LONDON
(Reuters) – When Saudi King Abdullah arrived home last week, he came
bearing gifts: handouts worth $37 billion, apparently intended to
placate Saudis of modest means and insulate the world’s biggest oil
exporter from the wave of protest sweeping the Arab world.
But some of the biggest handouts over the past two decades have gone to
his own extended family, according to unpublished American diplomatic
cables dating back to 1996.
The cables, obtained by WikiLeaks and reviewed by Reuters, provide
remarkable insight into how much the vast royal welfare program has
cost the country — not just financially but in terms of undermining
social cohesion.
Besides the huge monthly stipends that every Saudi royal receives, the
cables detail various money-making schemes some royals have used to
finance their lavish lifestyles over the years. Among them: siphoning
off money from “off-budget” programs controlled by senior princes,
sponsoring expatriate workers who then pay a small monthly fee to their
royal patron and, simply, “borrowing from the banks, and not paying
them back.”
As long ago as 1996, U.S. officials noted that such unrestrained
behavior could fuel a backlash against the Saudi elite. In the
assessment of the U.S. embassy in Riyadh in a cable from that year, “of
the priority issues the country faces, getting a grip on royal family
excesses is at the top.”
A 2007 cable showed that King Abdullah has made changes since taking
the throne six years ago, but recent turmoil in the Middle East
underlines the deep-seated resentment about economic disparities and
corruption in the region.
A Saudi government spokesman contacted by Reuters declined to comment.
MONTHLY CHEQUES
The November 1996 cable — entitled “Saudi Royal Wealth: Where do they
get all that money?” — provides an extraordinarily detailed picture of
how the royal patronage system works. It’s the sort of overview that
would have been useful required reading for years in the U.S. State
department.
It begins with a line that could come from a fairytale: “Saudi princes
and princesses, of whom there are thousands, are known for the stories
of their fabulous wealth — and tendency to squander it.”
The most common mechanism for distributing Saudi Arabia’s wealth to the
royal family is the formal, budgeted system of monthly stipends that
members of the Al Saud family receive, according to the cable. Managed
by the Ministry of Finance’s “Office of Decisions and Rules,” which
acts like a kind of welfare office for Saudi royalty, the royal
stipends in the mid-1990s ran from about $800 a month for “the lowliest
member of the most remote branch of the family” to $200,000-$270,000 a
month for one of the surviving sons of Abdul-Aziz Ibn Saud, the founder
of modern Saudi Arabia.
Grandchildren received around $27,000 a month, “according to one
contact familiar with the stipends” system, the cable says.
Great-grandchildren received about $13,000 and great-great-
grandchildren $8,000 a month.
“Bonus payments are available for marriage and palace building,”
according to the cable, which estimates that the system cost the
country, which had an annual budget of $40 billion at the time, some $2
billion a year.
“The stipends also provide a substantial incentive for royals to procreate since the stipends begin at birth.”
After a visit to the Office of Decisions and Rules, which was in an old
building in Riyadh’s banking district, the U.S. embassy’s economics
officer described a place “bustling with servants picking up cash for
their masters.” The office distributed the monthly stipends — not just
to royals but to “other families and individuals granted monthly
stipends in perpetuity.” It also fulfilled “financial promises made by
senior princes.”
The head of the office at the time, Abdul-Aziz al-Shubayli, told the
economics officer that an important part of his job “at least in
today’s more fiscally disciplined environment, is to play the role of
bad cop.” He “rudely grilled a nearly blind old man about why an eye
operation promised by a prince and confirmed by royal Diwan note had to
be conducted overseas and not for free in one of the first-class eye
hospitals in the kingdom.” After finally signing off on a trip,
Shubayli noted that he himself had been in the United States twice for
medical treatment, once for a chronic ulcer and once for carpal tunnel
syndrome. “He chuckled, suggesting that both were probably job-induced.”
FOLLOWING THE MONEY
But the stipend system was clearly not enough for many royals, who used
a range of other ways to make money, “not counting business
activities.”
“By far the largest is likely royal skimming from the approximately
$10 billion in annual off-budget spending controlled by a few key
princes,” the 1996 cable states. Two of those projects — the Two Holy
Mosques Project and the Ministry of Defense’s Strategic Storage Project
— are “highly secretive, subject to no Ministry of Finance oversight or
controls, transacted through the National Commercial Bank, and widely
believed to be a source of substantial revenues” for the then-King and
a few of his full brothers, according to the authors of the cable.
In a meeting with the U.S. ambassador at the time, one Saudi prince,
alluding to the off-budget programs, “lamented the travesty that
revenues from ‘one million barrels of oil per day’ go entirely to ‘five
or six princes,’” according to the cable, which quoted the prince.
Then there was the apparently common practice for royals to borrow
money from commercial banks and simply not repay their loans. As a
result, the 12 commercial banks in the country were “generally leary of
lending to royals.”
The managing director of another bank in the kingdom told the
ambassador that he divided royals into four tiers, according to the
cable. The top tier was the most senior princes who, perhaps because
they were so wealthy, never asked for loans. The second tier included
senior princes who regularly asked for loans. “The bank insists that
such loans be 100 percent collateralized by deposits in other accounts
at the bank,” the cable reports. The third tier included thousands of
princes the bank refused to lend to. The fourth tier, “not really
royals, are what this banker calls the ‘hangers on’.”
Another popular money-making scheme saw some “greedy princes”
expropriate land from commoners. “Generally, the intent is to resell
quickly at huge markup to the government for an upcoming project.” By
the mid-1990s, a government program to grant land to commoners had
dwindled. “Against this backdrop, royal land scams increasingly have
become a point of public contention.”
The cable cites a banker who claimed to have a copy of “written
instructions” from one powerful royal that ordered local authorities in
the Mecca area to transfer to his name a “Waqf” — religious endowment —
of a small parcel of land that had been in the hands of one family for
centuries. “The banker noted that it was the brazenness of the letter …
that was particularly egregious.”
Another senior royal was famous for “throwing fences up around vast stretches of government land.”
The confiscation of land extends to businesses as well, the cable
notes. A prominent and wealthy Saudi businessman told the embassy that
one reason rich Saudis keep so much money outside the country was to
lessen the risk of ‘royal expropriation.’”
Finally, royals kept the money flowing by sponsoring the residence
permits of foreign workers and then requiring them to pay a monthly
“fee” of between $30 and $150. “It is common for a prince to sponsor a
hundred or more foreigners,” the 1996 cable says.
BIG SPENDERS
The U.S. diplomats behind the cable note wryly that despite all the
money that has been given to Saudi royals over the years there is not
“a significant number of super-rich princes … In the end,” the cable
states, Saudi’s “royals still seem more adept at squandering than
accumulating wealth.”
But the authors of the cable also warned that all that money and
excess was undermining the legitimacy of the ruling family. By 1996,
there was “broad sentiment that royal greed has gone beyond the bounds
of reason”. Still, as long as the “royal family views this country as
‘Al Saud Inc.’ ever increasing numbers of princes and princesses will
see it as their birthright to receive lavish dividend payments, and dip
into the till from time to time, by sheer virtue of company ownership.”
In the years that followed that remarkable assessment of Saudi
royalty, there were some official efforts toward reform — driven in the
late 1990s and early 2000s in particular by an oil price between $10-20
a barrel. But the real push for reform began in 2005, when King
Abdullah succeeded to the throne, and even then change came slowly.
By February 2007, according to a second cable entitled “Crown Prince
Sultan backs the King in family disputes”, the reforms were beginning
to bite. “By far the most widespread source of discontent in the ruling
family is the King’s curtailment of their privileges,” the cable says.
“King Abdullah has reportedly told his brothers that he is over 80
years old and does not wish to approach his judgment day with the
‘burden of corruption on my shoulder.’”
The King, the cable states, had disconnected the cellphone service
for “thousands of princes and princesses.” Year-round government-paid
hotel suites in Jeddah had been canceled, as was the right of royals to
request unlimited free tickets from the state airline. “We have a
first-hand account that a wife of Interior minister Prince Naif
attempted to board a Saudia flight with 12 companions, all expecting to
travel for free,” the authors of the cables write, only to be told “to
her outrage” that the new rules meant she could only take two free
guests.
Others were also angered by the rules. Prince Mishal bin Majid bin
Abdulaziz had taken to driving between Jeddah and Riyadh “to show his
annoyance” at the reforms, according to the cable.
Abdullah had also reigned in the practice of issuing “block visas”
to foreign workers “and thus cut the income of many junior princes” as
well as dramatically reducing “the practice of transferring public
lands to favored individuals.”
The U.S. cable reports that all those reforms had fueled tensions
within the ruling family to the point where Interior Minister Prince
Naif and Riyadh Governor Prince Salman had “sought to openly confront
the King over reducing royal entitlements.”
But according to “well established sources with first hand access to
this information,” Crown Prince Sultan stood by Abdullah and told his
brothers “that challenging the King was a ‘red line’ that he would not
cross.” Sultan, the cable says, has also followed the King’s lead and
turned down requests for land transfers.
The cable comments that Sultan, longtime defense minister and now
also Crown Prince, seemed to value family unity and stability above
all.
(Editing by Jim Impoco, Claudia Parsons and Sara Ledwith)
