Arabian spite Saudi Arabia freezes out German companies

German relations with Saudi Arabia have been frosty for months, partly due to unfortunate comments made by a former foreign minister. Now Riyadh seems to have instituted a semi-official boycott of German companies.
Even the Crown Prince is giving Germany side-eye.

Saudi Arabia has some impressive infrastructure projects under way, including plans to spend over $500 billion on Neom, a brand new futuristic desert city nearly as large as Belgium. On paper, the plan touted to reduce the kingdom’s dependency on oil presents German companies with plenty of opportunities to do business there. But instead, German firms, from Siemens to Daimler to Bayer, have been run up against closed doors in Saudi Arabia in recent months.

Reports this week suggested that the desert kingdom had imposed a de facto boycott of Germany, its main European trading partner. Now a senior Saudi official has confirmed to Handelsblatt that Riyadh is indeed very cross with Berlin, and won’t consider German commercial bids until Germany changes its diplomatic tack.

To further complicate matters, after President Donald Trump pulled the United States out of the international nuclear deal with Iran earlier this month, Germany was one of several European countries that pushed for a continuation of its terms. But Iran is Saudi Arabia’s arch-enemy. Both Islamic nations struggle for regional hegemony and are involved in at least two proxy wars, in Syria and Yemen.

Problems began last November when Germany’s then-foreign minister, Sigmar Gabriel, known for his outspoken public statements, condemned Saudi “adventurism” in Lebanon and Yemen. The Saudis were angered by his remarks, and withdrew their ambassador. Six months later, he still has not returned to Berlin.

The Saudis are hurt that Germany has not recognized their massive modernization drive.

The Saudi source says his government is “seriously annoyed” and begrudges Berlin for failing to acknowledge its efforts toward reform. The Saudi government also feels its diplomatic overtures were rebuffed.

Oliver Oehms, head of the German chamber of commerce in Riyadh, said that Saudis are hurt that Germany has not recognized the country’s massive modernization drive. As part of their “Vision 2030” plan, King Salman and Crown Prince Mohammed bin Salman want to invest billions, grant civil rights to women and liberalize the economy.

German companies affected by the undeclared boycott include Daimler, Siemens, Boehringer, and Deutsche Bank. As many as 800 firms may have an interest in public tenders and competitions in Saudi Arabia. Last year, Germany exported €6.5 billion to Saudi Arabia, making it the country’s third-largest source of imports worldwide. German executives currently run two of Saudi Arabia’s biggest conglomerates. They include the CEO of the brand new city of Neom, former Arconic boss Klaus Kleinfeld.

Jörg Mayer, manager of Spectaris, a lobby group for manufacturers of optical, medical and mechatronic technologies, confirmed that all the signs point to an informal boycott. He passed on a clear message to the German government: They have to seek talks with Riyadh to try to solve the problem, otherwise German firms will be left empty-handed.

All the while, Riyadh is keeping up the pressure. In a long overseas trip earlier this year, the country’s crown prince visited the United States, Britain, France and Spain. But, in what appears to have been a deliberate snub, he pointedly skipped Germany.

Mathias Brüggmann is the head of Handelsblatt's foreign affairs desk, leading the coverage of the Ukraine crisis. Maike Telgheder is an editor at Handelsblatt, covering the health economy, pharmaceutical and chemicals companies. To contact the authors: [email protected], [email protected]