October 2 marks the one-year anniversary since the murder of Saudi critic Jamal Khashoggi, a killing that sparked a global furor surrounding the kingdom's royal family.
The murder of Khashoggi, a Washington Post columnist, took place in the Saudi consulate in Istanbul. It was carried out by a 15-man hit squad that traveled from Saudi Arabia on diplomatic passports. Saudi Arabia's ruling family has denied it ordered the murder but evidence has mounted since the killing that implicates high-level Saudi officials.
In June, the UN special rapporteur on extrajudicial, summary or arbitrary executions, Agnes Callamard, said that Saudi Arabia is responsible for the "pre-meditated execution" of Khashoggi. Callamard, also determined that there was credible evidence, warranting further investigation of high-level Saudi officials' individual liability, including that of the Crown Prince Mohammed bin Salman.
The crown prince said last week that he takes "full responsibility" for the murder but denied allegations that he ordered the killing. In an interview with CBS's "60 Minutes," he said the killing was a "heinous crime" and a "mistake" by individuals working for the Saudi government.
In the immediate weeks following Khashoggi's murder, when more details began to emerge, Saudi's stock exchange, the Tadawul, fell sharply as investors feared the kingdom's relationship with the international community would suffer.
Saudi stocks saw their biggest intraday drop since December 2014 almost two weeks after the murder, when President Donald Trump warned of a "potential severe punishment" for the kingdom — although no punishment has come to pass. Still, over the 12 months since Khashoggi's death, the Tadawul index has risen and fallen to hit the exact same level it was a year ago.
Analysts say that Saudi Arabia has largely escaped punishment for the murder because it is too important as a strategic ally in the Middle East. There are major economic considerations too — Saudi Arabia is one of the world's largest oil producers and it's also a large buyer of U.S., U.K. and European arms.
Saudi Arabia has made significant efforts to attract more inflows of foreign investment after its economy shrank in 2017 for the first time in nearly a decade. The International Monetary Fund predicts that its economy will grow 1.9% in 2019 and 3% in 2020, aided by a stronger non-oil sector.
"It's difficult to tell if there's been any direct impact on the Saudi Arabian economy from Khashoggi's death," Jason Tuvey, senior emerging markets economist at Capital Economics, told CNBC Tuesday.
"But the clearest indirect evidence we've had that it could have deterred investors is that foreign direct investment into the kingdom has remained very low. The crown prince has pinned his hopes on attracting more foreign investment as part of his efforts to diversify the economy away from oil."
According to the UN's World Investment Report for 2019, FDI (foreign direct investment) flows to Saudi Arabia rose from $1.4 billion in 2017 to $3.2 billion in 2018, still significantly lower than the 2008 peak of $39 billion.
"Political factors and lower oil prices were largely responsible for lower than usual FDI flows to Saudi Arabia. Recent efforts aimed at economic diversification in the country have identified FDI as a key priority, however," the report noted.
The political direction of the kingdom is under close scrutiny. Crown Prince Mohammed bin Salman was seen as a modernizing force in Saudi Arabia, having presented his 'Vision 2030' program of economic reforms and plans to diversify the economy away from oil. He has also overseen a crackdown on corruption and social reforms, such as women being able to drive.
Saudi Arabia's foreign policy could be off-putting for some investors given its military operation in Yemen against Iranian-backed Houthi rebels, and its bitter relations with its regional rival Iran.
"Khashoggi's murder came about a year after we saw the corruption crackdown, which also contributed to general investor uncertainty over the direction that the kingdom is taking politically," Tuvey noted.
"There had been signs of capital flight around the time of the murder but in the longer-term the main damage is likely to come via the hit to the kingdom's attractiveness for direct investment."
The Khashoggi case threatened to overshadow the crown prince's moves to modernize the kingdom — for a while at least, according to Ayham Kamel, head of MENA at Eurasia Group.
"The Khashoggi issue cannot be easily swept under the rug and the crown prince has now realized that he needs a more proactive approach that embraces the need for some measure of accountability," he told CNBC Wednesday.
"The long-term challenge for the kingdom remains structural and revolves around the effectiveness of reforms and the ability of the government to attract foreign investors to build up a non-oil economy."