Saudi says won’t bow to political pressure, threatens response to any sanctions

Saudi Arabia’s state news agency on Sunday cited an official as expressing the kingdom’s “total rejection of any threats and attempts to undermine [it]” as the fallout of the disappearance of Jamal Khashoggi rocked the Saudi stock exchange.

After nearly two hours of trade the Tadawul was down 7.0 per cent, its biggest drop since December 2014, amid fears a reduction of foreign investment or even US sanctions could follow if it is proven the kingdom was involved in the case.

Read: Saudi stocks see biggest drop since 2014 on Khashoggi fallout

US President Donald Trump said over the weekend the country would not cancel arms deals with Saudi Arabia but promised “severe punishment” if its role in the incident was proven.

Meanwhile, Britain, France and Germany said on Sunday they were treating the case with “utmost seriousness”.

Saudi Arabia has dismissed allegations that Khashoggi was murdered in the Saudi consulate in Istanbul on October 2 after entering to get documents for his forthcoming marriage.

The kingdom said last week it would be conducting a joint investigation of what happened with Turkey, which could include Turkish officials being allowed access to the consulate.

Read: Saudi team in Turkey investigating Khashoggi disappearance

In the statement to Saudi Press Agency on Sunday, the unnamed official said the kingdom had been a leader in securing stability and prosperity in the Arab world and fighting extremism.

“The kingdom affirms its total rejection of any threats and attempts to undermine [it], whether by waving economic sanctions, using political pressure, or repeating false accusations that will undermine the kingdom and its staunch positions and Arab, Islamic and international stances.”

The statement went on to promise if the kingdom receives any action “it will respond with greater action”, noting its “influential and vital role in the global economy”, an apparent reference to its position as the world’s largest oil exporter.

“Saudi Arabia appreciates the voices of the wise people around the world who have [shown] wisdom, deliberation and the search for truth, rather than rushing to exploit rumours and accusations to achieve goals and agendas that have nothing to do with the search for truth,” the unnamed official concluded.

The Saudi Embassy in Washington later tweeted a “clarification”, thanking countries including the United States “for refraining from jumping to conclusions” over the case.

In a sign Saudi King Salman bin Abdulaziz Al Saud may seek a diplomatic solution to the incident, he stressed the strength of Saudi-Turkish ties in a telephone call with President Tayyip Erdogan of Turkey, SPA said late on Sunday.

The king thanked Erdogan for welcoming a Saudi proposal to form a joint working group to discuss Khashoggi’s disappearance and said no one could undermine their relationship.

The kingdom is currently increasing oil production to make up for cuts to Iranian crude exports after the US reintroduces sanctions on Iran next month.

Trump has repeatedly urged Saudi monarch King Salman to help lower oil prices by increasing production due to concerns they could hurt Republican chances at the upcoming US state elections.

Read: Trump: I told Saudi king he wouldn’t last without US support

Brent crude prices have risen more than 40 per cent over the last 12 months to over $80 a barrel. West Texas Intermediate has seen a similar increase and now stands at around $71.50 a barrel.

In a column published just after the SPA statement, Saudi-owned Al Arabiya channel’s general manager Turki Aldakhil warned that imposing sanctions on Saudi Arabia could spark global economic disaster.

“It would lead to Saudi Arabia’s failure to commit to producing 7.5 million barrels. If the price of oil reaching $80 angered President Trump, no one should rule out the price jumping to $100, or $200, or even double that figure,” he wrote, according to Reuters.

The controversy comes at a delicate time for the kingdom as it seeks to increase foreign investment as part of a wider reform agenda to boost employment and see the private sector play a greater role in the economy.

Foreign investment hit a 14-year low in 2017, dropping from $7.5bn to $1.4bn, as the kingdom suffered a recession linked to low oil prices.

Read: Foreign investment in Saudi at 14-year low despite reforms

Over the weekend a number of media partners and attendees listed for the Saudi Public Investment Fund’s Future Investment Initiative conference, deemed a key part of the kingdom’s FDI agenda, pulled out due to concerns over events surrounding Jamal Khashoggi’s disappearance.

Read: JP Morgan and Ford will not attend Saudi investor event

British billionaire Richard Branson also said he would halt Saudi investment in his Virgin space companies and suspend his role as an advisor on major tourism projects.

Read: British billionaire Branson among advisers for Saudi Red Sea tourism project

“This is happening at a time when Saudi Arabia is preparing for a big investment event and they don’t need people suspending or pulling out investments,” Nadi Barghouti, head of asset management at Emirates Investment Bank in Dubai, told Reuters.

Trump has not described what punishment Saudi Arabia might face. He has indicated Washington does not want to harm close defence ties, saying the United States would be punishing itself if it halted sales of military equipment to Riyadh.

But US senators have triggered a provision of the Global Magnitsky Human Rights Accountability Act requiring the president to determine whether a foreign person is responsible for a gross human rights violation. The act has in the past imposed visa bans and asset freezes on Russian officials.

The kingdom is also facing pressure from Europe, with Britain, France and Germany issuing a joint statement.

“There needs to be a credible investigation to establish the truth about what happened, and – if relevant – to identify those bearing responsibility for the disappearance of Jamal Khashoggi, and ensure that they are held to account,” the countries said.

Saudi Arabia’s allies Bahrain and the UAE emerged in support of the country on Sunday.

“As necessity now arises to clarify the facts associated with this crisis in a neutral and honest manner, we reaffirm our categorical rejection of the repercussions of the politicised anti-Saudi campaign,” the UAE’s minister of foreign affairs and international cooperation, Sheikh Abdullah bin Zayed Al Nahyan, said.

With contributions from Reuters