Trump tours Asia as tax bill hits at home. British sex scandal could derail Brexit. By Hamish McDonald.

Princes in the tower: Saudi house arrests

Saudi Arabia’s Crown Prince Mohammed bin Salman.
Saudi Arabia’s Crown Prince Mohammed bin Salman.
Credit: Fayez Nureldine / AFP / Getty Images

It’s full house at the Ritz-Carlton hotel in Riyadh, where the Saudi crown prince, Mohammed bin Salman, has confined at least 17 of his fellow royals and other notables in a surprise purge of alleged corruption last Saturday. The hotel doesn’t have rooms available until next month.

Pundits around the Middle East are trying to work out what it all means. At one level it’s just a consolidation of power around the crown prince, known as MBS, who is impatiently trying to modernise the kingdom a bit. He recently allowed women to drive cars, for example, and started moves to rein in the promotion of Wahhabi fundamentalism.

Those arrested include a potential rival for the throne, Prince Mutaib bin Abdullah, a favoured son of the late King Abdullah and head of the National Guard, which protects the royal family and key oil installations. With new United States training and equipment, including Apache attack helicopters, the guard was starting to rival the armed forces, which MBS commands as defence minister. Another sleeping rough at the Ritz-Carlton is Saudi Arabia’s richest investor, Prince Alwaleed bin Talal, at least until recently a friendly shareholder helping Rupert Murdoch control his empire from a minority stake.

But there were other developments alongside the purge. Lebanon’s prime minister, Saad Hariri, had flown to Riyadh the day before, straight from a meeting in Beirut with a senior adviser to Iran’s supreme leader. Last Saturday he announced from Riyadh his resignation, blaming death threats against him on Iran and its local Shiite proxy, Hezbollah. The Saudi government said this was a “declaration of war” by Hezbollah.

Then a ballistic missile fired from Yemen by the Iran-backed Houthi militia was intercepted by one of Saudi Arabia’s US-supplied Patriot missile defence batteries before it hit Riyadh’s airport. Conjecture is that it had been smuggled in components into Yemen through the Saudi and Emirates blockade. The Saudis and Emiratis announced the closure of all Yemeni ports on Monday. The United Nations said this would worsen the famine and epidemics caused by the two-year conflict. The Houthis threatened strikes at Saudi and Gulf airports.

It seems to add up to the Saudis urging war to slap down Hezbollah, before it consolidates its gains in equipment and training from the fight in Syria, and to prevent Iran gaining a secure Shiite corridor to the Mediterranean through Syria and Lebanon.

They are volunteering Israel for the job. In September, the Israeli Defence Forces carried out a large-scale exercise to practise war with Hezbollah, with mock terrorist infiltrations, evacuation of Israeli border towns, and a push into Lebanon.

When it comes to taking on Iran, there’s long been more urgers than action-takers. On Monday, former US secretary of state John Kerry told London’s Chatham House that Israeli, Saudi and Egyptian leaders had all pressed Barack Obama early in his term to bomb Iran, but none were stepping up themselves.

Trump in Asia

Donald Trump’s Asian tour got off to a sabre-rattling start in Japan and South Korea this week, featuring appearances at US military bases attended by masses of American and local troops, before moving on to China and then Vietnam this weekend.

Back home, the US senate was advancing a new bill designed to put the frighteners on Chinese leader Xi Jinping. Named after the American student who died shortly after his release from a North Korean prison, the Otto Warmbier Banking Restrictions Involving North Korea Act, or BRINK Act, would penalise Chinese entities, including its big banks, that helped North Korea dodge trade and financial sanctions.

Xi will be hoping a lavish welcome, and some concessions to American investors such as Microsoft, will keep Trump on side. The big contest comes in Vietnam, where Trump will push a new US vision of “Indo-Pacific” security to counter Xi’s message of economic prosperity radiating from China. There is movement, too, on the Trans-Pacific Partnership, with the 11 other members led by Japan and Australia trying to get Trump to reconsider it.

Trump in paradise

Before he left, Trump threw a delayed-action bomb into the business world, which had been worried about him starting a trade war. Instead, he has launched an international tax war.

In the draft tax bill presented by Republicans this week, Trump proposed his long-mooted cut in the corporate tax rate from 35 per cent to 20 per cent, loosened inheritance taxes and income tax cuts favouring the rich – all to great applause from Wall Street. It took a while to wake up to what accountants called an “atom bomb” and the “gorilla in the room”: a 20 per cent “excise” on payments by US corporations to related parties overseas.

It upsets a whole raft of arrangements to shift profits to subsidiaries in low-tax jurisdictions and costs to home base. Many would say this is long overdue. The “Paradise Papers” cache released this week by the International Consortium of Investigative Journalists reveals the thriving state of tax-haven activity by players including Apple and Nike, the British royals and numerous entertainers.

Adding to Trump’s embarrassment on the Russian front, it shows his commerce secretary, Wilbur Ross, has hidden ownership of a shipping firm whose top client is a Russian energy company owned by Vladimir Putin’s son-in-law, Kirill Shamalov, and oligarch Gennady Timchenko, who is under US sanctions.

However the 20 per cent excise invites other countries to follow suit. In Canberra, the Treasury says it is on the case.

Sex scandal to reverse Brexit?

The waves from the Harvey Weinstein sexual abuse scandal have travelled far, even up the Thames into Westminster where the British defence secretary has resigned and at least one other senior minister’s job is at risk, while in the Labour opposition one MP is suspended from the party and sadly a minister in the Welsh parliament has taken his own life.

In the shakily ruling Conservative Party, the “spreadsheet of shame” about sexual misconduct is widening a rift between younger members elected along with former prime minister David Cameron, who generally supported staying in the European Union, and older and young-fogey types who held Cameron to the fatal referendum on Brexit. It would be an interesting sociological study to see if unwelcome sexual advances correlate to education in the top boys’ public schools. Conceivably, the sex scandal could lead to an internal revolt that sees a retreat from the “hard” Brexit the Tory nostalgists yearn for, and even effective abandonment of an exit.

Another initiative paralleling US events could aid the retreat. The British electoral commission is looking into donations and loans to the pro-Brexit campaign totalling $US11 million by insurance industry figure Arron Banks. An independent website, OpenDemocracy, had reported Banks is not as rich as he makes out, suggesting he was channelling the funds for someone else. Banks said rumours he was working for the Russians were “complete bollocks”.  


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This article was first published in the print edition of The Saturday Paper on November 11, 2017 as "Princes in the tower: Saudi house arrests".

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Hamish McDonald is a Walkley Award-winning foreign correspondent.

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