Saudi Arabia hoped to raise at least $10 billion from bond sales next month
The Justice Against Sponsors of Terrorism Act (JASTA), which would allow families of 9/11 victims to sue Saudi Arabia in U.S. courts, became law today by virtue of a Senate override of the earlier veto by President Obama.
The legislation could interfere with the kingdom’s plans to raise money through a bond sale next month, according to energy finance experts. The bill was vetoed by President Obama on Sept. 23, but the Senate overwhelmingly overturned the veto in a vote today.
Under current U.S. law, victims may sue a country designated as a state sponsor of terrorism, such as Iran. With JASTA in place, citizens are allowed to sue countries without that designation – like Saudi Arabia, which had been implicated as providing support to the 19 hijackers who promulgated the attacks against the U.S. on Sept. 11, 2001. Those hijackers were responsible for the deaths of 2,977 men, women and children in New York City, Ohio and Washington, D.C. and many of the families want to sue the backers of that act.
While the bill received unprecedented bipartisan support in both houses of Congress, President Obama vigorously opposed the bill, saying it would erode diplomatic norms, a feeling that is shared by many national security advisers.
Former Ambassador to Oman Gary Grappo told Oil & Gas 360® the bill “violates every element of sovereign immunity, an essential principle of world order respected by civilized nations since the Peace of Westphalia of 1648.”
Supporters of the bill see it as a moral imperative, however, saying victims of the 9/11 attacks deserve justice.
Now that Congress has overturned the president’s veto allowing the bill to become U.S. law, however, the legislation could create negative market sentiment around the Saudi’s planned bond sale. The kingdom plans to sell at least $10 billion in bonds in October, according to Bloomberg. Proceeds from the sale would help fund Saudi Arabia’s economic transformation plan and plug a budget shortfall caused by lower oil prices.
The bill “could dent investor demand in near term,” said Kaan Nazli, who helps oversee $4.8 billion of emerging-market debt at Neuberger Berman Europe Ltd. in The Hague. “It would subject the new bonds to some headline noise but ultimately the U.S.-Saudi relationship is very deep and the thinking would be that this issue would be overcome somehow.”
Ambassador Grappo was less certain that the U.S.-Saudi relationship would recover so easily. “The proposed law would seriously undermine relations with [Saudi Arabia],” he said.
The Saudi stock market takes a beating
The near-term effects are already apparent as markets react to JASTA. The Saudi Arabian riyal weakened the most since May on Wednesday, with Saudi stocks posting the largest losses in the world for a second straight day, according to Bloomberg.
Saudi Arabian officials haven’t made a decision yet on the timing of the bond and amount they plan to raise, Finance Minister Ibrahim Al-Assaf said in a statement.
Shortly after today’s Senate override of Obama’s veto, the White House lashed out and called the veto ’embarrassing’.
“I would venture to say that this is the single most embarrassing thing that the United States Senate has done, possibly, since 1983,” Obama spokesman Josh Earnest told reporters aboard Air Force One, the Hill reported.
