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U.S. Discloses Saudi Holdings of Treasuries for First Time - Bloomberg

The Treasury Department released a breakdown of Saudi Arabia’s holdings of U.S. debt, after keeping the figures secret for more than four decades.

QuickTake Saudi Arabia’s Strains

The stockpile of the world’s biggest oil exporter stood at $116.8 billion as of March, down almost 6 percent from a record in January, according to data the Treasury disclosed Monday in response to a Freedom-of-Information Act request submitted by Bloomberg News. The tally ranks Saudi Arabia among the top dozen foreign nations in terms of holdings of U.S. debt, and compares with China’s $1.3 trillion trove, and $1.1 trillion for Japan.

“The politics has always been secretive, so have their finances,” said David Ottaway, a Middle East Fellow at the Woodrow Wilson International Center, a research institute in Washington. “It does answer the question of how much they own, which is surprisingly not that much.”

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Yet the disclosure may bring more questions than answers, because Saudi Arabia’s foreign reserves amount to $587 billion, and central banks typically put about two-thirds of their coffers in dollars, according to International Monetary Fund data. Some nations accumulate Treasuries in offshore financial centers, meaning the holdings show up under the data of other countries. For example, Belgium, which held $143 billion of U.S. government debt as of February, is home to Chinese custodial accounts, analysts say.

In a sign that Treasury’s figures on the kingdom’s ownership fall short of the full tally, the New York Times reported last month that Saudi officials threatened to sell $750 billion of Treasuries and other assets in the U.S. if Congress enacts a bill allowing the monarchy to be held responsible in American courts for any role in the Sept. 11, 2001, terror attacks.

Calls and e-mails to the Saudi Finance Ministry and the Saudi Arabian Monetary Agency outside of regular working hours weren’t answered or returned.

The U.S. started releasing data on foreign ownership of Treasuries in 1974. Since then, the Treasury’s policy had been to not disclose Saudi holdings, and it grouped them instead with those of 14 other mostly OPEC nations, including Kuwait, Nigeria and the United Arab Emirates, Bloomberg reported in January. The group held $281 billion as of February, down from a record of $298.4 billion in July.

For more than a hundred other countries, from China to the Vatican, the Treasury had provided a detailed monthly breakdown of how much U.S. debt each owns. The figures for March are scheduled for release at 4 p.m. New York time Monday.

1970s Decision

The special arrangement was a product of the 1973 oil shock following the Arab embargo. It’s among concessions that U.S. administrations made over the years to maintain America’s strategic relationship with the Saudi royal family and access to the kingdom’s oil reserves.

The question of Saudi holdings of Treasuries is gaining importance as the monarchy faces fiscal pressure from the decline in oil prices and costly wars in the Middle East.

In the past year, Saudi Arabia burned through 16 percent of its foreign-exchange reserves to plug its biggest budget shortfall in a quarter-century, according to data from the kingdom’s central bank. The signs of strain are prompting concern over Saudi Arabia’s potential influence on the world’s largest and most important bond market.

Saudi holdings of Treasuries peaked at $123.6 billion in January, the data released Monday show.

“As we look at official and central bank and investment holdings of Treasuries around the world, we’ve seen a lot of fluctuations, we’ve seen a gradual erosion of positions that have been held for some time,” said Jim Vogel, head of interest-rate strategy at FTN Financial in Memphis, Tennessee. The impact of those reductions has been mitigated by purchases by overseas private investors, he said.

Following is a table of U.S. debt holdings of the oil-producing nations for which the Treasury released data Monday:

CountryUSD BlnSaudi Arabia116.8United Arab Emirates62.5Kuwait31.2Oman15.9Iraq13.4Qatar3.7Nigeria3.1Bahrain1.2Algeria0.7

Source: U.S. Treasury Department. Data as of March.

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