A Saudi bank has reached an agreement with a US lender to extend a $1.2 billion loan forgiveness program to the Islamic Bank of New York (IBNY).
The agreement was reached after a lengthy and bitter legal battle.
“IBNY is delighted to extend its loan forgiveness programme to the Bank of Islamic Credit (BIC),” the bank said in a statement.
“The BIC is a trusted and proven partner for Saudi Arabia’s credit system.”
Saudi Arabia is one of the top recipients of US aid, with $3.4 billion in US funding last year.
The deal will see BIC lend the Saudi bank $300m of a $4.4bn loan from the International Monetary Fund, which has been promised by the Saudis to support the BIC’s expansion.
Saudi Arabia, which also owns stakes in other large US banks, is one the world’s largest private creditors, lending a total of $12.5bn.
It also holds US$1.4tn of foreign reserves.
The US government has long been sceptical of the Saudis’ support for the Bic, which it sees as a conduit for money laundering.
Its sanctions against the bank have caused an exodus of capital from the country, causing the Bichlian state to miss its most vital financial targets, such as oil.
But the deal with the BIS comes at a delicate time for Saudi Arabian President Abdulaziz Al Saud.
His conservative government has imposed a series of economic and security restrictions, including the closure of the US Embassy in Riyadh and the ban on foreign financial transfers.
A number of the country’s key businesses have also been placed under strict restrictions, such is the global financial crisis.
Abdulaziz is also under pressure to shore up the economy and curb rising corruption, which have led to the resignation of several senior officials in the past week.
Saudi Arabia has been under a series, ranging from an economic crisis and a war on corruption to the creation of the Islamic State of Iraq and the Levant (ISIL, also known as ISIS).
The kingdom has also faced a wave of terrorism attacks, including last week’s attempted suicide bombing of a Riyadh hotel that killed more than 30 people.
The Saudis also face mounting concerns about the countrys long-term health, as the country has a chronic shortage of oxygen.
BIC has been one of several US banks that have sought to open branches in Saudi Arabia.
Earlier this year, HSBC also opened a branch there.
IBNY, which is also based in New York, has about 100 employees in the US, including a handful of engineers, financial analysts and others who work for the bank’s subsidiary in New Jersey.
IBNY declined to comment when contacted by New Scientist.