Given the fact that the new Saudi crown prince Mohammed bin Salman has had such a stringent and overwhelming focus on rooting out corruption in Saudi Arabia since his November 2017 declaration to do so – and the ensuing arrests that took place shortly thereafter – it would certainly be ironic (though not entirely surprising) to learn that the crown prince could be involved in what could only be described as optically questionable business practices himself.
But such was the topic of a Wall Street Journal article detailing bin Salman's business dealings, including a recent massive deal with Airbus, that has helped him grow his wealth from almost nothing - at least by local standards - to untold billions.
Prince Mohammed bin Salman was a teenager when he realized his father, Prince Salman bin Abdulaziz, was, by Saudi royal standards, a pauper.
While other sons of Saudi Arabia’s founder grew wealthy from government business, Salman, then the governor of this capital city, supported his family with handouts from his brother the king. Mohammed decided to change that, he later told associates.
The crown prince - who has grand plans to usher in a new era of prosperity for Saudi Arabia, including a "Saudi 2030" economic vision that looks to modernize and change the landscape of the country's economy over the course of the next decade or so - is often credited with expanding the role that women play in Saudi corporations - removing a ban on female drivers, and implementing Saudi sports stadiums that admit women. Despite this, organizations like Human Rights Watch still contend that the Prince is overseeing a growing and unprecedented number of human rights violations.
And now, the Wall Street Journal is digging deeper into his business practices, which look to be politically influenced and organized within the Prince's close family.
The Journal has released a report detailing several of the prince's own business dealings and methods that he himself has used to enrich himself and build exorbitant personal wealth. The incredibly long and detailed piece put out by the Journal talks about some of the prince's business ventures which have been little publicized in the past, noting:
Prince Mohammed is managing director—and 20% owner—of a chemical producer that supplies large, state-controlled firms, Saudi corporate filings showed as recently as last year. A company majority-owned by two of the crown prince’s younger brothers was awarded a coveted broadband license from the government, Saudi records showed.
Additionally, in 2015, Prince Mohammed helped engineer a multibillion-dollar deal between European plane giant Airbus SE and Saudi Arabia’s state-owned Saudia Airlines, according to documents reviewed by The Wall Street Journal and interviews with more than a dozen people involved in the transaction. The deal is worth tens of millions of dollars to his family, the documents show.
The article notes the obvious - that the "anti-corruption" attitude could be a "do as I say, not as I do" policy for the prince:
The story of the Airbus deal suggests this mixing of business and government remains a staple of the Saudi economy, despite the crown prince’s highly publicized crackdown on many other royals who the prince said abused their power to get rich. Indeed, Airbus decided to go into business with the king’s family despite its reservations over the blurry distinction between private and public financial interests, according to people familiar with the matter.
Further called into question is a company called Tharawat that the prince allegedly helps control, despite not having an equity interest in. His younger brother supposedly owns 99% of the company, keeping it tied closely to the prince:
A company called Tharawat has emerged as a key player in the business activities of Prince Mohammed’s family. According to Saudi corporate filings, one of his younger brothers, Turki bin Salman, owned 99% of the investment firm as of May 2017, while another brother, Naif, owned the remaining 1%. Prince Turki has since bought his brother’s stake, according to Ammer al Selham, Tharawat’s CEO.
In practice, Prince Mohammed controls and benefits from Tharawat’s business, say several people familiar with their dealings, including two who have discussed the firm with him. Mr. Selham disputed that, saying: “At no time was HRH Prince Mohammed bin Salman a shareholder or a beneficiary of the company.”
The journal reported that this company is involved in several businesses:
Tharawat and a subsidiary own the majority of a tech firm called Jawraa that was awarded a coveted broadband license from the Saudi government in 2014, Saudi records show. The license allowed it to become one of three companies operating new mobile-phone networks in the country.
Tharawat has had interests in fish farms, real estate, tech services, agricultural-commodity trading and restaurants. It owns an office park in Riyadh. An investment vehicle Tharawat owns, Nasaq Holding, says on its website that it is investing in construction to take advantage of “the government’s tenth development plan including investments worth $358.2 billion in real estate.” Saudi corporate filings show that Tharawat owned a company that partnered with Ochsner Health System in New Orleans to bring Saudis to the U.S. for organ transplants.
But the main focus of the WSJ article appeared to be to put a recent deal with Airbus under the microscope. As the article explains, Airbus conducted a recent deal with Saudia Airlines using Therawat as an intermediary. In addition, Therawat is reported to have an interest in a bank that raised capital to enter the jet leasing business. Ultimately, Tharawat was to benefit by being able to somehow get Airbus to sell them jets at a discount, and then not passing those discounts to Saudia Airlines who would pay close to the market price to lease them:
Tharawat in 2014 acquired a 54% stake in Quantum Investment Bank, a Dubai-based company with scant history of deal making, corporate documents show. Prince Turki, Mohammed’s younger brother, became Quantum’s chairman. Quantum executives didn’t respond to requests for comment, and the bank later took down its website.
Executives from Quantum and another small bank formed a company called International Airfinance Corp., or IAFC, to enter the jet-leasing business.
IAFC became the manager of a fund called ALIF, structured to follow Muslim strictures against paying interest. Airbus agreed to invest $100 million in ALIF if the fund bought only Airbus planes. On June 23, 2014, Airbus and IAFC held a “signing ceremony” in London to announce the new fund, hosted by Prince Turki bin Salman, International Airfinance said in a press release. The fund was aiming to raise $5 billion in equity and debt, deal documents show.
Of course, it was then reported that Saudia didn't really "shop around" for a deal and that Airbus wanted to complete the deal despite reservations, including investigations into potential corruption overseas because they didn't "want to prevent the son of the king doing business.”:
People involved in the process say Saudia didn’t solicit competitive bids from leasing companies, and rebuffed the advances of companies seeking to offer competitive rates before choosing ALIF to do the deal.
In response to questions about the deal, Saudia Vice President Abdulrahman Altayeb said in an email that “the aircraft acquisition transaction was in accordance with Saudia’s internal procedures, which included a review of the lease price to ensure its competitiveness against the market benchmark, as well as aircraft delivery schedule being in line with Saudia’s requirements related to its fleet plan.”
Lending his name to the deal made it easier to consummate, WSJ reported:
Others with a stake in the deal were thrilled by the involvement of a Saudi prince. “We took it as a good thing that there were people with deep pockets and political connections that we thought would make this transaction happen,” says one of those people, who says he considered the princes’ involvement “a good risk mitigator” for investors.
And so, in addition to receiving a share of income that the country produces from its oil, these new business ventures that seem to leverage the crown prince's political and family ties are helping propel him to new levels of wealth and power. If the Prince is trying to consolidate power, his actions are likely helping him do that and the addition of grandiose wealth as a result of these types of deals also comes in handy.
If the prince wants to convince us that he's really serious about rooting out corruption, maybe he could start to understand that when one finger points forward, three more point back.