Ever since Sept. 11, there has been repeated speculation about whether or not Saudi investors would pull their money out of the US, either because of fears of financial recriminations or because of the fragile state of the US economy, or both. For the past eleven months, it has been just that — speculation. Saudi banks saw no mass flow of funds back into the Kingdom. There was some inflow of capital but not as much as was invested abroad; the net effect was still an outflow.
Last week’s astonishing lawsuit filed in the US by families of Sept. 11 victims against Saudi individuals, banks and charities may change things. Already there are fresh reports — and from highly respectable sources such as the Financial Times of London and the BBC — of Saudis responding by moving large amounts of their US investments — up to $200 billion it is claimed — to the European market.
It is easy to see the lawsuit acting as an incentive to investors to look afresh at the safety of their funds. It would be naive to imagine that this is going to be the one and only such case targeting Saudi assets; there is an anti-Saudi mood in the US, and Saudi property and investments are going to be seen as easy prey. Moreover, not only is the US notoriously litigious, it is, for all its belief in the free market and its dependency on foreign investors to fund government debt, notoriously interventionist. The US authorities are far more prone to issue orders freezing the accounts of particular groups or nationalities than the Europeans, and often on the most tenuous of grounds. Who can, therefore, predict with conviction that the US authorities or courts will not attempt at some point in the future to seize Saudi assets in the country.
However, it must be remembered that the figure of $200 billion reported as moved is just speculation. There is nothing to confirm it, not yet anyway. It would be almost impossible to move all that money in just a few days. Two billion dollars, perhaps, but not two hundred billion. To liquidate and transfer such an amount would take weeks if not months. In any event, it is impossible to account for the nationality of fund movements: who can tell if monies moving from the US to Europe are Saudi, Arab or African or institutional?
More tellingly, the figures do not add up. It is reckoned that private Saudi investments abroad amount to $750 billion, of which investments in the US account for 60 percent or $450 billion. Of that, some 35 percent (around $160 billion) is in the US capital market —equities and bonds. The rest, $290 billion, is mainly in property. Given the state of the US real estate and stock markets, this is not the time to sell. Nor is there any evidence of mass sales of property or stocks, either of which would trigger sudden price slumps and make front-page news across the US. There is no sign of it.
But just because there is no evidence of massive amounts of Saudi money moving out of the US into Europe — bankers also report no evidence yet of investments returning home— that does not mean that investors are not thinking about it. There is now a sense that the US is not as safe, not as rewarding and certainly not a welcoming and friendly as it was.
In time, that is bound to have major consequences.
