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Global finance has a Saudi Arabian problem

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Saudi Arabia’s Kingdom Center tower is a 99-storey skyscraper in Riyadh. Supplied

NEW YORK (Reuters Breakingviews) – Is global finance complicit with Saudi Arabian? Following the alleged assassination of a journalist critical of the kingdom, that’s the question leaders of the world’s biggest banks and investment firms must ask themselves.

That is before they fuel up their jets and head to Crown Prince Mohammed bin Salman’s “Davos in the Desert” in just over a week.

From a strictly moral perspective, if they believe a scintilla of what has been put forward by Turkish authorities, they should bow out as JPMorgan’s Jamie Dimon did Sunday night.

The top American, European and Japanese banks and investment firms do business with many governments and regimes their executives can’t be particularly proud of at dinner time with the family. They rationalize the work by saying if they don’t do it, someone else will; and, anyway, they’re in no position to judge the political systems of other nations. These are potentially defensible arguments that can be applied to many clients associated with China, Russia and other countries accused of human-rights abuses.

The Saudi case adds a complicated wrinkle to this calculus. First, the Saudis deny involvement in the disappearance of Jamal Khashoggi, who entered the kingdom’s consulate in Istanbul and didn’t come out, Reuters reported. Second, there is little guidance from above on how to proceed.

President Donald Trump has expressed dismay over the alleged killing by Saudi agents. But Mr Trump, who has branded the US press as “enemies of the people,” also said he didn’t want the matter to affect a $110 billion sale of arms to Saudi.

The imposition of sanctions, like those applied by the United States and European Union to Russia after the annexation of Crimea, would make it an easier decision for executives like BlackRock’s Larry Fink, or the bosses of France’s two largest banks to skirt the second installment of the Future Investment Initiative next week in Riyadh.

Though banks may still act for some Russian companies, their executives now mostly skip public events like the St. Petersburg International Economic Forum. They do not want to be accused of renting out the public reputation and dignity of the organizations they run to a regime that, in the Saudi case, allegedly sanctioned the high-profile murder of a subject.

Saudi has also been engaged in foreign-policy actions that have stoked instability in the Middle East and beyond, like the blockade of Qatar. Arguably worst has been the ongoing prosecution of a proxy war in Yemen that has left three-quarters of Yemenis, or 22 million people, needing humanitarian assistance or protection, according to the United Nations.

Of course, accusations that China similarly commits human-rights violations hasn’t stopped banks from investing in the country. Last year’s death of a Nobel Peace Prize laureate in a hospital under heavy guard didn’t stop executives from Standard Chartered, Société Générale, Blackstone or Mizuho from attending the China Development Forum in March.

Then there’s the money. This year, Saudi Arabia generated $247 million in fees from selling securities, arranging loans and advising on deals, according to Refinitiv. And that’s without the mother of all deals taking place. The now-shelved stock offering of Saudi Aramco, the national oil company which MBS contends is worth $2 trillion, could produce $200 million alone.

The biggest recipients have been banks whose executives were scheduled to grace the stage at the crown prince’s fiesta. The agenda was scrubbed from its website last week. Dimon’s company leads the league tables, or the rankings Refinitiv compiles based on estimated fees,

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