Three years ago Saudi Arabia announced Vision 2030, an ambitious plan to transform the economy of the kingdom. How’s it going? It rather depends on whom you ask.
The Financial Times reported recently that the prominent asset managers BlackRock and HSBC have launched dedicated Saudi investment funds. Such moves are both indications that the kingdom is a good place to make money and that, at least for some people, the caution prevailing since the grisly murder last October of Saudi dissident Jamal Khashoggi is less of a barrier to doing new business.
{mosads}But at the end of last month the kingdom also beheaded 37 people, mostly from the minority Shia Muslim community, co-religionists of Iran. Some people may have judged that the timing showed public relations ineptitude on a grand scale: The executions happened just as an international investors conference opened in Riyadh. (In an additional twist, especially considering it was immediately after Easter, one of the dead was crucified, which, in Saudi terms, means the head and body are put on public display.)
The basis for business optimism, at least numerically, was outlined by the International Monetary Fund on April 29 when its director for the Middle East told Reuters that it was expecting a slightly higher growth rate in 2019 because the Saudi non-oil sector is expanding faster than the wider economy. Given that Brent crude, the benchmark for prices, recently surpassed a healthy $70 per barrel, there should be additional satisfaction.
But Vision 2030, at least as originally envisaged, was about the longer term and also about reducing the role of oil in the Saudi economy. Fast-forward three years and the prevailing wisdom is that the kingdom will need longer to make the changes it is hoping for and the oil will remain the focus of its prosperity for decades.
For the moment, oil’s position is being confirmed in the Saudi economy. Indeed, it is increasing. The state oil company Saudi Aramco has just bought the state petrochemicals company Sabic for $69 billion and raised $12 billion on the bond market to help pay for it. That rather sounds like the kingdom, along with many oil companies, thinks that oil demand will increase in the coming decades. (Our declining demand in the first world, a consequence of both efficiency and environmental concerns, will be more than matched by increasing demand in the third world, where many families will be buying their first cars.)
Success or failure, Vision 2030 is, and will be, the responsibility of Saudi Crown Prince Mohammad bin Salman, aka MbS, the 34-year-old dynamo who is trying to transform Saudi Arabia.
In an analysis I wrote two years ago “Saudi Arabia’s Vision 2030, One Year On,” I mentioned four obstacles to progress: the low oil price; the expense of the war in Yemen; the likely resistance of the Saudi religious establishment; and whether the then-crown prince, MbS’s elder cousin, was in favor of the project.
The scorecard for MbS is looking good: oil is up, Saudi clerics have been marginalized, and the previous crown prince was forced to resign in MbS’s favor. Only the continuing Yemen war is a distraction. On May 3, some imprisoned women activists were bailed. Arguably though, other challenges have emerged. The tension with Iran has increased and, in the past few weeks, Riyadh is backing additional foreign adventures in Sudan and Libya.
There is also the question of Washington’s relationship with Riyadh, which until recently was thriving because of bonding between MbS and White House senior adviser and presidential son-in-law, Jared Kushner. But then, prompted by the higher oil price, President Trump tweeted criticism of Saudi King Salman, in a communications style which may have gone down well in Texas but would have grated in the desert.
Change is certainly happening in the kingdom but it has not been smooth, and doesn’t look like it will be so in the future, either.
Simon Henderson is the Baker Fellow and director of the Bernstein Program on Gulf and Energy Policy at the Washington Institute for Near East Policy. Follow him on Twitter @shendersongulf.