Economy / Finance, Human Rights, Neo-liberalism, Politics, Violence

Investing in Saudi Arabia’s oil company is an investment in a brutal regime

Nov 5 2019

By Editorial Board  – The Washington Post

SAUDI CROWN Prince Mohammed bin Salman appears confident he has overcome the international backlash that followed the murder of journalist Jamal Khashoggi 13 months ago. Last week, the annual investment conference the kingdom sponsors saw the return of senior government officials and business executives who boycotted it last year, soon after a killing that U.S. intelligence concluded was ordered by the crown prince. On Sunday, the Saudi oil company, Aramco, announced that it was finally going forward with its first public share offering, an initiative Mohammed bin Salman has been touting since 2016.

Before Western investors pile in, they ought to consider how Saudi Arabia has changed in the nearly five years since its previous ruler, King Abdullah, died, as a new report by Human Rights Watch shows.

Even without the report, the Aramco initial public offering comes with some red flags. The first shares are being offered only on Saudi Arabia’s small stock exchange, and there are reports that domestic investors are being pressured into buying them. Mohammed bin Salman has promoted a $2 trillion valuation for the company, even though international analysts say that may be a third more than it is worth. Aramco temporarily lost half its production following an Iranian-sponsored attack on its production facilities in September, and its ability to defend itself against further strikes is questionable.

But the political risks may be even graver. As Human Rights Watch documents, Mohammed bin Salman’s much-hyped push to modernize the kingdom has been accompanied by some of the most brutal and arbitrary repression in its history.

Around the time of his promotion to crown prince in 2017, the report recounts, Saudi intelligence, prosecution and security services were purged and placed under the direct control of the royal court. There followed wave after wave of political arrests. First came “prominent clerics, public intellectuals, academics and human rights activists” in September 2017; then, two months later, “businesspeople and royal family members.” In May 2018, it was the turn of women’s rights activists, 19 of whom were seized.

The sweeps continued even after the murder of Khashoggi and the international backlash that followed. In April writers and activists were arrested in another crackdown, the report says. Four more religious figures were detained last month.

Jailing peaceful domestic critics is nothing new for the Saudi regime. What makes the Mohammed bin Salman era different, Human Rights Watch says, “is the sheer number and range of individuals targeted over a short period of time as well as the introduction of new repressive practices not seen under the previous Saudi leadership.” For example, the report says a number of the women arrested last year were held incommunicado for months at a secret prison, and at least four were tortured with electric shocks, whippings and sexual assaults.

International investors may believe themselves immune from such treatment. They shouldn’t be so sure. Among those caught up in the Saudi sweeps are U.S. citizens and one of the world’s most prominent investors, Alwaleed bin Talal. Anyone buying into Saudi Arabia has to be prepared for the reckless adventures and strong-arm tactics of its 34-year-old ruler. November 4, 2019

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Annex:

Should KiwiSavers go into business with Saudi Arabia’s repressive regime?

Rob Stock* –  Stuff , New Zealand

OPINION: The latest challenge to the cosy sense of wellbeing surrounding KiwiSaver is the partial sale of state-owned Saudi Arabian oil giant Aramco.

KiwiSaver has made investors of everyone, and there’s been a gradual waking up to some of the less morally defensible investments KiwiSaver funds make.

Many KiwiSaver schemes, which invest in shares and bonds of many companies, have dumped investments in companies involved with tobacco and weapons after public outcry.

Now KiwiSaver scheme providers are going to have to choose whether to buy shares in Aramco and go into the fossil fuel business with one of the world’s great repressive regimes.

Many KiwiSavers will have strong views on buying shares in a company that’s directly responsible for between four and five per cent of global carbon emissions.

As things stand, unless they’re in a fund that excludes fossil fuels, they’re likely to end up with Aramco shares in their funds, if it ends up becoming a big deal in global share indexes.

Aramco will be debated on two ethical fronts by KiwiSavers.

The first is whether we want our money invested in yet another fossil fuel producer.

The second is whether we want to extend our personal financial dealings with Saudi Arabia.

I find the second question much easier to answer than the first.

My personal stance on fossil fuels and KiwiSaver is that I would prefer my fellow earth-dwellers to reduce their dependence on fossil fuels, ride a bike to work like I do, and offset their flights.

But as long as I own a part share in a car (my wife and I share one) or rely on goods delivered by trucks, or fly on planes, I’d feel like a screaming hypocrite to avoid all oil companies in KiwiSaver.

That would feel as hypocritical to me personally as would demanding the exclusion of Airbus, Boeing or Rolls Royce from my KiwiSaver for their involvement in the nuclear arms industry of our allies France, the United Kingdom and the United States while still merrily relying on them to fly me off on holiday.

But while I am conflicted on Airbus, Boeing, Rolls Royce (which I would much prefer have no exposure to nuclear weapons at all), and also on fossil fuel producers, I am not conflicted on human right abuses.

The repression of women, homosexuality and “dissidents” in Saudi Arabia- not stopping short of torture and murder- is dreadful.

Like many things in this life, there are no ethical clean lines which we can stay comfortably on the right side of.

Global trade means we are each exposed to business with virtually every large country in the world.

Saudi Arabia is our 26th largest trade partner. We buy over $500 million of their oil each year. Some of it ends up in the tank of your car, motorbike, scooter, that Uber you took, or the truck that took the goods you bought to the supermarket.

This September 14, 2019, satellite image provided by NASA Worldview shows fires following Yemen’s Houthi rebels claiming a drone attack on two major oil installations in eastern Saudi Arabia. The drones attacked the world’s largest oil processing facility in Saudi Arabia and a major oilfield operated by Saudi Aramco early Saturday, sparking a huge fire at a processor crucial to global energy supplies. The island shown in the image is Bahrain, while the peninsula in the image is Qatar. (NASA Worldview via AP)

I accept I have no ability to avoid the Saudi taint in my life at this time, but I can say no to going into business with the Saudi state through having some of my KiwiSaver money buy shares in Aramco.

?We all do, and thanks to the internet, it really is no longer hard to find a KiwiSaver scheme that does not absolutely offend your ethical convictions.

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* Money and consumer affairs reporter

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