U.S. cables detail Saudi royal welfare program | Reuters

By Simon Robinson

LONDON | Mon Feb 28, 2011 7:51am EST

The head of the office at the time, Abdul-Aziz al-Shubayli, told the economics officer that an important part of his job "at least in today's more fiscally disciplined environment, is to play the role of bad cop." He "rudely grilled a nearly blind old man about 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 finally signing off on a trip, Shubayli noted that he himself had been in the United States twice for medical treatment, once for a chronic ulcer and once for carpal tunnel syndrome. "He chuckled, suggesting that both were probably job-induced."

FOLLOWING THE MONEY

But the stipend system was clearly not enough for many royals, who used a range of other ways to make money, "not counting business activities."

"By far the largest is likely royal skimming from the approximately $10 billion in annual off-budget spending controlled by a few key princes," the 1996 cable states. Two of those projects -- the Two Holy Mosques Project and the Ministry of Defense's Strategic Storage Project -- are "highly secretive, subject to no Ministry of Finance oversight or controls, transacted through the National Commercial Bank, and widely believed to be a source of substantial revenues" for the then-King and a few of his full brothers, according to the authors of the cable.

In a meeting with the U.S. ambassador at the time, one Saudi prince, alluding to the off-budget programs, "lamented the travesty that revenues from 'one million barrels of oil per day' go entirely to 'five or six princes,'" according to the cable, which quoted the prince.

Then there was the apparently common practice for royals to borrow money from commercial banks and simply not repay their loans. As a result, the 12 commercial banks in the country were "generally leary of lending to royals."

The managing director of another bank in the kingdom told the ambassador that he divided royals into four tiers, according to the cable. The top tier was the most senior princes who, perhaps because they were so wealthy, never asked for loans. The second tier included senior princes who regularly asked for loans. "The bank insists that such loans be 100 percent collateralized by deposits in other accounts at the bank," the cable reports. The third tier included thousands of princes the bank refused to lend to. The fourth tier, "not really royals, are what this banker calls the 'hangers on'."

Another popular money-making scheme saw some "greedy princes" expropriate land from commoners. "Generally, the intent is to resell quickly at huge markup to the government for an upcoming project." By the mid-1990s, a government program to grant land to commoners had dwindled. "Against this backdrop, royal land scams increasingly have become a point of public contention."

The cable cites a banker who claimed to have a copy of "written instructions" from one powerful royal that 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 for centuries. "The banker noted that it was the brazenness of the letter ... that was particularly egregious."

Another senior royal was famous for "throwing fences up around vast stretches of government land."

The confiscation of land extends to businesses as well, the cable notes. A prominent and wealthy Saudi businessman told the embassy that one reason rich Saudis keep so much money outside the country was to lessen the risk of 'royal expropriation.'"

Finally, royals kept the money flowing by sponsoring the residence permits of foreign workers and then requiring them to pay a monthly "fee" of between $30 and $150. "It is common for a prince to sponsor a hundred or more foreigners," the 1996 cable says.

BIG SPENDERS

The U.S. diplomats behind the cable note wryly that despite all the money that has been given to Saudi royals over the years there is not "a significant number of super-rich princes ... In the end," the cable states, Saudi's "royals still seem more adept at squandering than accumulating wealth."

But the authors of the cable also warned that all that money and excess was undermining the legitimacy of the ruling family. By 1996, there was "broad sentiment that royal greed has gone beyond the bounds of reason". Still, 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." (more to this story @Link)