Key Points:
• The Kingdom of Saudi Arabia (KSA) is being blamed for the disappearance and possible death of U.S. resident and journalist, Jamal Khashoggi
• The Trump administration is considering sanctions against the Kingdom in response
• Mohammed bin Salman (MBS) may have damaged his position as future King
• Long term impact of military contracts with KSA are unlikely to be negative
Background:
• On October 2, Jamal Khashoggi, a Saudi citizen and U.S. resident, was last seen entering the Saudi Consulate in Istanbul
• Khashoggi, previously enjoyed a close relationship with the Saudi Royal Family, serving as an adviser to the director of Saudi Arabia’s Intelligence Agency
• President Trump threatened harsh punishment if it was proven Saudi Arabia was responsible for Khashoggi’s death
• U.S. allies, Britain, France, and Germany called for a credible investigation by Saudi and Turkish authorities
What Has Happened:
It has been reported that the Saudis will take some responsibility for Khashoggi’s death – claiming it was the result of an interrogation gone awry. Given the escalating tensions and international attention and condemnation, Secretary of State, Mike Pompeo, has travels to Saudi Arabia to meet with MBS. The concern over the death of Khashoggi is only complicated by the strained relationship with traditional U.S. ally, Turkey. The Trump administration is facing internal pressure from a Congress already skeptical of Saudi Arabia’s handling of the war in Yemen and the cursory U.S. support for the conflict.
Why it Matters:
“I’m worried about succession challenges now and was not before. This event will be blamed on MBS internationally and it marks him both externally and internally. While his father, the King, can broker this while alive, I suspect others who may aspire to the crown may believe MBS is a marked man internationally. We need to watch how the royals react and keep an ear to the ground about how well this act is accepted internally. Ambitious competitors for the crown could see an opportunity.”
Lieutenant General Frank Kearney, Academy Securities’ Advisory Board Member
“The business environment with respect to KSA will be affected by this situation in the near-term (eg. reduced participation in KSA investment conference next week), but will remain essentially unaffected in the long-term. The geo-strategic importance of the U.S./KSA relationship, relative to larger Mid-East concerns, is too important to let this incident impact long-term business partnerships and/or foreign military sales agreements. That said, the media coverage surrounding this incident will demand some semblance of a response. It will be crafted to be meaningful in the near-term, but not harmful in the long run. “
Lieutenant General David Deptula, Academy Securities’ Advisory Board Member
Original Post 10/15/2018