MBS's missing $20bn: 'spending money like a beggar' for a stranger's goodwill

Alameen Templeton

Where did the $20billion go? On the sidelines of Donald Trump’s infamous $213billion “(another) deal of the century” in 2017, Saudi Arabia promised to invest $20billion in US infrastructure.

BlackRock was the chosen partner to launch the massive investment and the world’s biggest fund manager this month (and seven years later) unveiled “one of the world’s biggest infrastructure funds” amid much fanfare.

Sounds great. America is crying out for investment in its ageing infrastructure, some of it more than 50 years old. For instance, it’s going to take years before the Baltimore bridge, destroyed in a ship ramming in March, is rebuilt, and it’s going to cost anywhere between $400million and $800million to get it done.

So, $20billion in Saudi money for US infrastructure could go a long way – right now. Couldn’t it?

Larry Fink’s back pocket

Err, actually, it couldn’t.

It turns out, about $9.5billion of it may have ended up in BlackRock boss Larry Fink’s and his buddies’ back pockets – just at a time when Americans are crying out for repairs to their crumbling infrastructure. It’s a major election issue.

The Saudi Arabian twenty billion dollars seemed to disappear like a raindrop in the Sahara once Trump’s arms deal fanfare had died down. Certainly, given the scale of Saudi leader Muhammad bin Salaman’s generosity in injecting in one shot a massive $233billion boost to the US economy, one would have expected better returns than the beggar’s serving it received.

In rand terms, at Sunday’s exchange rate of R17.67 to the dollar, $233billion equates to an eye-watering R4.117trillion. That’s about double the size of South Africa’s national Budget.

Pay back the money

But, less than a year after the deal was signed, US Senators voted overwhelmingly to sanction Saudi Arabia over its genocidal war against Yemen, the clearest sign MBS’s friendship investment had gurgled directly down a neocon plughole into oblivion.

Donald Trump vetoed the bill, but not once during the entire saga did the “principled” Senators demand that their armaments factories hand back the Saudi money.

Compare that to the free pass Nazi Israel is enjoying today as it grinds the Palestinians, their houses, their schools, their hospitals, their roads, their water tanks, their fuel supplies, their aid trucks, toys, family photos, culture and history into a genocidal pulp. Then, you understand just how low the kingdom ranks on the ladder of America’s top allies.

Of course, Saudi Arabia is a hard sell, and we’re not trying to argue it should be given a fair chance; it’s as much an artificial country as is Israel. But the contrasts between the two on America’s popularity ladder throw issues into such stark relief that they’re difficult to ignore.

Spending money like a beggar

How much money has Israel sent to the USA since 1948? The financial flows are in the opposite direction. Israel is dependent for its existence on US handouts and annual aid. It can murder and kill, it can annihilate and exterminate in the most horrifying, bloody way and still it remains, snuggled close to America’s genocidal heart.

Perhaps, MBS should blame himself. It could be said he’s a billionaire, but he spends money like a beggar – only for today, and with no thought of tomorrow.

Just as the senators didn’t think of giving back the money, so they never bothered to keep track of the $20billion intended for their infrastructure. It doesn’t seem like the Saudis did, either.

Americans are losers, too

Once the announcement was made, almost all publicity about it ended. Since then, BlackRock has bought out Global Infrastructure Partners for $12.5billion, with the deal finalised on October 1. But the deal was settled with $3billion in cash and the $9.5billion balance paid for in BlackRock shares. In other words, BlackRock paid itself with the Saudi money and handed over paper to GIP’s former owners.

But ordinary Americans are the losers too. GIP isn’t a US-focussed fund. The majority of its investments are outside America.

We don’t know how the money was handed over, what checks and balances accompanied it and into which bank accounts it finally settled.

But, tracking BlackRock’s moves to enter the infrastructure market since 2017 has shown few signs that the $20billion has benefitted America in any real, substantial way.

Markaz Sahaba’s investigations can surmise that, maybe, ordinary Americans have benefitted directly to the measly tune of $340 843 among all the deals probed. An investment in Essential Utilities is probably the only deal that has delivered what ordinary Americans would ordinarily regard as some real infrastructure out of the entire $20billion from Saudi Arabia. Essential Utilities provides water to Californian households.

Death is booming

But let’s get back to the 2017 arms deal. It signalled a stratospheric liftoff of Saudi arms buying, when Trump stepped into the ring.

The value of United States arms agreements with Saudi Arabia between 2010 and 2017 was about 76.3 billion U.S. dollars, still much higher compared to the measly 17.4 billion U.S. dollar agreements between 2000 and 2009.

So, from 2000 to 2017, Saudi Arabia bought $93.7billion worth of arms from the USA. Then, in 2017, KSA agreed to buy $110billion immediately, more than doubling its total arms purchases to a mind-boggling $203.7billion.

At the same time, it also agreed to buy another $350billion over ten years. So, by 2027, total Saudi purchases of US armaments should total a massive $553.7billion.

We don’t have the ability or the bodyguards required to investigate that staggering pile, but the $20billion is easier to track, given BlackRock’s fingerprints plastered all over it.

Talking up its book

As Bloomberg noted in May 2017, BlackRock promised grandiosely it would stump up another $20billion from banking “partners” to match Riyadh’s contribution to red-white-and-blue infrastructure. This would create a $40billion pile of seed capital that would be geared up into a $100billion fund for investments in “stateside” infrastructure, BlackRock said.

By the way, BlackRock claims to have $10trillion worth of assets under management; in 2017, it claimed it had just over $360 billion in assets. So, in just seven years, it’s increased its AUM from $360billion to $10trillion, a multiple of an eye-popping 27.7. Doesn’t that sound a bit dodgy, a bit like “Trump accounting 101” when applying for a bank loan?

Four, long years after the Saudis agreed to hand over $20billion to Blackrock, on June 30, 2021, Blackrock registered the BLACKROCK INFRASTRUCTURE SUSTAINABLE OPPORTUNITIES FUND.

It charges 5.25% purchase fee, plus a 0.25% “distribution or service” fee. So, that’s a 5.5% upfront charge, very high by industry standards.

Consider this warning note investment advisors commonly issue to clients: “Fee-conscious investors should pay careful attention to one particular type of mutual fund: those that carry front-end load charges, which can be up to 5.5% of the investment amount.” Enough said?

It’s all in the fine print

The fund has “Investor A” shares, for the schmuks, and “Institutional” shares for its buddies. Investor A shares are sold for 5.25%; Institutional shares are sold WITHOUT A FEE.

Its business is to buy shares, “equity securities of companies in the infrastructure business segment or derivatives with similar economic characteristics”. So, it’s not investing in direct, or individual, infrastructure projects.

Its prospectus filed with the Securities Exchange Commissions says: “The Fund may invest in an unlimited amount in securities of foreign issuers, including those in emerging markets.” So, it’s not a dedicated fund investing in “stateside” infrastructure, especially if it can be invested more profitably elsewhere.

Blackrock also has a “Goldman-Sachs” escape clause written into the prospectus, allowing it to compete directly with the fund and to direct the fund to invest in competing projects in which it “could” make a loss: “Neither BlackRock nor any Affiliate is under any obligation to share any investment opportunity, idea or strategy with the Fund. As a result, an Affiliate may compete with the Fund for appropriate investment opportunities. The results of the Fund’s investment activities, therefore, may differ from those of an Affiliate and of other accounts managed by BlackRock or an Affiliate, and it is possible that the Fund could sustain losses during periods in which one or more Affiliates and other accounts achieve profits on their trading for proprietary or other accounts. The opposite result is also possible.

Tiny fund with $9.8m

“In addition, the Fund may, from time to time, enter into transactions in which BlackRock or an Affiliate or their directors, officers or employees or other clients have an adverse interest. “

There’s only one problem with the fund; it has only $9.8million worth of assets on book, so not much is to be seen in it of the Saudi’s famous $20billion.

A likelier child of the Saudi’s donation is BlackRock’s purchase of the GIP infrastructure fund. On January 12, 2024, BlackRock agreed to buy GIP infrastructure fund, with $100billion in assets (shares) under management, for $12.5-billion.

Hey presto! Blackrock has delivered its infrastructure fund with $100billion in assets under management, as promised. The deal was finalised three weeks ago. But, it didn’t need $20billion to do the deal.

Bloomberg reports “BlackRock will pay $3 billion in cash and roughly 12 million shares of its common stock”.

Washing the hand

So, the balance of $9.5billion was paid with Blackrock shares, from “its common stock”, not with all the Saudi cash, presumably on hand.

So, Blackrock in effect gave the $9.5billion to itself.

According to Bloomberg in January: “BlackRock Inc. agreed to buy Adebayo Ogunlesi’s Global Infrastructure Partners for about $12.5 billion, vaulting the world’s biggest money manager into the top ranks of investors that make long-term bets on energy, transportation and digital infrastructure.

Wikipedia says the deal “aims to tap into the infrastructure market, forecasted to be one of the fastest-growing segments of private markets in the years ahead.^[11]^[12]^[13]

Bloomberg said at the time the deal would create “an infrastructure fund that will rival the industry’s largest players, including Macquarie Asset Management and Brookfield Asset Management”.

Grandiose plans

It said the combined BlackRock-GIP Fund would have $150billion under management.

“The transaction marks a major move by CEO Larry Fink to reshape BlackRock as a strong player in the fast-growing private and alternative assets markets. The deal is expected to close in the third quarter of 2024.”

It was finalised on October 1, according to Wikipedia.

Fink said at the time: “The combination of BlackRock infrastructure with GIP will make us the second largest private markets infrastructure manager with over $150 billion in total AUM, providing clients—especially those saving for retirement—with the high-coupon, inflation-protected, long-duration investments they need” .

Wikipedia’s list of companies in which GIP holds shares shows two-thirds of them, 32 out of 48, are foreign companies, not operating in the US.

Billionaires’ wish list

And they’re almost all energy companies, with very few focusing on the “hard” infrastructure like roads, bridges, dams and buildings that the ordinary American public is crying out for. Instead, the focus is on profitability, rather than need.

Take a look for yourself:

ADNOC Gas Pipelines, – Abu Dhabi National Oil Company.
Access Midstream Partners, America’s largest gas power company.
ACS Renewables, a European wind energy company.
Ascend Telecom Infrastructure Private Limited, a cellphone tower company in India.
Atlas Renewable Energy, an American renewable energy company.
Biffa, a British waste management company.
Bluepoint Wind, a New York wind energy company.
Borkum Riffgrund 2, a German offshore wind farm.
ChannelView Cogeneration, a gas-fired power project in Texas.
Clearway Energy, an American clean-energy company.
Compañía Logistíca de Hidrocarburos, a Spanish oil-storage company.
Competitive Power Ventures, an American power company.
CyrusOne, manages data centres in America.
East India Petroleum, an oil company in India.
Edinburgh Airport, Scottish.
Empresa Eléctrica Guacolda S.A., a coal-power company in Chile.
EnLink Midstream, a Texan energy company.
Eolian Energy, an investment firm in the US.
Freeport LNG, a Texan gas exporter.
Naturgy (fka Gas Natural SGD, S.A.), a Spanish energy company.
Gatwick Airport, British.
Gladstone LNG Project, an Australian energy company.
Gode Wind 1, a German wind farm.
Great Yarmouth, a British company.
Hess Infrastructure Partners, a US company owned by GIP.
Hornsea 1, a UK wind farm.
London City Airport, British.
Medallion Gathering & Processing, a Texan oil firm.
Pacific National, an Australian rail freight operator.
Peel Ports, a UK port operator.
Perdaman Karratha Ammonia-Urea Project, an Australian chemical company.
Pluto Train 2, an Australian gas company.
Port of Melbourne, Australian.
Port of Brisbane Corporation, Australian.
QCLNG Common Facilities, an Australian energy company owned by GIP.
Rio Grande LNG, a Texan gas company.
Ruby Pipeline, a Wyoming pipeline company.
Saavi Energía, a Mexican energy company.
Signature Aviation, a Florida aviation company.
Skyborn Renewables, a European wind power company.
SUEZ Group, a French waste company.
Sydney Airport, Australian.
Terra-Gen Power, a US energy company.
TransitGas AG, a Swiss gas transit company.
Terminal Investment Limited, a Swiss terminal company.
Tramarsa, a Peruvian port services company.
Vantage Towers AG, a European cellphone tower company.
Vena Energy, a Malaysian energy company.

No bang for his buck

MBS isn’t getting much “bang for his buck” in terms of buying American goodwill. And the American public is getting the same amount, due to its greedy billionaires.

We could also consider BlackRock’s pathetic Infrastructure Sustainable Returns Fund, but with just $9.8million in assets under management, it doesn’t even feature on any worthwhile radar.

Its first year saw stellar results, clocking in a 24.66% return, reduced to 18.66& after “sales charges”. Then, it fell off the cliff, managing to eke out just 1.79% over the last three years. Most traders would tell that’s the performance typical of a “pump-and-dump” portfolio.

It looks more like it was an “idea” at one stage, but history has moved on and the “idea” no longer holds much attractions to its master.

Even if it was originally meant for American infrastructure, its foreign-weighted components make nonsense of the idea.

Very un-American

Its investments are in National Grid plc (a British multinational electricity and gas utility that also supplies gas and electricity to New York and Massachusetts), SBA Communications REIT Corp Class (owns and operates almost 40,000 cell towers in the United States, Canada, Central America, South America, and South Africa), Equinix REIT Inc(the world’s largest REIT focusing on interconnected data centers platforms and architecture for businesses), Enel (Italian gas and electricity company), Flughafen Zuerich AG, PG&E Corp (provides natural gas and electric service to residential and business customers in northern and central California), E.ON N (a German energy firm operating in 30 countries, but primarily Europe, where its been forced to refund millions to customers for bill delays and has been accused of “ripping off” millions), Canadian National Railway, Essential Utilities Inc (an American utility company that has stakes in Illinois, Indiana, New Jersey, North Carolina, Ohio, Pennsylvania, Texas and Virginia The company provides drinking water and wastewater treatment infrastructure and services), and AENA SME SA, (a Spanish SOE, an airport service management firm).

It’s $340 843 investment in Essential Utilities is probably the only deal that has delivered some real infrastructure to ordinary Americans out of the entire $20billion from Saudi Arabia. And no good will for Saudi Arabia.

And there’s still $7.5billion unaccounted for … maybe it was spent on handling fees, storage fees, purchase fees, sales fees, contractor fees and a myriad other “hidden costs” that are the thousand cuts bringing many a profitable venture to its knees.