The government ofcan be confusing for many outside of the country. It is a complex series of very wealthy families, and it seems there is almost always a certain level of a power struggle between the wealthy. It is a land of kings and royalty, not one where you need to be voted into office. This seems to work well for many of the rich in the area, but is also opens those in power up to ongoing threats of a takeover.
Oil as a national product has brought billions of dollars of profits into the country. The creation of affluent families has turned the desert of Saudi Arabia into the scene for many fantasies and more than a few Hollywood movies. What those stories do not share is what happens when oil prices start to fall, and the cash flow slows down?
That is precisely what is happening right now, with the flow of wealth slowing down in the once wealthy nation. When times are right, it seems that money is no object. As oil prices drop and oil holdings no longer automatically mean power in the region, the ruling party goes into a panic. They are suddenly faced with the reality that the families within their country may have more in cash reserves that the entire nation.
To balance the national reserve with the overall cash flow in the country, it seems government officials got a bit creative in the form of a significant economic purge. Starting on Sunday, Mohammad bin Salman authorized an all-out attack against the pocketbooks of many of the wealthiest families in the country.
Mohammad bin Salman held out some of the elite inas being a threat to the government and named them as being a political enemy. This meant the ruling party was able to nab over $33 billion in “at risk” funds. Essentially this meant that the ruler took everything he could from anyone who might think about taking over the country. They also took billions more in assets for a total of closer to $800 billion total in question.
These at-risk funds taken from the most powerful families in the area were only the start. The next day, the government froze at least 1,200 bank accounts. These accounts again being tied to a great deal of wealth in the country, and they were singled out as being threats to the security of Saudi Arabia.
Whether they singled out an entireor just started picking off individual accounts, it seems cash reserves was the primary focus. It is a quick way to curb a certain level of power to directly take away their access to cash, but it also can be turned into a boost to the overall value of the nation.
It seems as the accounts were taken by the government, there might be a movement made to not only freeze them but confiscate the funds. According to a recent report about this process:
“So when could the confiscatory process end…the ruling Saudi royal family has realized that not only can it crush any potential dissent by arresting dozens of potential coup-plotters, it can also replenish the country’s foreign reserves, which in the past 3 years have declined by over $250 billion, by confiscating some or all of their generous wealth, which is in the tens if not hundreds of billions. If MbS continues going down the list, he just may recoup a substantial enough amount to what it makes a difference on the sovereign account.”
Are these allegations of corruption and movement against the government just a scheme by the King of Saudi Arabia to increase his standing within the country? While this claim may seem a bit outlandish, it is not all that far-fetched as we consider the fact that any funds took via a complaint of corruption against the state government become the property of the government. This can become much more of a mere freezing of accounts if they are successful in taking all of the funds in question.
To understand the actual value of this type of power move, keep in mind that it is estimated that the most wealthy families in Saudi Arabia hold cash and other assets that combined to be more than twice the total country national reserve.
Hitting the elite of Saudia Arabia in their bank accounts not only solves the issue of them trying to overtake the current ruling family but also creates a huge windfall as far as cash flow for the country. Time will tell as far as showing if this plan works or if it creates more of a power struggle between the current ruler and the rich.
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