SAUDI ROYAL WEALTH: WHERE DO THEY GET ALL THAT MONEY?

S E C R E T SECTION 01 OF 07 RIYADH 004784


DEPT PASS TO EXIM ELECTRONICALLY
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E.O. 12958: DECL: OADR 1.6X6
TAGS: EFIN ECON PGOV PINR SOCI SA
SUBJECT: SAUDI ROYAL WEALTH: WHERE DO THEY GET ALL THAT MONEY?


1. (U) CLASSIFIED BY ACTING DCM ALBERT THIBAULT. REASON: 1.5
(B). THIS MESSAGE FULFILLS A POST REPORTING PLAN REQUIREMENT.

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SUMMARY AND INTRODUCTION
--------------


2. (C) SAUDI PRINCES AND PRINCESSES, OF WHOM THERE ARE THOUSANDS,
ARE KNOWN FOR THE STORIES OF THEIR FABULOUS WEALTH--AND TENDENCY TO
SQUANDER IT. THIS CABLE EXAMINES THE MECHANISMS, NOT COUNTING
BUSINESS ACTIVITIES, THROUGH WHICH SAUDI ROYALS OBTAIN THEIR MONEY.
THESE MECHANISMS OFTEN PROVIDE THE SEED MONEY FOR ROYALS TO LAUNCH
LOCAL AND INTERNATIONAL BUSINESS VENTURES. A SUBSEQUENT CABLE WILL
EXAMINE THE BUSINESS ACTIVITIES OF SAUDI ROYALS.


3. (S) THE MOST COMMON MECHANISM FOR DISTRIBUTING THE NATION'S
WEALTH TO THE ROYAL FAMILY IS THE FORMAL, BUDGETED SYSTEM OF
MONTHLY STIPENDS FOR ALL MEMBERS OF THE AL SAUD, MANAGED BY THE
MINISTRY OF FINANCE'S "OFFICE OF DECISIONS AND RULES." THE
STIPENDS RANGE FROM $270,000 PER MONTH ON THE HIGH END TO $800 PER
MONTH FOR THE LOWLIEST MEMBER OF THE MOST REMOTE BRANCH OF THE
FAMILY. BONUS PAYMENTS ARE AVAILABLE FOR MARRIAGE AND PALACE
BUILDING. THE EMBASSY ESTIMATES THAT THE STIPENDS SYSTEM PUTS AN
ANNUAL DRAIN OF ABOUT $2 BILLION ON THE $40 BILLION GOVERNMENT
BUDGET.


4. (S) ASIDE FROM THE STIPENDS SYSTEM, A HANDFUL OF THE
SENIORMOST PRINCES ENRICH THEMSELVES BY CONTROLLING SEVERAL BILLION
DOLLARS IN ANNUAL EXPENDITURES IN "OFF-BUDGET" PROGRAMS. WITH NO
MINISTRY OF FINANCE OVERSIGHT OR CONTROLS, THESE PROGRAMS ARE
WIDELY VIEWED AS SOURCES OF ROYAL RAKEOFFS. AS CHARACTERIZED BY
BILLIONAIRE PRINCE AL-WALID BIN TALAL (STRICTLY PROTECT) TO THE
AMBASSADOR, THROUGH THESE OFF-BUDGET PROGRAMS, FIVE OR SIX PRINCES
CONTROL THE REVENUES FROM ONE MILLION BARRELS PER DAY (B/D) OF THE
KINGDOM'S EIGHT MILLION B/D OF CRUDE OIL PRODUCTION.


5. (S) OTHER WAYS SOME PRINCES OBTAIN MONEY INCLUDE BORROWING FROM
THE BANKS, AND NOT PAYING THEM BACK. WITH THE POSSIBLE EXCEPTION
OF NATIONAL COMMERCIAL BANK (NCB),WHICH HAS ALWAYS BEEN VIEWED
HERE AS THE ROYAL FAMILY'S BANK, SAUDI BANKS GENERALLY TURN ROYALS
AWAY UNLESS THEY HAVE A PROVEN REPAYMENT TRACK RECORD. PRINCES
ALSO USE THEIR CLOUT TO CONFISCATE LAND FROM COMMONERS, ESPECIALLY
IF IT IS KNOWN TO BE THE SITE FOR AN UPCOMING PROJECT AND CAN BE
QUICKLY RESOLD TO THE GOVERNMENT FOR A PROFIT. ANOTHER COMMON
MONEYMAKING SCHEME IS FOR INDIVIDUAL PRINCES TO "SPONSOR" SOMETIMES
HUNDREDS OF EXPATRIATE WORKERS WHO ARE UNLEASHED TO FREELANCE ON
THE LOCAL ECONOMY AND IN RETURN PAY THEIR ROYAL SPONSOR A SMALL
MONTHLY FEE, USUALLY AROUND $100.


6. (S) IN THE END, ROYALS STILL SEEM MORE ADEPT AT SQUANDERING
THAN ACCUMULATING WEALTH. DESPITE THE HANDOUTS, THERE ARE MORE
COMMONER BILLIONAIRES THAN ROYAL BILLIONAIRES IN THE KINGDOM. THE
WEALTHIEST ROYALS AND THEIR PERSONAL FORTUNES BY OUR ESTIMATES ARE:
AL-WALID BIN TALAL BIN ABD AL-AZIZ -- $13 BILLION, KING FAHD -- $10
BILLION, DEFENSE MINISTER PRINCE SULTAN BIN ABD AL-AZIZ -- $10
BILLION, KHALID BIN SULTAN BIN ABD AL-AZIZ -- $2 BILLION.


7. (S) ROYALTY HERE IS EXPECTED TO HAVE WEALTH AND THE TRAPPINGS
OF POWER TO A CERTAIN DEGREE. FOR EXAMPLE, IMPORTANT ROYAL FAMILY
MEMBERS HOLD 'MAJLISES' WHERE VISITORS WILL DISCUSS THEIR CONCERNS
AND SEEK ROYAL INTERCESSION WITH AUTHORITIES. CROWN PRINCE
ABDULLAH'S WEEKLY MAJLIS ATTRACTS MANY DOZENS TO HUNDREDS OF
PETITIONERS MOST OF WHOM RECEIVE SOME GIFT OR ATTENTION TO THEIR
PROBLEMS. PRINCES CUSTOMARILY PROVIDE HOSPITALITY, TOO. ONE
FORMER EASTERN PROVINCE GOVERNOR, FAHD BIN SALMAN, CLAIMS THAT HE
SPENDS IN THE NEIGHBORHOOD OF SR 4 MILLION OUT OF HIS OWN POCKET ON
LARGESSE AND FEASTS FOR COMMONERS DURING THE HOLY MONTH OF RAMADAN.
HOWEVER, THERE IS A DIFFERENCE BETWEEN APPROPRIATE ROYAL LARGESSE
AND GREED. MANY BELIEVE THAT ROYAL GREED HAS GONE BEYOND THE
BOUNDS OF REASON, TO INCLUDE WIDESPREAD INTERLOPING ON THE BUSINESS
COMMUNITY'S TURF, TRADITIONALLY OFF LIMITS TO ROYALS. (SEE SEPTEL
EXAMINATION OF PRINCES IN BUSINESS.) AS LONG AS THE ROYAL FAMILY
VIEWS THIS COUNTRY AND ITS OIL WEALTH AS AL SAUD INC., THE
THOUSANDS OF PRINCES AND PRINCESSES WILL SEE IT AS THEIR BIRTHRIGHT
TO RECEIVE DIVIDEND PAYMENTS AND RAID THE TILL. IT IS OUR VIEW
THAT OF THE PRIORITY ISSUES THE COUNTRY FACES, GETTING A GRIP ON
ROYAL FAMILY EXCESSES IS AT THE TOP. END SUMMARY AND INTRODUCTION.

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THE SYSTEM OF STIPENDS
--------------


8. (C) EVERY PRINCE AND PRINCESS FROM BIRTH GETS A MONTHLY
ALLOWANCE, WHICH IS PART OF THE STATE BUDGET AND DISTRIBUTED
THROUGH AN OFFICE OF THE MINISTRY OF FINANCE CALLED THE "OFFICE OF
DECISIONS AND RULES" (IDARAT AL-MUQARRARAT WA AL-QAWA'ID). ECONOFF
RECENTLY PAID A COURTESY CALL ON THE OFFICE'S DIRECTOR, ABD AL-AZIZ
AL-SHUBAYLI. THE OFFICE, IN AN OLD BUILDING IN WHAT PASSES AS
RIYADH'S BANKING DISTRICT, WAS BUSTLING WITH SERVANTS PICKING UP
CASH FOR THEIR MASTERS. AL-SHUBAYLI, WHO SPOKE NOT A WORD OF
ENGLISH, HOSTED ECONOFF FOR NEARLY TWO HOURS IN AN OPEN-DOOR
SESSION THAT WAS INCESSANTLY INTERRUPTED BY PETITIONERS. BASED ON
AL-SHUBAYLI'S COMMENTS, ECONOFF'S OBSERVATIONS AND COMMENTS BY A
SAUDI FAMILIAR WITH THE ORGANIZATION, THE OFFICE APPEARS TO SERVE
AT LEAST THREE FUNCTIONS:

-- DISTRIBUTION OF STIPENDS TO THE ROYAL FAMILY.

-- DISTRIBUTION OF STIPENDS TO OTHER FAMILIES AND INDIVIDUALS
GRANTED MONTHLY STIPENDS IN PERPETUITY. EXAMPLES INCLUDE THE
AL AL-SHAYKH FAMILY--DESCENDENTS OF THE ORIGINAL "WAHHABI,"
MEMBERS OF THE AL-SUDAYRI FAMILY, CADET BRANCHES OF THE ROYAL
FAMILY, SUCH AS THE BIN JILUWI--FAMOUS COMRADES-IN-ARMS WITH
THE KINGDOM'S FOUNDER ABD AL-AZIZ, AND DESCENDANTS OF
INDIVIDUAL SOLDIERS WHO ASSISTED ABD AL-AZIZ IN HIS CONQUEST
OF THE ARABIAN PENINSULA.

-- FULFILLMENT OF FINANCIAL PROMISES MADE BY SENIOR PRINCES, SUCH
AS CROWN PRINCE ABDALLAH OR RIYADH GOVERNOR SALMAN, TO AVERAGE
SAUDIS, MOST LIKELY DURING A MAJLIS WHEN NUMEROUS SAUDIS
PERSONALLY APPROACH AND PETITION SENIOR LEADERS.


9. (S) THE STREAM OF PETITIONERS INTO AL-SHUBAYLI'S OFFICE DURING
THE MEETING GENERALLY WERE OF TWO TYPES: THOSE SEEKING FOLLOW-
THROUGH OF A ROYAL COMMITMENT, AND THOSE SEEKING TO VERIFY
LEGITIMATE REGISTRATION ON THE ROLES AS RECIPIENTS OF MONTHLY
STIPENDS.


10. (S) THE FIRST TYPE INCLUDED MANY PETITIONERS WHO HAD SLIPS OF
PAPER WITH ROYAL DIWAN LETTERHEAD CARRYING HAND-SCRAWLED ARABIC
INSTRUCTIONS FOR ASSISTANCE. AL-SHUBAYLI GENERALLY GRUDGINGLY
APPROVED THESE, BUT IT WAS CLEAR TO ECONOFF THAT AN IMPORTANT PART
OF HIS JOB, AT LEAST IN TODAY'S MORE FISCALLY DISCIPLINED
ENVIRONMENT, IS TO PLAY THE ROLE OF BAD COP. FOR EXAMPLE, HE
INTENSELY AND RUDELY GRILLED A NEARLY BLIND OLD MAN ON WHY AN EYE
OPERATION PROMISED BY A PRINCE AND CONFIRMED BY ROYAL DIWAN NOTE
HAD TO BE CONDUCTED OVERSEAS AND NOT FOR FREE IN ONE OF THE FIRST
CLASS EYE HOSPITALS IN THE KINGDOM. AFTER LISTENING FOR SOME
MINUTES TO THE REQUISITE GROVELING AND PLEADING, AL-SHUBAYLI SIGNED
OFF ON THE REQUEST. AFTER THIS PARTICULAR EPISODE, AL-SHUBAYLI
TURNED TO ECONOFF AND NOTED THAT HE HAD BEEN IN THE U.S. TWICE FOR
MEDICAL TREATMENT HIMSELF, ONCE FOR A CHRONIC ULCER AND ONCE FOR
CARPEL TUNNEL SYNDROME. HE CHUCKLED, SUGGESTING THAT BOTH WERE
PROBABLY JOB-INDUCED.


11. (C) AL-SHUBAYLI HAS BEEN THE ONLY DIRECTOR OF THE OFFICE
SINCE ITS CREATION UNDER KING ABD AL-AZIZ ALMOST HALF A CENTURY AGO
WHEN IT WAS CALLED THE RIYADH FINANCE OFFICE. HE CLEARLY REALIZES
THAT DISCRETION IS KEY TO KEEPING HIS JOB. WHEN ASKED BY ECONOFF
WHAT HIS OFFICE DOES, HE SAID "FINANCIAL THINGS, LIKE ANY OFFICE OF
THE MINISTRY OF FINANCE." WHEN ASKED WHETHER THE SAG'S AUSTERITY
BUDGETS WERE AFFECTING HIS OFFICE, HE INITIALLY JUST ANSWERED, "OF
COURSE." HE LATER NOTED THAT THE OFFICE HAD RECENTLY PUT OUT THE
WORD THAT ALL RECIPIENTS OF MONTHLY STIPENDS HAD TO COME INTO THE
OFFICE TO VERIFY THEIR RIGHT TO BE ON THE ROLLS. HE MENTIONED THAT
HE HAD DISCOVERED CASES OF SERVANTS WHO WERE STILL PICKING UP
MONTHLY STIPENDS FOR RECIPIENTS WHO HAD DIED. THIS EXPLAINED THE
SECOND TYPE OF PETITIONERS PRESENT DURING ECONOFF'S VISIT. ONE
SAUDI SUCCESSFULLY VERIFIED HIS RIGHT TO A STIPEND WITH A SERIAL
NUMBER FROM THE RIFLE HIS FATHER HAD USED IN BATTLE WITH ABD AL-
AZIZ. ANOTHER, WHOM ECONOFF VAGUELY RECOGNIZED, INTRODUCED HIMSELF
AS THE SAUDI TV WEATHERMAN. AFTER JOKING ABOUT THE MONOTONY OF HIS
JOB--ALWAYS FORECASTING "HOT AND DRY"--HE TOLD ECONOFF THAT HE WAS
IN RIYADH TO VERIFY THAT HIS INFIRM UNCLE IN JEDDAH BELONGED ON THE
ROLLS.


12. (S) EVEN WITH HIS RETICENCE, AL-SHUBAYLI NOTED THE OBVIOUS,
THAT THE MOST IMPORTANT FUNCTION OF THE OFFICE IS TAKING FINANCIAL
CARE OF ROYALS. WHILE AL-SHUBAYLI REFUSED TO ELABORATE, ACCORDING
TO A VARIETY OF SOURCES, ROYAL FAMILY STIPENDS ARE AS FOLLOWS:

-- THE REMAINING SONS AND DAUGHTERS OF ABD AL-AZIZ ARE ON
INDIVIDUAL PAY SCALES, RANGING FROM ABOUT $200,000 TO $270,000
PER MONTH ($1 EQUALS 3.75 SR).

-- GRANDCHILDREN OF ABD AL-AZIZ RECEIVE IN THE RANGE OF $27,000
PER MONTH, ACCORDING TO ONE CONTACT FAMILIAR WITH THE
STIPENDS. PRINCE AL-WALID BIN TALAL TOLD BUSINESS WEEK THAT
HE, AS A GRANDSON, RECEIVED ABOUT $19,000 PER MONTH.

-- GREAT GRANDCHILDREN GENERALLY RECEIVE ABOUT $13,000, AND GREAT
GREAT GRANDCHILDREN RECEIVE $8,000 PER MONTH.

-- UPON MARRYING, A PRINCE CAN RECEIVE A STIPEND OF ABOUT $1 - 3
MILLION FOR CONSTRUCTION OF A PALACE, THOUGH THIS GRANT IS NOT
AUTOMATIC AND REQUIRES SOME INFLUENCE WITH THE ROYAL DIWAN.
MONTHLY STIPENDS ALSO VARY DEPENDING ON WHETHER A ROYAL IS
SINGLE OR MARRIED.

-- AMOUNTS FOR DISTANT ROYALS OR PRIVILEGED NON-ROYALS IS
SUBSTANTIALLY LESS. THE LEAST ONE RECEIVES IS $800 PER MONTH.
A TYPICAL MID-LEVEL MEMBER OF A NON-ROYAL RECIPIENT FAMILY
WOULD RECEIVE ABOUT $5,000 PER MONTH.


13. (C) BASED ON THE ABOVE SCALE AND ASSUMING ABOUT 60 REMAINING
SONS AND DAUGHTERS OF ABD AL-AZIZ, AND AN AVERAGE 7 CHILDREN PER
PARENT (420 GRANDCHILDREN, 2,900 GREAT GRANDCHILDREN, AND PROBABLY
ONLY ABOUT 2,000 GREAT GREAT GRANDCHILDREN AT THIS POINT),TOTAL
ANNUAL STIPEND PAYMENTS WOULD AMOUNT TO OVER $2 BILLION. THE
STIPENDS ALSO PROVIDE A SUBSTANTIAL INCENTIVE FOR ROYALS TO
PROCREATE SINCE THE STIPENDS BEGIN AT BIRTH. A SAUDI WHO RECENTLY
ATTENDED PORTLAND STATE UNIVERSITY TOLD ECONOFF THAT THERE IS A
PRINCE IN THE SMALL PORTLAND, OREGON SAUDI STUDENTS ASSOCIATION WHO
HAS CONVINCED A LOCAL COMMUNITY COLLEGE TO CARRY HIM ON THE ROLLS
EVEN THOUGH HE WOULD NEVER ATTEND A CLASS. ACCORDING TO THIS
SAUDI, THE PRINCE'S MAIN GOAL IN LIFE IS TO HAVE MORE CHILDREN SO
HE CAN INCREASE HIS MONTHLY ALLOWANCE.


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OFF-BUDGET PROGRAMS
--------------


14. (S) WHILE THE STIPEND SYSTEM IS THE OFFICIAL MECHANISM FOR
TAKING CARE OF ROYALS' FINANCIAL NEEDS, IT IS CLEARLY NOT ENOUGH
FOR MANY PRINCES, AND SEVERAL OTHER ENRICHING PRACTICES, GENERALLY
VIEWED AS CORRUPT, OCCUR. BY FAR THE LARGEST IS LIKELY ROYAL
SKIMMING FROM THE APPROXIMATELY $10 BILLION IN ANNUAL OFF-BUDGET
SPENDING CONTROLLED BY A FEW KEY PRINCES, PRIMARILY DEFENSE
MINISTER SULTAN. TWO OF THESE PROJECTS--THE TWO HOLY MOSQUES
PROJECT (ABOUT $5 BILLION PER YEAR) AND THE MINISTRY OF DEFENSE'S
STRATEGIC STORAGE PROJECT (ABOUT $1 BILLION PER YEAR)--ARE HIGHLY
SECRETIVE, SUBJECT TO NO MINISTRY OF FINANCE OVERSIGHT OR CONTROLS,
TRANSACTED THROUGH THE NATIONAL COMMERCIAL BANK (SEE BELOW),AND
WIDELY BELIEVED TO BE A SOURCE OF SUBSTANTIAL REVENUES FOR THE KING
AND A FEW OF HIS FULL BROTHERS. IN A RECENT MEETING WITH THE
AMBASSADOR, SAUDI BILLIONAIRE PRINCE AL-WALID BIN TALAL, ALLUDING
TO THESE OFF-BUDGET PROGRAMS, LAMENTED THE TRAVESTY THAT REVENUES
FROM "ONE MILLION BARRELS OF OIL PER DAY" GO ENTIRELY TO "FIVE OR
SIX PRINCES."


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GOING TO THE BANK
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15. (S) THE TWELVE COMMERCIAL BANKS IN THE COUNTRY ARE GENERALLY
LEARY OF LENDING TO ROYALS BECAUSE THE BANKS HAVE LIMITED RECOURSE
SHOULD A PRINCE DEFAULT ON A LOAN. NATIONAL COMMERCIAL BANK (NCB)
HAS BEEN THE PRIMARY BANK OF THE ROYAL FAMILY FOR MANY YEARS. IN
THE LATE 1980S AND EARLY 1990S, NCB'S NON-PERFORMING ROYAL LOAN
PROBLEMS WERE SO SEVERE THAT THE BANK NEARLY COLLAPSED. KING FAHD
REPORTEDLY INJECTED $2 BILLION OF PERSONAL FUNDS INTO THE BANK TO
RESTORE ITS FINANCIAL INTEGRITY. THE MANAGING DIRECTOR OF A MAJOR
BANK IN THE KINGDOM TOLD EMBOFFS THAT HIS BANK, WITH LOANS TO FEWER
THAN A DOZEN PRINCES, WAS PROBABLY AT THE LOW END OF THE SPECTRUM
IN TERMS OF EXPOSURE TO ROYALS. HE IS CARRYING TWO NON-PERFORMING
LOANS--ONE FOR 300 MILLION SR TO PRINCE SATTAM BIN ABD AL-AZIZ, AND
ANOTHER SMALLER LOAN TO A SON OF PRINCE SALMAN BIN ABD AL-AZIZ.
THE BANK WITH PROBABLY THE LOWEST EXPOSURE TO ROYALS IS THE
KINGDOM'S ONLY ISLAMIC BANK--AL-RAJHI. ACCORDING TO ITS TOP
OFFICER, THE BANK HAS A STRICT POLICY AGAINST LENDING TO THE AL
SAUD. HE SAYS THE BANK HAS ONLY MADE TWO EXCEPTIONS, TO PRINCES
WHO HAVE BEEN LONGSTANDING RELIABLE CUSTOMERS OF THE BANK. AT THE
HIGH END ARE NCB AND SAUDI AMERICAN BANK (SAMBA). IN ITS LATEST
FINANCIAL REPORT, FOR THE THIRD QUARTER OF 1996, SAMBA REPORTED
LOWER PROFITS THAN LAST YEAR DUE IN PART TO A 200 MILLION SR
PROVISION FOR A BAD LOAN, WHICH, ACCORDING TO A SAMBA OFFICER, IS
TO ONE OF THE BROTHERS OF KING FAHD'S WIFE. THE BANKS HAVE THE
FREEDOM TO REFUSE DOING BUSINESS WITH ROYALS, BUT BANKS SUCH AS NCB
AND SAMBA HAVE HAD A POLICY OF ATTRACTING SUCH "HIGH NET WORTH
CLIENTS" TO THEIR PRIVATE BANKING DEPARTMENTS TO ADD PRESTIGE TO
THE BANK.


16. (S) THE MANAGING DIRECTOR OF A MAJOR BANK IN THE KINGDOM TOLD
THE AMBASSADOR THAT HE VIEWS ROYALS IN FOUR TIERS, WHICH DETERMINE
HOW HIS BANK DEALS WITH THEM: THE TOP TIER IS THE SENIORMOST
PRINCES, GENERALLY THE MOST WELL-KNOWN SONS OF ABD AL-AZIZ. SOME
OF THESE HAVE ACCOUNTS AT THE BANK, BUT, PROBABLY BECAUSE OF THEIR
EXORBITANT WEALTH, THEY NEVER ASK THE BANK FOR LOANS. THE SECOND
TIER INCLUDES SENIOR PRINCES KNOWN TO BE INCREDIBLY WEALTHY BUT WHO
OFTEN SEEK LOANS FROM THE BANK. THE BANK INSISTS THAT SUCH LOANS
BE 100 PERCENT COLLATERALIZED BY DEPOSITS IN OTHER ACCOUNTS AT THE
BANK. HE SAYS SUCH ARRANGEMENTS HAVE WORKED WELL FOR THE BANK.
THE THIRD TIER ARE THE THOUSANDS OF LESSER PRINCES WHOM THE BANK
REFUSES TO LEND TO. THE FOURTH TIER, NOT REALLY ROYALS, ARE WHAT
THIS BANKER CALLED THE "HANGERS ON"--PEOPLE WHO WORK FOR PRINCES
AND WHOSE "CASH FLOWS" CAN CHANGE DRAMATICALLY FROM ONE DAY TO THE
NEXT. THESE, HE SAID, HAVE MOST RECENTLY GIVEN THE BANK THE MOST
TROUBLE.


17. (S) WITH A FEW NOTABLE EXCEPTIONS, THERE IS NOT EXTENSIVE
ROYAL OWNERSHIP OF THE TWELVE COMMERCIAL BANKS IN SAUDI ARABIA.
PRINCE AL-WALID BIN TALAL IS THE MAJORITY OWNER OF UNITED SAUDI
COMMERCIAL BANK AND HE IS TRYING TO ACQUIRE SAUDI CAIRO BANK.
RUMORS ARE THAT OTHER PRINCES, JEALOUS OF HIS SUCCESS, ARE TRYING
TO BLOCK THE ACQUISITION. THE BANKING COMMUNITY EXPECTS THAT HE
WILL MERGE THE TWO BANKS IF HE SUCCESSFULLY ACQUIRES SAUDI CAIRO
BANK. A SECOND RUMOR IN THE BANKING COMMUNITY IS THAT THE MONEY
BEHIND KHALID BIN MAHFUZ'S RECENT ACQUISITION OF 100 PERCENT
OWNERSHIP OF NCB--THE LARGEST BANK IN THE KINGDOM--CAME FROM THE
KING'S SON, ABD AL-AZIZ BIN FAHD, WHO IS THE SHADOW OWNER. IT IS
WIDELY VIWED IN BANKING CIRCLES THAT KHALID BIN MAHFUZ, A FORMER
BCCI INDICTEE, COULD NOT HAVE GOTTEN CENTRAL BANK APPROVAL TO FULLY
OWN NCB WITHOUT THE MOST SENIOR ROYAL BACKING. SAUDI HOLLANDI BANK
IS MAJORITY OWNED BY THE CONGLOMERATE AL-MAWARID, WHICH IN TURN IS
OWNED BY PRINCES. THE MAJORITY OWNERS OF THE OTHER BANKS ARE
GENERALLY THE LARGE NON-ROYAL BUSINESS FAMILIES IN THE KINGDOM.


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LAND GRABS
--------------


18. (C) STORIES ABOUND OF SOME GREEDY PRINCES EXPROPRIATING LAND
FROM COMMONERS. GENERALLY, THE INTENT IS TO RESELL QUICKLY AT HUGE
MARKUP TO THE GOVERNMENT FOR AN UPCOMING PROJECT. DISCONTENT OVER
ROYAL USURPATION OF LANDS HAS BEEN EXACERBATED BY SAG CUTBACKS IN
LAND DISTRIBUTION PROGRAMS WHICH PRIMARILY BENEFITED THE MIDDLE
CLASS. FROM THE MID-1970S TO THE LATE 1980S THE SAG UNDERTOOK AN
AMBITIOUS, AND POPULAR, LAND GRANT PROGRAM DESIGNED TO SETTLE
NOMADIC POPULATIONS AND TO GARNER THE SUPPORT OF THE SAUDI
POPULACE. OVER 1.3 MILLION RESIDENTIAL PARCELS WERE DISTRIBUTED
FREE OF CHARGE THROUGHOUT THE KINGDOM, WITH LITTLE MORE THAN A
PETITION TO THE LOCAL GOVERNOR REQUIRED TO OBTAIN THE DEED. AN
EQUALLY SUCCESSFUL PROGRAM WAS ADMINISTERED BY ARAMCO, WHOSE
ENVIRONS TODAY ARE SURROUNDED BY UPSCALE NEIGHBORHOODS SETTLED BY
EMPLOYEES WITH THE HELP OF A COMPANY-DEEDED PIECE OF PROPERTY AND
NO-INTEREST LOANS.


19. (C) THE LAND GRANT PROGRAM HAS NOW DWINDLED TO AN EPISODIC
GESTURE OF ROYAL LARGESSE, PERHAPS BECAUSE THE NUMBER OF GRANTS WAS
STRESSING THE GOVERNMENT'S ABILITY TO PROVIDE INFRASTRUCTURE --
WATER, ELECTRICITY, AND ROADS. SIMILARLY, ARAMCO, HAVING
DISTRIBUTED OVER 30,000 PLOTS OF LAND, RAN OUT OF DESIRABLE ACREAGE
AND NOW OFFERS A LUMP SUM CASH PAYMENT. WHEN COMBINED WITH THE
ABSENCE OF MORTGAGE LOANS FROM THE COMMERCIAL BANKS, A DECADE-LONG
WAITING LIST FOR A GOVERNMENT HOME LOAN, THE RESULT IS THAT HOME
OWNERSHIP IS BECOMING AN ELUSIVE GOAL FOR YOUNG, NON-ROYAL SAUDIS.


20. (S) AGAINST THIS BACKDROP, ROYAL LAND SCAMS INCREASINGLY HAVE
BECOME A POINT OF PUBLIC CONTENTION. IN THE 1993 "MEMORANDUM OF
ADVICE" PETITION SIGNED BY OVER 100 OF THE KINGDOM'S MORE ACTIVIST
CLERICS, THE KING WAS URGED TO HALT THE DISTRIBUTION OF LAND,
EXCEPT TO THOSE WITH LIMITED INCOMES OR NO PLACE TO LIVE. MINISTER
OF DEFENSE SULTAN, HIS SONS, AND THE OFFSPRING OF KING FAHD ARE THE
MOST OFT-CITED SENIOR CULPRITS:

-- ACCORDING TO A BANKER WHO SAYS HE HAS A COPY OF THE WRITTEN
INSTRUCTIONS, DEFENSE MINISTER SULTAN ORDERED LOCAL
AUTHORITIES IN THE MECCA AREA TO TRANSFER TO HIS NAME A
"WAQF"--RELIGIOUS ENDOWMENT--OF A SMALL PARCEL OF LAND THAT
HAD BEEN IN THE HANDS OF ONE FAMILY LITERALLY FOR CENTURIES.
THE BANKER NOTED THAT IT WAS THE BRAZENNESS OF THE LETTER,
WITH NO EFFORT TO HIDE THE SIMPLE INTENT OF CONFISCATING LAND,
THAT WAS PARTICULARLY EGREGIOUS.

-- THE KING'S SON, ABD AL-AZIZ BIN FAHD, WAS REPORTEDLY GRANTED
THE HUGE EXPANSE OF LAND THAT THE KING KHALID INTERNATIONAL
AIRPORT OUTSIDE OF RIYADH WAS BUILT ON FOR RESALE TO THE
GOVERNMENT FOR THE PROJECT.

-- PRINCE MISHAL BIN ABD AL-AZIZ (ELDER HALF-BROTHER OF SULTAN),
WHO ACCEDED TO BEING PASSED OVER IN THE LINE OF SUCCESSION, IS
FAMOUS FOR THROWING FENCES UP AROUND VAST STRETCHES OF
GOVERNMENT LAND. ONE CONTRACTOR REPORTS BEING ORDERED BY
MISHAL TO KEEP EXTENDING THE PERIMETER OF THE FENCE ENCIRCLING
HIS DESERT PROPERTY OUTSIDE OF RIYADH UNTIL AN ADDITIONAL 80
SQUARE KILOMETERS OF LAND WERE INCORPORATED INTO HIS PRIVATE
ESTATE. LIKEWISE, MISHAL HAS ACQUIRED A 450 SQUARE KILOMETER
TRACT ENVELOPING THE KING KHALID MILITARY CITY OUTSIDE OF HAFR
AL-BATIN.

-- MISHAL'S FULL BROTHER, MITIB BIN ABD AL-AZIZ, IS THE
BENEFICIARY OF ALL LAND RECLAMATION PROJECTS ALONG THE ARABIAN
GULF. THIS RIGHT WAS GRANTED AFTER MITIB INSISTED THAT HIS
FATHER, KING ABD AL-AZIZ, HAD PROMISED HIM ALL OF THE
KINGDOM'S FISHERY RIGHTS. THE FAMILY'S COMPROMISE WAS TO
CREATE THE NATIONAL FISHERIES COMPANY, OF WHICH MITIB WAS MADE
A PARTNER, AND TO CEDE HIM THE RIGHTS TO ALL RECLAIMED LANDS
IN THE EASTERN PROVINCE.


21. (S) THE CONFISCATION OF LAND BY SOME GREEDY PRINCES EXTENDS
TO BUSINESSES AS WELL. ONE PROMINENT AND WEALTHY SAUDI BUSINESSMAN
REPORTS THAT ONE REASON SOME WEALTHY SAUDIS KEEP SO MUCH MONEY
INVESTED OUTSIDE OF THE COUNTRY IS BECAUSE THEY DO NOT FACE THE
RISK ABROAD OF "ROYAL EXPROPRIATION" OF BUSINESS ASSETS. ACCORDING
TO THIS BUSINESSMAN, AS SOON AS A SMALL BUSINESS SHOWS SIGNS OF
HIGH GROWTH AND PROFIT POTENTIAL, THE OWNER, PARTICULARLY IF HE IS
KNOWN TO BE WELL-OFF, WILL COME UNDER PRESSURE FROM ROYALS TO SELL
OR GO INTO PARTNERSHIP. AS A RESULT, MANY OF THE MORE PROMINENT
BUSINESSMEN NOW CHOOSE TO USE A LESSER NAME SAUDI AS A SHADOW OWNER
OF A BUSINESS TO AVOID DRAWING THE ATTENTION OF BUSINESS-HUNGRY
PRINCES.


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THE VISA RACKET
--------------


22. (C) A PHENOMENON OF THE PAST FIVE OR SO YEARS HAS BEEN THE
ROYAL SPONSORSHIP OF EXPATRIATE LABOR FOR PROFIT. EVERY FOREIGN
WORKER IN THE COUNTRY HAS TO BE SPONSORED BY A SAUDI TO OBTAIN AN
IQAMA--RESIDENCE PERMIT. PERMISSION TO SPONSOR FOREIGN WORKERS IS
GRANTED BY THE MINISTRY OF LABOR. THE AVERAGE SAUDI CAN SPONSOR
FIVE OR SO, ENOUGH TO HIRE MAIDS, NANNIES, AND DRIVERS.
BUSINESSMEN CAN GENERALLY GET PERMISSION TO HIRE EXPATS TO FILL
JOBS IN THEIR COMPANIES, ALTHOUGH THIS IS GETTING HARDER WITH THE
SAG PUSH TO SAUDIIZE THE WORKFORCE. ROYALS CAN GET PERMISSION FROM
THE MINISTRY TO SPONSOR SEEMINGLY UNLIMITED NUMBERS OF EXPATS, EVEN
THOUGH THEY HAVE NO WORK FOR THEM.


23. (C) IT IS COMMON FOR A PRINCE TO SPONSOR A HUNDRED OR MORE
FOREIGNERS, KNOWN HERE AS "FREELANCERS," WHO ARE ALLOWED TO FIND
THEIR OWN JOBS, MOST OFTEN AS SERVANTS OR UNSKILLED LABORORS. IN
EXCHANGE FOR THE PRIVILEGE OF BEING IN SAUDI ARABIA, THESE
FOREIGNERS PAY THEIR ROYAL SPONSOR A NOMINAL FEE--$30 TO $150 PER
MONTH, WHICH ADDS UP TO A SUBSTANTIAL TAKE FOR SOMEONE SPONSORING
OVER A HUNDRED EXPATS--ON AVERAGE ABOUT $10,000 PER MONTH PER 100
EXPATS UNDER SPONSORSHIP.


24. (C) WE BELIEVE THAT THIS PRACTICE WAS LARGELY BEHIND THE
RAPID GROWTH IN THE EXPATRIATE POPULATION, FROM ABOUT 4.2 MILLION
TO 6.5 MILLION, BETWEEN 1992 AND 1995. WITH THE ECONOMY GROWING AT
1 PERCENT OR LESS DURING THOSE YEARS, JOB EXPANSION WAS NOT
JUSTIFYING THE RAPID EXPATRIATE POPULATION GROWTH. IN JANUARY
1995, THE SAG RAISED THE PRICE FOR A 2-YEAR IQAMA TO A HEFTY 2,000
SR ($533). THIS COMBINED WITH THE COST OF HOMEWARD PASSAGE FOR
WORKERS WHICH MUST BE BORNE BY SPONSORS IS NOW MAKING IT
UNECONOMICAL TO ENGAGE IN THE WIDESPREAD SPONSORSHIP OF
FREELANCERS, AND WE BELIEVE THAT THE EXPAT POPULATION HAS LEVELED
OFF OR IS IN DECLINE AS A RESULT. ONE INDICATION OF THIS IS THAT
THE CENTRAL BANK HAS REPORTED THAT EXPATRIATE WORKER REMITTANCES
ARE DOWN FROM $12 BILLION IN THE FIRST 9 MONTHS OF 1995 TO $9.9
BILLION FOR THE SAME PERIOD IN 1996.


--------------
PRINCES BETTER AT SPENDING THAN SAVING
--------------


25. (S) ALL THE WEALTH THAT HAS BEEN DISTRIBUTED TO PRINCES OVER
THE PAST 20 YEARS HAS NOT CREATED A SIGNIFICANT NUMBER OF SUPER-
RICH PRINCES. THERE ARE MORE NON-ROYAL BILLIONAIRES THAN ROYAL
ONES. THE HEADS OF THE BIG BUSINESS FAMILIES--AL-JOMAIH, AL-
JUFFALI, BIN MAHFUZ, AL-RAJHI, OLAYAN, JAMEEL, AL-RASHID, FOR
EXAMPLE--ARE KNOWN BILLIONAIRES WHILE ONLY A HANDFUL OF PRINCES ARE
IN THE SAME LEAGUE. THE LONE EXCEPTION OF A PRINCE WHO HAS TURNED
HIS SEED MONEY INTO A MULTI-BILLION DOLLAR EMPIRE IS AL-WALID BIN
TALAL--THE SON OF AN OUTCAST SON OF ABD AL-AZIZ. WE CALCULATE THAT
HIS FOREIGN AND DOMESTIC INVESTMENTS GIVE HIM A NET WORTH OF ABOUT
$13 BILLION. THE OTHER BILLIONAIRE PRINCES AND OUR ESTIMATE OF
THEIR WORTH ARE KING FAHD -- $10 BILLION, DEFENSE MINISTER PRINCE
SULTAN -- $10 BILLION, AND HIS SON KHALID BIN SULTAN -- $2 BILLION.


--------------
COMMENT: AL SAUD INC. -- NO END IN SIGHT
--------------


26. (S) WHILE ROYALTY HERE IS EXPECTED TO HAVE WEALTH AND THE
TRAPPINGS OF POWER TO A CERTAIN DEGREE, THERE IS A BROAD SENTIMENT
THAT ROYAL GREED HAS GONE BEYOND THE BOUNDS OF REASON. ROYAL
EXCESS IS A COMMON TOPIC OF CONVERSATION AMONG NON-ROYAL SAUDIS AND
EXPATRIATES ALIKE. PALACE CONSTRUCTION, KNOWN TO BE FINANCED FOR
EVERY PRINCE THROUGH THE STIPEND SYSTEM, IS A VISIBLE SIGN OF SUCH
EXCESS. ONE PALACE IN DOWNTOWN RIYADH HAS NEVER BEEN OCCUPIED
BECAUSE THE ROYAL BUILDER SIMPLY DIDN'T LIKE IT. IT NOW STANDS AS
A MONOLITHIC REMINDER OF CONSPICUOUS CONSUMPTION. SUCH EXCESSES
WERE TOLERABLE WHEN THE ECONOMIC TIDE WAS RISING FOR EVERYONE.
NOW, WITH FLAT PER CAPITA GDP AND A GENERAL SENSE THAT QUALITY OF
LIFE IS DECLINING FOR THE AVERAGE SAUDI, THE TRANSFER OF SO MUCH
STATE WEALTH IS RESENTED AND ONE OF THE COMBUSTIBLE MIXES BESETTING
SAUDI ARABIA'S FUTURE. AS IF THIS WEREN'T ENOUGH, THE ROYAL FAMILY
IS INCREASINGLY ALIENATING THE MERCHANT CLASS (AS EXAMINED SEPTEL)
VIA PERVASIVE VIOLATION OF A DICTUM BY THE KINGDOM'S FOUNDER, ABD
AL-AZIZ, THAT ROYALS STAY OUT OF BUSINESS.


27. (S) THERE IS SOME SENTIMENT THAT CROWN PRINCE ABDALLAH, AS
KING, WOULD INTERCEDE TO ROLL BACK THE ROYAL TAKE. IT IS NOT CLEAR
YET, HOWEVER, THAT HE WOULD HAVE THE POWER OR INCLINATION TO MAKE
SWEEPING CHANGES, BY, FOR EXAMPLE, ELIMINATING OFF-BUDGET PROGRAMS
OR EVEN CURTAILING THE STIPEND SYSTEM. EVEN WITH STIPEND AMOUNTS
REMAINING FLAT, DISBURSEMENTS ARE GROWING WITH THE HIGH POPULATION
GROWTH OF THE ROYAL FAMILY. SUCH CUTTING BACK INTERNALLY MIGHT
FURTHER FRACTURE THE RULING CLAN.


28. (S) IT IS OUR ASSESSMENT THAT OF THE PRIORITY ISSUES THE
COUNTRY FACES, GETTING A GRIP ON ROYAL FAMILY EXCESSES IS AT THE
TOP. BUT AS LONG AS THE ROYAL FAMILY VIEWS THIS COUNTRY AS "AL
SAUD INC.," EVER INCREASING NUMBERS OF PRINCES AND PRINCESSES WILL
SEE IT AS THEIR BIRTHRIGHT TO RECEIVE LAVISH DIVIDEND PAYMENTS, AND
DIP INTO THE TILL FROM TIME TO TIME, BY SHEER VIRTUE OF COMPANY
OWNERSHIP.


FOWLER