group, and Xenel Group.
Through broadening its membership base to incorporate more powerful economic actors, The Council has improved its political influence in the public sector, thus facilitating the expansion of the transnational investment bloc. “The Council,” as acknowledged in its website, “plays an advocacy role by working with the American and Saudi public and private sectors on issues affecting trade and investment.” In this regard, over the years the Council has organized and convened formal discussions between senior executives of Saudi and American companies and government officials from the Saudi Ministries Foreign Affairs, Commerce, and Health and the U.S. Departments of State and Commerce. The opinions and commentary from these gatherings have informed both governments through policy papers and recommendations from business (The U.S.-Saudi Business Council, 2022). The same role in supporting the expansion of the transnational investment bloc is played by other bilateral councils such as the U.S.-Qatar Business Council (1996) and the u.s.-uae Business Council (2009).
It is very crucial to know that the energy, financial, and military corporations that put the building blocks of the transnational investment bloc have been central to the entire architecture of the expanding ties between the U.S. and gcc countries through these economic bodies. The leading corporations in these sectors, such as Boeing, Lockheed Martin, Chevron, ExxonMobil, and Bechtel, usually occupy influential positions within these organizations. They are mostly on the board of directors or have a special membership that distinguishes them from less prominent members. For example, in the case of U.S.-Saudi Arabian Business Council, the majority of these corporations have “Chairman’s Circle” and “Platinum” membership which implicitly amounts to having a higher status, thus more influence in the overall policy direction of the organization.
5 Saudi Arabia’s Role
Saudi Arabia, among other gcc countries, has played an integral role in the formation as well as the expansion of the transnational investment bloc. In the 1970s, the Saudi government gradually asserted ownership and control of Aramco, an oil corporation that had been owned and operated by a consortium of U.S. energy corporations as part of a “participation agreement” with the Saudi government. By 1980, after a decade of negotiations steadily increased the ownership stake of the Saudi government, the transition to complete Saudi government control of oil production and revenues was essentially completed- though the name change from Aramco to Saudi Aramco would not be official until 1988. Like other gcc countries, Saudi Arabia benefited from the
Since this agreement was reached, over $6 trillion Saudi petrodollars have flowed through U.S. financial markets over the next four decades (al-Labbad, 2013). These petrodollars have linked Saudi investors to the U.S. financial market by providing major sources of credit for the U.S. Treasury, and as important sources of capital for U.S-based transnational commercial banks, buttressing their capital reserves as they sought to manage their leveraged position during the debt crisis in the developing world during the 1980s. Petrodollars also functioned as a key element in sustaining the high levels of U.S. debt and global imbalances that have been an important characteristic of the structure of the global economy in the post-2000 era (Hanieh, 2011: 97).
With the decline in oil prices that occurred after 1981, Saudi Arabia began to use petrodollars to transition to foreign direct investment strategies that offered investment opportunities to transnational capital in the areas of defense contracting, commercial manufacturing and service sector investment. According to the World Investment Report of 1997, “the share of inward fdi stock in gdp increased from 6.6 percent to 39 percent between 1980 and 1990” (Bardesi, Davies and Ozawa, 2002). Some of the most significant partnerships were in the petrochemical sector, led by the Saudi Basic Industries Corporation (sabic), a subsidiary of Saudi Aramco, established in 1976. sabic undertook joint ventures with a wide range of transnational energy firms, including U.S. firms such as Shell Oil, Exxon Chemical, Mobil Oil (all three were previous investors in
After the initial growth of foreign direct investment in the 1980s, the next surge of fdi took place from 2000 to 2008, made possible by a tenfold increase in oil prices from 1999–2008, driven largely by rising demand from China. Saudi Arabia and the uae used Sovereign Wealth Funds, quasi-government agencies that managed the revenues from natural resources, to invest heavily in gcc and foreign markets. The exponential growth of petrodollar revenues led to the emergence of a heavily consolidated capitalist class in the gcc with an ownership stake in petrochemicals, construction, real estate, financial investments, and services. By the 1990s and early 2000s, gcc governments worked together and in coordination with international financial institutions and trade organizations (including gatt and the wto) to lower trade barriers and capital restrictions among gcc countries. Large-scale corporations from Saudi Arabia and the uae benefited the most from this market liberalization. Foreign investors, led by U.S. corporations, also increased their fdi during this period, building on earlier joint venture partnerships in petrochemicals, manufacturing, military contracting and services (Hanieh, 2011: 87–94).
Today these investment ties between U.S. and Saudi Arabia have expanded across a variety of areas. There has been a dramatic expansion in U.S.-Saudi relations as even a wider range of transnational investors have committed substantial capital in Saudi Arabia as part of the restructuring of the Saudi economy. Now, more than before, the two sides have a mutual interest in maintaining the stability of this system. Recent developments in Saudi Arabia’s economic strategies have further tied this country to the U.S. capital markets. Data provided by the Saudi Ministry of Investment show that the ten largest U.S. investments in the Kingdom have a combined paid-in capital of over $56 billion (Kenner and Al-Ahmad, 2021: 13). According to the Department of Commerce’s Bureau of Economic Analysis (bea), the U.S. cumulative investment in the Kingdom rose from $3.7 billion in 2000 to nearly $11 billion in 2019, about 200% increase (U.S. Department of Commerce, Bureau of Economic Analysis, 2021). This amount has been increasing as Prince Mohammed Bin Salman has been trying to reduce oil dependency and turn Saudi Arabia into a foreign investment hub. In order to accomplish this task, Saudi Arabia has been notably investing, largely through its Sovereign Wealth Fund, known as Public Investment Fund
6 Energy Ties
In accordance with the Trilateral program the U.S.-Saudi energy ties increased significantly. This was while these ties were decreasing between U.S. and non-Arab sources. In 1975, imports of Saudi oil increased 45 percent, while oil imports from Canada declined 21 percent. By 1976, Saudi crude oil alone accounted for over 23 percent of U.S. oil imports (Bird, 1980: 344–45). Over the following decades, the rise of U.S. domestic production, due to drilling technologies and imports of crude oil from Canada, has not dramatically affected Saudis’ share of the U.S. oil market and its commercial and political outcomes (Kemp, 2016).9
Today the U.S.-Saudi Arabia energy connection is no longer limited to crude oil export.10 There have been multiple energy joint ventures (jv) between U.S. oil companies and Saudi Aramco both in Saudi Arabia and in the U.S. a few examples of these jvs inside Saudi Arabia are Aramco’s partnership with Shell known as sasref11 and between Petromin12 and Mobil known as pemref.13 Shell is a key partner in Saudi projects as it has joined sabic14 in Saudis’ biggest petrochemical venture and “Saudi Aramco’s partner in the biggest export refinery” (Shammas, 2000: 48). ExxonMobil is also, as mentioned in its website, “one of the largest foreign investors in the Kingdom and also one of the largest private sector purchasers of Saudi Aramco crude oil.” The company has participated in the petroleum refining and petrochemicals manufacturing industries in the Kingdom through three jvs: samref- a refining 50–50 jv with Saudi
Except for these jvs that are in Saudi Arabia, Saudi Aramco and sabic have considerable investments in U.S. oil companies, mostly through Saudi Aramco’s International Division, founded in 1991. To understand the scope of Saudi Aramco, one needs to think of it not “just as a national oil company,” to borrow from Young (2018), but “a global energy company with aims to expand its production cycle to refineries globally and vast petrochemical operations.” The company is the Saudis’ largest investment arm and holds more than seven U.S.-based subsidiaries (Kenner and Al-Ahmad, 2021: 21). Of particular significance are three remarkable enterprises, Star, Motiva, and gcgv (Gulf Coast Growth Ventures). Star Enterprise was Saudi Aramco’s first major foreign jv through which [Saudi Refining, Inc- sri]15 partnered with Texaco in 1988. The focus of the enterprise was to refine, distribute, and market petroleum in 26 Southern and Eastern states in the U.S. and in the district of Columbia (Saudi-Texaco Joint Venture, 1989; Shammas, 2000: 48). Motiva Enterprise was founded in 1998 as a jv between Shell (%35), Texaco (%32.5), and sri (Shammas, 2000). What makes it a very special case is that later in 2017 it became fully owned by Saudi Aramco. Through this acquisition, now Saudi Aramco owns the largest refinery in the U.S. in Port Arthur, Texas, worth$13.8 billion (by the end of 2018) and capable of refining 635,000 barrels of crude oil per day (Saudi Aramco Prospectus, 2019). As the largest gasoline processor in the U.S. now Saudi Aramco “markets gasoline, diesel and other refined products in 26 states and the District of Columbia under the Shell brand as well as through unbranded wholesalers” (Kemp 2016).16 The Motive project has been expanding its operations as in 2019 it acquired Flint Hills, which owns and operates a chemical plant in Port Arthur (Kenner and Al-Ahmad, 2021: 22).
Finally, there is sabic partnership with ExxonMobil. In May 2018, they announced that they created a new jv to advance development of the Gulf Coast Growth Ventures project, a 1.8 million ton ethane cracker planned for
In addition to the state-owned oil company, there are several private Saudi businesses that have built up an impressive overseas presence. The one which is active in the U.S. is Nimir Petroleum Co. ltd (npc) that is linked to Saudi Royal Family whose activities range from the upstream end to oil refining and distribution (Shammas, 2000: 50). All things considered, we can safely say that even if the U.S. is less dependent on Saudi oil, the energy links between the two countries are profound enough to keep them into each other’s orbit. As Young (2018) correctly points out “It might not be Saudi oil that is fueling Americans’ cars, but the downstream revenue is going to Saudi Arabia.”
7 Defense Contracts
After the fall of the Shah of Iran, Saudi Arabia became the main recipient of U.S. Foreign Military Sales program. Even before the Iranian Revolution, Saudi Arabia made up 99% of U.S. Foreign Military Construction Sales agreements (total of $10.3 billion) and deliveries ($4 billion) from 1971 to 1977 (Wight, 2021: 109–111). Today U.S. arms sales to Saudi Arabia is no longer bound to its “energy security” as some argue (Stokes and Raphael, 2010) and cannot be considered only as a function of U.S. energy dependency. The records of military sales during the past decade, indicate that weapons export means more to U.S. corporate profits than they do to the Saudis as the biggest customer of the U.S. weapons producers (Ivanova, 2018). According to Stockholm International
The “Arms Transfer Initiative” policy put forth by the National Security Council is a recent policy measure that highlights the economic underpinnings of security policies. This policy strengthens the traditional linkage between weapons sales and alliance with the U.S. as it cuts regulations and waiting time in tandem with weapons sales, all in exchange for the promise of economic growth (Ivanova, 2018; Yglesias, 2019). As Tina Kaidanow, a State Department diplomat pointed out, the policy is explicitly meant to “expand opportunities for American industry [and] create American jobs” (Ivanova, 2018). This policy is a vivid manifestation that U.S. foreign policy is increasingly linking arms sales to the profits of defense corporations (Yglesias, 2019). However, the officials do not usually admit that the sole purpose of the arms transfer is economic. They often cite some rationale for the sale in order not to be viewed as “merchants of death” but instead guarantors of U.S. “national interests,” “regional stability,” and eventually “world peace.” In fact, sometimes they tend to characterize arms sale in positive terms to have the public support by designating sale programs with the prefix “peace”; as in the sale of F-15 to Saudi Arabia under “Peace Sun” (Klare, 1984: 27).18
The U.S. government has long been protecting the military industry in its efforts to extend its market to the Persian Gulf. This support spans consecutive administrations. During the Ford administration, Congress passed a bill
Arms sales to Saudi Arabia [as well as other gcc countries] have become a much easier task due to the great ties between the Saudis and the entire range of actors involved in arms transfer which constitute the nerve center of foreign military sales. These actors fall into three categories of private arms suppliers, governmental arms exporters, and governmental arms regulators. The link between the Arab leaders and the U.S. large defense contractors such as Boeing, Lockheed Martin, Raytheon, McDonnell Douglas, Northrop Grumman is established mostly through the economic bodies mentioned before. These institutions provided the testing ground for the U.S.-Saudi military ties to further evolve into a private enterprise. U.S. private military contractors are the major beneficiaries of these ties which benefit from arms sales and military service programs. Saudis’ petrodollars tempted the U.S. government to allow the privatization of services that were previously the exclusive domain of the Pentagon and the U.S. military. In the 1970s, Saudi Arabia “hired California-based Vinnell Corporation to train the twenty- six thousand members of the Saudi National Guard in modern weapons use and military tactics under the supervision of former U.S. army officers. This deal was the first instance of
Saudis also have had influence within the U.S. Defense and State Department mostly through what is known as the “Arab Lobby” (Brad, 2010). This way the Saudis are connected to those agencies in charge of making decisions on arms sales before Congress and the public know about such transfers. Some of these agencies that are poised at the core of U.S.’s arms export establishment and manage arms trades are: Office of Munitions Control (omc) and Office of Security Assistance and Sales (osas) in the State Department; and the Office of the Assistant Secretary of Defense for International Security Affairs (isa) and the Defense Security Assistance Agency (dsaa) in the Pentagon (Klare, 1984: 55).
These ties prove more crucial as we realize that the process of arms sales begins well before the formal request from buyer states to the U.S. government. Arms sales are initiated through informal negotiations between U.S. officials and foreign military officials, as well as “promotional activities” conducted by U.S. defense contractors. It means that the military firms with close ties to Arab leaders (deepened by the Business Dialogues and u.s-gcc economic councils) engage in a wide range of activities to promote their products against their competitors and ensure that the leaders already have a “brand name” when approaching the U.S. government to supply a particular system. These activities entail advertising and other marketing techniques but has also included extensive use of bribery and other illicit practices. Through its investigation into Lockheed Martin’s alleged controversial payments abroad, the Senate Subcommittee on Multinational Corporations of the Senate Foreign Relations Committee found that the company had made $200 million of such payments, of which $38 million had gone to bribery and kickbacks. Of course, Saudi Arabia was one of the recipients. Other major defense firms including McDonnell Douglas, Northrop Grumman, and Raytheon, also admitted making such bribes to their potential customers. Today, even though federal regulations have imposed more restrictions on such firms’ activities, “there is no way to prevent company personnel from making an informal agreement with prospective buyers over drinks in the nearest cocktail lounge or in the ‘hospitality suits’ maintained by all the major suppliers in adjacent hotels” (Klare, 1984: 64–66). The point is that all of these activities occur before the buyers place their official request to the U.S. government. Saudis have had an edge when it comes to establishing such informal ties.
8
As mentioned in the previous chapter, Saudi Arabia (as well as other Arab oil producers) found the U.S. debt market a secure place to park the petrodollars that was pouring to the Kingdom following the spikes in its oil revenues. The latest updates show that Saudi Arabia now holds $134.4 billion in U.S. Treasury securities, making the Kingdom the fourteenth largest creditor of U.S. debts (U.S. Department of the Treasury-Federal Reserve Board, 2021). This shows a whopping 1000% increase in Saudis holding over the last two decades ($11.7 billion in 2000) (U.S. Department of the Treasury-Federal Reserve Board, 2016).
Beside U.S. debt markets, Saudis have long been interested in investment in U.S. technology and financial markets. Figure 4.1 shows Saudi Arabia’s investment in U.S. companies 2008–2018.
Saudi investors are now the single largest source of capital for U.S. startup companies. Since 2016, Saudi’s Sovereign Wealth Fund (swf) has flowed roughly $60 billion in U.S. Silicon Valley directly or indirectly (through financing half of SoftBank Corp’s $100 billion Vision Fund), investing in companies like Lucid, Sisco Systems, Lyft, Uber, WeWork, Slack, and Magic Leap (Brown and Bensinger, 2018; cfr, 2018; Layne, 2018). Table 4.1 shows the top investment rounds by Saudi investors:
Saudi investment in different U.S. business sectors by the source of investment
Company |
Sector |
Investment round (millions usd) |
Saudi investor |
|---|---|---|---|
Uber |
Rideshare platform |
$11,321 |
swf |
Lyft |
Rideshare platform |
$4,915 |
Kingdom Holding |
Magic Leap |
Augmented reality |
$1,888 |
swf |
Lucid Motors |
Car manufacturer |
$1,131 |
swf |
Virgin Galactic |
aerospace |
$280 |
swf |
Desktop Metal |
Industrial manufacturing |
$273 |
Saudi Aramco Energy Venture |
Beamreach Solar |
Energy |
$239 |
Riyadh Valley Company |
Snap |
Social media network |
$250 |
Prince Alwaleed Bin Talal of Saudi Arabia |
Siluria Technologies |
Oil and gas |
$151 |
Saudi Aramco Energy Venture |
Digital Signal |
Facial recognition technology |
$125 |
Technology Control Corporation |
Rive Technology |
Oil and gas |
$85 |
Saudi Aramco Energy Venture |
Like in industry sectors, swf is also the most prominent Saudi investor in U.S. equity markets. According to Securities and Commission filling in May 2020, the Saudis’ swf investment in U.S. stock market quadrupled in value and reached nearly $10 billion (Mohamed, 2020). The investment portfolio contains a variety of companies’ shares ranging from Citigroup and Bank of
It must be noted that swf is not the only source of Saudis’ money flooding the U.S. markets. Private investors have their own high stakes in these companies. Prince Alwaleed Bin Talal, among others, has had great stakes in companies like Twitter, Lyft, Snapchat, Citigroup, etc. (cfr, 2018; Manjoo, 2017). Olayan Group of Saudi Arabia (in private sector) is another Saudi family-owned conglomerate which has invested mostly in U.S. financial institutions. cs First Boston, Transamerica (5.3%), First Chicago (6.8%) and J.P. Morgan (1%), Merrill Lynch ($6.6 billion) and also companies like Thermo Electron (5%) and Occidental Petroleum (4%) are among few businesses this group has invested in.22
9 U.S. Banks, Financial and Non-financial Sectors, and Saudi Arabia’s Transformation
Saudi-U.S. financial ties are not just limited to Saudi investments in the U.S. The Saudi Prince’s decision to open the country to foreign investors as a necessary step to diversify away from oil exportation has created another grid of financial ties between the two countries. Especially since 2015, American firms, banks, financial institutions, consultancies23 and private investors have made large commitments to Saudi Arabia and invested a significant amount of energy to win access to the liberalization and privatization plans in the country. Firms like Goldman Sachs, JPMorgan, Morgan Stanly, Citigroup, Blackrock, to name a few, registered to attend the Vision 2030 conference in Riyadh and set themselves up for huge profits stemming from investments and deals following the Prince’s decision to transform the country’s economy (Horowitz and Egan, 2018; Young, 2018).24 The profitability of their engagement with the
Bin Salman’s transformative strategy manifested in Vision 2030, which includes building a futuristic emission-free mega-city known as neom and new refinery and petrochemical sites like Jazan, is an extremely expensive undertaking, and at the same time, a beneficial opening for the dominant actors in global capital markets which converge on Wall Street. To finance its transformation, Saudi Arabia has been on a “spending spree” over the past five years. For 2018, Saudi Arabia added up $90 billion in capital expenditure to its normal budget (Young, 2018). The declining oil revenues of 2016 led Saudi Arabia to borrow over $60 billion in international debt markets, particularly from U.S. banks which have had a significant role in facilitating Saudi Arabia’s dollar-dominated bond sales amounting to $52 billion since 2016. As an illustration, in only one contribution a consortium of banks including Goldman Sachs, Citigroup, and JPMorgan lent Saudi swf $11 billion in September 2016 (Horowitz and Egan, 2018). This and other such examples indicate that Wall Street is a significant component in financing Saudi Arabia’s attempted economic transformation.
In addition to borrowing, Prince Bin Salman has counted on a public offering of 5 percent of Saudi Aramco as a foundational component of his Vison 2030. Since the release of the blueprint for this large sell in 2016, American banks have been increasingly involved in the processes of valuation and preparation of deals for the sales to public investors across the world. JPMorgan, Morgan Stanley, hsbc, Moelis (a boutique investment bank) and later Bank of America are among the banks that expect a boon by making profit from this public sale (Horowitz and Egan, 2018; Layne, 2018). The footprint of U.S. banks’ profit-making is even noticeable in Saudis’ partnership with American companies. For instance, Blackstone has managed a $20 billion fund that Saudi Arabia has injected into U.S. infrastructure. Even after the tech companies and startups bear fruit and “go public,” it is U.S. banks who “expect to cash in on underwriting fees.” That is why it seems as if “[everything] is all about Wall Street looking for opportunities” (Horowitz and Egan, 2018).
At the same time that the U.S. financial sector is financing the attempted industrial restructuring of Saudi Arabia, the U.S. non-financial sector is reaping profits from the industrial implications of Vision 2030-led transformation. For example, there is a significant American firms’ involvement in the Kingdom’s projects to expand arts, entertainment, sports, and tourism industry. The Prince has allocated over $60 billion to these sectors. In another instance, on May 2017 General Electric announced that it signed a $15 billion contract
The construction sector is one the most awarded beneficiaries of the Saudis’ Vision Realization Program. In 2019, the Kingdom awarded $52.6 billion worth of contract to boost spending on sectors ranging from housing to oil and gas development (Kenner and Al-Ahmad, 2021: 16). American construction firms have been increasingly involved in expanding the Kingdom’s infrastructure. Bechtel company is an old ally in this sector that has been active in Saudi Arabia since 1940s when it built the railway that linked the capital with the oil-producing east (Wald, 2018: 31). The company has been working on the Jubail project in Eastern Province of Saudi Arabia since the mid 1970s, which is the “biggest civil engineering project in modern times,” Bechtel claims (Bechtel Corporation, n.d.).25 The company was asked to manage the expansion of the project to Jubail ii (2006–2016) which required another $11 billion funding totaling the cost of the project over $20 billion. In 2016, the project was further expanded for another five years that makes Bechtel involved in a fundamental aspect of Saudi Arabia’s agenda for providing educational facilities and residential accommodation in Jubail.26 The construction giant is the key developer of the neom project and won another contract in August 2020 to develop neom’s primary infrastructure, which will include a “highly advanced transport system” (Bechtel Corporation, 2020).
According to data from meed Projects,27 the projects won by American companies in the Kingdom are worth more than $700 billion. Jacobs Engineering Group, Fluor Corporation (in 1970s won a $14 billion project to construct a natural-gas-gathering system), and kbr Inc. have received major parts of these projects amounting to a total value of $225 billion. American companies are
Although not as visible as projects in the entertainment sector or giga-projects, the mining sector has witnessed incredible expansion over the last decade. American mining companies have been very interested in partnering with the Saudis in the joint ventures in this sector. According to the Saudi Ministry of Investment, three of the top ten largest U.S. Saudi joint ventures in terms of paid-in capital are in the mining industry. Alcoa, The Mosaic Company, and Tronox Limited have partnered with the Saudi Ma`aden company in several joint ventures that are worth over $20 billion in total.
10 The Political Implications of U.S.-Saudi Economic Ties
We have documented the influence of an integrated transnational capitalist bloc on U.S. policy toward Saudi Arabia and the Persian Gulf over the past four decades. Transnational capital has pooled its efforts in corporate-funded think-tanks that integrate the interests of U.S.-based defense, energy, and financial corporations across a wide network of growing U.S.-Saudi investment ties. It is no longer possible, if it ever was, to neatly separate the interests of a transnational investment bloc, focused on maximizing their own profits, from how the U.S. foreign policy establishment defines “strategic” interests. As we have shown, a transnational investment bloc led by defense contractors, as early as the 1970s, was instrumental in working with U.S. policymakers to identify U.S. military expansion in the Persian Gulf region as central to U.S. national security. They were joined as early as the 1980s by an emerging transnational investment coalition that included U.S. energy and financial corporations.
These relationships have expanded dramatically over the decades, as an even wider range of U.S. transnational investors have committed substantial capital in Saudi Arabia as part of the restructuring of the Saudi economy. Furthermore, the substantial growth of Saudi Public Investment funds into a wide range of U.S. investments have further solidified and deepened the lobbying power of this transnational investment bloc, which operates as
Countering this bloc in U.S. foreign policy would require building a broad coalition that could link the concerns of human rights groups, social welfare organizations, labor unions and peace organizations in a campaign to reverse U.S. militarization abroad and at home. The fact that the U.S. Congress voted in 2019 to cut off U.S. military assistance to Saudi Arabia’s war in Yemen and, in a separate vote in 2020, to block $23 billion in arms sales to the United Arab Emirates that had been approved by President Trump, indicates that there is some momentum to challenge some aspects of status quo policy (despite President Trump’s successful vetoes).
Whether this momentum can continue will be largely dependent on the ability of critics of the U.S. militarization of the Persian Gulf to build a broad enough coalition to challenge the power of the well-financed and deeply entrenched transnational investment bloc. Contrary to accounts that speak of U.S. “strategic interests” without referencing how the transnational investment bloc defines those interest, our account emphasizes the profit-making motives behind those “strategic” choices. We hope this helps to advance a broader politicization about the relationship between this transnational investment bloc, U.S. militarization, and the efforts to build constructive alternative definitions of “security” and human welfare.
This chapter is a revised and expanded version of Mazaher Koruzhde and Ronald W. Cox (2022) “The Transnational Investment Bloc in U.S. Policy Toward Saudi Arabia and the Persian Gulf,” Class, Race and Corporate Power, Vol. 10 (1): Article 1.
In another study, Mazaher Koruzhde (2022) shows how the events surrounding the 1979 Iranian crisis, namely the fall of the Shah, the hostage crisis, and the Iran-Iraq war played a crucial role in the formation of the transnational investment bloc by first, accelerating the breakdown of liberal internationalism represented by détente and second, facilitating the replacement of the Shah as an ally with the Saudis.
Such important events as the 1993 u.s.-gcc Private Sector Business Conference which was organized by the Committee for the first time and held in Washington DC. The conference attracted hundreds of public and private sector leaders and officials in order to further promote the agenda of strengthening business and security ties to the region.
Dr. Anthony currently serves on the United States Department of State Advisory Committee on International Economic Policy’s Subcommittee on Sanctions. The political implications of his role will be examined in the next section.
The Initiative would establish a military communication network linking the gcc member states and a missile warning system. The Initiative was proposed to link the network to U.S. systems in order to integrate gcc defenses within the region as well as with the United States.
An American technology-oriented defense, intelligence and security firm headquartered in Centreville, Virginia.
The Committee also publishes special reports and analyses, including Occasional Papers, Gulf Link, Gulf Wire, and Issue Briefs.
From $9.76/barrel in 1999 to $90.32/barrel in 2007 and to over $145 in the first half of 2008. See (Hanieh, 2011).
In order to defend its market, Saudi Arabia has tapped into its historic ties with the U.S., downstream integration, strategic marketing relationships and competitive pricing (Kemp, 2016).
Here are some activities that are far more lucrative for both sides and have created a tremendous amount of wealth for them: “energy research and technology development; oil and gas exploration and production; the construction and operation of fuel storage tanks and marine terminals; reservoir and onshore as well as offshore drilling platform maintenance, pipelines, pumping stations, refineries, shipping, marketing, and management and operations” (Anthony, 1999: 2).
Saudi Aramco bought Shell’s share for $631 million in September 2019 (Shell).
The General Petroleum and Mineral Organization.
It was merged into Saudi Aramco in 1993.
Saudi Arabia Basic Industries.
U.S. unit of Saudi Aramco.
According to Shell’s announcement in May 2017, Saudi Aramco “assumes full ownership of the Motiva Enterprises llc name and legal entity, including the refinery at Port Arthur, Texas and 24 distribution terminals. Additionally, Motiva has the right to exclusively sell Shell-branded gasoline and diesel in Georgia, North Carolina, South Carolina, Virginia, Maryland and Washington, D.C., as well as the eastern half of Texas and the majority of Florida” (Shell, 2017).
Although economists believe that federal spending on health care, education, and infrastructure can be more economically effective in terms of creating jobs and opportunities than that on defense spending (Garrett-Peltier, 2017).
Other examples are sale of F-15 and F-16S to Israel, “Peace Fox” and “Peace Marble” respectively; sale of F-4S to Egypt, “Peace Farrow”; sale of F-15S to Japan, “Peace Eagle.”
Of course, the argument for the job creation, as mentioned before, is very controversial. Paul Krugman and Bernie Sanders cast doubt on the validity of this argument at the time the deal was in process.
Saudi investors traded $86 billion worth of American stocks in 2020. See (Capital Market Authority, 2020).
Production firms like William Morris Endeavor Entertainment llc.
For more on Olayan Group’s investments see (Bartlett, 1991; Dealbook, 2008; Shepherd Jr., 1987).
They have a key role in transforming Saudi Arabia. There is an influx of giant consultant companies like McKinsey, Boston Consulting Group (bcg), A.T. Kearney, Strategy&, and Oliver Wyman to this country. See (Consultancy.uk, 2016).
As they had already made over $300 million by advising Saudis on debt deals and mergers (Horowitz and Egan, 2018).
In 1983, the Guinness Book of Records listed this project as the largest undertaken in history (Wight, 2021: 122).
Which means the involvement of other American tech companies like Amazon, Apple, and Snap in order to contribute to building Saudis’ tech-focused cities (Layne, 2018).
The statistics are available at:
For other accounts of the failure of the Iran nuclear deal see (Koruzhde and Popova, 2022).
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