Prince Plans to Wean Saudi from Oil by 2020
Saudi Arabia is ready for a world without oil. At least that’s the goal of Deputy Crown Prince Mohammed bin Salman, the 31-year-old son of King Salman bin Abdulaziz. On Monday, the government of the de facto OPEC leader agreed to sweeping economic reforms, spearheaded by the prince, to wean the oil exporter off crude revenues by 2020, which currently account for close to 80 percent of the country’s income, and transform the Kingdom into a diversified global investment power.
Since oil’s downturn in late 2014, low prices have strained the Saudi economy and that of the Middle East at large, leading the Kingdom to cut spending, tap foreign-exchange reserves, and secure billions in loans. During oil’s boom prior to 2014, Saudi’s spendthrift mentality may have been best described by another prince as, “Let’s go crazy.” From 2010 to 2014, Saudi Arabia lost between 80 to 100 billion dollars a year, a quarter of the entire Saudi budget, on inefficient spending that nearly tipped the country into economic collapse.
“Vision 2030,” as the Deputy Crown Prince calls his plan, aims to ensure Saudi Arabia doesn’t find itself in such dire straits again through a combination of economic and social policies that will include diversifying the economy, increasing foreign investments, tax increases, a larger role for the private sector, and asset sales, most notably a share of the Kingdom’s crown jewel, Saudi Aramco, estimated to be worth more than $2 trillion.
Known as “Mr. Everything” by diplomats since assuming his position of power with unprecedented control over state oil operations, the national investment fund, economic policy, and the Ministry of Defense, Prince Mohammed has shaken up Saudi Arabia’s traditional modus operandi, most recently superseding oil Minister al-Naimi and scuttling the April 17 Doha talks. His progressive vision towards economic reform without oil is akin to his stance on social policiesand opening the historically insular country’s doors to tourists and foreign workers.
Prince Mohammed’s leadership acumen has not been lost on President Obama, who found him “extremely knowledgeable, very smart, and wise beyond his years.” After meeting in Riyadh with a congressional delegation, Republican Senator Lindsey Graham called the prince, “a guy who sees the finite nature of the revenue stream and, rather than panicking, sees a strategic opportunity.” Adding, “His view of Saudi society is that basically it’s now time to have less for the few and more for the many. The top members of the royal family have been identified by their privilege. He wants them to be identified by their obligations instead.”
In a recent Bloomberg interview, commenting on his vision for Saudi Arabia, Prince Mohammed pointed out that, “We [the younger generation] think in a very different way. Our dreams are different.”
Details of the plan are expected within six weeks, but the announcement already represents a stark departure from Saudi Arabia’s longstanding reclusive style. While it has been met with praise, it’s yet to be determined if the plan will pan out, or what it will mean for U.S.-Saudi relations and U.S. energy security.