US legislation tests Washington-Riyadh relations

OREANDA-NEWS. September 12, 2016. The US House of Representatives passed a bill today that would open the door to private lawsuits against Saudi Arabia, complicating Washington's relations with the top Opec producer.

The House approved the bill by a voice vote, just minutes after commemorating the 15th anniversary of the 11 September 2001 terrorist attacks in the US. The bill would make it easier for US citizens to sue foreign governments in US courts over the alleged support for terrorism. The Senate unanimously voted to approve the bill in May.

The legislation does not mention Saudi Arabia by name. But attorneys representing victims of the attacks in the decade and a half since 2001 repeatedly have tried to take legal action against Saudi Arabia-based organizations. US courts repeatedly have thrown out such claims on the grounds of sovereign immunity. The proposed legislation could allow such claims to proceed.

Riyadh has reacted strongly against the bill and what it sees as false accusations of the Saudi support for terrorism. Saudi officials point to the 2004 final report of the US 9/11 Commission, which found no evidence that the Saudi government as an institution or senior Saudi officials individually funded the terrorist group al-Qaeda. Riyadh also highlights its role as a key US partner in the Middle East, including in the campaign against Islamic militant group Isis.

President Barack Obama's administration has opposed the bill, largely out of concern that it creates a potential vulnerability of US interests in foreign courts as the proposed legislation narrows the definition of sovereign immunity. The White House hoped the Republican leadership in the House will make changes to the bill to address concerns about US assets abroad. Those concerns are serious but "there are compelling concerns on the other side of this as well," House speaker Paul Ryan (R-Wisconsin) said yesterday.

The 9/11 legislation will shake the confidence of Saudi and other international investors in the US, Saudi foreign minister Adel Jubeir has said. The US administration has dismissed concerns that Saudis could retaliate by withdrawing assets from the US financial system if the bill becomes law, pointing out that Saudi Arabia would not benefit from a destabilization of global financial markets that such a withdrawal may spark. The administration has cheered Riyadh's efforts to diversify its oil-dominated economy, hoping that US companies can play a role in implementing Saudi energy reform objectives.

Saudi Arabia as of June held \\$98.3bn of US treasury securities, down from \\$109.5bn a year earlier, US Treasury estimates show. The number may not reveal the full scale of Riyadh's US assets. Saudi Arabia's estimated US debt holdings have decreased by 20pc since December, based on the Treasury's monthly reports. The decline is consistent with the overall decrease in the Saudi foreign reserve asset values, as Riyadh continues to run a large budget deficit. Saudi crude output was at an all-time high of 10.67mn b/d in August, almost a third of Opec's total.

A separate bill proposed by senators Rand Paul (R-Kentucky), Mike Lee (R-Utah), Al Franken (D-Minnesota) and Chris Murphy (D-Connecticut) seeks to block sales of US military equipment to Saudi Arabia. The US State Department most recently authorized a \\$1.15bn sale in August. "Saudi Arabia is an important partner, but their war in Yemen, funded by the US, has become a disaster that is making our country less safe every day," Murphy said.

Obama's presidency has resulted in a spike in sales of US military equipment to Saudi Arabia and other Gulf countries.

"We stand shoulder to shoulder with our partners in Saudi Arabia as they figure out the most effective way to limit the national security risk [along its border with Yemen]," the White House said.