Will Saudi Arabia Destabilize global Financial Markets?

At the heart of the matter is 28 pages of the original Congressional report which probed the 9/11 attack on twin towers. These 28 pages were never released since it is supposed to link some members of Kingdom of Saudi Arabia as abettors of that crime. Now the US Congress is considering a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.

As of now the bill is not expected to be passed in a Congress divided by bitter partisanship, especially during an election year. It is sponsored by Senator John Cornyn, Republican of Texas, and Senator Chuck Schumer, Democrat of New York. It has the support of an unlikely coalition of liberal and conservative senators, including Al Franken, Democrat of Minnesota, and Ted Cruz, Republican of Texas—who is in the race for GOP nomination. It passed through the Judiciary Committee in January without dissent.

Saudi officials have long denied that the kingdom had any role in the Sept. 11 plot, and the 9/11 Commission found “no evidence that the Saudi government as an institution or senior Saudi officials individually funded the organization.” But critics have noted that the commission’s narrow wording left open the possibility that less senior officials or parts of the Saudi government could have played a role. Suspicions have lingered, partly because of the conclusions of a 2002 congressional inquiry into the attacks that cited some evidence that Saudi officials living in the United States at the time had a hand in the plot.

Those conclusions, contained in 28 pages of the report, still have not been released publicly.

Potential Impact on US-Saudi relations

Now Saudi Arabia threatens to off –load its holdings of nearly USD 750 billions of US treasury bills etc if US congress proceeds further, which might end up in large number of claims from KSA by affected US citizens. According to a report in New York Times, the foreign minister of KSA has given this threat and it could impact markets severely.

There is lots of concern among the Obama administration regarding the impact of the proposed bill. It is argued that it will affect the US actions abroad since foreigners will be able to legally question actions of US citizens in their jurisdiction. But the proponents argue that the bill can be narrowly drawn to cover only terror related activities like 9/11 on US soil.

Obama administration seems to be more worried about fallout of exposing the possible role of some Saudi elites in the terror attacks than about the de-stabilization of markets due to unloading of huge Saudi holdings.

The nature of relationships which Bush and Cheney had with KSA leaders might also be brought into question. The US involvement in KSA is very substantial –military/diplomatic/economic- and there is a concern that this bill might unravel the whole lot of that. That is one of the major reasons that the 28 pages of the Congressional report was classified as “super confidential” and never got released.

The 60 minute segment of CBS news talked about the 28 pages recently. As per this report in Zerohedge

“Is it sensitive Steve, might it involve opening a bit of can of worms, or some snakes crawling out of there…yes.”  That’s how the latest “60 Minutes” segment ended. [CBS News—10th April 2016]

The comment was in reference to the final chapter of a Congressional investigative report into 9/11 that has been left out of the report due to it being classified. The Congressional investigative report is a report that was completed and handed over to the 9/11 commission, who ultimately produced the final “official” report.

The 28 pages that were classified have only been seen by a select few, and allegedly have to do with details around the existence of a possible Saudi support system for the hijackers while they were in the US among other implications of official Saudi involvement.

The push to declassify the documents is being led by then Chairman of the Senate Select Committee on Intelligence, former Senator Bob Graham (D-FL), who has been a strong advocate of the documents being declassified since the Bush administration classified them due to matters of national security back in 2003.

Point blank, the Democratic senator said the hijackers were “substantially” supported by Saudi government, as well as charities and wealthy people in that country. 

Congressional member Graham [D-FL] was explicit – “I think it is implausible to believe that 19 people, most of whom didn’t speak English, most of whom have never been in the United States before, many of whom didn’t have a high school education, could’ve carried out such a complicated task without some support from within the United States,” Graham said.

For now only a handful of people know for sure: those who have seen the contents of the 28 classified pages. And here are some notable quotes by those that have actually read these 28 pages (the below is an extract from the CBS “60 Minutes” program that was linked to earlier):

Graham: I think it is implausible to believe that nineteen people, most of whom didn’t speak English, most of whom had never been in the United States before, many of whom didn’t have a high school education, could have carried out such a complicated task without some support from within the United States.

Interviewer: You believe that support came from Saudi Arabia

Graham: Substantially

Interviewer: When you say the Saudis you mean the government, rich people in the country, charities?

Graham: All of the above. You can’t provide the money for terrorists and then say I don’t have anything to do with what they were doing.

In general, the 9/11 commission did not get every single detail of the conspiracy. We didn’t have the time, we didn’t have the resources. And we certainly didn’t pursue the entire line of inquiry in regards to Saudi Arabia.

The papers are currently locked in a guarded vault beneath the Capitol called a Sensitive Compartmented Information Facility (SCIF). Very few people have access to these sites.

According to another report –

Actually, the kingdom’s involvement was deliberately covered up at the highest levels of our government. And the cover-up goes beyond locking up 28 pages of the Saudi report in a vault in the US Capitol basement. Investigations were throttled. Co-conspirators were let off the hook.

Case agents I’ve interviewed at the Joint Terrorism Task Forces in Washington and San Diego, the forward operating base for some of the Saudi hijackers, as well as detectives at the Fairfax County (Va.) Police Department who also investigated several 9/11 leads, say virtually every road led back to the Saudi Embassy in Washington, as well as the Saudi Consulate in Los Angeles.

Yet time and time again, they were called off from pursuing leads. A common excuse was “diplomatic immunity.”

There are also reports that Saudi citizens were flown out of US immediately after 9/11 when there was actually a blanket ban on any flights. As per the same report quoted above –

After then Saudi Ambassador to USA Prince Bandar met on Sept. 13, 2001, with President Bush in the White House, where the two old family friends shared cigars on the Truman Balcony, the FBI evacuated dozens of Saudi officials from multiple cities, including at least one Osama bin Laden family member on the terror watch list. Instead of interrogating the Saudis, FBI agents acted as security escorts for them, even though it was known at the time that 15 of the 19 hijackers were Saudi citizens.

But interestingly how much KSA holds in US assets is not clear. another Zerohedge report says –

“Their actual composition remains as a secret, because while the US discloses the explicit Treasury holdings of all other nations, Saudi Arabia’s holdings, for some unknown reason, are not officially disclosed.

“It’s a secret of the vast U.S. Treasury market, a holdover from an age of oil shortages and mighty petrodollars,Bloomberg wrote of Saudi Arabia’s US Treasury holdings.

As a matter of policy, the Treasury has never disclosed the holdings of Saudi Arabia, long a key ally in the volatile Middle East, and instead groups it with 14 other mostly OPEC nations including Kuwait, the United Arab Emirates and Nigeria,” Bloomberg goes on to note, adding that the rules are different for almost everyone else. Although Saudi Arabia’s “secret” is protected by “an unusual blackout by the U.S. Treasury Department, for more than a hundred other countries, from China to the Vatican, the Treasury provides a detailed breakdown of how much U.S. debt each holds.”

The Zerohedge report says –

The Obama administration, meanwhile, is far less concerned about the market impact of a Saudi liquidation, and far more worried what a real inquiry into the Saudi role of Sept.11 would reveal (and who it would implicate) and as a result is building straw man arguments that the legislation would put Americans at legal risk overseas. In fact, as the NYT reports, “Obama has been lobbying so intently against the bill that some lawmakers and families of Sept. 11 victims are infuriated. In their view, the Obama administration has consistently sided with the kingdom and has thwarted their efforts to learn what they believe to be the truth about the role some Saudi officials played in the terrorist plot.”

“It’s stunning to think that our government would back the Saudis over its own citizens,” said Mindy Kleinberg, whose husband died in the World Trade Center on Sept. 11 and who is part of a group of victims’ family members pushing for the legislation.

Stunning indeed, and yet that’s precisely who the “U.S.” president sides with when attempting to get to the bottom of the 2001 terrorist attacks”.

Increasingly it is becoming clear that those 28 pages contain explosive information on the role of Saudis in the 9/11 attack. It will clearly come out –it’s more a question of when than if—and if Saudis as threatened off load billions of asset holding, then global markets will not be what they are.

Already global markets are reeling under possible recession forecast for USA and bond markets in particular are in turmoil. Many of the bigger banks are in doldrums and a looming threat of Brexit –Britain leaving EU- is making the situation grim.

USA has to choose between punishing the perpetrators of terror –whosoever they are- and turmoil in part of the global markets due to KSA sale of its assets. 

About the Author

Professor R Vaidyanathan
Professor of Finance, Indian Institute of Management (IIM) Bengaluru, Bharat