Congress Mulls Saudi Sanctions, But Low Risk of Imminent Impact to Industry

Lawmakers are newly considering imposing sanctions on Saudi Arabia amid calls for President Trump to investigate the disappearance of a Saudi-born journalist. But any possible impact on U.S. weapons makers doing business with Riyadh is unlikely to be felt in the short term.

Jamal Khashoggi, a Saudi dissident and opinion writer for the Washington Post, was last seen entering a Saudi Arabian consulate in Turkey on Oct. 2, prompting many to believe that the Saudi government is responsible for his disappearance, or possible murder.

USS Freedom (LCS-1). Photo: U.S. Navy.

USS Freedom (LCS-1). Photo: U.S. Navy.

A bipartisan group of senators led by the leaders of the Senate Foreign Relations Committee triggered the Global Magnitsky Human Rights Accountability Act on Oct. 11, urging Trump to impose sanctions against higher-level officials in Riyadh if found connected to Khashoggi’s disappearance. Trump now has 120 days to decide whether those sanctions are merited.

The president said Thursday that he would not support a halt in U.S. arms sales to Saudi Arabia – even if evidence emerged that the country had murdered Jamal Khashoggi – for fear that the Arab Gulf nation could take its defense business elsewhere.

“We don’t like it, not even a little bit,” he said, according to multiple reports. “But whether or not we should stop $110 billion in this country knowing [Saudi Arabia has] four or five alternatives — two good alternatives? That would not be acceptable to me.” The United States and Saudi Arabia signed a memorandum of intent in 2017 to provide $110 billion to Riyadh over a 10-year period, according to the Defense Department.

Trump also noted that the alleged event in question took place in Turkey, and that Khashoggi is not a U.S. citizen. The journalist has been a U.S. resident since 2017.

The memorandum of intent includes a wide variety of arms and equipment for Riyadh. This past July, Lockheed Martin [LMT] was awarded a $450 million contract for the design and build of four multi-mission surface combatant ships for Saudi Arabia, for which final delivery is expected by 2022. The new build will be a derivative of the Freedom-class Littoral Combat Ship (LCS). The Lockheed Martin-led team is comprised of shipbuilder Fincantieri Marinette Marine and naval architect Gibbs & Cox.

Saudi Arabia has recently been approved to procure various armaments, including a $1.3 billion proposed sale for BAE Systems’ M109A6 Paladin self-propelled howitzer this past April, and a 2017 approval for Lockheed Martin’s Terminal High-Altitude Area Defense (THAAD) missile defense system for $15 billion.

It is unlikely that defense contractors selling equipment to Saudi Arabia will see any significant impact to its programs in the short term, said Owen Daniels, associate director of Middle East security initiatives at the Brent Scowcroft Center for Strategy and Security at the Atlantic Council in Washington, D.C.

The senators’ choice to trigger the Magnitsky Act helps to avoid a congressional function on sanctions as it focuses only on individuals, he said. As Trump has 120 days to respond to the congressional letter, any response within the next four months is unlikely, he noted.

But the uptick in bipartisan support for sanctions and a weapons ban against the Saudis since the July bombing of a Yemeni school bus by the Saudi-led coalition, and now again since the disappearance of Khashoggi, means there is a possibility for broader sanctions in the long term, he noted.  

“We may see actions against individuals in the short term, but I think the impact for industry won’t necessarily hit in the immediate term.,” he said.

Daniels noted that the relationship between Congress and Saudi Arabia has tended to be more “fraught” than that of the executive branch and Riyadh, and the latter has only swelled since Trump took office.

For typical foreign military sales cases, lawmakers are provided a summary of anticipated future sales for the upcoming year known as the Javits report in February, according to the State Department. That provides Congress with an opportunity to review the potential sales, provide feedback and express any concerns.

Congress is alerted of proposed sales for major defense equipment valued at $14 million or more, defense articles or services valued at $50 million or more, or design and construction services valued at $200 million or more. If the sale is to NATO, a NATO member state, Japan, Australia or New Zealand, the letter of intent must be presented to Congress at least 15 days prior to the proposed sale date, and at least 30 days prior for other countries.

“In general, the executive branch, after complying with the terms of applicable U.S. law … is free to proceed with an arms sales proposal unless Congress passes legislation prohibiting or modifying the proposed sale,” according to the State Department.

In order to block or modify a sale, Congress must pass legislation expressing its will on the sale, and be capable of overriding a possible presidential veto. Lawmakers are free to pass legislation to block or modify an arms sale any time up to the point of delivery.

The two highest ranking members of the Senate Foreign Relations Committee told Capitol Hill reporters Thursday that U.S. sales to Saudi Arabia are already effectively frozen. Ranking Member Sen. Robert Menendez (D-N.J.) has been holding up the sales since the Senate launched an informal review process to investigate civilian casualties caused by the Saudi-led, U.S.-supported coalition in Yemen and the possibility of the weapons used having been sold by the U.S. government.

Foreign Relations Committee Chairman Sen. Bob Corker (R-Tenn.) said “Congress will not let this idly go by” and that he reached out to an unnamed defense contractor as reports emerged about Khashoggi.

“I shared with him before this happened: ‘Please do not push to have any arms sales brought up right now because they will not pass, OK?’” he said. “With this, I can assure you it will not happen for a while.”

Sen. Chris Murphy (D-Conn.), who sits on the Senate Foreign Relations Committee, told reporters he believes “a rethink of our alliance with Saudi Arabia is on the table,” and that “clearly the easiest and more effective way to send a message is on arms sales.”

The results of the investigation into Khashoggi’s death could have implications for U.S. involvement with the Saudi-led coalition in Yemen, Murphy added.

“Our participation in the Yemen war is predicated on our belief that the Saudis are telling us the truth when they say they are not intentionally hitting civilians,” he said. “I think we have a lot of reason to doubt whether the Saudis are telling us the truth about a whole lot of things.”

Sen. James Inhofe (R-Okla.), who chairs the Senate Armed Services Committee (SASC), said he plans to consult Defense Secretary Jim Mattis before deciding whether to block arms sales to Riyadh.

“I’m going to keep my powder dry until that happens,” he told reporters Thursday. “Right now, I would not want to suspend sales.”

The U.S.-Saudi relationship is “defendable, and it should continue,” Inhofe continued. “We want to make sure that this isn’t something that’s going to disrupt that.”

Riyadh is a “very major partner in that part of the world, where we don’t have that many partners,” he added.

If it were proved that Saudi officials were involved in the disappearance and possible murder of Khoshaggi, Congress would “unleash the sanctions from Hell,” said Sen. Lindsey Graham (R-S.C.), a SASC member who co-signed Wednesday’s letter to the president.

“I want to make an example of this government, if they did this,” he told reporters Thursday. “Anybody else thinking that they can have an alliance with us and we don’t care about our values, they’d be mistaken.”

Graham said arms sales would have to be considered in the event that sanctions are imposed, but was less committed the possibility of reducing U.S. involvement in Yemen

“They’re two different things, absolutely,” he said, adding that the Yemen war is “a proxy war with Iran.”

Daniels, of the Atlantic Council, said the recent events are unlikely to have a major impact on the U.S.-Saudi relationship.

“The Saudis have long been one of the largest — if not the largest — importer of U.S. arms,” he said. The relationship “has survived turbulent times in the past, and I think so long as there is not a legal reason for it to decline … it will continue to survive.”

Few global defense contractors could compete against the U.S. industry for business in Saudi Arabia, he noted. Riyadh has made occasional procurements from China, but “never to the extent that they have with the U.S.,” he added.

“I don’t think that this current situation would necessarily impact any sector more greatly than another, or necessarily tilt the balance in the favor of Russia and China, unless there is some kind of major sanctions effort through Congress that makes taking arms shipments … off the table,” he said.

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