Note that in Dubai the locals are also getting favored treatment, as Dubai World is taking the position that it won’t dump assets to pay its creditors unless it can sell at the price and profit Dubai World wants – that is, they’re defaulting on their loans to foreigners in an attempt to make the fortunes of rich locals untouchable.

It’s the same deal, in a different realm, as was the pre-9/11 issuance of visas to Saudis. Pre-9/11, there was no nationality that was a better risk to be given visas to visit, work, or study in the US. Where other countries, including first-world countries, always had ‘visa status-jumpers’ who would overstay, seek to change their status, or otherwise game the system, the Saudis were practically perfection. They almost never tried to change their visa status and almost never stayed in the US, returning the the KSA when the purpose of their visa was accomplished. Afterwards, Saudis faced among the most challenging processes to get visas to the US for any reason.

In future borrowings for parastatal, quasi-governmental projects, a Sovereign Guarantee will become mandatory. No more pretence that “of course, the Government would never allow a default”. This means SABIC companies, VELA (a Saudi Aramco subsidiary) and many others will no longer be treated as “sovereign” and will pay the price in higher lending margins.

If you want to enjoy all the protection and benefits that the Western legal system provides (and these loan agreements are almost uniformally subject to English Law), then you have to play by the rules. Whether you like it or not. The Saad/Gosaibi situation is no different; break the rules and live with the consequences. It is all a matter of trust.

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