Arrests and 'corruption': Inside Saudi Arabia's business affairs

A review of Amoudi's career trajectory sheds some light on the workings of the Saudi economy, as well as on this spate of arrests; apparently a warning to the business world.

On 4 November 2017, King Salman bin Abdulaziz al-Saud established by decree an anti-corruption committee to be led by his son, Mohammed bin Salman, Crown Prince and new strongman of the regime.

The spectacular wave of arrests that followed has shaken the country's elites. The unprecedented operation targeted high-ranking princes, ministers and business figures.

Success story

Born in Ethiopia in the early 1940s at the heart of the Hadhramaut diaspora, Mohamed al-Amoudi joined his father in Jeddah in 1963. Although penniless, he was soon integrated into the business world through his family connections.

His cousin worked at the bank of Khaled bin Mahfouz, Jeddah's principal financier and a business partner of Ali bin Moussalem. The latter, whose name appears numerous times in the Karachi dossier, belongs to a tribe located on the Yemeni border and was employed by the governor of Najran, uncle of the seven princes of the powerful Sudairi clan.

	Mohamed al-Amoudi visiting the Preem de Lykel refinery in Sweden, which he owns [Gösta Axelsson/OrientXXI]

During the civil war in North Yemen (1962 -1970), Ali bin Moussalem was Riyad's emissary in that part of the country. He had the challenging role of bringing certain tribes into line in support of the kingdom. This role brought him close to Prince Sultan Bin Abdelaziz al-Saoud, the defence minister in charge of the Yemen dossier.

According to several Ethiopian and Saudi sources, during his first years in Jeddah, Amoudi was Ali bin Moussalem's chauffeur. He then became his business associate, acting as intermediary between bin Moussalem's network of investors and a large Swedish construction company, for whom he was likely the Saudi sponsor.

At the end of the 1980s, the Saudi branch of this company passed into the control of Mohamed al-Amoudi, who in reality represented several investors, before obtaining a huge construction contract for the oil company the Saudi Strategic Storage Programme.

Led by the then defence minister, Prince Sultan, this was at the time one of the largest construction projects in the world.

The golden years of the oil boom

From the beginning of the oil boom of the 1970s, which saw oil revenues increase 25-fold between 1970 and 1979, until the end of the 1980s, the state spent prolifically.

Many more public infrastructure projects of this sort were financed. The country's business leaders were often closely involved with the government's development plans, with some building up their capital purely through state investment in infrastructure.

Bin Salman's chosen weapon - the accusation of corruption - is one that can injure anyone

The lack of transparency characteristic of the Gulf States, as well as the inability of the state to manage and control its spending, resulted in public contracts being awarded for political reasons, with those supportive of the regime and their partners able to unlock significant profits.

The princes in charge often received large commissions from the companies selected, where they weren't already secretly associated with them.

The Saudi business world considers Mohamed al-Amoudi to be playing a similar role for Prince Sultan as he did for Ali bin Moussalem, with the prince said to be a hidden partner in Amoudi's company.

A few years later, in March 1994, at a time when oil prices were low, Mohamed al-Amoudi attracted international attention by purchasing (via Monrocha Holdings Ltd, registered in Cyprus) the Swedish oil company OK Petroleum for US$738 million.

He became the first foreign investor in Sweden and an actor with interests in every aspect of the oil industry (prospecting in the North Sea and East Africa, refining and distribution).

The princes in charge often received large commissions from the companies selected, where they weren't already secretly associated with them

While Amoudi is the registered owner of the Cypriot holding, it is an open secret in the Saudi business community that he in fact represents several hidden investors. They include bin Mahfouz, whose own purchase offer for the oil company was rejected because of his involvement in a financial scandal in the US.

According to two well-informed Saudi sources who requested anonymity, the other investors are Prince Sultan, and to a lesser extent bin Moussalem.

According to one of the sources, shortly after the death of Prince Sultan on 22 October 2011, Moussalem held a meeting of all the secret investors to ensure the prince's succession and divide his share among his designated heirs.

A warning

The case of Mohamed al-Amoudi is in many respects symptomatic of practices that were commonplace in the world of Saudi business affairs: Until the end of the 1980s, the only requirement for enriching yourself was proximity to those in power.

After that, reduced public spending as a result of declining oil prices forced the private sector to seek new markets with private clients. A sort of natural selection process operated amongst those who had initially profited from the largesse of government; only the ones with the business acumen to manage and grow their wealth were able to sustain operations.

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Today, while the business class has in part become autonomous from political power - albeit continuing to court its favour - the origins of the fortunes of those entrepreneurs who survived to become key economic players has been cast into doubt through links with what the newly-created committee deems to be corruption.

The wave of arrests of 4 November 2017 showed an unmistakable political motivation on the part of the anti-corruption committee. Mohammed bin Salman, poised to succeed his father, has attempted to destroy all networks likely to oppose his "new vertical power", to quote Stephane Lacroix.

The arrests have included Miteb bin Abdallah (now released), son of the previous sovereign and chief of the powerful national guard, members of the Sultan clan, and Prince al-Waleed bin Talal, the richest man in Saudi Arabia as well as one of the most outspoken.

The arrest of many businessmen who were not active in politics is more of a surprise.

Since its emergence, the Saudi private sector has never constituted a threat to the power of the Sauds. In a country in which family and tribal allegiances are strong, the private sector, despite its financial clout, has never constituted a structured class, or "bourgeoisie".

The economic measures implemented by the crown prince in his national transformation programme, while shaking up the economy, did not prompt an outcry from the private sector.

The arrest of Mohamed al-Amoudi can be read as a warning to local businessmen. The message is: Business should privilege certain networks and in no circumstances benefit those who might nourish seditious aims.

Al-Amoudi was the ideal target to push this message home. His connections are well known, he has no tribal support, and his economic activity inside Saudi Arabia is practically non-existent.

If this message to the business world is not headed, Mohammed bin Salman has made it clear that he will stop at nothing. His chosen weapon, the accusation of corruption, is one that can injure anyone.