Blood and Oil, page 6
As an experiment, Mohammed decided to create his own foundation that would require no approval from anyone except himself. It would be a chance to create from the start a modern Saudi institution. He called it the Mohammed bin Salman bin Abdulaziz Foundation, or MiSK. To avoid the pitfalls of the past, he issued a tender for consultants to help design it from the ground up. Western firms jumped at the opportunity.
Mohammed also aligned himself with his wealthy cousin Alwaleed bin Talal. In 2012 Alwaleed wrote a letter to King Abdullah’s Royal Court chief Khalid al-Tuwaijri. Saudi Arabia, he said, could be heading for a crisis. Oil prices were high at the time, but the Saudi budget was straining under huge outlays for subsidies and a host of handouts to the population. Health care was mostly free, education abroad was sponsored by the state, and citizens got special benefits for every child born. A Riyadh resident could turn on a water tap for hours and barely suffer the consequences; yet Saudi Arabia is one of the most water-scarce countries in the world, having to desalinate 1.2 billion cubic meters of saltwater a year—more than any other country on earth.
The kingdom’s population was growing, costs were rising, and the rest of the world was talking with more urgency about using less oil. What would happen when oil prices dropped? To ward off a catastrophe, Alwaleed argued, Saudi Arabia needed to diversify, invest in solar and nuclear energy, and start moving some of its oil wealth abroad so it would have diversified sources of income.
To do this, Alwaleed suggested turning Saudi Arabia’s Public Investment Fund (PIF), a government-owned investor, into a giant money manager that could put Saudi oil revenue into other industries. It was the same model Saudi Arabia’s own neighbors in Abu Dhabi, Kuwait, and Qatar followed with savings from oil. Alwaleed pitched the plan in a meeting with senior princes and other officials from Abdullah’s Royal Court. “I’m with Alwaleed,” Mohammed said. In a second meeting they brought the plan to King Abdullah.
But the king and his advisors were dismissive. Moving money out of oil and into other investments was a risk, and the Al Saud were allergic to risk. Saudi Arabia had never done it before. What’s more, PIF was like a moth-ridden back closet of forgotten investments, a fund full of local companies whose owners, in some cases with royal links, got PIF money as a sort of bailout. The notion that it could become a world-class investor seemed like a fantasy. Plus, the old guard reasoned, the world still needed oil.
Mohammed also became close to a civil servant named Turki Al Sheikh, a police official who was a few years older, had a taste for ostentatious cars and watches, and hailed from the Al Sheikh family, direct descendants of the eighteenth-century founder of Wahhabism.
In early 2015, with Salman on the throne, all of Mohammed’s ideas were suddenly the highest priority. The day after the funeral of King Abdullah, Mohammed was fully in charge of the Royal Court and sending out orders at 4 a.m. for prominent Saudi officials and businessmen to come for a meeting later that day. Among other questions, he asked them if there was any risk in upending governance in the kingdom by doing away with most of the committees and bodies that King Abdullah had used for decades. Some expressed the view that such a change should be made slowly to monitor for unforeseen impacts. “Nonsense,” he said to them. “If it’s the right thing to do, we do it today.”
Within six days of his father’s becoming king, Mohammed was named chair of a new entity called the Council of Economic and Development Affairs, one of two committees that would oversee just about everything in the country. He had carte blanche to shake up the country’s financial and development plans, though he surrounded himself with a cast of advisors with little government background and encouraged them to argue with him into the night on policy ideas.
Within two months, he’d selected the Public Investment Fund as the institution to put the country on the global investing map and lead up many of the reforms. By April, he took over the country’s money-making machine, Saudi Aramco. Mohammed was in control of the most profitable and biggest company in the world.
One of Mohammed’s first courses of action was to hire international polling companies to survey people about their perceptions of Saudi Arabia, especially any negative views. The results were unsurprising: it’s a closed society with homegrown terrorists, no cinemas or entertainment, highly restricted rights for women, and other well-known views. Mohammed created a task force to address each point with an action plan. It was time for Saudi Arabia to enter global society on an equal footing, he told aides. Time and again, he told aides that their country had everything it needed to be a powerful nation on the world stage with a strong economy no longer reliant on oil.
And most importantly of all, King Salman announced that his brother, Muqrin, was stepping down from the line of succession. Mohammed would be the new deputy crown prince, putting him second in line to the throne behind only his cousin, Mohammed bin Nayef. Mohammed had real power now. The moves sent shudders through cousins who saw Saudi Arabia entering a new Salman-centric era that could go on for decades if Mohammed were to follow in his father’s footsteps.
The moves happened relatively quietly with few big headlines but were without precedent in the country’s history. Mohammed was deputy crown prince and commander of the armed forces, and he controlled the great gushing oil wells that could underwrite his wildest ideas.
Chapter 3
Party in Maldives
July 2015
The models arrived first, one boatload after another of long-legged young women pulling up to the dock at Velaa Private Island. The resort’s butlers and housekeepers were amazed. There were just so many of them, around 150 in all, and most had traveled for days, flying from Brazil or Russia to Male, the capital of the Maldives, a tiny nation in the Indian Ocean. From Male the women took smaller planes to a northern archipelago, where they boarded boats across a turquoise expanse of the Indian Ocean to Velaa. The resort had staffers on hand to greet each woman and politely shuttle her by golf cart to a medical center to be tested for sexually transmitted diseases. Only after the testing was done and the women had settled into their villas did the seaplanes carrying Mohammed bin Salman and his friends arrive.
It was the summer of 2015, and Mohammed was closer than anyone could have predicted to the Saudi throne. In the six months since his father had become king, he had hit Riyadh harder and faster than any prince in recent memory. Mohammed had taken charge of the economy of one of the richest nations on earth and was free to spend its money however he deemed fit. He was leading a war in Yemen and getting to know politicians in the world’s capitals. And that came after three workaholic years of reforming his father’s charities and building political capital with powerful Al Saud members. Now it was time to celebrate.
That required a discreet place in keeping with his outsized new status. The Maldives were the perfect choice: a stunning setting in the open ocean replete with tucked-away resorts that could be closely controlled for as long as the prince wanted, overseen by a government so sympathetic to the Saudis that it was discussing selling an archipelago to the kingdom.
Mohammed had first visited Velaa about a year earlier with his father’s entourage and was taken by the resort. Its Czech developer acquired the rights to build up a pristine island and designed it to be one of the world’s most luxurious and expensive destinations. Velaa’s four dozen or so villas, many built on platforms over a coral reef, have private decks and swimming pools. Each comes with a butler. There’s a disco and a snowmaking machine so revelers can frolic in a blizzard by a tropical beach.
Since the Maldives government prohibits resorts from putting up buildings higher than the surrounding trees, Velaa’s developer installed extremely tall palm trees along one beach so he could erect a tower with a view over the ocean. Its roof just reaches the crowns of the transplanted palms. Beneath that tower is a cellar stocked with exorbitantly priced French wine. And that’s separate from the resort’s main restaurant, which is built over the water so diners can watch sea turtles swim below while eating meals prepared by a gourmet chef.
Velaa has a combination of service and secrecy hard to match anywhere in the world. The resort’s general manager during Mohammed’s first visit, an experienced hotel executive from Malta named Hans Cauchi, impressed the prince. His staff members were impeccably trained, some by the International Institute of Modern Butlers, and understood how to be simultaneously attentive and discreet. Even the back-office staff knew to bow whenever Mohammed or King Salman walked by.
By the time the 2015 party was being planned, Cauchi no longer worked for Velaa. Instead he was doing work for Mohammed, facilitating luxury deals like home and yacht purchases. Mohammed enlisted him to help organize the 2015 party.
It was a vacation fit for a prince, starting with what workers called a “buyout” of the resort. That meant Mohammed and his guests had the entire island to themselves for close to a month. The Miami rapper Pitbull agreed to attend, though he stayed at another resort on a nearby island. The Korean pop star Psy and Afrojack, one of the world’s most popular DJs, came too.
Money wasn’t an issue for Mohammed. His office agreed that each of the resort’s three-hundred-plus employees would get a $5,000 bonus, a big deal for workers who made $1,000 to $1,200 per month. And that was before the expected cash tips.
To maintain the prince’s privacy, Velaa managers told staff they were not to bring smartphones onto the island during the visit. Each could bring a basic Nokia 3310 or no phone at all. Two Velaa employees got fired on the spot for breaking the rule.
There was a good reason for secrecy. Mohammed knew that Saudi Arabia’s young people were tired of decades of obscene spending by the ruling family and frustrated by online accounts of princes’ ostentatious homes, spending sprees at Harrods, and sports cars racing through the streets of Mayfair. He was cultivating the image of a reformer and didn’t want to be seen in the same light as the famously spoiled princes of his generation—like King Fahd’s son Abdulaziz bin Fahd, for example, a powerful prince famous for traveling the world with an entourage of two dozen, which has been dogged by sordid tales of sex and violence described in court filings. In 2012 a member of his retinue was convicted of drugging and raping a woman at the Plaza Hotel in Manhattan, where Abdulaziz had rented out a block of rooms.
Such behavior carried a growing political risk for a family who cast themselves as benevolent and pious, ruling their growing country with generosity, a steady hand, and a longtime alliance with some of Islam’s most conservative clerics. Flouting the rules of Islam while imposing strict religious laws on their people was an easy way to lose popularity at home. Every time a prince is seen blowing millions of dollars on parties with alcohol and scantily clad models, a fissure spreads in the existing network of fractures between the rulers and the ruled.
Mohammed believed the changing demographics of Saudi Arabia made the concern urgent. A sizeable portion of Saudis live near the poverty line, and even the well educated struggle to find work in the kingdom’s smaller cities and poorer, Shia-dominated Eastern Province. The key ingredients for instability were already there, and Mohammed was careful not to stir them up with new resentment of the royal family. He’d seen what could happen during the Arab Spring, when the Muslim Brotherhood, a ninety-year-old Islamist movement, temporarily won the presidency of Egypt citing the high-flying, alcohol-drenched ways of Saudi royals as proof of the corruption of the Gulf regimes.
So it was especially important that the Saudi people not find out that Mohammed was paying Velaa some $50 million for a vacation with his entourage.
Once the guests arrived, Velaa’s own servers were kept at the periphery; the prince’s party brought service staff to attend to individual needs, apparently, two Maldivian workers said, because the Saudis didn’t want to be seen drinking by residents of another Muslim country.
Velaa’s butlers and cleaners and chefs were surprised by how few Saudis there were, compared to the huge number of non-Saudi women. Just a few dozen men came from the kingdom, all friends and relatives of Mohammed, staff were told. Once they arrived, they retired to their villas and pretty much stayed there until the evening, though Mohammed and some friends did take at least one jet ski ride. Workers weren’t sure if they were afraid of being photographed on the beach by oceangoing paparazzi or were just hewing to the nocturnal schedule customary in the Saudi summer.
Once the sun went down and the entertainers arrived, the men emerged. A DJ (some nights a band) set up on the main dance floor, near the pool, while smaller acts set up on other stages around the island. One night Afrojack, a Dutch DJ who performs for stadium crowds, put on a show. He was playing electronic beats that started calmly and climaxed to throbbing dance grooves when an excited Mohammed climbed onto the stage. The men and models cheered when Mohammed took over the DJ table and started playing records of his choice while Afrojack skulked away muttering, careful to curse out loud only when he was out of the prince’s earshot.
The parties continued until dawn, when many of the men retired to a villa. They’d emerge late in the afternoon.
Even during a time of revelry, Mohammed seemed unable to completely lose himself. Walking during the day in shorts and a T-shirt with a couple of friends, he seemed to turn inward, says someone who observed him there. While the other men spoke animatedly, Mohammed was silent, apparently thinking about something more serious than women and music.
Then all of a sudden it was over. News of Mohammed’s visit leaked in a local publication, and Iranian-backed news picked it up. Less than a week after the trip started, Mohammed and his delegation were gone. The women left soon after.
Mohammed was also buying some serious toys. He rented the Serene—a 439-foot yacht that Bill Gates rented in 2014 for $5 million a week—for a half day after spotting it from the air. Mohammed loved it. The yacht had an underwater viewing room, a jacuzzi, two helicopter pads, and a business-style conference room. It was sleek and luxurious, perfect for hosting VIPs, but it could also transform into a party palace for nights with close friends.
Over the subsequent six weeks, Mohammed’s team negotiated with agents of Yuri Shefler, the owner. They finally reached a deal for 429 million euros, about double the original cost. His team also bought a garish French château near Versailles—with fountains, stately grounds, and even a moat—for more than $300 million.
The ultimate owner of the yacht and the French palace was Eight Investment Company, headed by Mohammed’s close friend Bader al-Asaker. It’s part of a constellation of companies in Saudi Arabia set up by Mohammed in 2014 as he started to make serious money. The company in turn was owned by Three Hundred Fifty Six Holding Company, the holding company for many of his personal assets that dated back to his stock-trading endeavors in 2012. The holding company in turn owned other companies given numbers for names, including Fifty Five Investment Company and Ninety Investment Company.
Over time, some of these assets would blend with those of the state. The Serene would at times act as a floating majlis for meetings with foreign officials and high-profile business delegations in the years ahead. Eventually, it would become the centerpiece of an eleven-boat flotilla that comprised an offshore palace for Mohammed to relax away from the watching eyes of his family.
Watching from Riyadh and their multi-million-dollar homes abroad, Mohammed’s rivals were increasingly uneasy. This was no longer a game of waiting for King Salman to die so that a son of King Abdullah or the late Crown Prince Nayef, long-time minister of interior, could take the throne as the first of the Al Saud’s third generation to become king. Mohammed was already running the show, with his father the king’s blessing. Even though Mohammed bin Nayef, the crown prince, stood between Mohammed and the throne, the young prince was taking steps that made him the effective leader of the country with more power than any king had ever had before.
Mohammed bin Salman’s appointment in May 2015 as chairman of a new government council overseeing Saudi Arabia’s state oil company was particularly galling to many uncles and cousins. Aramco was the source of wealth for the entire country, and a chunk of its profits kept the Al Saud living in luxury. Plus, if Salman had wanted to put one of his sons in charge of Aramco, wouldn’t Abdulaziz—for years a deputy oil minister well versed in international petroleum negotiations—be the obvious choice?
One of Mohammed’s chief rivals was Turki bin Abdullah, the son whom the deceased King Abdullah insulted as fat from his hospital bed. A former air force pilot whom his father appointed governor of Riyadh in 2014, Turki liked to argue he was fourth in line to the throne. But if Mohammed ascended instead, the young king could rule until long after Turki had grown old and frail.
Since leaving the air force, Turki had grown ostentatious, often traveling in a convoy of two 737 jetliners with friends, advisors, and so much luggage it took hours to disembark. He also had a modern-day harem—a group of attractive women who lived lavishly all over the world on a monthly check on the condition that they pick up and meet him wherever on request. Even when paying an informal visit to the Riyadh palaces of his sister or brother, Turki would wear a tan or black bisht, a cloak embroidered with gold thread, the Saudi equivalent of a formal suit.
Believing himself a victim of his father’s relatively miserly ways, Turki was also obsessed with money. And it had gotten him embroiled in scandals, including a distant but important role in the roiling 1Malaysia Development Berhad sovereign wealth fund debacle that was just coming to light in late 2015. He received tens of millions of dollars from 1MDB allegedly for his role in part of the scheme where his business advisor used his connections and name to make it look like Malaysia was entering a joint venture with the government of Saudi Arabia. The maneuver is said to have allowed the conspirators to pocket hundreds of millions of dollars. Turki and others implicated deny the charges.
