Trump’s Ambitious Call for $1 Trillion in Saudi Investments
As President Trump prepares for his diplomatic trip to Saudi Arabia, he’s set to make waves with a bold proposal: asking for a staggering $1 trillion investment from the oil-rich kingdom into the United States. This ambitious figure mirrors the entire Gross Domestic Product (GDP) of Saudi Arabia from last year.
The Crown Prince’s Initial Offer: $600 Billion
Crown Prince Mohammed bin Salman has already pledged $600 billion to the U.S. during Trump’s presidency. However, economists caution that both of these investment figures may be overly optimistic. Saudi Arabia is dealing with its own financial difficulties, including a potential budget deficit that could exceed $70 billion this year. With oil prices plummeting, the kingdom is finding itself more reliant on borrowing than lending.
A Contrast of Expectations
Despite the crown prince’s plans, experts argue that achieving even half of Trump’s requested $1 trillion may be unrealistic. "I don’t see how they get anywhere close to $600 billion, let alone $1 trillion," states Tim Callen, an economist and former IMF mission chief to Saudi Arabia.
The Bigger Picture: Domestic Focus
Callen highlights a shift in Saudi Arabia’s economic strategy. “We’re more focused on the domestic economy,” he noted, indicating that priorities may be leaning away from foreign investments. Trump and bin Salman, however, continue to speak in extravagant numerical terms, highlighting their penchant for grandeur over feasibility.
A Partnership Built on Deals
Trump’s history with Saudi Arabia includes strong business ties, facilitated by his son-in-law and advisor, Jared Kushner, who has fostered a close rapport with the crown prince. Both leaders are known for their boisterous claims, often allowing their teams to manage the complexities involved in turning these lofty proposals into reality.
Past Promises and Current Realities
During his visit to Saudi Arabia in 2017, Trump claimed to have secured $450 billion in investments; however, Callen’s analysis suggests that this figure was overstated. While U.S. exports to Saudi Arabia from 2017 to 2020 amounted to $92 billion, this was, in fact, less than during President Obama’s final term in office.
Recent Developments in U.S.-Saudi Relations
Skepticism surrounds Trump’s assertion of securing $1 trillion in investments during his upcoming trip. The White House maintains that Trump has successfully brought in over $5 trillion in new investments since taking office. While recent deals have been announced, there’s a concern that some agreements might be tentative or mere rehashes of older deals to inflate numbers.
Key Deals and Economic Landscape
- The U.S. Department recently approved a $3.5 billion sale of air-to-air missiles to Saudi Arabia.
- An investment forum in Riyadh is set to showcase partnerships with major American corporations like IBM, BlackRock, and Citigroup.
The Saudi Financial Strain
With a series of megaprojects underway, such as the ambitious Neom project, costs have escalated. Originally estimated at $500 billion, projections have now soared into the trillions, leading to substantial outlays that strain Saudi finances. The kingdom has serious obligations, including hosting the 2030 World Expo and the 2034 World Cup, both requiring robust infrastructure investments.
A Future of Uncertainty
Complications mount as Saudi Arabia’s need for high oil prices—around $108 a barrel to break even—contrasts sharply with its current pricing around $60. If the kingdom desires large-scale investments in the United States, it may have to resort to further borrowing.
Conclusion: A Lesson in Realism
While the proposal may sound grand, the realities facing Saudi Arabia indicate that the $1 trillion figure is indeed far-fetched. As they navigate their financial landscape, it’s unclear how much the kingdom can realistically shift into U.S. investments. As Farouk Soussa, a Goldman Sachs economist, reminds us, the 1.4 trillion in Saudi assets abroad is already significantly tied up.
As this high-stakes diplomatic dance unfolds, it’s evident that both Trump and Prince Mohammed will need to navigate the complexities of global finance with more than just big numbers—they’ll need sound strategy and realistic expectations to turn this ambitious vision into reality.
