September 9, 2017
Najib-Trump meeting under the spotlight
Malaysia’s embattled premier will seek to reset bilateral relations with America’s leader while avoiding any commitments that may irk his financial patrons in Beijing.
Singapore, September 9, 2017 5:10 PM (UTC+8)
The US Department of Justice has filed dozens of civil lawsuits seeking to seize dozens of US-based properties and other assets tied to 1MDB, a state fund Najib created and until recently oversaw. The charges claim Malaysian officials and their associates conspired to fraudulently divert US$1.7 billion from 1MDB to purchase assets in America.
Media reports have widely speculated that Najib is the unnamed “Malaysian Official 1” mentioned in the charge sheet. US investigators believe more than US$3.5 billion was illicitly siphoned from the state fund. The DoJ recently asked to stay its civil proceedings to avoid prejudicing an ongoing US government criminal investigation into the charges.
Najib’s 1MDB troubles extend beyond the US. Abu Dhabi’s sovereign wealth fund gave 1MDB five days to make a US$600 million payment owed to its International Petroleum Investment Company. Malaysia had vowed to make the payment from proceeds collected in a 1MDB asset sale rationalization plan. Switzerland and Singapore have also opened probes into alleged financial irregularities involving the fund.
The Malaysian leader appears keen to leverage the Trump visit as a diplomatic opportunity to deflect attention from his 1MDB troubles, emphasizing to his critics that he has been invited at the highest level of the US government while the DoJ-led cases and Federal Bureau of Investigation probe are ongoing.
US-Malaysia relations had improved significantly under former US President Barack Obama, but notably cooled after the 1MDB probe was launched, opening the way for China to steal a march. Najib has leaned heavily on China, now Malaysia’s largest trade partner and foreign investor, for financial sustenance amid a sluggish domestic economy.
Chinese state enterprises have stepped in to acquire a power generation business and other distressed 1MDB assets to relieve pressure on the indebted fund, adding further impetus to the strategic importance of bilateral ties while pulling Najib’s beleaguered administration closer to Beijing.
Najib also secured US$34 billion in economic and investment agreements with Beijing last year, including the first major defense deal between the two countries involving the purchase of four Chinese-made naval vessels. The two sides held their first joint military drill, involving more than 1,000 Chinese troops, in September 2015.
Those drills, including joint search and rescue, hijacked vessel rescue, and disaster relief were held partly in the Strait of Malacca, a strategically crucial waterway where as much as 80% of China’s energy imports pass. Strategic analysts predict the US would bid to block China’s passage through the narrow waterway in any conflict.