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C O N F I D E N T I A L SECTION 01 OF 03 RIYADH 000226 
 
SIPDIS 
 
TREASURY FOR D/S NEAL WOLIN 
 
E.O. 12958: DECL: 02/25/2020 
TAGS: ECON PREL EFIN EINV SA
SUBJECT: TREASURY D/S WOLIN DISCUSSES ECONOMIC AND 
FINANCIAL ISSUES IN SAUDI ARABIA 
 
Classified By: Ambassador James B. Smith for reasons 1.4(b) and (d) 
 
¶1. (U) Summary:  On February 13-14, Treasury Deputy Secretary 
Neal Wolin visited Saudi Arabia and met with Saudi Arabian 
Monetary Agency (SAMA) Governor Muhammad Al Jasser and 
Minister of Finance Ibrahim Al Assaf.  Wolin reviewed the 
improving strength of the U.S. and global economies, and 
other issues of mutual interest at the International Monetary 
Fund (IMF) and Group of Twenty Finance Ministers and Central 
Bank Governors (G-20). 
 
¶2. (U) In Riyadh, the Deputy Secretary also participated in a 
roundtable discussion at SAMA with several Saudi bank 
chairmen, sharing views on the global economic recovery.  In 
Jeddah, Wolin gave a speech at the Jeddah Economic Forum on 
Global Economic Governance after the Crisis.  End summary. 
 
--------------------------------- 
MEETING WITH SAMA GOVERNOR JASSER 
--------------------------------- 
 
(U) Economic Recovery 
---------------------- 
¶3. (U) Wolin overviewed the encouraging signs of recovery in 
the U.S. economy, while noting that challenges with respect 
to high unemployment and the housing markets persist.  Wolin 
shared the USG's thinking with respect to the intermediate 
and longer-term fiscal picture, ongoing work on regulatory 
reform, and USG efforts to boost growth in small- to 
medium-sized enterprises (SMEs). 
 
¶4. (C) Overall, Jasser felt positive about the trajectory of 
U.S. economic recovery, noting that he did not subscribe to 
the "double-dip" theory.  He was interested to see where 
things would go with smaller financial institutions when 
"things cool down," and whether the theory of "too big to 
fail" would persist in the future.  Jasser was also 
interested to learn about U.S. plans to support SMEs, noting 
his view that SMEs represent the key to the job growth in the 
U.S. 
 
¶5. (C) Referencing the unprecedented policies undertaken by 
the Treasury Department over the last year and a half and the 
subsequent improvement in the U.S. economy, Jasser shared his 
belief in the necessity of taking a long-term 
view when making policy decisions.  Many times, he said, 
important and dramatic decisions are unpopular at the outset. 
 Wolin offered a corollary -- that as things improve, 
memories become short and it is hard for some to remember 
that we were only recently staring into a potential abyss. 
 
¶6. (C) Jasser described the importance of the G-20 London 
Conference in April, calling it a "watershed moment" for the 
global economy where the world's largest economies came 
together to make important decisions on financial regulation 
and economic growth.  Wolin commended Saudi Arabia on its 
bold fiscal stimulus efforts. Jasser thanked Wolin for his 
comments, noting that Saudi Arabia "didn't need to do it for 
ourselves, but did it for the global economy," and was 
therefore glad that the efforts had been appreciated.  (Note: 
Saudi Arabia announced in 2009 a $500 billion fiscal stimulus 
package to be spent over 5 years. End note.) 
 
(U) Saudi Arabia's Enlightened Self Interest 
--------------------------------------------- 
¶7. (C) Jasser stated that for over thirty years, Saudi Arabia 
has made decisions based on the long-term impact of those 
decisions on the global economy, rather than on the basis of 
domestic political considerations. For example, Saudi Arabia 
was conscious of the global impact of its decision-making 
during the Iranian Revolution, Iran/Iraq War, economic crisis 
in Latin America, and even in the "good times" in 2006-2008, 
when good policies could make a difference. He stated Saudi 
Arabia is not "dumb" or "altruistic," but acts out of 
"enlightened self interest." 
 
¶8. (C)  Jasser stated that, as an oil economy, Saudi Arabia 
has the ability to both undermine and safeguard the world's 
economy.  He noted that Saudi Arabia was able and willing to 
support reform efforts at the IMF and World Bank, but that 
the ability to harm or help the global economy is a better 
measure of a nation's relative economic importance than GDP. 
(Note: This was probably a reference to the IMF's policy of 
basing a large portion of IMF quota share on the GDP of 
member economies and the ongoing dialogue on whether certain 
countries - including Saudi Arabia - will lose quota share. 
 
RIYADH 00000226  002 OF 003 
 
 
End note.) 
 
(U) The Riyal-Dollar Peg and Global Growth 
------------------------------------------- 
¶9. (C) Jasser reaffirmed Saudi Arabia's support for the 
riyal-dollar peg, noting that the peg is in Saudi Arabia's 
"cold-blooded self interest," though he noted it sometimes 
felt like "we are alone."  Referencing past calls by China 
and others in the G-20 for an alternative to the U.S. dollar 
as the world's reserve currency, Jasser said some have asked 
him why he does not give up on the U.S. dollar.  He turned to 
a response he gave to a European newspaper 
that asked why Saudi Arabia hadn't switched its peg to the 
Euro, "When oil is denominated in Euros, we'll research it." 
 
(U) Saudi Bank Health and Conglomerates 
---------------------------------------- 
¶10. (C) When asked about the health of Saudi Arabia's banking 
sector, Jasser noted that they weathered the crisis very 
well, despite some collateral damage.  Jasser underscored the 
importance of the SAG's long-term counter-cyclical policies 
since 1966, and efforts to ensure its banks are neither 
over-leveraged nor exposed to toxic assets.  He said banks 
were somewhat affected during the financial crisis, but added 
there was good provisioning.  On non-performing loans, SAMA 
expected more than 200% provisioning, and held conservative 
capital ratio policies. 
 
¶11. (C) Referring to the default of AH Al Gosaibi and 
Brothers Company and the Saad Group, two conglomerates run by 
Saudi families that defaulted on roughly $20 billion in 
loans, Jasser stated that the families "thought they could 
get involved in dubious dealings, but then the market got 
involved."  Wolin stated there was a sense of concern in the 
international financial community with regard to transparency 
in settling their debts.  Jasser explained these were not 
financial institutions, and therefore not regulated by SAMA, 
and that much of the conglomerates' activity was outside the 
Kingdom.  He was adamant that Saudi Arabia did not do 
anything inappropriate in helping to resolve the issue, 
noting that Saudi banks were able to offset some of their 
credit to these conglomerates against collateral.  He added 
that he has defended the Saudi actions publicly several 
times.  Regarding allegations of "back-door deals," Jasser 
said that was "not the way it went -- the debt is still 
there, it is just set off plain and simple." 
 
----------------------------------- 
MEETING WITH FINANCE MINISTER ASSAF 
----------------------------------- 
 
(U) Economic Recovery 
---------------------- 
¶12. (U) Wolin overviewed the encouraging signs of recovery in 
the U.S. economy, while noting that challenges with respect 
to high unemployment and the housing markets persist.  Wolin 
shared the USG's thinking with respect to the intermediate 
and longer-term fiscal picture, ongoing work on regulatory 
reform, and USG efforts to boost growth in small- to 
medium-sized enterprises (SMEs). 
 
¶13. (C) Assaf highlighted the strong relationship between the 
Saudi Ministry of Finance and the U.S. and said the G-20 had 
been a reflection of that cooperation.  Assaf was a strong 
believer in the SAG's fiscal stimulus program, sharing that 
the SAG was doing what was right for the country by investing 
surplus in infrastructure and education.  He hoped other 
countries in the G-20 were moving forward with their reforms 
as well. 
 
(U) The Riyal-Dollar Peg and Global Growth 
------------------------------------------- 
¶14. (C) Minister Assaf stated that the dollar peg has 
historically helped with predictability and reliability in 
the Saudi economy, according to Assaf, and "we are sticking 
to it."  He affirmed that there are no alternatives to the 
dollar and stated that Saudi Arabia is not like China; the 
Kingdom's imports and exports are largely priced in dollars. 
He referenced IMF work from 3-4 years ago on global 
imbalances that had concluded that Saudi Arabia needs to save 
when oil prices are high.  He also noted that Saudi Arabia's 
foreign exchange reserves are low related to China. 
 
(U) Food Security 
------------------ 
¶15. (C) Assaf and Wolin shared views on approaches to food 
 
RIYADH 00000226  003 OF 003 
 
 
security.  Wolin overviewed the Administration's commitment 
to spending over $3.5 billion on food security over the next 
three years, including a significant commitment to 
World Bank's Global Agriculture and Food Security Program 
(GAFSP).  When asked whether the Saudi government would 
participate in the GAFSP, Assaf responded that he was 
personally interested in food security and supported both 
providing agricultural assistance to and promoting 
agricultural trade with developing countries.  He noted the 
SAG is working with the Saudi Fund for Development, Islamic 
Development Bank, and the International Finance Corporation, 
and highlighted Saudi Arabia's investments in Ethiopian rice 
production.  Assaf noted that such efforts are in Saudi 
Arabia's interest. Assaf said the SAG hadn't discussed 
participating in the GAFSP, but was happy to work with the 
program "in parallel and cooperatively." 
 
¶16. (C) With respect to Afghanistan, Assaf said that the SAG 
had earmarked funds -- including a new $150 million 
commitment -- but dispersing it had been slow because of 
concerns over Afghanistan's ability to administer and 
implement programs appropriately.  (Note:  The Saudi Fund for 
Development is waiting for the Government of Afghanistan to 
submit proposals.  End note.) 
 
(U) Liberia 
------------ 
¶17. (C) Wolin asked Assaf about a loan from the Saudi Fund 
for Development to Liberia.  Liberia would like the loan 
restructured in conformity with the terms under the Highly 
Indebted Poor Country (HIPC) debt relief program.  The Saudi 
Fund for Development has yet to resolve this past loan, and 
it is holding up potential additional loans from the Saudi 
Fund that could help Liberia modernize the port of Monrovia. 
Assaf said that, although it is not a member of the Paris 
Club, it is active in the HIPC initiative, and was happy to 
look at the issue.  (Note: Saudi Development Fund officials 
told Acting A/S Baukol earlier in the day that it has offered 
HIPC-comparable terms to Liberia, but could not do anything 
to write down Liberia's debt per its charter.  End note.) 
 
------------- 
(U) OUTREACH 
------------- 
¶18. (SBU) Deputy Secretary Wolin attended a roundtable lunch 
discussion at SAMA with members of SAMA's staff and four 
Saudi bank chairmen -- Ibrahim Al Touq of Banque Saudi 
Fransi, Khaled Olayan of Saudi British Bank (SABB), Abdulaziz 
Al Ohali of Saudi Investment Bank, and Abdulaziz Al Zamil of 
Alinma Bank.  Much of the conversation centered on the state 
of the U.S. economy: how the U.S. will finance the budget 
deficit, foreign investment in the U.S., America's ability to 
wind down its expansionary fiscal policies, and whether the 
U.S. will increase taxes.  In addition, several chairmen and 
SAMA Vice Governor Abdulrahman Al Hamidy raised their 
frustration over the USG's treatment of Saudis when entering 
the United States. 
 
¶19. (U) In Jeddah, Wolin gave a speech at the Jeddah Economic 
Forum on Global Economic Governance after the Crisis.  The 
text of the speech is publicly available on Treasury's 
website. 
 
¶20. (U) This cable was cleared by D/S Wolin. 
SMITH