Russians Flock to Saudi Forum as Mnuchin Joins West's Exodus

(Bloomberg) -- It takes more than allegations of a state-approved murder in a foreign country to scare away the titans of Russian industry.

A large delegation of Russian chief executives and at least one billionaire plan to attend Saudi Arabia’s Future Investment Initiative next week amid an exodus by western officials and companies in response to dissident journalist Jamal Khashoggi’s disappearance. Turkey says it has evidence that Khashoggi was tortured, murdered and dismembered by Saudi agents after he entered the kingdom’s consulate in Istanbul on Oct. 2. Saudi officials deny involvement.

“Why should we spoil our relationship with Saudi Arabia without understanding what had happened there?” Russian President Vladimir Putin told the Valdai foreign-policy forum in Sochi on Thursday.

Kirill Dmitriev, chief executive of the state-run Russian Direct Investment Fund and a leading player in Putin’s push to engage Saudi Arabia, has encouraged business leaders in fields ranging from petrochemicals to diamonds to banking to attend the event. The size of the delegation suggests there may be some truth to President Donald Trump’s warning that Russia and China are waiting to pounce if the U.S. cancels lucrative contracts with Saudi Arabia over Khashoggi’s disappearance.

Russians Flock to Saudi Forum as Mnuchin Joins West's Exodus

‘Russian Card’

“Russia is building situational coalitions with all those that the West opposes,” said Valery Solovei, a political scientist at the Moscow State Institute for International Relations. “The Saudis will play the Russian card in order to achieve a more restrained U.S. attitude.”

The controversy over the journalist’s fate prompted a raft of global business executives to cancel plans to attend the forum and exposed divisions between the White House and Congress over the best response to a vital U.S. ally in the Middle East. Republican lawmakers are threatening to sanction the Saudi government over the objections of the president if the Turkish allegations are proven. 

U.S. Treasury Secretary Steven Mnuchin said on Twitter Thursday that he’s withdrawing from the Saudi investment summit. He said he’d met with Trump and Secretary of State Mike Pompeo and “we have decided I will not be participating.”

Trump told reporters later Thursday that it “certainly looks” like Khashoggi is dead and warned of “very severe” consequences for the killing. He said his administration is waiting for the results of “about three different investigations” as it decides how to respond. “It’s bad, bad stuff,” Trump said. “But we’ll see what happens.”

Dutch Finance Minister Wopke Hoekstra, French Economy Minister Bruno Le Maire, and U.K. International Trade Secretary Liam Fox also pulled out of the forum on Thursday.

Russia and Saudi Arabia, the world’s two biggest oil exporters, have grown closer since crude prices collapsed in 2014 and now coordinate production under the so-called OPEC+ format. Amid mounting calls in the West to isolate Riyadh, Putin -- whom Trump said last weekend was “probably” responsible for killing political opponents -- is unlikely to let a controversy over human rights deflect him from trying to reassert Russia’s influence in the Middle East.

High Profile

Sibur Holding PJSC’s Dmitry Konov, Alrosa PJSC’s Sergey Ivanov and VTB Group’s Andrey Kostin are among those joining the Russian delegation. That contrasts with high profile cancellations including JPMorgan Chase & Co.’s Jamie Dimon, Uber Technologies Inc.’s Dara Khosrowshahi and Credit Suisse Group AG’s Tidjane Thiam.

Russian billionaire Mikhail Gutseriev, who owns oil company Russneft PJSC, and ECN Group’s Grigory Berezkin are also considering making the trip to Riyadh. Berezkin said he had not yet received a visa.

“The Russian Direct Investment Fund together with its partners plans to actively participate in the Future Investment Initiative conference,” the sovereign wealth fund said in a statement.

Putin’s view of the controversy echoed earlier comments by Trump, who lamented in an interview with the Associated Press on Tuesday that the Saudis were considered “guilty until proven innocent.”

Joint Fund

RDIF and Saudi Arabian Oil Co. announced a joint $1 billion energy fund this year, while Dmitriev’s organization has said it plans as much as $10 billion in investments with the Saudi sovereign wealth fund. Russian banks and a joint Russia-China investment fund are also eager to take part in Aramco’s plans for an initial public offering, according to Dmitriev.

Russia’s delegation may be less apologetic, but it won’t be alone. Even as European and U.S. bank chiefs publicly announced they won’t attend the FII, which was conceived by Saudi Crown Prince Mohammed bin Salman as he sought to project an image of a modernizer, they still plan to send senior deal makers, according to people familiar with their plans.

Organizers of the event, now in its second year, removed a list of attendees from the website, creating a shroud of secrecy around the conference.

Sanctions Calls

Increasing calls for sanctions against senior Saudi officials could create an opening for Russian business, itself grappling with restrictions on raising money and on technology transfers since the U.S. and the European Union enacted measures to punish the Kremlin after the 2014 annexation of Crimea from Ukraine.

A bipartisan group of U.S. senators invoked the 2016 Magnitsky Act -- a law initially intended to punish Russia for human rights abuses-- in a letter to Trump concerning the suspected murder of Khashoggi. They gave the administration 120 days to respond to the Senate Foreign Relations Committee with a decision on potential sanctions against Saudi officials accused of responsibility.

Trump told reporters last week that the government in Riyadh had agreed to buy $110 billion in U.S. weaponry. “If we don’t sell it to them, they’ll say, ‘Well, thank you very much, we’ll buy it from Russia,’ or ‘Thank you very much, we’ll buy it from China,’” he said.

The Saudi crown prince “is a terribly important diplomatic success” for Putin, said Alexander Baunov, a senior fellow at the Carnegie Moscow Center. “For Russia, new opportunities in the Middle East are emerging, and the Kremlin will not abandon this because of the death of one journalist.”

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