1/ Mike Pompeo said the U.S. will give Saudi Arabia "a few more days" to investigate the death of journalist Jamal Khashoggi while the Trump administration and the Saudi royal family look for an explanation that doesn't implicate Crown Prince Mohammed bin Salman. Pompeo said the Saudis could be trusted to "conduct a complete, thorough investigation," because they "made a personal commitment to me, and the Crown Prince also made a personal commitment to the president." Asked if his administration was trying to give the Saudis room to come up with an explanation absolving Mohammed, Trump said: "I'm not giving cover at all. They are an ally." (NBC News / Washington Post / Politico / CNN)
- Treasury Secretary Steven Mnuchin will not attend next week's investment conference in Saudi Arabia after talking with Trump and Pompeo. (CNBC / Wall Street Journal / Politico / Washington Post / New York Times)
Republican lawmakers are threatening to sanction and end arms sales to the Saudis, despite Trump's objection to canceling a $110 billion arms deal. He claims the deal would create 500,000 U.S. jobs. Additionally, a bipartisan group of senators have invoked the 2016 Magnitsky Act, giving the administration 120 days to respond to the Senate Foreign Relations Committee about potential sanctions against officials responsible for human rights violations. (Bloomberg)
The U.S. received $100 million from Saudi Arabia the same day Mike Pompeo arrived in Riyadh to discuss Khashoggi's disappearance. Saudi Arabia publicly pledged the payment to support U.S. stabilization efforts in northeastern Syria in August, but the timing of the transfer raised questions about a potential payoff as Riyadh tries to manage the fallout over Khashoggi's disappearance. (Washington Post) -
2/ U.S. intelligence agencies are confident that Saudi Crown Prince Mohammed bin Salman was involved in the disappearance and murder of Jamal Khashoggi. While spy agencies haven't been able to collect direct evidence about whether Mohammed ordered the killing of Khashoggi or if his intention was to have Khashoggi captured and taken back to Saudi Arabia, circumstantial evidence points to the prince's involvement. (New York Times)
3/ A frequent companion of Saudi Arabia's crown prince entered the country's consulate in Istanbul hours before Khashoggi arrived. Maher Abdulaziz Mutreb was also seen outside the Saudi consul general's home, leaving a Turkish hotel with a large suitcase, and leaving Istanbul — all in the same day. (New York Times)
- One of the 15 suspects in the alleged murder of Khashoggi died in a "suspicious traffic accident." Mashal Saad al-Bostani was a member of the Saudi Royal Air Force and one of the 15 suspects who landed in Istanbul on Oct. 2 – the day that Khashoggi disappeared – and left the same day after visiting the Saudi consulate. (Yeni Safak / Business Insider / New York Post)
At least nine of 15 suspects identified by Turkish authorities worked for the Saudi security services, military or other government ministries. (New York Times)
4/ Aras Agalarov formed a U.S. shell company a month before the June 2016 Trump Tower meeting between Trump Jr. and Natalia Veselnitskaya, the Kremlin-linked Russian attorney offering damaging information about Hillary Clinton. The Russian billionaire moved almost $20 million to a U.S. bank account 11 days after the meeting using a company he formed anonymously with the help of an accountant who has had clients accused of money laundering and embezzlement. (The Guardian)
- The Re-up: Day 601. Federal investigators are looking into a series of suspicious financial transactions involving people who attended the 2016 Trump Tower meeting. The transfers reveal how Aras Agalarov, a Russian billionaire with strong ties to Trump and Putin, used overseas accounts to distribute money through a web of banks to himself, his son, and at least two people who attended the meeting. Investigators are focusing on two bursts of activity: one occurring shortly before the Trump Tower meeting and one immediately after the 2016 election. (BuzzFeed News / The Hill)
Notables.
- Don McGahn is out as White House counsel. McGahn planned to leave the White House this fall, but his exit was expedited after Trump announced Patrick Cipollone as his successor. Cippollone served as a Justice Department lawyer under the George H.W. Bush administration. (CNN / New York Times)
?? Who The Fuck Has Left The Trump Administration. A timeline of all the departures so far… (WTF Just Happened Today Community Forum)
Trump threatened to deploy the military to the U.S.-Mexico border and upend the reworked trade deal with Mexico and Canada if Central American countries don't stop a convoy of Honduran migrants making its way toward the U.S. (Bloomberg / The Guardian / Washington Post)
Robert Mueller is pushing Paul Manafort to provide information about Roger Stone, who may have communicated with Julian Assange or WikiLeaks about releasing hacked emails from Hillary Clinton's campaign. Manafort agreed to cooperate with the special counsel as part of pleading guilty to two counts of conspiracy. He is also awaiting sentencing on 18 counts of financial crimes. (ABC News)
Trump's lawyers called a sexual assault lawsuit by a former "The Apprentice" contestant "meritless" and "politically-motivated." Summer Zervos alleges that Trump groped and kissed her without her consent in 2007. (ABC News)
The Trump Organization sued the estate of a man who died in a Trump Tower apartment fire for $90,000 in unpaid maintenance fees. (NBC News)
The shadow of a Saudi trader is seen on a stock market monitor in Riyadh, Saudi Arabia. Hassan Ammar/Associated Press
As the fallout continues over the disappearance of the Saudi journalist Jamal Khashoggi, the government in Riyadh is putting on a tough face. If there are sanctions over the alleged murder of Mr. Khashoggi, the Saudis want the world to know, they will fight back.
On Sunday, the Saudi government released a recalcitrant statement: “The Kingdom also affirms that if it receives any action, it will respond with greater action, and that the Kingdom’s economy has an influential and vital role in the global economy and that the Kingdom’s economy is affected only by the impact of the global economy.”
These are empty threats. Saudi Arabia is not in a position to harm the United States. In fact, when it comes to relations between the United States and Saudi Arabia, Washington has all of the leverage. American policymakers shouldn’t forget that.
One of Crown Prince Mohammed bin Salman’s primary objectives is to diversify the Saudi economy and wean his country off its dependence on oil. Unemployment in Saudi Arabia is at more than 12 percent, and some 70 percent of employed Saudis work for the government. The Saudi labor ministry estimates that the economy needs to create 1.2 million jobs by 2022 to lower unemployment to a still dismal 9 percent.
But because the country lacks business experience and special expertise outside of the oil and petrochemical industries, that won’t be possible without foreign — and particularly American — participation. That’s why the Saudis have been making so many deals recently: The Public Investment Fund has partnered with AMC to open and run movie theaters across the country because AMC knows how to manage cinemas. Saudi Arabia is pursuing deals for Snap and Amazon to open facilities in the kingdom because they can offer tech opportunities.
It’s not just the private sector. The Saudi government bureaucracy also relies heavily on American management expertise. Riyadh has been hiring American consultants since the 1950s, and in recent years American firms like McKinsey, Boston Consulting Group and Oliver Wyman have worked on hundreds of projects for the kingdom. In some cases, Saudi government bureaucrats work side by side with these consultants to implement government programs.
The Saudi Public Investment Fund — the kingdom’s sovereign wealth fund, which is estimated to have more than $250 billion in assets — is also closely tied to the American economy. To name just a few of its major investments: It put $3.5 billion into Uber in 2016 and almost half a billion dollars in the start-up Magic Leap this year; it invested $45 billion in SoftBank’s Vision Fund, which invests heavily in American technology start-ups; and it made a $5 billion investment with a possible growth to $20 billion in a Blackstone fund for United States infrastructure. Much of the tens of billions of dollars cannot be pulled out on a whim. These start-ups are private companies without open markets for their shares. Prince Mohammed is building a domestic reputation with this tech portfolio, so its success is politically important, too.
All of this is at risk if the dispute worsens between Saudi Arabia and the United States over Mr. Khashoggi’s disappearance. Not only could the Saudis not retaliate because their economy is so intertwined with that of the United States, but they will also be susceptible to pressure. Targeted sanctions — if it comes to that — could force consultants to withdraw or cut off the Saudi Public Investment Fund’s access to the profits of its investments. More likely, though, is that a continuing dispute would force American businesses like AMC to seriously reconsider involvement in the country because of negative publicity.
What about oil? Whereas Saudi Arabia could once shock the world economy by cutting oil exports or production to raise prices, it no longer has that power. The oil market today is significantly more diverse than it was in 1973, when Saudi Arabia and other Arab petroleum exporters unilaterally raised the price of oil and unsettled the American economy. In fact, the United States now produces more oil than Saudi Arabia, and imports make up a smaller percentage of domestically refined crude oil.
Saudi Arabia cannot embargo or unilaterally raise oil prices for the United States without doing greater harm to its own industry and revenues. If Riyadh directed the national oil company, Saudi Aramco, to halt exports to the United States today, it would primarily hurt Aramco itself. Aramco owns Motiva, the largest refinery in the United States, and Motiva is more reliant on Saudi oil than any other part of America’s energy ecosystem. If Aramco tried to raise prices by cutting oil production or exports, it would face irate customers in Asia and hurt its own refineries in China and Korea, too.
We do not yet know for certain what happened to Mr. Khashoggi, but President Trump has now said that he believes the Saudi journalist is dead and that there was high-level Saudi government involvement. If the United States determines that Saudi Arabia is at fault, the Trump administration will have a real opportunity. Of course, President Trump has so far indicated that he doesn’t have much interest in holding Saudi Arabia accountable. But with calls for a response growing louder on Capitol Hill, the White House should see a strategic opportunity here.
The Saudis are dependent on the United States, and public opinion is increasingly against them. Already, Treasury Secretary Steven Mnuchin has backed out of a high profile finance conference in Riyadh next week. Mr. Trump could use this as a chance to pressure Riyadh to come around on some of his real priorities: the peace deal between the Israelis and the Palestinians that Jared Kushner is trying to broker; a resolution to the dispute with Qatar, which hosts a critical American military base; billions of dollars more in purchases from American industries.
Saudi Arabia is not in a position to threaten the American economy. In fact, the kingdom may be overestimating its own economic clout. It would be a mistake for Riyadh to try to act on its threats against the United States.
Ellen R. Wald (@EnergzdEconomy) is the author of “Saudi, Inc.: The Arabian Kingdom’s Pursuit of Profit and Power” and the president of Transversal Consulting.
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