Traveling to the Middle East
Over my working years, I travelled extensively in the Middle East. It began in the late 80s, thirty-five years ago, when I went through the region to work on disposing of my bank’s $4B of Latin American sovereign debt. In some ways, it was the petrodollar surge of OPIC and the Middle East that had created the Latin American debt crisis of that age since those petrodollars, which morphed into Eurodollars, had to be productively reinvested and nowhere could or wanted to put that scale of money to work faster than the countries of Latin America. The places I went included Saudi Arabia, the Emirates, Bahrain, Kuwait and Jordan. Even then, Iran and Iraq were off the travel list. My second tranche of travel to the region was even more intensive during the 90s when I ran the Global Private Banking business. I was there again due to all those Petrodollars, only this time it was because we managed private hordes of wealth for many of the HNW families in the region. The venues were more or less the same, only more concentrated on Saudi Arabia and the Emirates, where wealth was building very rapidly. I have calculated that I have spent more than 200 business days in the region since during those years in particular, I was a very regular visitor. I even had to travel to the region while running the asset management business at Bear Stearns, first to form a joint venture in Israel and then to form a joint venture in Saudi Arabia right before my world at BSAM blew up (totally unrelated to the region).
Today I am hearing about President Joe Biden’s trip to the Middle East. He is making two stops, first in Israel to meet with the Prime Minister there, Yair Lapid, and then to Riyadh, Saudi Arabia, where he will meet with King Salman and his seventh son and the de facto ruler of the Kingdom, Mohammed bin Salman (MBS). If it sounds like a seventh son shouldn’t be heir apparent, remember that King Salman was the twenty-fifth son of his father, King Abdulaziz. All the dialogue about the U.S. relations with Israel and Saudi Arabia bring back lots of memories for me from my years of traveling that region. I found it particularly interesting to hear a cable news pundit say that Biden’s flight from Ben Gurion airport to King Khalid airport in Riyadh was highly unusual and may have been the first direct flight between those cities. That caught my attention because it is simply not true. It may be true that no commercial flights follow that path, but in 2007 I flew on a Saudi Prince’s private plane direct from Jeddah to Ben Gurion airport, so I suspect that similar flights from King Khalid airport certainly had occurred.
Travel into Saudi Arabia was always an interesting affair and I imagine that it has not gotten too much less so since then. While many people travel to the Emirates, especially Dubai, these days, Saudi Arabia remains much more of a private Kingdom for several reasons. To begin with, it is the seat of the Islamic religion with the holiest of places being the cities of Mecca and Medina, both on the Red Sea alternately north and south of the second largest city of the country, Jeddah. The general level of turmoil in the region is less about open hostilities with neither Iran or Iraq (or even Afghanistan for that matter) engaged in any open warfare. Even Yemen in more quiet than it has been in a long time. But the quiet belies plenty of undercurrent or turmoil across the region with the U.S. perhaps not so much in physical evidence, but certainly still working the region hard behind the scenes. Oil may be eventually replaced by alternative fuels and sources of fuel, but with the Ukraine war disrupting Russian oil and gas flows as it has, the oil-producing countries of the Middle East are again on center stage as the demand for their resource remains quite high, despite efforts to reduce it.
The U.S. has historically had strong relationships with both Israel and Saudi Arabia. The U.S., with its influential Jewish population has always been sympathetic to Israel despite its lonesome position as a Jewish state in the midst of a sea of Muslim, Arabic states. The delicacy of the Palestinian situation has always presented issues for the U.S. and while Israel has generally been more militant with the Arabs of Palestine, it has seen the wisdom of some degree of moderation in sharing the holy lands of Jerusalem with the Muslim population. Moshe Dayan, the one-eyed Defense and Foreign Minister of state famously conceded the lands of the holy Dome of the Rock at Temple Mount (technically the Al-Aqsa Mosque) to the Palestinians as well as the West Bank and Gaza Strip as a means of reconciliation and a path to peace. Unfortunately, that did not solve the basis of conflict and it is impossible to say whether the Israelis or Palestinians have been more aggressive in managing the relationship over the years. Suffice it to say that it is at best a tenuous peace in a troubled multi-religious land.
Saudi Arabia owes a great deal of its wealth to both England in the early days after WWI and then America in the days since the formation of Aramco in 1933 (technically only called Aramco since 1944 since Standard Oil of California controlled the operation by itself prior to that and used its name California-Arabian Standard Oil Company). Aramco was owned thereafter by a consortium of four large American oil companies (SoCal, Standard Oil of NJ, Texaco and Mobil). During the Yom Kippur War of 1973, Saudi Arabia was allowed to acquire a 25% interest in Aramco and increased that stake to 100% during the next three years of the Petrodollar boom. Between the Gulf War in 1990 and the various Iraqi incursions and wars since then, the relationship between the U.S. and Saudi Arabia has been both strengthened and strained at times as the U.S. has been the Saudi military protector and the Saudis have been the oil spigot for much of the U.S. oil demand. To say the least, the relationship of the U.S. in this region with both Saudi Arabia and Israel is complicated both historically and politically.
When I would travel the region I would see, hear and feel every bit of this complication. The Israelis were adamant about their settlements that Palestinians said encroached on their God-given lands. When I worked for Africa Israel and even though I had nothing to do with Israeli activities, I was forced to recuse myself as a board member of CARE due to protests by pro-Palestinian organizations. At the same time, when I would travel to Riyadh, some of my clients (who were members of the royal family…not so rare since there are over 6,000 princes in the Kingdom) would complain about our policies towards Saudis. Of course they chose to ignore that most of the 9/11 terrorists were of Saudi descent and Osama bin Laden was a rogue member of the bin Laden family, one of the largest construction families in Saudi Arabia. Their concern was the crateloads of old and worthless military equipment that the U.S. forced Saudi Arabia to buy in addition to the needed military equipment they wanted to insure their ability to keep Saddam Hussein of Iraq at bay. The U.S. was using its military muscle to help balance the balance of payments with Saudi Arabia brought about by the increased reliance on Saudi oil. All very complicated.
This all comes to mind today as President Joe Biden threads the needle between his meeting with the Israeli PM yesterday, his meeting with the Palestinian leader, Mahmoud Abbas, this morning, and his flight to Riyadh today to meet with King Salman and his rogue seventh son, MBS. I do not envy him the tightrope he must tread while traveling to the Middle East.