DUBAI, Oct 14, 2018 (BSS/AFP) – Saudi Arabia warned Sunday it would
retaliate against any sanctions imposed on the oil-rich kingdom over the
disappearance of journalist Jamal Khashoggi, as the Riyadh stock market
plunged on growing investor jitters.
From tech tycoons to media giants, a host of Western companies are now
distancing themselves from the Gulf state, imperilling Crown Prince Mohammed
bin Salman’s much-hyped economic reform drive.
US President Donald Trump threatened ally Saudi Arabia on Saturday with
“severe punishment” if Khashoggi, who has been critical of Prince Mohammed,
was killed inside its Istanbul mission.
But Riyadh vowed to hit back against any action against it.
“The kingdom affirms its total rejection of any threats or attempts to
undermine it whether through threats to impose economic sanctions or the use
of political pressure,” an official source said, quoted by state news agency
SPA.
He said Riyadh would “respond to any action with a bigger one”, pointing
out that the oil superpower “plays an effective and vital role in the world
economy”.
As investors took fright, Saudi stocks tumbled by around seven percent at
one point on Sunday, wiping out their gains for 2018.
Business barons including British billionaire Richard Branson and Uber CEO
Dara Khosrowshahi, as well as media powerhouses like Bloomberg and CNN, have
pulled out of next week’s Future Investment Initiative (FII) in Riyadh,
dubbed “Davos in the desert”.
– ‘Baseless allegations’ –
Khashoggi, a Washington Post contributor, vanished after entering the
consulate on October 2 to obtain official documents for his upcoming
marriage.
Turkey on Saturday stepped up pressure on Saudi Arabia by accusing the
kingdom of failing to cooperate with a probe into the journalist’s
disappearance.
Turkish officials have said they believe Khashoggi was killed inside the
mission and claims have been leaked to media that he was tortured and even
dismembered.
Saudi Arabia insists Khashoggi left the building safely and dismissed
accusations that authorities had ordered his murder by a hit squad as “lies
and baseless allegations”.
The kingdom’s Tadawul All-Shares Index (TASI) lost more than 500 points,
diving by seven percent in the first two hours when trading resumed after the
weekend, in panic selling reminiscent of the days after the global financial
crisis in 2008.
It later clawed back some losses to close down 3.5 percent at 7,266.59
points.
The index had already dropped 3.0 percent on Thursday, following a rout on
world stock markets fuelled by worries about higher interest rates and US
President Donald Trump’s attacks on the Federal Reserve.
Mohammed Zidan, market strategist at Thinkmarket in Dubai, said the drop
in Saudi stocks was the result of panic selling because of several political
and economic factors.
“There has been a kind of uncertainty surrounding the situation of the
disappearance of Khashoggi which has caused the market to fall,” Zidan told
AFP.
“The withdrawal of top participants from the Riyadh investment conference
has also negatively impacted traders’ sentiment,” he said.
– Public relations crisis –
The pullouts have cast a pall on the annual summit at which Prince
Mohammed wowed investors last year with talking robots and blueprints for a
futuristic mega city.
The withdrawal of Uber’s Khosrowshahi from the event is particularly
symbolic as the kingdom’s vast Public Investment Fund (PIF) has invested $3.5
billion in the ride-hailing app.
Branson, who dropped two directorships linked to Saudi tourism projects
around the Red Sea, said claims about Khashoggi’s disappearance would “change
the ability of any of us in the West to do business with the Saudi
government”.
Global multinational corporations “see potential in a developing market
like Saudi Arabia, but for many the reputational risk of being associated
with FII outweighs the potential gains from the Saudi economy,” said Michael
Stephens, a Middle East expert at the Royal United Services Institute.
Washington lobbying firm Harbour group which represented the Saudi
government, has also terminated its $80,000 per month contract.
“We (have) ended the relationship,” Richard Mintz, managing director of the
firm, told AFP.
The Saudi leadership faces “an acute public relations crisis” over
Khashoggi’s disappearance, said consultancy group Eurasia.
“The leadership will now have to manage a more serious threat to its
economic liberalisation strategy,” Eurasia said.
“At this point, Saudi Arabia will find it incredibly challenging to
contain the emerging crisis.”