Three Reasons Why Saudi Arabia Flip-Flopped On Iran.

And
Now Supports The US Nuclear Deal
By Tyler Durden
Created 09/06/2015 - 18:01
[1]
Submitted by Tyler Durden [1] on 09/06/2015 18:01 -0400
Back in April, when the first outline of the Iran nuclear deal first appeared, Saudi Arabia
(together with Israel) would have none of it. As the Atlantic Council summarized back then
[19], Saudi Arabia and Israel find themselves in the same camp as opponents of a nuclear
deal with Iran, but the Sunni kingdom and Jewish state have very different reasons for
their opposition. Israelis are concerned mainly with a nuclear-armed Iran, while the Saudis
worry more about Irans growing regional influence, analysts said March 16 at the Atlantic
Council.... for the Saudis its been a traditional concern about Irans intentions in the
Gulf.
One month later, the Saudi snub was heard around the globe when King Salman skipped
a summit of Gulf Arab leaders at Camp David, which was widely interpreted as the latest
embarrassment for the US president by a long-time mid-east US ally.
And then, a few months later, just as the new Saudi KJng Salman arrived in the US for his
first trip since assuming the throne in January (and rented out all 222 rooms [20] at the
Washington D.C. Four Seasons hotel), something unexpected happened: Saudi Arabia
gave its blessings for the Iran deal. This is what Deutsche Welle [21] reported on Friday:
Saudi Foreign Minister Adel al-Jubeir said on Friday that President Barack Obama had
assured the Saudi king that the deal agreed in July with Iran prevents Tehran from
acquiring nuclear weapons, includes inspections of military and suspected sites and has a
provision for re-imposing sanctions should Iran violate the agreement.
Al-Jubeir said that under those conditions, Saudi Arabia would support the deal.
Now we have one less problem for the time being to deal with, with regards to Iran, alJubeir said after a meeting between the king and Obama on Friday. We can now focus
more intensely on the nefarious activities that Iran is engaged in in the region.
As BBC confirmed [22], Saudi Arabia has said it is happy with President Obamas
assurances that the recent nuclear deal with Iran will not imperil the Gulf states. Saudi
Foreign Minister Adel al-Jubeir said his country was satisfied that the deal would contribute
to security and stability in the Middle East.
So what prompted the Saudis to change their mind in such a short time frame? There were
three main reasons.
First, as we reported [24] some time ago, since the primary driver behind the Iran deal is
not the Obama State Department but the US military-industrial complex, which is hoping
for yet another regional flash point to capitalize on selling weapons into yet another war,
one of the side deals cut with the Saudis to make the Iran deal more appetizing was a
$1bn arms agreement, which senior US officials told the NYT [25] would provide weapons
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for the Saudi military for the campaign against the jihadist group Islamic State and the
Houthi rebel movement in Yemen. The deal primarily comprised missiles for US-made F15 fighter jets, the officials said. More importantly, it boosts US GDP at a time when the
US is desperate for any incremental growth.
Second, as Al Arabiya reported yesterday [24], Saudi Arabia unveiled a giant raft of
investment and partnership potential opportunities in sectors including oil and gas, civil
infrastructure, and banking as part of a 21st century vision of the cooperation between the
two long-term allies, sources told Al Arabiya News on Saturday. The vision was presented
by Saudi Deputy Crown Prince and Defense Minister Mohammad bin Salman, who also
heads the kingdoms economic and development council.
The list of proposals includes the kingdoms state-run oil giant Saudi Aramco rolling out
new projects in refining, distribution and support over a five-year period.
Mining was also mentioned as a promising sector, with plans to work with U.S.
companies to extract vast deposits of phosphate, bauxite and silica.
In the healthcare sector, Saudi authorities seeking to double the clinical capacity in the
next five years are slated to work with U.S. health insurers to set in place a new national
program.
Foreign direct investment - which so far has been a rarity in the kingdom - is also
mentioned as being among the plans, with major U.S. retailers expected to be invited to
set up shop.
Who will benefit the most from all of this? Why the US again:
U.S. banks and finance firms are also to be invited to enter Saudi, with retail and
commercial institutions mentioned by sources. American lenders are also suggested to tap
in to the kingdoms lucrative mortgage market.
With the Saudi government ramping up investment in free zones, roads, and
communication networks, the kingdom will soon aim to employ and rely completely on
U.S. construction companies, sources told Al Arabiya News.
The proposals were based on studies conducted by leading business and
technology consultants, including Booz Allen Hamilton and BCG.
On Friday, during Saudi King Salmans visit to Washington, the king told reporters that his
country must allow more opportunities for U.S. and the kingdom to do business.
Because if the US cant growth from within, and it the domestic US oil industry is now in
shambles with mass shale defaults just over the horizon, what better place to invest
money than the country whose oil production policies are among the key drivers for
collapsing oil prices.
Third, and perhaps most important, is that with oil at $50 and lower, Saudi Arabia is in dire
financial straits as we have been covering extensively over the past month, leading to fear
not only about the record Saudi budget deficit [26], but also concerns that the Saudi Riyal
could be the next currency [27] to lose its USD peg and devalue. Which means that just
like US shale companies, Saudi Arabia is suddenly all too reliant on capital markets
2

access, and the generosity of creditors to fund its record budget deficit, which is only set to
rise (as we previews back in November 2014).AFP with the explanation [28]:
Saudi Arabia will cut spending and issue more bonds as it faces a record budget
shortfall due to falling oil prices, the finance minister said on Sunday. The kingdom -the biggest Arab economy and the worlds largest oil exporter -- is facing an
unprecedented budget crunch after crude prices dropped by more than half in a
year to below $50 a barrel.
We are working... to cut unnecessary expenditure, Assaf told Dubai-based CNBC Arabia
in Washington, where he is accompanying King Salman on a visit.
He said the government would issue more conventional treasury bonds and Islamic
sukuk bonds to finance the budget deficit -- which is projected by the
International Monetary Fund at a record $130 billion (117 billion euros) for this year.
The kingdom has so far issued bonds worth less than 100 billion riyals ($27 billion/24
billion euros) to help with the shortfall, he said, without providing an exact figure. We
intend to issue more bonds and could issue sukuk for certain projects... before the end of
2015, Assaf said.
Recall that in addition to China and the rest of the EMs and petro-exporters, Saudi too has
been burning through US reserves (i.e., mostly Treasurys): Jadwa said that by the end
of July the government had withdrawn $82 billion from its reserves, reducing the
assets to $650 billion. The reserves are expected to drop to $629 billion by the end of the
year, Jadwa said. Well take the under.
To summarize: in order to get the Saudis to agree to the Iran deal, all the US had to do is
remind King Salman, that as long as oil is where it is to a big extent as a result of Saudis
own record oil production, crushing countless US oil corporations and leading to the
biggest layoffs in Texas since the financial crisis, the country will urgently need access to
yield-starved US debt investors.
If in the process, US corporations can invest in Saudi Arabia (and use the resulting assets
as further collateral against which to take out even more debt), while US military
corporations sell billions in weapons and ammo to the Saudi army, so much the better.
And that is why Saudi King Salman flipflopped on short notice.
And then, there is Donald Trump...

Source URL: http://www.zerohedge.com/news/2015-09-06/three-reasons-why-saudiarabia-flip-flopped-iran-and-now-supports-us-nuclear-deal

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[19] http://www.atlanticcouncil.org/blogs/new-atlanticist/strange-bedfellows-saudi-arabia-israel-oppose-irannuclear-deal-for-different-reasons
[20] http://www.zerohedge.com/news/2015-09-04/red-carpet-rolled-out-saudi-king-arrives-washington-booksall-222-rooms-four-seasons
[21] http://www.dw.com/en/saudi-arabia-accepts-obamas-assurance-on-iran-nuclear-deal/a-18695132
[22] http://www.bbc.com/news/world-us-canada-34153624
[23] http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/08/Obama%20Salman.jpg
[24] http://english.alarabiya.net/en/business/economy/2015/09/05/Saudi-unveils-giant-U-S-partnership-andinvestment-plans-.html
[25] http://www.nytimes.com/2015/09/04/us/politics/iran-deal-will-top-agenda-when-saudi-king-visits-whitehouse.html?ref=middleeast
[26] http://www.zerohedge.com/news/2015-08-25/saudi-arabia-music-just-stopped-scramble-slash-spendingbegins-oil-math-reveals-dire
[27] http://www.zerohedge.com/news/2015-08-24/something-very-wrong-saudi-arabia
[28] http://news.yahoo.com/saudi-cut-spending-issue-more-bonds-shore-budget-004245907.html
[29] https://twitter.com/realDonaldTrump/status/640624897601982464