$350bn of deals as Trump arrives in Saudi Arabia
US president hopes to rekindle a strategic relationship grown frosty under Obama
President Donald Trump was met by King Salman in Riyadh on Saturday morning, with officials pledging deals of around $350bn as the two allies rekindle a relationship that had grown frosty under the Obama administration.
The agreements included a $110bn arms package that the White House said would help Saudi Arabia and the Gulf states face Iranian threats and contribute to counter terrorism operations, “reducing the burden on the US military,” a White House official said.
The value of the deals signal a revived partnership that promises Saudi investment into US infrastructure in return for US arms deals for the kingdom.
Saudi Arabia is also looking for US support as Riyadh tries to transform its oil-reliant economy after the sustained drop in crude prices triggered a budgetary crisis and rapid deceleration.
The kingdom hopes to cement this renewed commercial partnership with a common vision to check Iranian ambitions in the Arab world.
Mr Trump on Saturday began a number of political and economic meetings with the Saudi leadership. On Sunday he will give a speech on Islam when he meets 50 Muslim leaders.
The king, walking with the aid of a stick, accompanied Mr Trump up a red carpet at the royal terminal of Riyadh’s airport, with the president’s wife Melania following at the back of the small welcoming committee.
Mrs Trump, who like many foreign dignitaries did not cover her head or wear the black abaya robe, was nonetheless conservatively dressed in flowing dark trousers and blouse, accessorised with a gold belt.
TV footage of the president’s blonde daughter Ivanka caused an instant sensation online. The hashtag “#TrumpsDaughter” trended on twitter in the region, including one man asking the president for her hand in marriage. Others satirised Saudis’ infatuation with the mother-of-three.
As the president landed, dozens of chief executives from Saudi Arabia and the US were convening at a forum where they discussed Saudi financial flows into America, and how the US could help diversify the kingdom’s oil-reliant economy.
“The government is taking a back seat and putting the private sector as the locomotive to drive the economy,” said Khalid al-Falih, the Saudi energy minister. “There will be risks, but we will work with you to mitigate it.”
Saudi Aramco, the state oil company, signed more than $50bn worth of deals on Saturday, around $22bn of which were new memorandums of understanding, including:
● Investing $7bn with Rowan over 10 years to own and operate drilling rigs, creating 2,800 jobs in Saudi Arabia.
● Extending a joint venture with Nabors for oil well services, seeing $9bn of investment over 10 years, creating up to 5,000 jobs in the kingdom.
● A new joint venture with National Oilwell Varco in Saudi Arabia to manufacture driving rigs and equipment, seeing $6bn of investment over 10 years.
Aramco also said it would boost operations at its US refinery unit Motiva, with a planned $12bn investment with a likely additional $18bn by 2023. The deal aims to create 12,000 jobs by 2023.
Six firms — including Honeywell, McDermott and Weatherford — signed MOUs to expand Aramco’s use of locally produced goods and services, bringing $19bn of investment to the kingdom.
Aramco also signed a deal with GE to deliver $4bn worth of savings via digitisation of the oil firm’s operations. This was part of a GE package of valued at $15bn.
When deputy crown prince Mohammed bin Salman visited Washington earlier this year, the White House estimated that Saudi investment pledges could rise to around $200bn.
In the defence sector, Lockheed Martin signed a $6bn deal to assemble 150 Blackhawk helicopters in the kingdom, supporting 450 jobs. Raytheon and General Dynamics also signed agreements to support the localisation of defence contracts.
The deals support Prince Mohammed’s plans for the world’s third-largest spender on arms to create a domestic industry led by the newly formed company Saudi Arabia Military Industries. The kingdom wants to source half of defence spending locally by 2030 from 2 per cent now.
Saudi Arabia’s sovereign Public Investment Fund pledged $20bn for a $40bn Blackstone US infrastructure fund, with $20bn to be raised from other parties. Blackstone said it expects, with debt financing, to invest $100bn in infrastructure projects, mainly in the US.
“This potential investment reflects our positive views around the ambitious infrastructure initiatives being undertaken in the US as announced by President Trump,” said Yasir Al Rumayyan, managing director of PIF.
PIF was also an anchor investor in SoftBank’s Vision Fund, which on Saturday finalised its first close at $93bn.
As well as PIF, the technology fund — which is targeting a final close at $100bn within six months — received investments from PIF Mubadala Investment Company of the United Arab Emirates, Apple Inc., Foxconn Technology Group, Qualcomm Incorporated and Sharp Corporation.
PIF is believed to have pledged $45bn for the fund, which is expected to invest significantly in the US.
Dow Chemical, whose chief executive Andrew Liveris co-chaired the Saudi-US CEO Forum on Saturday, agreed to invest more than $100m for a polymers manufacturing plant, while studying a proposed investment in silicones production.
Majed bin Abdullah Al Kassabi, the minister of commerce and investment, granted new licenses to 19 US companies that will start operations in Saudi Arabia, including names such as Citigroup and Whirlpool.
At the close of the Saturday morning forum, about 70 senior Saudi executives and US chief executives boarded buses outside the Four Seasons hotel, bound for lunch with King Salman and Mr Trump at the royal court.
The elite business delegation is set to hold postprandial talks with prince Mohammed, architect of the kingdom’s reform plans.
Around 30 US executives were approved to attend the lunch, including names such as Larry Fink of BlackRock, Michael Corbat of Citigroup, Roy Harvey of Alcoa, Adena Friedman of Nasdaq and financial adviser Michael Klein.
Amid tight security, royal guards took the executives’ phones, before they boarded the coaches.