US Treasury Quashes Saudi Threat of Dumping Treasuries

A secret US-Saudi deal from 1973 falls apart.

Ever since the US made a secret deal with Saudi Arabia in 1973 to end the oil embargo, the Treasury Department has never disclosed Saudi Arabia’s holdings of US Treasury securities.

“It’s among concessions that U.S. administrations made over the years to maintain America’s strategic relationship with the Saudi royal family and access to the kingdom’s oil reserves,” Bloomberg News explained, after it had successfully pushed the Treasury via a Freedom-of-Information Act request into finally disclosing the data.

So today, the Treasury released the data on Saudi Arabia for the first time. It’s a doozie: a lot smaller than the number that had been bandied about in the media.

This became a big public issue in early April, when the Saudi government threatened the White House and members of Congress that it would dump its purportedly vast Treasury holdings and other US assets if Congress dared to pass a bill that would permit plaintiffs to sue the Saudi government in US courts for any role in the September 11, 2001, attacks.

At the time, the White House lobbied Congress against the bill. According to the New York Times, these “Saudi threats have been the subject of intense discussions,” with officials warning “senators of diplomatic and economic fallout from the legislation.”

Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.

But that purported $750 billion in US assets – to whatever extent they exists – contain a relatively small amount of Treasuries. Today, in its March figures, the Department of the Treasury made Saudi ownership of Treasuries part of its monthly TIC reports: a mere $116.8 billion.

Saudi holdings of Treasuries peaked in January at $123.6 billion and have since dropped 5.5%, as the country grapples with huge budget deficits due to the oil bust and its “costly wars in the Middle East,” as Bloomberg put it.

Until today, the Treasury reported Saudi holdings only as part of a lump-sum figure for a group of 14 large oil producers, mostly OPEC members. Those were the only countries treated that way. The holdings of all other countries have been reported by individual country — even the Vatican.

By comparison, China is number 1 with $1.245 trillion in US Treasuries as of March, and Japan number 2 with $1.137 trillion. Note among the next in line, the tiny offshore financial centers with disproportionate positions in US Treasuries, which they hold for others: Number 3, the Cayman Islands with $265 billion; number 4, Ireland with $264 billion; Brazil with $246 billion; Switzerland with $230 billion; the UK with $228 billion; and Luxembourg with $221 billion.

Saudi Arabia, with its $116.8 billion in US Treasuries, is in 13th position, behind Belgium and India.

So how important are Saudi holdings? The total US Gross National Debt is $19.2 trillion, of which the US government itself holds $5.37 trillion in federal pension funds, the Social Security Trust Fund, etc. And the remaining $13.83 trillion is held by the “public,” which includes Saudi Arabia. Hence, its share of Treasuries held by the public amounts to 0.8% — a drop in the bucket!

Saudi Arabia might also hold some Treasuries in offshore custodial accounts to create another layer of secrecy and to keep the securities beyond the long arm of the US government.

But even if Saudi Arabia decided to dump whatever Treasuries it holds to punish the US for trying to come to grips with the facts around 9-11, it would barely make a ripple. In our insane world of negative interest rates, Japan’s 10-year government debt has a negative yield of -0.11% despite the country’s fiscal nightmare; and 10-year yields of other countries are near zero, with the German 10-year yield at 0.14%. In that crazy environment, US Treasuries are hot.

They sport a practically luxurious 10-year yield of 1.76%, more than 10 times the German 10-year yield! So any additional supply that Saudi Arabia might dump on the market would be mopped up instantly at the slightest uptick in yields by buyers that have been mauled half to death by ingenious central-bank policies.

Who is the new king of cross-border mergers and acquisitions that is now buying at record pace and at peak prices, funded by state-owned banks? Read… China Inc. Tries to Buy the World, with Impeccable Timing

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  33 comments for “US Treasury Quashes Saudi Threat of Dumping Treasuries

  1. Much of the over-priced Saudi oil was traded for over-priced American arms.

    • nick kelly says:

      You mean Canadian arms- 15 billion dollar deal re: LAVs (light armored vehicle)
      It is a branch of General Dynamics but they will be built in Canada.
      BTW: as an arm chair gadfly of armor I was taken aback at the weight of LAV- 32 tons? I’ve never queried it but JC that’s the weight of a Sherman.
      Given that weight- I would describe this as a tank on wheels- 8 of them.
      On flat desert or roads, wheels are superior to tracks which are notorious for wear.
      As usual, Canada is sweating whether these might be used against locals-
      UK has used armored cars in Ireland -the US has used tanks domestically’.
      Let’s just get some tail lights down the road here and cash that cheque (US read: check)

      Sorry- sure you’ve sold them a bunch of stuff- but this was one was Can

      • Nicko says:

        My fellow Canucks are small fish. For example, the US just ‘gifted’ Egypt the first batch of over 700 armored MRAP (initially built for Afghanistan – retail 500K-1 million each) vehicles to combat terrorism. Nice present. Other allies like France are falling over themselves to sell arms to Egypt’s gov.

      • Bill H says:

        I was an LAV crewman in the Marine Corps once upon a time. The vehicle weight was around 30k lbs after a full combat load, so I think your figures are about double, unless they’ve gone to using DU for armor! Cheers.

        • Winston says:

          “For example, the US just ‘gifted’ Egypt the first batch of over 700 armored MRAP (initially built for Afghanistan – retail 500K-1 million each) vehicles to combat terrorism.”

          “Even as the revolt against the government grows because there is not enough money to buy food. What’s wrong with this picture?”

          Nothing at all for the Saudi Royals. Who do you think those MRAPs are intended to quell? See also, “China is spending more on policing its own people than on its defense budget.”

        • nick kelly says:

          Bill – I also thought maybe it was a misprint so I looked it up and here’s what I copied:

          ‘The Canadian Forces’ original LAV III was powered by a 350 hp 7.2L Caterpillar 3126 diesel and had a combat weight of just over 17 tonnes – 19 tonnes when fitted with basic add-on armour, 23.6 tonnes for the Afghan mission’s LAV LORIT refit. For LAV UP, the LAV IIIs were re-engined with 450 hp 9.3L Caterpillar C9s which, together with other improvements, pushed LAV UP baseline weight to 20+ tonnes (more than a fully-loaded LAV III). LAV 6.0 with kit is 25 tonnes, gross vehicle weight 28.5 tonnes, combat weight could be 35 tonnes.’

          And get this the Saudi version is to be up- engined again to a 12 liter CAT.
          Sounds damn heavy to me and according to the next paragraph it can no longer be called a Light Armored Vehicle- it’s a medium. I wonder why we’re calling them ‘light’ -PR?

        • Bill H says:

          That sounds like a completely different vehicle than the ones we used. how do you double the load on the chassis with a complete redesign? Ours were very capable and could get through most terrain. I don’t see how in the hell that is going through sand with that much weight! Seems like they just have purchased Bradleys. Much more heavily armored and tracked as well. But then again, they might not be for sale. Best

  2. Agnes says:

    Does anyone really think the Saudis care if Joe Sixpack and Jane Mocha-Latte know what they did or did not do? What really matters is what the fundamentalist neighbors and citizens of theirs know.

  3. EVENT HORIZON says:

    264 Billion for the Cayman Islands, a tourist destination with no industry and not exports, makes perfect sense.

    I like the Cayman Islands. I like going down there 3 times a year to check in and talk to certain people. It is good to know that the 264 Billion is safe and secret and nobody talks.

    I once stayed in the Cayman Island (the big one, not little Cayman) for a month (long story why) I spent time with a nice British girl who worked for one of the “banks” (no kidding). She was British and I am a dual-citizen with an American passport (and one from a country in South America). Anyway, I asked her if she ever came across famous, familiar American politician names.

    She smiled. She winked. She told me her job depended on her keeping quiet. So, I just rattled off names and when I said those she recognized, she smiled and winked………………………you average voting stupid Americans have no idea what fools you are………………….

    • frederick says:

      We know VERY well whats going on We just arent smart enough to figure out what to do about it but we are working on it believe me

  4. nick kelly says:

    So Saudi has about 120% of one months QE when it was 85 billion a month.
    Now if we could get folks to stop angsting about China’s trillion and a bit of securities. The US biggest problem right now is the strength of the US dollar. If China wants to dump US securities that would seem to help.

  5. Unity says:

    I sue Saudi Arabia for one Million Dollars because of 9/11. Is there some form I need to fill out?

    • Nicko says:

      Victims successfully sued Gaddafi’s government over Lockerbie…why not?

      Speaking of Libya, notice how the US and EU are stepping up support? Refugees and oil. ;)

  6. Thomas Malthus says:

    I struggle to believe that number.

    The deal was:

    We will protect you and allow you to get very rich and fly in whores and blow for parties.

    You will get to keep a small % of your oil money so you can live large and the rest goes into US debt that you can never touch.

    You trade oil in USD.

    You buy billions of dollars of weapons from us.

    You get US corporations to build stuff you don’t need (see Economic Hitman – Perkins)

    The spare cash from decades of oil sales surely has to be more than 116B… maybe the Saudis have bought trillions of dollars of weapons and built epic amounts of infrastructure since that time?

    I was in the airport a few years ago and it is a massive empty white elephant…

    So maybe they do only have 116B in the kitty.

    • Iggy says:

      GREAT PLANET “no choice – clones – eternal return of the identical” … Pitiful

  7. Pete Franklin says:

    bullshit story.
    The TIC report only details direct holdings by the SAMA (Saudi central bank), i.e., TIC only shows the country jurisdiction. They can’t release the actual amount held by Saudi because they don’t know. The TIC report also shows “countries” like Cayman, Ireland, Belgium, Luxembourg as large “holders”. Of course in reality it’s the legal entity of an investment fund located in said countries who are the beneficial owners.

    The TIC also doesn’t show non-US holdings of Treasuries IN the U.S. (e.g., SAMA’s T-Bills held via a USD custodial account with JPMChase in New York) and THAT number is huge in that most overseas sovereigns and the like hold U.S. securities INSIDE the U.S., not outside.

    Poor reporting and inaccurate conclusions.

    • Wolf Richter says:

      It seems you missed the part in the article about custodial accounts, Cayman Islands, Ireland, Luxembourg, etc.

      • Pete Franklin says:

        No. The article talks about “quashing” a Saudi threat using nonsense data. Saudi has earned about $5.3trillion on oil in the past 30 years (based on exports of 8m bbl/day $60bbl), of which the king keeps half. Their assets (SWF/SAMA) after paying for public expenditures etc has netted about 1.5trillion, which, invested, has grown to about 6.5trillion today and the king’s assets are about 5trillion, so together (since the king owns the treasury) they are sitting on anywhere from 10+trillion in liquid investments via a variety of vehicles.

        that is a lot of muscle. They can move markets, if they want. It would be counterproductive for some of their holdings, which is why all their talk about Treasuries is bluster. What they are saying between the lines is they have the ability to cause market disruptions. We’ll who blinks first.

        • Chicken says:

          Considering the risks our politicians have taken on by supporting ISIS behind our backs and looking the other way as Shia genocide occurs, I’d say Saudi wins in the short term but at great cost to the status-quo establishment.

          How’d I do?

  8. Chris says:

    The special relationship between the US and Saudi Arabia is nearing the end of the line. The Saudi’s support terrorism, probably had a hand in 9/11, dictate oil supply and suppress their Shia minority, among other unpleasant realities. The American public is finally starting to wake up to the true nature of our ‘good friends’. In reality, the American public is now starting to wake up to the reality of a great many things, including the true nature of our political parties, the shills who run them and the power brokers who own the shills. The phenomenon of Trump and Sanders is a direct reflection of this growing realization and accompanying disenchantment. Bottom line, change is a afoot and not the bogus chant of change commonly hailed by candidates for political office. The change will be painful as it will involve the demise of the petrodollar, the growth of regional hegemonic powers and economic restructuring. The level of pain and social disruption will depend on the level of enlightened leadership and the ability of the American Electorate to remain focused. Get ready for a lot of pain.

    • Nicko says:

      The Dollar has a habit of floating to the top, don’t count it out for a long while yet.

    • Chicken says:

      “demise of petrodollar”

      Saudis are in no position to rock the boat, given the atrocities they’ve committed outside their country and most likely decades of price gouging on oil.

      Besides, not sure why POTUS himself wouldn’t want their oil to remain in the ground except it’s claimed the most environmentally friendly on the planet. Maybe pedophilia and terrorism trump environmentalism, we’ll see where priorities lie.

  9. Mike R. says:

    Wolf, thanks for presenting this information. I wasn’t familiar with TIC report. I do think though that it very likely doesn’t present the full truth about who owns what. The TIC report adds up to about 6 trillion. It seems implausible that the rest of the US debt is held in nickel/dime amounts to add up to another 7 trillion or so.

    I would have to think the Sauds have alot more US dollars in assets than this report shows. Same probably for many other countries on the list.

  10. Yoshua says:

    In 2012 the world reached the Energy Half Way Point when the petroleum industry consumed half of the global petroleum production to be able to produce, process and deliver petroleum.

    In 2017 the ratio will be 6:4 and in 2022 the ratio will be 7:3 in favour of the petroleum industry.

  11. Jim Tan says:

    The $700+ billion number looks suspiciously close to the assets of the Saudi Arabian Monetary Agency (SAMA). According to Wikipedia:

    “In addition to acting as the central bank of Saudi Arabia, the Saudi Arabian Monetary Agency controls SAMA Foreign Holdings, the sovereign wealth fund of Saudi Arabia. The fund is the third largest sovereign wealth fund in the world, with assets of over $700 billion.”

    I think the $750 billion asset number likely refers to assets ( stocks & bonds ) managed by US and European Investment Managers for the SAMA sovereign wealth fund.

  12. Tom McCloskey says:

    What would the Saudi’s buy with the proceeds of the liquidation?

    The Saudi message would be taken seriously, if they rapidly bought precious metals in large quantity; with physical delivery to a “safe” jurisdiction, of course. These particular markets are apparently small enough for prices to move quickly and substantially. The move would also have a positive knock-on effect for the Kingdom’s budget–a concomitant rise in the price of their main export.

    Unfortunately for the U.S., the dollar would probably be an immediate loser.

    I bet this scenario has already been vetted by both sides, in private.


  13. frederick says:

    hey Wolf why did you censor my response to “Unity” on who he/she should be suing regarding 911 alittle too close to the truth or what?

    • Wolf Richter says:

      I have no patience with that kind of BS here.

      BTW, I watched the Twin Towers come down from Church Street. Colleagues of mine saw the first plane from their window before it hit. As I said, I have zero patience with this sort of nonsense about 9-11.

    • Saint_Hacker says:

      Visit for reprogramming. They will take all your whammy CTs to the cleaners and accelerate your evolution by close to 1000 years

  14. ManAboutDallas says:

    Does anyone REALLY believe the Treasury Department is going to fork over the REAL number based on the behest of some “Freedom of Information Act” ? The “Freedom of Information Act” is nothing more than another risible “law” at which those who hold themselves above and beyond the “law” ( meaning everyone in and around Washington D.C. ) can thumb their arrogant noses. The Treasury number is a lie, just as is every other number coming out of Washington.

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