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Saudi Arabia is continuing to deny its involvement in the disappearance of prominent Saudi journalist and critic Jamal Khashoggi, who was last seen entering the Saudi consulate in Istanbul on October 2.
Turkish investigators allege that Khashoggi was killed in the consulate in an operation planned by Saudi leadership and have opened a criminal investigation into the case.
The Saudi government has denied the claims, calling them "baseless." But the disappearance of Khashoggi, a U.S. resident and frequent Washington Post contributor, has raised international alarm and pulled the world's attention once again to the Islamic kingdom's ongoing crackdown on dissent.
The ensuing controversy and concern highlight a longer string of diplomatic and foreign policy crises that will increase the political risk associated with the country, some analysts say.
"The Saudi leadership has not accurately assessed the risks of its different ventures and policies," Ayham Kamel, practice head for the Middle East and North Africa at political risk consultancy Eurasia Group, said in a client note this week.
The press and international community will likely draw links between the current crisis and previous high-profile detention cases including that of Lebanese Prime Minister Saad Hariri in Riyadh and the round-up of several wealthy Saudi businessmen and royals in the Ritz Carlton, both of which dominated headlines in the fall of last year. While the Saudis have insisted no foul play, emphasizing instead the monarchy's desire to fight corruption and ensure stability in the kingdom, the mounting controversies present an increasing challenge to its image as a pro-reform investment destination.
"A large part of the modernization drive in the kingdom depends on boosting confidence in the viability of the economic transition plan," Kamel wrote. "At this point, Saudi Arabia will find it incredibly challenging to contain the emerging crisis as confidence in the government's narrative will be limited. The Saudi leadership would need to present verifiable evidence to demonstrate that it is not implicated."
In an interview with Bloomberg Wednesday, Saudi Crown Prince Mohammed bin Salman said he would allow Turkish investigators to search the consulate, saying "we have nothing to hide."
Kamel foresees tradable Saudi assets coming under pressure and new bond issuances assessed with consideration of new risks if the situation worsens and Riyadh fails to provide a convincing defense. Since October 2, the date of Khashoggi's disappearance, the country's Tadawul index is down just under 2 percent; year-to-date, however, it's up nearly 8.5 percent.
Any further impact may depend in part on the U.S. response — which is likely to be minimal, looking at the warm relationship between the Donald Trump administration and Riyadh.
"U.S. action seems unlikely given Saudi remains a lynchpin regional ally and the personal relationship between Trump and MBS (Mohammed bin Salman) is so good," said Timothy Ash, senior emerging markets strategist at Bluebay Asset Management. "Meanwhile, Trump has not exactly set his stall out as a friend of the media profession."
The State Department expressed "concern" for Khashoggi's whereabouts, demanding transparency and saying it is "closely following the case."
This comes just a few weeks after an open diplomatic spat erupted between Saudi Arabia and Canada, the latter of which had taken to Twitter to criticize Saudi's imprisonment of female rights activists and demand their release. The kingdom then shocked the world by expelling the Canadian ambassador, withdrawing its Canadian investments and cutting trade ties with the country, telling it to stay out of its affairs.
"Trump, in comments in the Oval Office, told reporters on Wednesday he had raised Khashoggi's case with Saudi Arabia "at the highest level" and more than once in recent days, according to Reuters.
"We're demanding everything," Trump said when asked if he was demanding information from the Saudis. "We want to see what's going on. It's a very serious situation for us and for this White House ... We want to get to the bottom of it."
He said he and his wife, Melania, expect to invite Cengiz to the White House soon. "People saw him go in and didn't see him come out. We're going to take a very serious look at it. It's a terrible thing," Trump said.
"This is a bad situation. We cannot let this happen, to reporters, to anybody. We can't let this happen."
Some Saudi watchers have issued dire warnings for the country's ongoing stability.
One of those is Bruce Riedel, a 29-year veteran of the CIA and an expert on Gulf affairs. He recently called the kingdom its "least stable in 50 years," writing in a column for Al Monitor that "confidence in the economy and the prince's handling of economic issues is dropping" and criticizing the young crown prince for "arrest(ing) any independent voice." He pointed to the Saudi-led blockade of Qatar, which has so far failed in forcing the tiny petro-state to meet its demands, as well as the still stalled public listing of Saudi Aramco.
Still, many say these claims are a dramatic overreaction. Ali Shihabi, a Saudi national and founder of the Arabia Foundation, a Washington, D.C.-based think tank with which has close ties to the kingdom, described the criticisms as based on "speculative rumors." Discussing Khashoggi's disappearance and the Turkish accusation, he said on Twitter that "the Turks are not a neutral party" and that the story "just does not make sense."
Further consequences will depend on what the investigations produce — but the case comes at a critical juncture, one year into the kingdom's Vision 2030, a wide-ranging reform program aimed at diversifying and liberalizing the Saudi economy. Late October will see the hosting of its third annual Future Investment Initiative in Riyadh, whose success and image may now be vulnerable to greater scrutiny.
The outcome of the case is not likely to threaten the royal family, nor is it likely to impact the planned line of succession which would see the crown prince take up rule of the kingdom after his father, King Salman, according to the Eurasia Group analyst. But onlookers have pointed to divisions in the Al-Saud family, wherein lies opposition to some of the prince's more interventionist policies.
"While this is not the first incident of an abduction of a Saudi dissident," Kamel said, "fissures in the al Saudi family make this instance more sensitive."