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Bush family ties to Saudi Arabia (last updated October 4, 2004)
Fahrenheit 9/11 makes a lot out of the Bush family's alleged ties to Saudi Arabia. This piece aims to put such alleged ties into broader context.
There are some preliminary points worth making. First, the most important connection between the Bush family and Saudi Arabia is obviously that President George H.W. Bush protected Saudi Arabia by driving Iraq out of Kuwait and away from the Kuwait-Saudi border in 1991. Given that, it is not surprising that the Saudi government and elite classes would think highly of George H.W. Bush and, by extension, his family.
Second, while George H.W. Bush did bring the United States and Saudi Arabia closer together because of the Gulf War, the United States had already had a close relationship with Saudi Arabia. The United States gets more oil from Saudi Arabia than from any other country, and the United States has sold billions in military equipment to Saudi Arabia over recent decades. The United States became even closer to Saudi Arabia in the 1980s after developments in Iran.
Third, the $1.4 billion figure allegedly invested by Saudi Arabia into the Bush family and its friends lumps together several sources of money, none of which went directly to George H.W. Bush or George W. Bush. In fact, most of the figure is derived from payments by the Saudi government to a company that the Carlyle Group owned and sold before George H.W. Bush even became involved with Carlyle. Such "investment" by Saudi Arabia also should be compared more fairly against all the money that the United States has similarly "invested," not merely against the salary George H.W. Bush and George W. Bush have earned as president.
1970s: Investment in Arbusto (back to top)
Fahrenheit 9/11 focuses on one pre-Gulf War connection between Saudis and the Bush family: the alleged investment that James Bath made, reportedly on behalf of two wealthy Saudis, into George W. Bush's first oil company in 1978.
Rumors to that effect have spread for years. But Craig Unger, who Michael Moore cites as a key source for Fahrenheit 9/11, conceded in his 2003 book "House of Bush, House of Saud" that "no hard evidence has ever been found to back up that charge." Unger also reported that Bath himself had said that he had invested his own money into Bush.
"One hundred percent of those funds were mine. It was a purely personal investment," Bath is quoted as saying in a footnote in Unger's book. Bath reportedly said that Khalid bin Mahfouz and Salem bin Laden had nothing to do with either George W. Bush or his father. "They never met Bush. Ever. And there was no reason to. At that point Bush was a young guy just out of Yale, a struggling young entrepreneur trying to get a drilling fund."
Even if Bath did invest money on behalf of two Saudis, such an investment should be seen in context.
First, the amount reportedly invested was relatively small in relation to the amount that Bush raised for his company with the help of his uncle, Jonathan Bush, a Wall Street stockbroker and money manager. Bath reportedly invested $50,000 in Arbusto, which represents about 9% of the initial capital raised for Arbusto investment and only 1.5% of the total investment over the first few years of the company, according to the figures in a 1999 biography by Bill Minutaglio, "First Son: George W. Bush and the Bush Family Dynasty."
Second, Saudi activity in Texas was not unusual in the late 1970s. In fact, Texas and particularly Houston were seen in the 1970s as a prime destination for visiting Arabs and a place where U.S. companies could make lucrative business deals with Arab nations like Saudi Arabia. The Washington Post reported in 1975 that Houston was becoming a prime destination for wealthy Arab businessmen and even called Houston "the next best thing to Mecca" for Saudis in a 1981 article. That two Saudis might have had some indirect connection to Bush at this time is not particularly noteworthy given such context.
The movie also claims there is a lot of mystery about how Bush raised the money for Arbusto. But others have long reported that Bush's uncle, Jonathan Bush, raised capital for Arbusto from his own clients. Accordingly, Arbusto started off with about $565,000 in investments from 28 limited partners and then raised another $1.24 million from 36 investors in 1980 and another $1.72 million from 34 investors in 1981, according to the 1999 biography by Minutaglio.
Jonathan Bush explained his involvement to Minutaglio in a 1999 interview:
"I marketed his firm. I think I was probably pretty helpful. It didn't hurt him in the fact that his father had been in the oil business, so he knew a lot of the players. At the time there were big tax advantages in drilling oil wells. In those days, it behooved you to drill. You didn't have to do terribly well in order to do well because you got so many write-offs. So it was an attractive way to invest money and save taxes."
1980s: Saudi Support for Reagan-Bush Foreign Policies (back to top)
Fahrenheit 9/11 basically skips over the 1980s. During this time, Vice President George H.W. Bush was part of an administration that worked with Saudi Arabia largely in response to three developments in 1979-80.
First, with the fall of Iran's Shah Mohamad Raza Pahlavi in 1979, the United States lost a close ally that controlled some of the world's largest oil reserves, and the map changed considerably. The United States looked for new allies within the Middle East and began closer military ties with Saudi Arabia as its main oil-rich ally in the Middle East. With Iraq the only other choice, such a decision does not appear unreasonable.
Second, Iraq began a decade-long war with Iran to get its oil fields. The United States was officially neutral throughout the war and had reasons to oppose both countries, but the Reagan-Bush administration saw Iran as the greater threat, not unreasonable given that Iran had threatened to cut off oil exports, Iranian citizens had taken U.S. citizens hostage, and the Ayatollah Khomeini regularly referred to the United States as the Great Satan. The United States did not support Iraq directly, but it did renew diplomatic ties with Iraq and it did sell arms to Saudi Arabia that were sold in turn to Iraq, probably with the tacit approval of the Reagan-Bush administration.
Third, the Soviet Union sent troops into Afghanistan in December 1979 to support a communist regime, starting a decade-long struggle that turned about a third of the country's population into refugees. The United States decided to help the Afghan resistance with weapons and with training. Saudi Arabia also supported the Afghan resistance, with many young Saudis - including Osama Bin Laden - going to Afghanistan to fight the Soviet Union with the United States' blessing.
Fahrenheit 9/11 does not discuss such developments. Instead, it focuses only on the suggestion that "Saudi Arabia" helped George W. Bush's third oil company, Harken Energy, with business opportunities. Some have pointed to a $25 million investment by Abdullah Taha Bakhsh to help Harken Energy secure financing in the 1980s, and some have suggested that Harken got oil-exploration and use rights in Bahrain (an island off the coast of Saudi Arabia) because of the Bush family connections.
The Gulf War (back to top)
Again, Fahrenheit 9/11 does not mention the Gulf War, which arguably tied the United States - and especially the Bush family - to Saudi Arabia in a very major way.
The Gulf War was fought in large part to protect Saudi Arabia from Iraq, not just to free Kuwait from Iraqi invasion. The decision to come to Saudi Arabia - and the Saudis' acceptance of U.S. military aid at this time - changed the dynamics of Middle Eastern politics and helped lay the seeds of al-Qaeda's turning against the United States. The U.S. had a small military presence in Saudi Arabia of about 500 military personnel throughout the 1980s, but this changed in 1990.
The presence of thousands of U.S. troops in Saudi Arabia, the birthplace of Islam, upset many religious leaders. Osama Bin Laden, who had returned to Saudi Arabia from Afghanistan around 1990 and had offered Saudi leaders the use of his own forces to force Saddam Hussein out of Kuwait, was outraged that Saudi Arabia was turning to the United States and was allowing the presence of so many non-Muslims. Bin Laden has specifically said that one of his main goals is to drive the United States out of Saudi Arabia.
After the Gulf War, the number of U.S. forces in Saudi Arabia declined but did remain above the pre-war levels. The numbers again increased in 1998 as the United States used Saudi Arabia as a launching pad for more extensive air strikes against Iraq after Saddam Hussein refused to cooperate with weapons inspections.
Bush himself visited Saudi Arabia only twice during his term as president. He visited for two days in November 1990 during the building to the Gulf War and he visited a second time for one day in December 1992.
Fahrenheit 9/11 does not discuss these developments. Instead, it focuses on how George W. Bush was investigated for a potential insider trading allegation in 1990-91 and on how Bush's lawyer in this matter, Robert W. Jordan, served a decade later as the U.S. ambassador to Saudi Arabia from 2001 to 2003.
1999 - 2003: The Carlyle Group (back to top)
Moving past most of the Clinton administration and on to the late 1990s, Fahrenheit 9/11 focuses its attention on George H.W. Bush's connections with Saudi Arabia since he left the presidency, focusing primarily on Bush's indirect ties to Saudi Arabia via the Carlyle Group, the Washington-based equity firm owned in part by James Baker, Bush's longtime friend and his Secretary of State.
George H.W. Bush became involved with Carlyle in 1999, officially becoming a senior advisor to Carlyle's Asia Advisory Board. According to the New York Times, Bush helped the Washington-based private equity firm get investors and win business around the world, not just in Saudi Arabia but also in South Korea. He stepped down from the Asia Advisory Board in October 2003. Carlyle has reported on its website that Bush had no other position with Carlyle and is not currently affiliated with it.
George H.W. Bush, notably, was not a partner in Carlyle and did not own any part of Carlyle. Accordingly, any benefit to the Bush family from Saudi Arabia's dealings with Carlyle was indirect; it would be just as accurate - perhaps even more so - to say that Saudi Arabia's dealings with Carlyle benefit the California Public Employees Retirement System, which actually does own 5.5 percent of Carlyle and directly benefits from Carlyle's success.
(George W. Bush also has a past connection to Carlyle via his time in the early 1990s serving as a director of Caterair, an airline-catering company that Carlyle owned for a time.)
Regarding Saudi investment in Carlyle, like other private equity firms, Carlyle Group solicits wealthy investors around the world, invests in or buys out companies, and tries turning them around for a profit. The Saudi Binladin Group, a large construction company in the Middle East connected by family to Osama Bin Laden, did invest with Carlyle but withdrew its stake about a month after the September 11 attacks. Carlyle said in response to questions from the Washington Post in April 2002 that Saudi citizens had invested less than 1 percent of the $12.5 billion in capital then managed by the group.
Much is also made of Carlyle's connections to two particular companies: BDM International, a company which had a subsidiary that trained the Saudi military in the 1990s, and United Defense Industries, a defense contractor that has done some business with Saudi Arabia and that has done well since the September 11, 2001 attacks. Most of the $1.4 billion figure that is cited in Fahrenheit 9/11 as going to the Bush family and friends (taken from Craig Unger's book House of Bush, House of Saud) actually comes from contracts between Saudi Arabia and BDM.
But Fahrenheit 9/11 does not mention that BDM and United Defense actually receive most of their revenue from the United States government, not from Saudi Arabia. Fahrenheit 9/11 compares apples to oranges by comparing the presidential salary paid by the United States vs. a figure that comprises all money paid by Saudi Arabia to companies with indirect ties to George H.W. Bush. A fairer comparison would find that the United States contributes far more to BDM, United Defense, and even Halliburton - and thus presumably to the Bush family - than Saudi Arabia does.
For example, BDM did report $40.8 million in 1996 revenue for its work with Saudi Arabia's air force, $67 million for its work training the Saudi National Guard, and $50.3 million for its work with the Royal Saudi Land Forces. But all this constituted only 16 percent of its total revenues; work for the United States, by comparison, constituted 48 percent of total revenues that year.
Moreover, Carlyle sold BDM in December 1997, more than a year before George H.W. Bush became involved with Carlyle. Any gain that Carlyle directly derived from Saudi Arabia's contract with BDM happened before George H.W. Bush got involved with the firm.
Notably, Carlyle has investments in several different areas, not simply the military. According to Carlyle's website, Carlyle has less than 1 percent of its assets invested in the defense industry and does not consider itself a defense contractor. According to its website, half of Carlyle's assets are invested in telecommunications & media (23% of assets), automotive & transportation (17%), and aerospace (12%).
As for whether Bush's involvement is somehow unethical, Fahrenheit 9/11 shows Helen Thomas asking White House spokesman Ari Fleischer if there was any ethical conflict in Bush and Baker "using their world contacts with world leaders to represent one of the most well-known military arms dealers, the Carlyle Group." Fleischer responded that George W. Bush "has full faith that his family will conform with all proper ethics laws."
Fleischer's response was rooted in federal ethics laws, which generally are geared towards preventing former government employees temporarily from lobbying the current government. The only federal ethics law specifically pertaining to former government employees' contacts with the governments of foreign countries, 18 USC 207, only restricts certain former employees from knowingly "aid[ing] or advis[ing] a foreign entity with the intent to influence a decision of any officer or employee of any department or agency of the United States, in carrying out his or her official duties," within 1 year of leaving their post. Since George H.W. Bush has been out of the presidency since 1992, he can solicit Saudi citizens for investments and can even advise Saudi Arabia on influencing his son's decisions without violating this law.
Helen Thomas, however, was asking about larger ethical principles. It is clear that Bush could legally work for Carlyle, but her question suggests that Bush should not have done so. In any event, Bush's involvement with Carlyle also is not so unusual when compared to other former public officials who have been involved with companies, especially in recent years. For example, since leaving office, former Vice President Al Gore became a vice-chairman of a financial-services holding company in late 2001, has advised Google, and has joined Apple's board of directors.
Before 9/11: Strains over the Israeli-Palestinian conflict (back to top)
Fahrenheit 9/11 seems to suggest that the Bush administration is improperly tied to Saudi Arabia's government. A conflict over the Israeli-Palestinian situation in the summer of 2001 shows that the US-Saudi relationship was becoming strained even before September 11.
Saudi Arabia reportedly had become disturbed over the Bush administration's handling of the ongoing Israeli-Palestinian conflict, believing that Bush was favoring Prime Minister Ariel Sharon over Palestinian leader Yasser Arafat. Saudi Crown Prince Abdullah, effectively the country's ruler due to King Fahd's illness, reportedly became incensed upon hearing Bush's comments on August 13, 2001, in which Bush said that Israelis "do show a moderate restraint" and that Yasser Arafat "can do a lot more to be convincing the people on the street to stop these acts of terrorism and the acts of violence."
According to the Washington Post, Prince Bandar confronted National Security Advisor Condoleezza Rice in late August, reportedly telling her that Saudi Arabia disagreed with the United States' new policy and effectively would end its alliance with the United States over the shift. "From now on, we will protect our national interests, regardless of where America's interests lie in the region," Bandar told Rice, according to one account reported by the Washington Post.
The Bush administration reportedly took Bandar's words as a shock and quickly responded with a two-page letter that reportedly outlined the U.S. policy towards the Israeli-Palestinian conflict. According to the Washington Post's sources, this policy differed from Sharon's and was seen as "ground-breaking" by Saudi officials.
According to the Washington Post's sources, this letter helped save the US-Saudi relationship at that time. But the relationship changed again just days later with the September 11, 2001 attacks.
Since 9/11 (back to top)
In the wake of the September 11, 2001 attacks, President Bush has defended Saudi Arabia and its cooperation with the United States.
In a Sept. 20, 2001 press conference, Bush said that the Saudis had "been nothing but cooperative. Our dialogue has been one of - as you would expect friends to be able to discuss issues." Within days, Saudi Arabia cut off relations with the Taliban; Saudi Arabia had previously been one of only three countries to have recognized Taliban-controlled Afghanistan (the others were Pakistan and the United Arab Emirates). Saudi Arabia also agreed to allow the United States to use its air bases to some degree and to cooperate with efforts to cut off al-Qaeda's financing.
Bush administration officials continued to praise Saudi Arabia's cooperation with the United States in counterterrorism efforts throughout 2001. State Department spokesman Richard Boucher said at a Nov. 27, 2001 press briefing that Saudi Arabia had been providing "very good, excellent" cooperation, and White House spokesman Ari Fleischer described the level of Saudi cooperation as "strong" in a Nov. 28, 2001 press briefing.
Others criticized Saudi Arabia's cooperation as insufficient even after the Sept. 11 attacks. Saudi Arabia reportedly has provided more cooperation after experiencing attacks itself in May 2003.
Regardless of its relationship with the Bush family and administration, Saudi Arabia has devoted more resources to improving its image in the United States than in the past. Following the attacks, Saudi Arabia spent millions on public-relations within the United States. According to information reported to the U.S. Department of Justice under the Foreign Agents Registration Act, Saudi Arabia paid at least $26 million in 2001 and 2002 to firms it retained for media and public-relations work.
The $1.4 Billion Figure (back to top)
Fahrenheit 9/11 repeats the $1.4 billion figure that Craig Unger estimated in his book "House of Bush, House of Saud" (actually $1.477 billion) as going from Saudi Arabia to the Bush family, its friends and related businesses. This figure is based on some broad principles that are somewhat questionable. First, he took any money that Saudi Arabia paid or contracted to pay any company somehow affiliated with the Bush family or to Dick Cheney. Second, he took any money that Saudi citizens invested in a company somehow affiliated with the Bush family. Third, he took money that Saudi royalties gave to charities affiliated with the Bush family or to the Bush presidential libraries.
Some points worth noting about the figure:
- No money in the $1.4 billion figure went directly to the Bush family.
- As stated above, the figure is mostly comprised of money ($1.1886 billion) that went to a company that the Carlyle Group stopped owning (BDM) before George H.W. Bush even became involved with Carlyle. It is true that Bush's Secretary of State Jim Baker was associated with Carlyle during this period, which helps support the overall figure somewhat.
- The $1.4 billion figure does count about $115 million that went from Saudi Arabia and its citizens to companies affiliated with the Bush family while the Bush family member was involved. That includes $80 million invested by Saudis in the Carlyle Group, though no Bush family member owns part of the Carlyle Group or benefits directly from such investment. That also includes $25 million invested by a Saudi citizen in the Harken Energy company in the 1980s when George W. Bush was a director.
- The $1.4 billion figure also counts $180 million that went from Saudi Arabia to Halliburton in 2000 when Dick Cheney was its chairman and CEO.
- The figure also contains $1.5 million in donations to charities affiliated with George H.W. Bush (including his high school, Phillips Academy, which I also attended), $1 million to George H.W. Bush's presidential library, and a $1 million gift to George W. Bush's eventual presidential library.
However one credits Unger's figure, it pales compared to how much the United States has given the Bush family, based on the same principles that Unger applied to calculate his Saudi figure. It is difficult to calculate such a figure precisely, but even conservative estimates would put the figure at several times more than $1.4 billion. Any "investment" by Saudi Arabia into the Bush family and its friends should be compared more fairly against all the money that the United States has similarly "invested," not merely against the salary George H.W. Bush and George W. Bush have earned as president.
- The United States government has paid George H.W. Bush a lot of money just for being or having been president. It paid him a total of about $1 million in salary and expenses while president ($200,000 annual salary plus $50,000 annual expenses), another $1-2 million in post-presidential pensions (about $160,000 a year), and about $4 million in post-presidential expenses from 1992 to 2000. It has paid or will pay George W. Bush even more. It will pay him about $1.8 million in salary and expenses assuming just one term as president ($400,000 annual salary plus $50,000 annual expenses), probably millions in post-presidential pensions, and probably millions in post-presidential expenses.
- The United States government actually is a much bigger customer of various companies affiliated with the Carlyle Group, George H.W. Bush, George W. Bush and Dick Cheney than Saudi Arabia. It has paid billions to such companies, easily dwarfing the amount that Saudi Arabia has ever paid to such companies. United Defense, a defense contractor that was owned by Carlyle for several years, alone reported $3.81 billion in revenues from the United States just from 1998 to 2001, about twice Unger's entire figure.
BDM reported receiving $931.4 million in revenue from the United States in 1995 and 1996, compared to $281.0 million from Saudi Arabia in the same time period. Halliburton itself has been criticized for its own lucrative contracts with the United States, such as the .
- Third, United States citizens have given far more to the Bush family than Saudi royalty and citizens ever have. U.S. citizens have given millions upon millions to the various Bush campaigns (both through direct contributions and through the presidential-election funding system), as well as millions to George H.W. Bush's presidential library, which reported about $22 million in assets in FY 2002.
|
| Saudi Arabia Government
| U.S. Government
|
| Salary, expenses, pension, post-presidency expenses to GWB
| $0
| about $6-7 million as of 2004
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| Salary, expenses, future pension, future post-presidency expenses to GWB
| $0
| $1.8 million for his first term
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| Payments to companies affiliated at some time with GWB (Carlyle)
| $1,188.6 million
| far in excess of $5,000 million
|
Finally, it is worth pointing out, as Craig Unger does in his book, that Saudi Arabia has not just contributed to the Bush family. According to Unger, Bill Clinton approached Prince Bandar in 1991 for $20 million to launch a Middle East studies program at the University of Arkansas and that Prince Bandar announced that the request was approved shortly before Bill Clinton won the presidential election. There may be some irony in that, by Unger's own account, Saudi Arabia has contributed eight times as much to Bill Clinton's charities than to George H.W. Bush's.
Sources: Craig Unger, House of Bush, House of Saud: The Secret Relationship Between the World's Two Most Powerful Dynasties (Simon & Schuster, 2004). Bill Minutaglio, First Son: George W. Bush and the Bush Family Dynasty (Random House, 1999). Jonathan Beaty, "A Mysterious Mover of Money and Planes," Time, October 28, 1991. Dan Balz, The Saudi Connection: The next best thing to Mecca is Houston, Washington Post, April 19, 1981, C1. Richard Clarke, Against All Enemies: Inside America's War on Terror (Free Press, 2004). Information about military personnel stationed in Saudi Arabia from 1970 to 2003 is available on-line via the Department of Defense here. Carlyle Group, website, online here. Leslie Wayne, Elder Bush in big G.O.P. cast toiling for top equity firm, New York Times, March 5, 2001. Robert G. Kaiser, Enormous wealth spilled into American coffers, Washington Post, February 11, 2002. Transcript, White House March 5, 2001 press conference, on-line here. The U.S. Office of Government Ethics, on-line here, has a compilation of federal ethics laws on-line here. Robert G. Kaiser and David B. Ottaway, Saudi leader's anger revealed shaky ties; Bush's response eased a deep rift on Mideast policy; then came Sept. 11, Washington Post, Feb. 10, 2002. A transcript of Bush's Aug. 13, 2001 remarks about Yasser Arafat is on-line here. The U.S. Department of Justice has information based on reporting under Foreign Agents Registration Act on-line here. General Accounting Office, Former Presidents: Office and Security Costs and Other Information (GAO-01-983, September 2001). 3 U.S.C. 102 (setting compensation of president at $400,000 a year plus an expense allowance of $50,000). Annual reports for United Defense, BDM, and Halliburton filed with the Securities and Exchange Commission. Phillips Academy, Statement on Bush Scholars Program (December 31, 2002) (on-line here).
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