Notably, the deal was approved despite opposition from the Saudi fund’s investment screening panel. According to the minutes of the panel, objections to the investment plan included a major fee that “seems excessive,” the “inexperience of the Affinity Fund management” and a due diligence determination that the firm’s operations were “unsatisfactory in all aspects.” The panel was overruled, however, by the sovereign wealth fund’s board, controlled by Crown Prince Mohammed bin Salman, the de facto ruler of Saudi Arabia.
The circumstances of the deal led many to surmise that Mohammed bin Salman did not pursue Affinity Partners’ offer due to Kushner’s savvy in private equity, a field in which he has little experience. Instead, it appeared to be a payoff for Kushner’s support of Saudi policies within the Trump administration or as an attempt to purchase influence within the Republican Party and a possible second Trump presidency. While in the White House, Kushner supported the billions of dollars of US arms sales contracted to Saudi Arabia for the kingdom’s ongoing war in Yemen and military posture against Iran. He also defended the Saudi-US relationship from bipartisan congressional criticism after Mohammed bin Salman was implicated in ordering the assassination of Washington Post columnist Jamal Khashoggi in 2018. There is little doubt that Mohammed bin Salman also seeks to maintain his influence within the Trump-dominated GOP. While President Joe Biden has authorized some US arms sales to Saudi Arabia, his public criticisms and tepid support for the Saudi war in Yemen have angered the crown prince, who seems hopeful that Trump or another Republican will replace Biden in the Oval Office in 2025.
Mohammed bin Salman’s decision to invest Saudi state funds in a financially dubious enterprise like Affinity Partners may seem unusual, but the Arab Gulf monarchies and the United States have long understood foreign capital investments as serving economic and geopolitical objectives. For American and Arab political classes, these geopolitical objectives include advancing perceived national security interests and preserving their control over state institutions. The scale and nature of these capital flows have reshaped the economic and geopolitical orders of their respective countries and the entire world. Washington, the private finance industry, oil companies and the Arab Gulf monarchies have all dramatically increased their power in the process. Investments of capital continue to bind the economic and geopolitical strategies of the Arab Gulf monarchies and the United States, despite the rising challenges to that order.
The History of Investing for Influence
In the 1920s and 1930s, US oil companies invested substantially in the Arab Gulf monarchies of Iraq, Kuwait and Saudi Arabia, helping to establish or expand their petroleum industries. The monarchs welcomed these corporations and the new revenues, which funded the military and security services that would safeguard their rule and the economic development projects that provided for their domestic legitimacy. As petroleum production expanded, however, the Gulf monarchs (like the leaders of other extractivist states in the Global South) sought a greater share of profits for their governments, which the US oil companies resisted.
In 1950 the US government intervened in the oil-profit sharing dispute in an effort to strengthen allied Arab monarchies. By the dawn of the Cold War, Gulf oil exports had become vital to reconstructing Western Europe from the destruction of World War II, underscoring for many US strategists the need to secure the allegiance and stability of Arab governments through financial assistance. The Truman administration decided that increasing profit sharing with the Arab monarchies was preferable to relying on congressional approval for ongoing US government aid. Washington thus successfully pressed US oil companies in Saudi Arabia to increase their profit sharing to 50 percent. The reduction in revenue was offset with an equivalent federal tax deduction, in effect clandestinely subsidizing Saudi Arabia at the expense of American taxpayers. The US government subsequently negotiated the same deal with US oil companies with direct investments in the other major oil-rich Arab Gulf countries. These agreements, and the US investments tied to them, entrenched Arab Gulf oil as a key energy source of the post-war era, fueling the resurgence of global capitalism in much of the world. Higher oil revenues also strengthened the Western-aligned monarchies in Kuwait and Saudi Arabia, although they did not prevent the overthrow of the monarchy in Iraq in 1958.
Under ordinary circumstances, the Gulf Arabs would have deposited a significant portion of their petrodollars into US banks on favorable terms, given the size and strength of the country’s financial sector. The onset of the petrodollar boom in 1973, however, coincided with one of the lowest points in Arab-US relations. US aid to Israel during the 1973 Arab-Israeli War had outraged many regional leaders, prompting a retaliatory oil embargo against the United States, infuriating Americans in turn. Fearful that the US government might attempt to seize their assets, Arab lenders either deposited their capital in rival European banks or kept their money in US banks in short-term deposits. The former choice starved US firms of capital, while the latter put US banks at risk of default if Arab creditors chose to quickly withdraw their sizeable funds.
US officials in President Richard Nixon’s administration determined that convincing the Gulf Arab monarchies to invest sizable sums of petrodollars in long-term deposits and other investments in US institutions was not just an economic matter but a national security issue as well. While the Arab Gulf monarchies’ support for the oil embargo and higher petroleum prices aggravated US officials, the Arabs’ increased power in global finance and energy increased both the costs of conflict and the benefits of cooperation. The Nixon administration thus sought to return the Arab Gulf monarchies to the US fold by securing large, long-term investments of petrodollars that would tie their fortunes to the well-being of the US economy. Arab investors could then only harm the US economy if they were willing to sustain their own heavy financial losses. Safeguarding their capital in the United States would therefore encourage the Arab monarchies to end the oil embargo and moderate oil prices, alleviating pressures that threatened both the Western economic order and the unity of NATO. The same calculus would discourage the Arab monarchies from supporting another Arab-Israeli war—a high priority for US officials, who feared a repeat (or worse) of the 1973 war, where Moscow and Washington’s support for opposing sides had led to a dangerous nuclear standoff.
For these reasons, an internal US Department of Treasury memo in January 1974 declared it a top objective to “achieve major Middle Eastern Countries’ investment in the United States, utilizing dollars earned by oil exports; and develop a national program for attracting such investments to the United States.” Or, as Secretary of State Henry Kissinger put it, “we should absorb as much of their [Arab] money as we possibly can… our principal objective should be to maximize their [the Arab oil-exporting countries] dependence on us.” The US government focused on winning over Saudi Arabia, promising the kingdom access to advanced US weapons, diplomatic efforts to resolve the Arab-Israeli conflict and US financial and development expertise in modernizing the Saudi economy. Saudi King Faisal bin Abdulaziz Al Saud and his successors, still eager for US protection from Soviet-backed neighbors like Iraq and technological support for economic development, soon agreed. In March 1974, Riyadh negotiated an end to the oil embargo. The next month, the United States announced joint military and economic cooperation programs with the kingdom. In the following months, reassured Saudi, Kuwaiti and Emirati investors placed billions of petrodollars into US banks and investments for long-term holding (meaning they could not be easily liquidated and trigger volatility in US markets). While available data collection makes estimates imprecise, from 1974 to 1976, the net increase in OPEC members’ foreign investments and loans—the majority of which came from the Arab Gulf monarchies—totaled roughly $125 billion. Of this total, approximately 25 percent went to domestic US banks, government obligations and investments, with more going to US international banks.
Strains on a Century-Long Relationship
During the mid-1980s, global oil prices sharply declined and remained relatively low for 20 years, leading to a significant decrease in Arab investments in the United States. In the last two decades, however, oil prices have generally trended far higher, and the Arab Gulf monarchies are once again among the major sources of foreign capital inflows into the United States. These investments, along with those of China and Japan, have enabled the United States to continue its debt-driven economic growth. And while US capital flows into the Arab Gulf in recent decades remain smaller in comparison, Saudi Arabia has sought US direct investment in its effort to diversify its economy in sectors like communications and entertainment.
The Arab monarchies’ investments in the United States also continue to support their US arms purchases, which ballooned during President Barack Obama’s and Trump’s administrations, in part due to the joint Saudi and Emirati invasion and war on Yemen starting in 2015. From 2015 to 2019, Saudi Arabia received a quarter of all US arms exports, while the United Arab Emirates gained significant ground as a major consumer of US weapons in its own right. In the wake of public outcry over the assassination of Khashoggi, Trump defended a continuation of US arms sales to Saudi Arabia in part by linking these sales with continued Arab investment in the United States. He stated that “the Kingdom [had] agreed to spend and invest $450 billion in the United States,” which would bring “tremendous economic development, and much additional wealth for the United States.”
The Biden administration, on the other hand, has thus far had a far worse relationship with the Saudi monarchy due to Biden’s public condemnations of the crown prince regarding Khashoggi’s assassination and the introduction of partial restrictions on US arms sales in light of the continued war in Yemen. While UAE-US relations have not fallen quite as low, Emirati leaders have also expressed growing frustration with the Biden administration over its policies toward Iran and Yemen—and its reluctance to approve the export of certain weapons technologies.
To date, Emirati and Saudi investments in the United States remain high. Saudi investments alone are formally around $800 billion, although possibly much higher once accounting for undisclosed funds. In March 2022, however, Mohammed bin Salman told the state-run Saudi Press Agency that Saudi Arabia could decrease its investments in the United States. “In the same way we have the possibility of boosting our interests, we have the possibility of reducing them,” the crown prince said. Mohammed bin Salman is likely just sending a warning to Washington. But if he found US policy sufficiently threatening to his rule or national security, he could implement a reversal of the economic interdependence established under Nixon and Faisal in the 1970s.
Growing ties between the Arab Gulf states and Russia and China may also impact Arab-US financial and strategic relations. Collaboration between the oil-exporting Arab countries and Russia to prop up oil prices—even after Russia invaded Ukraine—has frustrated Washington. The Arab Gulf monarchies have also significantly increased their economic and political ties with China, the country the Biden administration has characterized as the United States’ biggest geopolitical challenge. China has surpassed the United States as the primary trade partner of the Arab Gulf states, and Chinese investments with and arms sales to the Arab kingdoms are on the rise. The United Arab Emirates has reportedly put on hold its efforts to purchase F-35 fighter jets from the United States due to Washington’s insistence that the Emiratis first cancel a deal with the Chinese tech giant Huawei to install its 5G network in their kingdom.
In March 2022, reports emerged that Beijing and Riyadh were in active talks to sell Saudi oil to China priced in yuan rather than dollars, the latter being the only currency the Saudis accept for payment. Such a move would have far-reaching implications, not only encouraging Saudi investments in China and its holdings of the yuan as a reserve currency but also strengthening the yuan in global capital markets as other countries acquired the currency to finance their own oil imports. These developments would come at the expense of the US dollar and investments in the US economy. Other countries might then follow Saudi Arabia’s lead, though a rapid shift is unlikely as this move would lead to a depreciation of their existing dollar-denominated assets. Over time, however, the Arab oil exporters might shift to yuan-denominated assets, either due to the continued growth of Arab-Chinese trade, worsening Arab-US relations or a combination of both. This shift would slowly but steadily chip away at the current global dominance of the dollar and US financial firms and, ultimately, the economic structures that undergird US geopolitical dominance.
From their beginnings to the present, the Arab Gulf monarchies and the United States have understood capital investments to involve both economic and geopolitical considerations. Foreign investments between the Arab Gulf kingdoms and the United States have greatly increased the wealth and power of both parties and helped shape the course of the world’s economic and political orders. Given this history, large-scale Arab-US investments may continue well into the future, weathering and even helping to overcome periodic disputes within the Arab-US relationship. Recent overtures by the White House, including Biden’s visit to Saudi Arabia in July 2022 and Vice President Kamala Harris’ visit to the United Arab Emirates in May 2022, speak to the economic and geopolitical entanglements binding the Arab Gulf monarchies and the United States. Enduring antagonism, however, particularly between Mohammed bin Salman and the US Democratic Party, coupled with China and Russia’s rising economic and geopolitical importance to the Arab Gulf states, could shake the foundation of the existing order—for better or worse.
[David Wight is visiting assistant professor of history at University of North Carolina at Greensboro.]
 David D. Kirkpatrick and Kate Kelly, “Before Giving Billions to Jared Kushner, Saudi Investment Fund Had Big Doubts,” New York Times, April 10, 2022.
 David S. Painter, Oil and the American Century: The Political Economy of U.S. Foreign Oil Policy, 1941–1954 (Baltimore: Johns Hopkins University Press, 1986) p. 165–171.
 Organization of the Petroleum Exporting Countries, Annual Statistical Bulletin (Vienna, 2018).
 David M. Wight, Oil Money: Middle East Petrodollars and the Transformation of US Empire, 1967–1988 (Ithaca: Cornell University Press, 2021) p. 69.
 Ibid., p. 84.
 David E. Spiro, The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets (Ithaca, NY: Cornell University Press, 1999) 57–58.
 Trump White House Archives, “Statement from President Donald J. Trump on Standing with Saudi Arabia,” November 20, 2018.
 Reuters, “Saudi crown prince says kingdom could reduce U.S. investments -SPA,” March 3, 2022.