Saudi Leaders Refuse To Give New Money To IMF Leaders of the G-20 nations a month ago pledged to get the IMF more than $1 trillion to pump into the world economy. Most of that was to come from new loans from rich countries, many of whom promised to boost their IMF contributions. But Saudi Arabia's leaders are holding out, leveraging wealth for more political and economic clout.
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Saudi Leaders Refuse To Give New Money To IMF

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Saudi Leaders Refuse To Give New Money To IMF

Saudi Leaders Refuse To Give New Money To IMF

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Next we'll follow up on one country's effort to be taken seriously. World leaders promised a month ago, to raise more than a trillion dollars for the International Monetary Fund. It's an effort to boost the global economy and many governments are pledging funds. Saudi Arabia, however, is not yet one of them. NPR's Tom Gjelten says the Saudis first want something for the money -assurance is they will be treated as a global player.

TOM GJELTEN: Saudi Arabia, the world's largest oil exporter, should be good for a generous IMF contribution. Even with the price of oil down, it has a huge trade surplus and more than $300 billion in foreign reserves. But the London summit came and went, as did the IMF spring meetings, and still no new Saudi money for the IMF. Eswar Prasad, of Cornell University, says the big IMF powers were disappointed.

Professor ESWAR PRASAD (Tolani Senior Professor of Trade Policy, Cornell University): They were counting on the Saudis and other major emerging markets to come up with significant contributions and commitments, rather than just expressions of interest.

GJELTEN: This story is not about the Saudis being stingy, however. Prasad, a former IMF division chief, says the Saudis know they have clout in the world's new economic order.

Prof. PRASAD: The Saudis want to see exactly what's on offer from the IMF. Like the other emerging markets, they want to see if a larger contribution will get them a larger working share that has more influence at the IMF.

GJELTEN: At a public forum here last week, Saudi Finance Minister Ibrahim Al-Assaf suggested his government is willing to consider boosting its contributions to international institutions like the IMF, but he laid down a condition.

Mr. IBRAHIM AL-ASSAF (Finance Minister, Saudi Arabia): Such cooperation would need to recognize the systemic importance of Saudi Arabia in the world economy and the oil market in particular.

GJELTEN: The systemic importance - al-Assaf is saying his country wants to be recognized as a key player in the global economic system. Not just at the IMF; more broadly.

The evolving global economy is realigning the world. Energy producers like Saudi Arabia have more power. Until now, the Saudis have relied on the United States for military protection - that may continue. But Saudi leaders are staking out a new leadership position on their own terms.

Flynt Leverett directs the GeoPolitics of Energy Initiative at the New America Foundation.

Professor FLYNT LEVERETT (Director of GeoPolitics and Geoeconomics of Energy Security Project, New America Foundation): They understand that their security is going to rely not just on their ability to get the U.S. to send aircraft carriers, if that's needed, but also on how they manage their wealth and use the kind of economic leverage that gives them.

GJELTEN: The IMF is one battleground. All major decisions there — who gets a loan, for how much, and under what conditions — are subject to a vote. The big industrial nations have a voting majority, so emerging nations are almost powerless. In pushing for a greater voice at the fund, Saudi Arabia is allied with China.

But on other issues Saudi leaders have their own positions. For example: while the Chinese have expressed interest in a new international currency as an alternative to the dollar, the Saudis have not. At U.S.-Saudi forum here last week, the governor of the Saudi Central Bank, Mohammed Al-Jasser, pointed out that the U.S. dollar has had many rivals in recent years.

Mr. MOHAMMED AL-JASSER (Governor, Saudi Central Bank): The euro is there, the sterling is there, the Swiss franc is there, all of these currencies are there and trying their best to be the ultimate global reserve currency. But the dollar still commands that position.

GJELTEN: Al-Jasser said central bank managers like himself with abundant foreign reserves prefer to hold them in U.S. dollars for practical, not political, reasons. The dollar has superior liquidity, safety and investment return.

A new reserve currency would be an issue for the IMF to consider, so the bigger voice at the fund, the Saudis could actually position themselves to get more U.S. attention. Again, Flynt Leverett.

Prof. LEVERETT: Right now, the Saudis are still a little more sympathetic to a continuation of dollar hegemony than, say, the Chinese or certainly the Russians would be. And so, in a way, you make yourself more valuable to the United States as a balancer.

GJELTEN: Saudi Arabia's fortunes, like those of other oil producers, have declined in the past year. But as the global economy recovers, so will Saudi oil revenues. The country is in stronger shape than other oil producers; it remains the key player in the OPEC oil cartel; and with their recent moves, Saudi leaders suggest they'll be an independent actor in the new global economic order.

Tom Gjelten, NPR News, Washington.

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