Saudi Billionaires Said to Seek Shielding Assets Amid Purge

  • 12 months   ago
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Wealthy Saudis are seeking to restructure their businesses to ring fence assets in case authorities widen their declared crackdown on corruption, according to three people with knowledge of the matter.

Several family groups and businessmen who aren’t implicated in the purge are talking to local banks and international law firms about how to structure their companies to make it harder for the kingdom to confiscate or seize assets, the people said, asking not to be identified because the discussions are private.


One option could be to split assets between more than one holding company, one of the people said, though it’s not clear how successful these plans could be because the government is closely scrutinizing business activity in the kingdom as part of the crackdown, he said. Talks are also tackling ways to protect overseas assets by moving them to offshore centers such as the Cayman Islands, he said.

The discussions reflect the fear among many wealthy Saudis that the unprecedented purge, seen by many as an attempt by Crown Prince Mohammed bin Salman to tighten his grip on power, is set to widen. Dozens of officials, princes and billionaires, including Prince Alwaleed bin Talal, the global investor whose Kingdom Holding Co. owns stakes in companies such as Citigroup Inc., have already been targeted.

New Rules

Over his meteoric rise to power since his father’s accession to the throne in 2015, Prince Mohammed has emerged as the country’s predominant leader, sidelining other senior royals as he moved to control all levers of government. The crackdown was the latest move to shatter an informal agreement to rule the kingdom by consensus among members of the royal family, a system that ensured political stability but stymied economic reforms.

The purge “is clearly more about the centralization of power,” Hasnain Malik, head of equity research at Exotix Capital, told Bloomberg TV on Tuesday.

“You can argue with the merits of whether that is a long-term sustainable equilibrium, but if Saudi is to implement the fast decisions it needs to transform its economy I would argue that centralization is at least necessary if not sufficient step,” he said.

The purge, however, is likely to reduce already sluggish private investment, hitting economic growth in 2018, according to economists.

“Lower levels of corruption, if achieved, could encourage more investment, but the impact of this is only likely to materialize over the long run, not immediately,” said Ziad Daoud, a Dubai-based analyst with Bloomberg Economics.

Overhauling Ties

The prince is also overhauling the ties with some of the richest families, who for decades have benefited from close relations with the government by winning contracts and partnering with international firms seeking a foothold in the Arab world’s biggest economy.

Under the crown prince’s blueprint to prepare the economy for the post-oil era, foreign companies are likely to have a bigger role in implementing the plan’s objectives, said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

“This could lead to greater moves to liberalize the business environment for foreign investors,” removing the need for a domestic partner, she said in a report.

The purge has prompted some Saudi billionaires and millionaires to sell investments in neighboring Gulf countries and turning them into cash or liquid holdings overseas to avoid the risk of getting caught up in the sweep, people familiar with the matter said this month. Few, however, are trying to shift money out of Saudi Arabia amid fears of attracting unwanted attention from authorities, they said.

One senior Saudi official, who asked not to be named, said over the weekend suspects are being offered settlements to avoid trial. If they accept, talks are held with a special committee to work out the details. Authorities estimate they may be able to recover between $50 billion and $100 billion from settlement agreements, the official said.