The Intrigue At The Heart Of The Beijing-Riyadh-Washington Triangle

Authored by Valentin Katasonov via The Strategic Culture Foundation,

Saudi Aramco (the Saudi Arabian Oil Company) is the world’s largest petroleum business. It owns more than 100 oil and gas fields in Saudi Arabia with reserves of at least 264 billion barrels of oil, which is estimated to be approximately one-fourth of the world’s known reserves of this raw material. The company’s production figures do not give the full picture, as data exists only for a few years. But as an example, in 2013 Saudi Aramco produced 3.4 billion barrels of crude oil. Analysts calculate that every year the Saudi company extracts about twice as much oil and gas, in terms of barrels of oil equivalent, as the largest US company ExxonMobil. Interestingly, Saudi Aramco never appears in the rankings of the world’s largest oil producers, since it does not publish financial information such as profit, sales, assets, or market capitalization. Therefore America’s ExxonMobil and Chevron, China’s Sinopec and PetroChina, the Anglo-Dutch company Royal Dutch Shell, Great Britain’s BP, and France’s Total top the rankings. But everyone knows perfectly well that these leaders in the global oil industry are mere dwarfs compared to Saudi Aramco.

Saudi Aramco’s management set off a real bomb in early 2016 when they announced their plans to privatize part of the company through a stock market IPO. The proposal was to sell shares in Saudi Aramco equal to about 5% of the company. But an estimate of the company’s potential market price is needed in order to understand how much this would be in absolute terms. Almost the next day after the announcement of the potential sale of part of the company (in January 2016), the global media published a stunning evaluation by the independent oil analyst Mohammad Al Sabban, a former senior adviser to the Saudi Arabian oil ministry. He estimated the company’s worth at $10,000,000,000,000 (ten trillion USD). For comparison I should add that in 2016 the largest US oil company, ExxonMobil, barely exceeded $350 billion in share capital. And yes, It’s true that later on some of the hype in the assessments died down and more rational numbers were cited, most often $2 trillion. This meant that Saudi Arabia would be able to rake in approximately $100 billion from the sale of 5% of the company. But the company’s biggest trump card isn’t even the current record levels of oil production, but rather the reserves of hydrocarbon raw materials at Saudi Aramco’s disposal. And that’s a number that none of the companies named in the rankings of the global oil industry can even begin to approach.

At present, Riyadh adjusts and verifies the data on the hydrocarbon reserves in the fields owned by Saudi Aramco. Financial reports are painstakingly drafted in the needed formats for a public offering of shares. The company is being restructured to optimize the way it is organized and managed. And finally, a crucial step was taken to lower the taxes on the company’s profits. The traditional tax rate has been 90%, but this year it was set at 50%, which roughly corresponds to the level at which the leading Western oil companies are taxed. Lowering the tax rate raises dividends and makes the company a more attractive target for investment.

But beginning in early 2017, the estimates of Saudi Aramco’s market value have unexpectedly begun to decline. Appraisals began to surface that claimed the company’s share capital was only worth $1.5 trillion, then $1 trillion. The consulting firm Wood Mackenzie estimated Saudi Aramco’s worth at $400 billion overall, bringing it closer to US-based ExxonMobil. And suddenly Western consultants began talking about the need to “discount” the value of the Saudi company, since it is state-owned, and in the securities markets all government issues are by convention sold “at a discount.” They point out that although Saudi Aramco currently pays 50% of its profits in taxes, since the government owns the company anyway it could restore the 90% tax rate tomorrow with a simple stroke of the pen. There is also the fear that oil prices could be low for the next few years, and Saudi Aramco might not be able to generate big profits. But none of that can remotely explain why the valuations of the Saudi company have dropped so precipitously in the past year.

Analysts blame this on the pressure Washington is putting on Riyadh, for reasons that have as much to do with the currency market as the oil market. And the pressure coming from Washington is, in turn, a response to the pressure also being exerted on Riyadh by China, which wants to buy oil from Saudi Aramco in renminbi instead of dollars. China is currently the world’s biggest oil importer, knocking the US out of its former first-place position. China is also the Saudi oil industry’s biggest customer, and Beijing does not want to pay extra for that black gold using American currency. A number of oil exporters that sell to China have already partially or entirely transitioned to settling their accounts in renminbi. Topping that list are Nigeria and Iran. Russia has also recently begun to sell some oil to China for renminbi (although only small percentage as yet).

Saudi Arabia, however, is heavily dependent on the US and has thus far refused to settle its accounts in renminbi. And that rebuff is costing the country dearly: Beijing is gradually finding other suppliers to take Riyadh’s place. The Saudis used to be China’s biggest foreign supplier of oil, but recently Russia has squeezed them out for that number-one spot. If this continues, Saudi Aramco might lose its Chinese market altogether.

Riyadh now finds itself caught between a rock and a hard place. It’s hard to imagine what Saudi Arabia could be hit with from across the Atlantic, should it sell even one barrel of oil for Chinese currency. After all, that would be a direct challenge to the petrodollar, which was born right there in Saudi Arabia in the 1970s, midwifed by the negotiations between Henry Kissinger and King Faisal.

Washington has sternly warned Riyadh to refrain from any ill-considered move to replace the dollar with the renminbi in its transactions with China, lest other players in the oil market follow suit (oil might then be traded for rubles, rupees, rials, etc.) And tomorrow that epidemic of transitioning to national currencies could infect other commodity markets. Incidentally, this year Beijing will begin to trade oil futures priced in renminbi on its commodity exchanges and claims that this is only the first step.

Voices have already been heard within the US president’s entourage that suggest blocking the listing of Saudi Aramco shares on the New York Stock Exchange. Signs have emerged of an organized campaign to short-sell the Saudi oil company. In light of that development, Riyadh has announced that it will put off its share listing until a later date. But its problem isn’t going to go away - Saudi Arabia will still have to make a choice between the dollar and the renminbi.

Although Beijing is upping its pressure on Riyadh, it is also simultaneously offering to directly buy out 5% of Saudi Aramco, while allowing the Saudis to forgo the usual ritual of listing shares on Western stock markets. And China is prepared to shell out a “fair” price (about $100 billion). The Chinese government has already announced that it is forming a consortium of energy and finance companies, plus China’s sovereign wealth fund, in order to purchase a “chunk” of the Saudi company. The Chinese media reports that that consortium is ready to become a cornerstone investor in Saudi Aramco.

Beijing’s winning move in its chess game against Washington has neutralized the US threat to disrupt the sale of Saudi Aramco, while simultaneously pushing Riyadh toward a decision to transition Saudi oil sales to the renminbi.

And so the plot thickens inside the Beijing-Riyadh-Washington triangle of intrigue.

Russia, Saudi Arabia Announce Billons In Energy, Military Deals, During Historic King Salman Visit

Two days ago, when we previewed the first ever visit by a Saudi King to the Russian capital - a move which prompted Bloomberg to call Russian president Putin the "new master of the Middle East" - we pointed out that according to Russian Energy Minister Alexander Novak, a joint Russian-Saudi fund to invest in the energy sector will be announced during the forthcoming visit of the Saudi King to Moscow, and that the preliminary agreement to establish the $1 billion fund has already been reached.

Fast forward to today when diplomatic history was made on Thursday, when Putin met with the King of Saudi Arabia Salman bin Abdulaziz Al Saud - the first state visit to Russia by a reigning Saudi monarch - and the launch of a new level of relations between the countries, as well as billions in new energy-focused deals (for more on the strategic implications from the summit, please read this).

Saudi Arabia"s King Salman and Russian president Vladimir Putin, Oct.5, 2017

The Saudi monarch"s visit comes after decades of strained relations. More recently, tensions were high over the war in Syria. Russia and Iran have staunchly backed Syrian President Assad while Saudi Arabia has supported the Sunni rebels fighting to oust him. However, relations began to improve in recent years and Salman"s heir, Crown Prince Mohammed bin Salman, has held several meetings with Putin.

There are also common points: the Saudi kingdom, much like Russia, has been hit by the fall in oil prices since mid-2014. Despite regional disagreements, the world"s two largest oil-producers found common ground on energy policy in November, when they led a deal between OPEC and non-OPEC states to cut production in a bid to shore up crude prices. So far that deal is holding and prices have recovered slightly to above $50 a barrel. In an apparent reference to the output deal, Salman told Putin on Thursday that Saudi Arabia is "eager to continue the positive cooperation between our nations in the world oil market, which fosters global economic growth."

After the meeting, as noted before, the two countries launched a joint energy investment fund worth $1 billion, which could include investments in natural gas projects and petrochemical plants. Among the deal signed, Saudi state oil firm Aramco, the world’s biggest energycompany,  signed a deal with Russian Direct Investment Fund (RDIF) and gas processing and petrochemicals company Sibur on joint projects in the area of oil refining. Amin Al-Nasser, Aramco chief executive said: "This marks a new milestone in business relations and partnerships with our counterparts in Russia. The visit by The Custodian of The Two Holy Mosques King Salman bin Abdulaziz Al-Saud to Russia will further enhance ties and will foster collaboration among Saudi and Russian companies on various fronts."

Aramco also signed a memorandum of cooperation with Russian state-owned oil company Gazprom Neft, to collaborate on drilling technologies and research and development areas, as well as employee exchange programs. According to the FT, Alexander Dyukov, chief executive of Gazprom Neft, said:

Given the ongoing macroeconomic uncertainties, it is of paramount importance that major oil producers coordinate their activities to improve the stability of the global oil and gas market. An important component of such engagement concerns sharing cutting-edge technological solutions and working together to improve efficiency in oil production and refining.

Putting the deals in context, trade volume between the two countries reached $2.8 billion last year, according to official Saudi press. Saudi Arabia"s Public Investment Fund, the kingdom"s sovereign wealth fund, announced in 2015 plans to invest $10 billion in Russia over the next five years, though only a fraction of that has so far been put up.

In an unexpected twist, the two countries also agreed to cooperate in nuclear energy, agriculture, information technology; trade, investments and social development.

"We have a vast potential for developing cooperation in nuclear power. Saudi Arabia plans to launch a major nuclear power program," said Russian Energy Minister and Co-Chairman of the Russian-Saudi Intergovernmental Commission Aleksandr Novak.

"Nuclear power may become one of the basic sources and an extra catalyst for the development of various industries and innovation technologies in Saudi Arabia," he added. That Saudi Arabia , the world"s largest oil exporter, is planning on using Russian help to build NPPs will certainly raise a few eyebrows. 

In addition to importing Russian nuclear technology, the Saudis also appear ready to expand food imports from Russia, which is set to remain the world"s biggest wheat exporter this year. Food security is a major concern for Saudi Arabia, which stopped local production of livestock feed and wheat due to water scarcity.

Novak said that for the first time a substantial delegation from Saudi Arabia, including about 200 representatives and 85 CEOs of large companies has come to Russia. "Eighty-five heads of the largest companies flew to Russia to establish links with Russian businesses and expand ties in all areas," the minister said.

Just as notably, Novak said that relations between the two countries have reached a “fundamentally new level recently,” Novak said. “Parliamentary contacts show good dynamics and the two countries business circles maintain intensive dialogue," he said, adding that that significant progress has been made. Novak added that work is underway on a roadmap for the mid-term development of trade, economic, scientific and technical cooperation between Moscow and Riyadh.

Putin and Salman are also expected to focus on extending the OPEC oil output cut agreement which has helped prop up oil prices. On Wednesday, Putin said he believes the oil cut agreement between OPEC and non-OPEC countries could be extended beyond March 2018. The next OPEC meeting is due to take place in Vienna at the end of November.

Relations between the two countries had traditionally been strained, especially during the Cold War when Saudis helped arm Afghan rebels fighting against the Soviet invasion. In recent years, however, strong relations between Saudi Arabia and the US have frayed, forcing Saudi Arabia to look for regional alliances elsewhere. Earlier on Thursday, Russian Foreign Minister Sergey Lavrov said Russia thinks highly of Saudi Arabia"s role in arranging talks between the Syrian government and the oppositions in Geneva.

* * *

In a dramatic announcement as part of today"s meeting, Saudi Arabia also announcedf it has agreed to buy Russian S-400 surface-to-air missile systems, according to Saudi-owned al-Arabiya television reported on Thursday. The countries also signed a memorandum of understanding to help the kingdom in its efforts to develop its own military industries, a statement from state-owned Saudi Arabian Military Industries said.

According to Reuters, SAMI said the MoU with Russian state-owned arms exporter Rosoboronexport came in the context of contracts signed to procure the S-400, the Kornet-EM system, the TOS-1A, the AGS-30 and the Kalashnikov AK-103.

While SAMI did not specify the number of each system or the value of the procurement deal, it said the procurement was “based on the assurance of the Russian party to transfer the technology and localize the manufacturing and sustainment of these armament systems in the Kingdom”, but provided no timeframe.

This means that after Iran and Turkey, the Russian war machine has expanded to Riyadh, which as a reminder bought hundreds of billions in weapons from the US this spring.

Is Israel next in line to buy Russian weapons?

* * *

While Salman"s visit signals closer Russian ties with Sunni Arab Gulf states, Russia"s support for its close regional ally, Iran is not expected to change. The U.S., meanwhile, remains Saudi Arabia"s top weapons supplier and its most critical Western ally.

Some, such as Anna Borshchevskaya, a fellow at The Washington Institute for Near East Policy, says Russia has no capacity to replace the United States as Saudi Arabia"s key ally.

Others are not so sure. Cited by ABC, analysts said Salman"s trip to Moscow is the clearest sign yet that Russia"s strategy in the Middle East, including its high-risk show of military power in Syria, has paid off.

"A number of Gulf leaders have been going with greater regularity to Moscow and I think for a simple reason: Russia has made itself much more of a factor in key parts of the Middle East as the U.S. has taken a step back in some ways, particularly in Syria," said Brian Katulis, a senior fellow at the Center for American Progress.

Or, as Bloomberg put it, "the Israelis and Turks, the Egyptians and Jordanians -- they’re all beating a path to the Kremlin in the hope that Vladimir Putin, the new master of the Middle East, can secure their interests and fix their problems. The latest in line is Saudi King Salman."

The Aramco IPO: A Geopolitical Game Of Thrones

Authored by Cyril Widdershoven via OilPrice.com,

The already strong bilateral relations between Saudi Arabia and China are hitting new levels, as the Kingdom and the Chinese Tiger have decided to set up a joint US$20 billion investment fund. The fund was announced by Saudi minister of energy Khalid Al Falih, after meeting with Chinese vice-prime minister Zhang Gaoli in Jeddah. Falih indicated that both countries will share the total investments and will be splitting the revenues of the fund, which is going to target projects in infrastructure, energy, mining and materials. This is not a surprise, as Saudi Arabia has already been heavily investing in energy and petrochemicals in China the last decades. Saudi Aramco’s main downstream investments lately almost all have been focusing on increasing the Saudi footprint in downstream China, mainly to lock in Chinese demand for crude and products. Falih also reiterated that both countries will sign around $20 billion in value of projects in the coming days. As reported in the press, Saudi Arabia will be willing to invest in the fund partly in yuan. The current visit by the Chinese is of significance, as it could be a precursor to a hefty Chinese involvement in the eagerly awaited Saudi Aramco IPO next year. In March, during a visit of the King Salman to China, the two countries signed several energy and space technology deals worth $65 billion.

Saudi Arabia has, in recent years, shown a willingness to form more in-depth relationships with its main Asian customers, China, India and Japan. The Chinese energy demand, which is still the main driver of the global oil and gas market growth, is considered to be vital for Saudi Arabia’s future. The Kingdom is currently in a heavy battle with Russia and arguably Iran for the title of China’s biggest oil supplier, a title that Russia took from Saudi Arabia at the start of this year. Several analysts have been very worried about this development as it could weaken the IPO of Saudi Aramco. However, Aramco’s prominent position in the Chinese market, and the ongoing investments that the Saudi oil giant is making in downstream production and capabilities in China, will contain any negative repercussions from loss of market share. In the long-run, Aramco’s position in China will only strengthen, which will allow the Kingdom to lock in a hefty portion of its export volumes.

The fact that both sides are willing to set up a new investment fund, holding $20 billion, is a clear sign of not only the readiness of Saudi Arabia to link its future to China, but also its eagerness to support any Chinese involvement and interest in the Aramco IPO. The willingness of Saudi Arabia to consider funding in yuan not only reflects the interest of Riyadh in China, but also indicates the rising importance of the Chinese currency in Gulf markets. The possible threat to the U.S. dollar, English Pound or Euro, should not be overestimated though. The total trade value between both China and Saudi Arabia is still low in comparison to other trade partners. The current focus is still on the extension of an energy-based economic relationship. This can and will however change in the coming years, analysts expect.

The increased influence that China, in stark contrast to its historically inward-looking strategies, has gained in the Gulf region, Iran and the Horn of Africa, has been recognized in Riyadh. Saudi Arabia is aware that an economic relationship with such an influential country also increases security. China’s involvement and links with Saudi adversaries, such as Iran, Syria, or even Qatar, are seen as potential mitigating forces in a regional conflict.

The growing friendship and intricate economic-strategic relationship between Beijing and Riyadh will have an impact on the Chinese relationship with other Arab countries and Iran. China could become involved in the ongoing sectarian and political battle that is currently raging in the Gulf region.

The Financial Times reported this week that China could be willing to invest in, or even buy outright, Saudi Aramco’s 5 percent. There is still no clarity on where Aramco will be listed or how the rights of minority shareholders can be protected, which means a major national entity stepping in is entirely realistic. After the IPO, the Saudi government will still be a 95 percent shareholder, owning and deciding the future of the oil giant. Saudi’s new crown prince Mohammed Bin Salman has linked his future, and that of his grand-scale economic diversification plans called Saudi Vision 2030, to the success of the Aramco IPO. Valuing the company at more than $2 trillion, the risks are clear. A failure of the sale could be not only putting part of Saudi’s economic plans on hold, but could mean a destabilization of the Saudi regime or even a removal of the crown prince. The FT, in a blog, indicated that China could step in as a financial savior. With around 8.5 million bpd of crude oil imports, which is 2.5 million bdp more than in 2014, the attractiveness of having a stake in Saudi Aramco is huge. Even though an energy diversification program is in place, China’s imports from Saudi Arabia are going to increase.

For Beijing, a stake in one of its main suppliers is a very attractive proposition. It will not only lock in Saudi crude oil and petroleum product exports to China but it will also provide some additional political and strategic clout in the heart of the Middle East.

As the U.S. is beginning to remove its military assets, new players have stepped in. Riyadh’s new leader, MBS, will have looked at the opportunity to play the two main other players, Russia and China, against each other. On both sides, the rewards for Saudi Arabia will be high. Moscow is needed to stabilize oil markets, and could assist gas flows to the GCC, while China is needed as an export destination. Both at the same time are needed to stabilize the Gulf region, as they are linked already to Iran, and increasingly Egypt. China’s historical reluctance to be militarily involved outside of its own influence spheres in Asia has changed. The current aggressive buildup of Chinese military hardware and forces in the Gulf region and Africa is forcing a realignment of Saudi geopolitics. An economic-financial bridge could be forged via Aramco. Current deal discussions in Jeddah could be linked to this.

Aramco and the Saudi crown prince will be weighing their options. The attractiveness of having the Chinese onboard is clear, but providing China with too much influence in the region could spell trouble for the Saudis. Playing other investors, financial institutions and countries against each other is now the name of the game. HBO would be wise to have a real good look at the GCC adventures right now. A real Game of Thrones is now being played out, and while Aramco’s IPO may be the first battle, it will be far from the last.

Saudi King To Visit Russia: Bringing Relationship To New Phase

Authored by Alex Gorka via The Strategic Culture Foundation,

Much has been said about the much vaunted trip of US President Donald Trump to Saudi Arabia where he was lavished with extravagant royal pomp. The $110 billion arms deal was signed and the plans to create an Arab NATO set the agenda. The visit – the president’s first foreign trip - was described as a major step to boost the US clout in the Middle East but the days when the region was Washington’s exclusive sphere of influence are gone.

The Kingdom has launched an ambitious Vision 2030 program to start a new chapter in its history, turning itself from a US dependent oil exporter to a regional powerhouse with diversified economy, gradually opening the doors to the whole world. Investment flows are to come from different directions with money put into different baskets. Saudi Arabia is intensifying its diplomatic efforts to change its perception to start a new era. Russia is viewed as a partner in the far-reaching plans.

The blossoming relationship between Russia and Saudi Arabia signals yet another sea change in the ever-evolving global order. King Salman is to become the first Saudi monarch to visit Russia. The trip is expected this month with talks on the way to specify the date. The visit acquires special importance as the King has taken a decision not to attend the July 7-8 summit of the G20 summit in Hamburg, Germany.

On May 30, President Putin welcomed then Deputy Crown Prince Mohammed bin Salman in the Kremlin and both men said they would deepen cooperation in oil and work on narrowing their differences over Syria. The visit came on the heels of US President Donald Trump’s historic visit to Riyadh.

Prince Mohammed bin Salman was recently appointed to the position of Crown Prince and heir to King Salman of Saudi Arabia. This appointment bodes well for the Russia-Saudi relations. The crown prince has overseen the ties with Moscow and has visited Russia many times. Russian President Vladimir Putin has called him a «very reliable partner with whom you can reach agreements, and be certain that those agreements will be honored».

Russia and Saudi Arabia might launch joint projects in petrochemical industry, in the field of renewable energy and liquefied natural gas (LNG) technologies among others. The Russia-Saudi Arabia brokered and recently extended oil output cut agreement between OPEC and non-OPEC members has become the flagship symbol of cooperation.

On June 2, Russia"s largest oil producer, Rosneft, and the Kingdom’s national oil company Aramco announced that they would look into joint investments in Saudi Arabia. The announcement was made after Rosneft head Igor Sechin and Saudi Aramco Chief Amin Nasser had held their first ever formal, scheduled meeting on May 30, going beyond brief encounters at international oil events.

The parties discussed possible ways of cooperating in Asia, including Indonesia and India, as well as in other markets. Cooperation in Asia between the world"s two biggest oil exporters would be unprecedented. Saudi Arabia via its oil giant Aramco has openly stated to be interested in global gas investment opportunities, starting in Russia’s Siberian region.

Investments have all chances to be a true ram. Saudi Arabia would particularly consider the issue of participating in the Arctic LNG projects. Russia and Saudi Arabia give indications of a possible OPEC 2.0 scenario, with Russia becoming a member. This would confront the market with a renewed and stronger oil cartel.

Russian gas giant Lukoil has revealed that it will also consider marketing oil alongside Saudi Aramco. Another Russian oil company, Tatneft, has announced it is open for cooperation with Saudi Arabia.

Saudi Arabia has confirmed it would evaluate the possibility of joining Russia"s arctic liquid natural gas (LNG) project. Saudi Aramco has always been heavily involved in the gas sector, as it is already a very large gas producer. It is pursuing shale gas in the future, with first production expected around 2020-2021.There are prospects for OPEC - non-OPEC cooperation going beyond crude oil to integrate the Gas Exporting Countries Forum (GECF). A new cartel would be powerful enough to stabilize the energy market and protect it from negative developments.

The parties do not agree on Syria and some other issues but the differences in political contacts are limited and do not affect the neutrality of Riyadh with respect to Crimea, the events in Ukraine and sanctions against Russia, which Saudi Arabia has never joined.

According to Dmitry Shugaev, the head of Federal service on military-technical cooperation (FSMTC), arms deals are being discussed. Russia"s Rostec state corporation has been in talks with Saudi Arabia and on the T-90S third-generation main battle tanks deal. Riyadh wants to purchase Russia MiG-35 lightweight fighters. S-400 cutting edge air defense systems are also on the table.

No doubt, the Qatar crisis will be part of the agenda. Russia has not taken sides in the current dispute between Qatar and other Arab states and it has a recent history of cooperation with all sides of this conflict. As a result, Russia is well suited to act as a mediator and a communications channel between Riyadh and those who support Doha – such influential actors as Iran and Turkey.

Evidently, Saudi Arabia wants to introduce adjustments to its policy of one-sided focus on the United States. Russia has improved its strategic stance in the region significantly in recent years. The King’s visit will be a "turning point" in relations between the two countries. Riyadh’s desire to boost the relations with Moscow can be seen as a shift to affect the political dynamics of the Middle East and even global politics.

Trump Signs "Single Largest Arms Deal In US History" With Saudi Arabia Worth $350 Billion

When all other sources of economic growth appear tapped out, there is always the military-industrial complex coming to the rescue of US GDP with the sale of arms and equipment to the world"s biggest purchaser of weapons: Saudi Arabia. Because when one looks beyond the pageantry, pomp and circumstance of Trump"s visit to Saudi Arabia, the main purpose behind the president"s visit is precisely that: selling weapons, some $350 billion over the next decade, according to estimates.

To be sure, Trump arrival in Saudi Arabia on Saturday was quite a spectacle, with the Saudi king throwing the president"s family arrival at the Royal Diwan a "welcome fit for a king."

WATCH: President Trump, the First Lady and Ivanka arrive at Royal Diwan alongside prancing horses and flag-bearers https://t.co/93yD8pG7AT

— NBC News (@NBCNews) May 20, 2017

However, it is what was announced on Saturday that is the highlight of the various meetings between the Trump delegation and his Saudi hosts, who have promised to invest billions of dollars in the U.S. as well and make other decisions aimed at pleasing Trump.

According to a statement just issued by the White House, Trump "has just completed largest single arms deal in US history, negotiating a package totaling more than $109.7 billion" which will boost Saudi Arabia"s defense capabilities, bolstering equipment and services in the face of extreme terrorist groups and Iran.  The White House added that the deal will create defense jobs while also reaffirming America"s commitment to Saudi Arabia.

In Saudi Arabia @POTUS has just completed largest single arms deal in US history, negotiating a package totaling more than $109.7 billion

— Sean Spicer (@PressSec) May 20, 2017

“This package of defense equipment and services support the long-term security of Saudi Arabia and the Gulf region in the face of Iranian threats, while also bolstering the Kingdom’s ability to contribute to counter terrorism operations across the region,” the White House said in a statement on Saturday, as quoted by CNBC News.

US President Donald Trump, along with US Secretary of State Rex Tillerson who is accompanying him on the trip, will attend the signing of a memorandum of intent on the package, Reuters reports, citing a White House official.

“This package demonstrates, in the clearest terms possible, the United States’ commitment to our partnership with Saudi Arabia and our Gulf partners, while also expanding opportunities for American companies in the region,” the statement reads, according to Reuters.

The deal will provide Saudi Arabia, the world"s largest importer of weapons (for the breakdown of the world"s weapons trade, see "Visualizing The Global Weapons Trade"), with top-tier equipment and services including missiles, bombs, armored personnel carriers, Littoral Combat Ships, THAAD missile defense systems, and munitions.

According to estimates cited by The Indepdent, including restocking and future commitments over the next ten years, the deal could balloons to $350 billion worth of arms, over a third of a trillion dollars.

Gary Cohn, Trump"s chief economic advisor, said Saudi Arabia is “going to hire US companies” as a result of the defense deal. The goal of the deal is “to invest a lot of money in the U.S. and have a lot of U.S. companies invest and build things over here,” Cohn said, according to a White House press pool report.

The vast funds which will boost the US defense sector will be spent to "address Saudi Arabia"s defense needs while scaling back U.S. military involvement in specific operations" the Hill reported.

Saudi Crown Prince Mohammed bin Salman began negotiations on this deal shortly after the 2016 US election when he sent a delegation to Trump Tower to meet with the president’s son-in-law Jared Kushner, who is serving as a senior advisor of sorts to Mr Trump.

The deal will be what the Washington Post said is a “cornerstone” of the proposal encouraging the Gulf states to form its own alliance like the North Atlantic Treaty Organisation (Nato) military alliance, dubbed “Arab Nato."

It"s not just weapons, however.

According to Bloomberg, Saudi Aramco will sign initial accords and joint-venture agreements valued at about $50 billion with companies including General Electric Co., Schlumberger Ltd. and Halliburton Co., Chief Executive Officer Amin Nasser told reporters in Riyadh. These companies are “trying to expand their footprint in the kingdom by expanding trade between the two sides,” he said.

“Many of us sitting on the table are overseeing substantial investments in the United States,” Energy Minister Khalid Al-Falih said. “Sabic has a big platform with the acquisition of GE Plastics which they continue to build on.” Other deals will be announced today, he said.

Saudi Aramco also plans to sign accords with Baker Hughes Inc., KBR Inc., Jacobs Engineering Group Inc., Nabors Industries Ltd., Weatherford International Plc, McDermott International Inc. and Rowan Companies Plc, two people familiar with the matter said earlier this week.

And so, with industrial and manufacturing spending in the US having declined over the past two years following the collapse in commodity prices, mothballing much of US capital spending, US GDP is about to get a fresh boost courtesy of what has become the world"s most prolific arms dealer.

With that, both the neo-cons in D.C., as well as the all-powerful American Military-Industrial complex can declare a truly unprecedented victory.