Will The $40 Billion Saudi Infrastructure Gift Influence Trump?

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Will The $40 Billion Saudi Infrastructure Gift Influence Trump?

Photo: AFP

Written by Zainab Calcuttawala; Originally appeared at OilPrice.com

It’s “Infrastructure Week” in Washington, and foreign powers are taking note.

Ahead of President Donald Trump’s upcoming visit to the Middle East, Saudi Arabia has promised to make $40 billion of its sovereign wealth fund available to the United States to bankroll part of the roughly $1 trillion in infrastructure improvements that Trump promised on the campaign trail.

The move is reminiscent of the KSA’s strategy amongst its allies in the Gulf Cooperation Council (GCC), as well as Morocco and Jordan. This GCC + 2 group of kingdoms is regularly showered with billions of dollars in gifts from its wealthiest members, earmarked for similar construction projects, allowing the most stable Arab countries to remain intimately connected through financial obligations. The monarchial structure of these countries allows the lead executive to accept the sizeable donations without much fuss from the public. It’s just the way things are done there, and citizens of those regions generally accept.

But using foreign funds, especially those from a country such as Saudi Arabia – which only garnered favorable reactions from 31 percent of Americans polled by Gallup in February 2017 – could be another political trap for Trump.

The KSA had gone all-in on Hillary Clinton before the election, expecting her to continue to tweak policies put in place by Barack Obama. Contributions from GCC nations, especially Saudi Arabia, to the Clinton Foundation total in the millions. Reports of the serial grand donations made voters question Clinton’s allegiances in the 2016 elections. Trump could suffer a similar loss in faith if he begins accepting funding from monarchies willy-nilly – though censuring the new commander-in-chief in the media for any questionable action has led to fierce resistance from the White House and far right.

Riyadh’s most recent $40 billion gift is an effort to court support in the Trump administration, especially as the Saudi Aramco IPO approaches next year. Deputy Crown Prince Mohammed Bin Salman met Trump at the White House in the early days of the new administration. Local media took to labelling the trip a “historic turning point” in bilateral relations – a marked shift from rumors regarding friction between the two countries during Obama’s tenure. Nonetheless, the Department of Defense continued to approve the KSA’s weapons orders for use in Yemen and other regional squabbles, and Trump will likely continue that legacy.

The new president has already declared his support for a new U.S.-Saudi program with $200 billion in direct and indirect investments over the course of his presidency for use in technical development in the energy sector and other advancements in financial relationships between the two countries. As Zero Hedge pointed out earlier this week, it would be ironic if the Saudi funds used for energy research end up discovering new ways to lower shale extraction costs for American producers.

Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries (OPEC), has led a vociferous effort to deter additional shale production, particularly from the Permian Basin. The modest jump in oil prices seen after OPEC agreed on a 1.2 million bpd cut allowed hundreds of rigs in the U.S. to reactivate, causing barrel rates to tumble as Libya and Nigeria also tallied rising outputs. Riyadh needs a strong barrel price to guarantee a hefty valuation for Aramco ahead of the IPO, which is why it announced that the nation would extend its cuts through March 2018. Saudi Arabian clout in the oil community would take a hit if the plan to rebalance supply fails over the next few months.

There’s nothing Trump can really do about shale production. Unlike oil-rich countries in the Gulf, Africa, and South America, where nationalized oil companies are the norm, the U.S. oil sector is highly privatized. The CEOs of ExxonMobil, Chevron, and the hundreds of other oil companies active in the country reserve the right to decide when to drill and when not to drill. On top of that, Trump’s campaign vow of unleashing exploration and extraction prospects in the U.S. makes it unlikely that the White House would use regulatory power to curtail future fossil fuel development. Carving out a niche in the new administration looks to be an uphill battle for Saudi Arabia.

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  • FlorianGeyer

    All we are witnessing in the US ‘Democracy’ is raw corruption that has always been used and abused by the wealthy ( bankers, land owners, royalty etc ) to co-opt the military power of those with large dept’s. In this case the USA. The USA has de facto become the enforcer for the criminal elite of the world.

    • Thegr8rambino

      It is the #1 terrorist state and threat to world peace right now along with Israel and NATO

      • FlorianGeyer

        I agree 100% and the relative failure of the Israeli and US proxy terror gangs has forced Israel and the JewSA into the sunlight.

        • Thegr8rambino

          Yes exactly and hopefully that is what kills them lol

  • Douglas Houck

    I’m sure they will get something for their $40 billion, but probably not what they want.
    https://www.nytimes.com/2017/05/18/opinion/what-saudi-arabia-needs-to-hear-from-trump.html?_r=0

    I don’t see what President Trump can do for SA regards Iran. Sell them weapons I guess.

  • Real Anti-Racist Action

    The Israeli general just announced two days ago that Saudi Arabia was one of their four most powerful allies including Jordan and Egypt and Turkey.
    Any friend of Israel is not friend of humans.
    Lock all Saudis inside of Saudi Arabia, do not let them out. They are killers just like their first cousins the Jews. They are all the same decedents of Abraham. They slit each other throats and now they want to slit everyone else’s throats as well. They are murderers and as Jesus said “Ye father is the Devil” and so it is.
    http://faithandheritage.com/

  • Bob

    Hillary really is a lousy deal-maker, she sold herself and her entourage out, to the Saudi’s for a lot less coin.