Saudi Arabia Threatens to Retaliate After U.S. Pressure Over Journalist’s Disappearance
Saudi stocks tumble as investors worry about economic fallout amid worsening ties between the kingdom and the international community
Saudi Arabia on Sunday threatened to retaliate against possible punitive measures after President Trump vowed “severe punishment” if an investigation proves the kingdom was behind the suspected death of a prominent Saudi journalist.
The Saudi government said that if economic sanctions or other forms of punishment were imposed on the kingdom, “it will respond with a larger action,” according to an official statement, which didn’t specifically mention the U.S. or any other country.
The statement also warned that the world’s top oil exporter “plays an impactful and active role in the global economy.”
In an apparent attempt to defuse tensions, the Saudi Embassy in Washington, D.C., later Sunday in a Twitter message said: “To help clarify recently issued Saudi statement, the Kingdom of Saudi Arabia extends it appreciation to all, including the US administration, for refraining from jumping to conclusions on the ongoing investigation.”
The earlier comments marked Riyadh’s strongest response so far to mounting international pressure over the mystery surrounding the disappearance of Saudi journalist Jamal Khashoggi, who was last seen entering the Saudi consulate in Istanbul on Oct. 2.
Turkish authorities believe Mr. Khashoggi, a government critic, was killed by Saudi hit men inside the consulate, and claim they have video and audio evidence to prove it. Saudi Arabia has vehemently denied the allegation, saying Mr. Khashoggi left the consulate and dispatching a security team to Turkey to help the investigation.
Despite the denials, the Saudi government remains under pressure to prove it did nothing wrong.
The Saudi reaction is exposing growing strains between the monarchy and its most important ally, the U.S., in what appears to mark the most significant clash between Riyadh and Washington since Mr. Trump came to office.
The Trump administration has made strengthening ties with the kingdom a priority of its Middle East strategy, partnering with Riyadh to confront religious extremism, to curb the influence of a common foe, Iran, and to try to broker an end to the Palestinian-Israeli crisis.
Even as Mr. Trump remained steadfast in his support for the Saudi leadership, the bilateral relationship hasn’t always been smooth. The president was recently critical of Saudi Arabia’s oil policy, calling it to lower global prices. There has also been growing opposition on Capitol Hill to the kingdom’s conduct of the war in Yemen over civilian victims.
Mr. Trump, in an interview with “60 minutes,” portions of which were broadcast Saturday, said he would be “very upset and angry” if the allegations prove true, and vowed there would be consequences.
But he also said he opposed sanctions against the U.S. ally because it may hurt jobs in the U.S. tied to a $100 billion arms deal with the kingdom.
Capitol Hill has been pressuring the Trump administration to rethink its close partnership with the Saudi leadership in light of Mr. Khashoggi’s suspected killing. Bipartisan lawmakers have raised the possibility of halting arms sales and of imposing economic sanctions on the kingdom.
They triggered an investigation by the Treasury Department’s Office of Foreign Assets Control to determine potential human rights violations under the Global Magnitsky Human Rights Accountability Act. The law gives the U.S. president 120 days to determine whether a foreign national is behind an extrajudicial killing, torture or other human-rights violation of someone exercising freedom of expression. If found guilty, it would lead to sanctions.
The foreign ministers of the U.K., France and Germany on Sunday ramped up pressure as they called for a credible investigation to determine what happened to Mr. Khashoggi, and to hold accountable those responsible.
“We encourage joint Saudi-Turkish efforts in that regard, and expect the Saudi government to provide a complete and detailed response,” they said in a joint statement, adding they already conveyed this message to Saudi authorities.
In its statement, Saudi Arabia said it rejected any attempt to undermine it through political pressure or by threatening to impose sanctions.
But it remains unclear what action Saudi Arabia would take if Washington does impose penalties. It is unlikely to cancel the arms deal while at war in a highly charged region. Saudi Arabia could raise the price of oil it sells to the U.S., but any attempt to influence market prices will also impact its other buyers.
The diplomatic crisis could impact investments. Saudi Arabia, most recently through its sovereign-wealth fund but also through Kingdom Holding, the company of tycoon Prince al-Waleed bin Talal, has been pumping billions of dollars into U.S. tech companies such as Uber and Snapchat Inc. U.S. banks including Citi and J.P. Morgan meanwhile, have expanded in Saudi Arabia.
“If U.S. sanctions are imposed on Saudi Arabia, we will be facing an economic disaster that would rock the entire world,” Turki al-Dakhil, a prominent Saudi commentator, wrote in a column on Sunday for the website of the state-aligned Al Arabiya news channel. “Riyadh is the capital of its oil, and touching this would affect oil production before any other vital commodity.”
Saudi Arabian stocks tumbled Sunday as investors worried about the impact of the growing international pressure, and particularly tensions with the U.S., analysts say. The Riyadh-based Saudi Stock Exchange’s benchmark Tadawul All Share Index closed 3.5% lower, after falling nearly 7% at one point.
Investors and business executives say the allegation of Saudi involvement in Mr. Khashoggi’s disappearance, if proven true, is likely to sour interest in the kingdom and derail an ambitious plan by Crown Prince Mohammed bin Salman to diversify the country’s economy away from oil.
Already, dozens of Western executives have pulled out of Riyadh’s premier business conference later this month, including Uber Chief Executive Dara Khosrowshahi, whose company is partly owned by the kingdom’s sovereign-wealth fund. Media partners such as CNN, Bloomberg and the New York Times also withdrew support for the conference, the Future Investment Initiative, dubbed “Davos in the Desert.”
Among the planned speakers for the Oct. 23-25 conference who also have decided not to attend are AOL co-founder Steve Case, Viacom CEO Bob Bakish, and media executive Arianna Huffington.
At least four people listed as members of the board of Prince Mohammed’s most ambitious economic transformation project—a $500 billion futuristic city on the Red Sea called Neom—said they would not work on the project, at least for now. They include former U.S. Energy Secretary Ernest Moniz.
Richard Branson, the British entrepreneur, said he would give up two directorships related to Saudi tourism projects and would suspend talks with Saudi Arabia about its proposed $1 billion investment in his Virgin Orbit and Virgin Galactic space ventures.