Ritz-Carlton Crackdown Still Haunts the New Saudi Arabia
(Bloomberg) -- The Ritz-Carlton Hotel in Riyadh, where hundreds of rich and once-powerful Saudis were detained in what the government called an anti-corruption campaign, has been a hotel again for four months. Its legacy as a jail, though, runs deep in the new Saudi Arabia.
Billionaires, royals and bureaucrats remain locked up, including Prince Turki bin Abdullah and former Economy Minister Adel Fakeih, a key architect of the kingdom’s transformation plan, according to associates. Some are now in the Al-Ha’er prison, a maximum-security facility south of the capital where many Islamic militants are incarcerated.
Those released had to promise to pay huge settlements, while some were banned from travel or required to wear ankle bracelets to monitor their whereabouts, according to their associates. The fate of those still being held is unknown, including the former head of the Saudi Arabian General Investment Authority, Amr Al-Dabbagh, and Ethiopian-born Saudi billionaire Mohammed Al Amoudi.
The arrests have created a climate of fear, obscuring the daily reports of change that Crown Prince Mohammed bin Salman is ushering in as a young reformer for a new era. Cinemas are open, genders mix more freely and women will be allowed to drive starting this month, but there’s an increasingly authoritarian side to his leadership.
The enthusiasm that existed when he unveiled his sweeping changes to Saudi society two years ago in “Vision 2030” has been slowly replaced with wariness about staying on-message, according to conversations with more than a dozen businessmen, government officials, activists and diplomats, all of whom asked not to be named for fear of retribution.
Some Saudis put phones in separate rooms or in plastic containers, worried their microphones are being remotely accessed. Most are reluctant to talk politics in public. A Saudi businessman recently asked a guest in his own sitting room to lower his voice as he discussed the kingdom’s anti-corruption campaign with friends.
Authorities detained some of the country’s most prominent women’s rights activists last month, accusing them of links to “hostile organizations” and with providing moral and financial support to “elements hostile toward the kingdom.”
“The crown prince’s version of one-man rule leaves no space for dissent or for anyone taking credit for achievements or change,” said James M. Dorsey, a Middle East specialist at Singapore’s Nanyang Technological University.
The 32-year-old prince toured the U.S. for three weeks in March, pitching his image and Saudi Arabia to senior U.S. businessmen. He is collaborating with Softbank Group Corp.’s Masayoshi Son on a $500 billion ultra-modern city in the desert. These are signs to international businessmen and bankers that real change is afoot.
At home, Prince Mohammed has replaced one style of authoritarian rule, where top royals ran ministries with little interference, to one with a single leader controlling all levers of power, and it’s worrying some.
Officials at foreign embassies say that they are seeing more Saudi nationals inquiring how to renew second passports and getting them issued for their children.
Foreign direct investment into Saudi Arabia last year was a fifth of the level of 2016 – $1.42 billion versus $7.45 billion – after international companies sold stakes in local businesses and brought in less money, according to a United Nations report last week.
Central bank data show money being moved abroad. In the fourth quarter, when the arrests began, personal transfers by Saudis jumped 46 percent compared to the same period a year earlier. They remained elevated in April -- the most recent month for which data is available -- when they were 27 percent higher than during the same month last year.
The kingdom for decades was a place where royals were free to spend lavishly while clerics made sure the country retained its ultra-conservative brand of Islam.
A drop in oil prices and slowdown in growth spurred the urgency for new policies that transition the economy away from petrodollars. Gross domestic product fell 0.7 percent last year, though growth is expected to pick up to 1.5 percent this year, according to a Bloomberg survey of economists, after oil prices got back to above $70 a barrel.
The prince may be using the activists as an example to other interest groups who want to pressure the government into making concessions, according to diplomats in Riyadh.
It’s a “warning to Saudi subjects in no uncertain terms that the state is the sole arbiter of policy, and interlocutor with foreign media, international organizations, and diplomats,” Kristin Smith Diwan, a senior resident scholar at the Arab Gulf States Institute in Washington, wrote.
Partly driving this fear is how the government handled its crackdown on corruption in November. A total of 381 suspects and witnesses were called in for questioning and detained at the Ritz-Carlton in Riyadh. The government released most in exchange for settlements that officials say total more than $100 billion; 56 were kept in custody “due to other pending criminal cases” or to continue investigations, the prosecutor said in January.
At the World Economic Forum in Davos in January, Finance Minister Mohammed Al-Jadaan said the government’s corruption purge was good for business and it would create “a level playing field.” “It will be your quality and your price and nothing else that will determine how successful you are,” he said.
Indeed, some of the new areas opened up by the crown prince, like entertainment, are booming. Some big Saudi families in particular are investing again, according to one foreign investor with interests in the kingdom.
Several top Saudi businessmen appear more eager to deploy cash at home and abroad months after the Ritz crackdown, the person said. They know the next few years will be tough, but they hope it’s for the right reason, he said.
But what happened left many others unsettled. The kingdom is rife with talk of detainees subjected to torture, including beatings and electric shocks. Three associates of detainees and a person briefed by a doctor who treated some of them relayed similar accounts of physical abuse.
The government has denied allegations of torture, and at least two released detainees, Prince Alwaleed bin Talal and Waleed Al Ibrahim, founder of Middle East Broadcasting Center, have said in media interviews that they were treated well. The government’s Center for International Communication did not respond to a request for comment.
To go home, detainees were shown a settlement amount desired by the government and pressured to agree, sometimes totaling close to the entirety of their wealth, according to people familiar with the matter. Since their release, they’ve being contacted by authorities repeatedly and given deadlines to pay up, the people said.
Those who remain in custody have been held for more than six months now without trial. Gregory Gause, a professor of international affairs and Saudi specialist at Texas A&M University, said he expects the government wants to avoid trials. “Too much dirt can come out,” he said. That said, they may be inevitable, he said.
“The way the purge was prepared in full secrecy and the swiftness with which it was implemented are impressive,” said Steffen Hertog, a professor at the London School of Economics who focuses on the Gulf monarchies. “But the campaign also shows that the government sometimes underestimates the complexity of policy challenges and the collateral damage its actions can create.”
©2018 Bloomberg L.P.