In Bed With Saudi Arabia

Written by Paul Warner Dobson exclusively for SouthFront

Modern Saudi Arabia is a recent incarnation, dating to 1932. Six years later Standard Oil discovered oil. Since this time Saudi Arabia’s fortunes have been linked to the price of hydrocarbons, and to the US. Today fossil fuels continue to account for 90% of the nation’s foreign currency earnings. While alternatives to hydrocarbons in the form of shale oil, fracking, tar sands, green energy and electric cars have diminished the importance of oil, polymer plastics guarantee demand for Saudi Arabia’s sole notable export. Most of the remaining 10% in currency earnings is revenue from the 7+ million pilgrims who visit the Islamic holy sites of Mecca and Medina annually.

Saudi governments have preferred to bankroll their operations from oil revenue rather than upsetting their pampered citizens with taxes. With an estimated budgetary break-even point of $65 per barrel, whenever prices fall below this point, they dip into reserves, something Saudi Arabia has done extensively in recent years. Saudi Arabia’s debt rosefrom $12 billion in 2014 to $85 billion in 2018 while their foreign currency reserves diminished from $797 billion to $514 billion.

The importance of Saudi Arabia to the US is primarily the Petrodollar, a system which obligates the world to buy OPEC oil for dollars, thus perpetuating international demand for the greenback. Furthermore the Saudi Rial is pegged to the US Dollar with Saudi reserves largely parked in US Treasury Bonds. In return the US guarantees to protect Saudi Arabia. It is likely US protection of Saudi Arabia will end, once their economic usefulness expires. That day is coming soon.

IMF predicts bankruptcy by 2020

In 2015 King Salman, son of Saudi Arabia’s founding father, King Abdulaziz Al Saud, became king at the age of 80 and his favourite son Prince Mohammed bin Salman (MBS) was appointed President of the Council of Economic Affairs and Development. Months later the IMF reported Saudi Arabia could be bankrupt within five years. MBS’s response was Vision 2030 – a 15 year ‘reform’ plan to diversify Saudi Arabia from oil and drag the conservative autocracy into the 21st century. Vision 2030 was received with tremendous enthusiasm within the kingdom, but considerable scepticism in the rest of the world. It’s three pillars are:

  1.  cementing Saudi Arabia’s position as the heart of the Islamic world
  2.  investment diversification and
  3.  exploiting Saudi Arabia’s geographic location to become an international trade/transport hub

Islamic Saudi Arabia

Vision 2030 seeks to stamp Saudi Arabia’s domination over the Muslim world and to entertain the 20 million pilgrim tourists they predict in 2020 and 30 million by 2030. Vision 2030 proposes the following:

  • constructing the world’s largest Islamic museum.
  • constructing other museums.
  • developing Islamic libraries and research facilities.
  • listing historic Arab and Islamic sites with UNESCO.
  • providing incentives to develop the Muslim non-profit sector, and
  • encourage individuals to volunteer their time and talents to charitable causes.

Investment powerhouse

Vision 2030 proposed transforming Saudi Arabia’s Public Investment Fund (PIF) into the world’s largest investment vehicle by transferring the state oil giant Aramco (valued by them at USD$2-2.5 trillion) to PIF’s portfolio, together with other non-oil state assets, such as real estate. Vision 2030 makes many exaggerated claims about Aramco’s worth and predictions about future success. The obvious flaw in Aramco’s partial-privatisation plan was the company’s requirement to disclose the true state of their assets and oil reserves during auditing. Many commentators speculate Saudi Arabia’s reserves have already peaked and their spare capacity is exaggerated. Aramco claims production capacity of 12.0 million barrels per day, with current production at 10.7. For unexplained reasons, Aramco has been unwilling or unable to bring the extra 1.3 million barrels online to make up for Iran’s exclusion resulting from US sanctions. Irrespective of this early investments by the PIF which include Uber (5% for USD$3.5 billion) and a joint $100 billion venture with Japan’s SoftBank have performed disappointingly.

Strategic location

Vision 2030 depicts Saudi Arabia as strategically located at the intersection of Europe, Asia and Africa; therefore ideally suited to being a major trading and transport hub. Vision 2030 speaks of creating a regional logistics centre, developing major airports and completing numerous railway projects including underground metros in MeccaMedinaRiyadh and Jeddah. They also planned completing the Haramain High Speed Rail Project linking the two holy cities (Mecca and Medina) with the Red Sea port city of Jeddah. Other infrastructure projects include the King Salman Bridge linking Saudi Arabia to Egypt and the $500 billion futuristic city of Neom.

Economic diversification

MBS repeats the self evident mantra that Saudi addiction to oil has thwarted other aspects of the economy. To remedy this Vision 2030 aims to expand non-oil economic sectors including:

  • Saudi Arabia has unexploited gold, uranium, silica and phosphate.
  • Vision 2030 aims to raise domestic military self-sufficiency from 2% to 50% and to become a military exporter, by establishing a dedicated Military Industrial holding company.
  • Domestic savings. Vision 2030 aims to see Saudi’s raise domestic savings from 6% to 10% of household incomes.
  • SME sector. Vision 2030 seeks to increase the Saudi small and medium sized enterprises (SME) sector from 20% to 35% of the economy and to replace migrant workers with locals.
  • Green energy. Vision 2030 aims to see Saudi Arabia produce 9.5 gigawatts of renewable energy annually.
  • Agriculture and Aquaculture development. Prevent water waste and prioritise viable projects.


Saudi Aramco is Saudi Arabia’s largest company and has exclusive rights to exploit the kingdom’s hydrocarbon sector. It’s a kingdom within a kingdom and operates housing projects, schools, magazines and numerous associated assets which serve operations and staff. Aramco’s importance to Vision 2030 was due to its partial privatisation bankrolling other projects. Vision 2030 proposed:

  • Changing Aramco’s status to a public holding company, rather than state owned enterprise.
  • Transfer ownership from the state to the PIF.
  • List Aramco on an international stock exchange and launch an IPO raising USD$100 billion.
  • Privatise Aramco’s subsidiary assets.

While stock markets competed to host the planned listing of Aramco in 2018, complications caused delays and now MBS speaks of a 2021 listing. However other aspects of Aramco’s restructuring remain on course.

Government reform and modernisation

Vision 2030 seeks to address Saudi Arabia’s notoriously obstructive and inefficient bureaucracy. Security, Economic and Development Councils were immediately abolished and the following was undertaken:

  • A government departments’ performance monitoring agency was established.
  • IT initiatives launched including an E-govt digital platform.
  • Immigration and Visa procedures streamlined.
  • Incentives to improve public service employee performance.
  • Anti-corruption Commitments were made.

Social health

MBS appreciates how dull life can be a religiously conservative theocracy, particularly for women. Vision 2030 proposes fixing this with:

  • Entertainment, amusement and theme parks (legalising cinemas was hinted at).
  • Promoting physical health and fitness.
  • Incentivising home ownership, particularly for the 70% of the population who are under 30. Vision 2030 aims to increase home ownership from 48% to 52%.
  • Social aid reform. Vision 2030 proposes replacing public subsidies on electricity, fuel, water etc (which also benefits the rich), to more targeted welfare.
  • Unemployment to be cut by half.
  • Rights for long term residents of Saudi Arabia to be recognised through a ‘Green Card’

How well has the plan worked so far?

Vision 2030 is either Saudi Arabia’s most ambitious strategy or the world’s largest spending spree. Irrespective Saudi Arabia remains on track for bankruptcy within a few years for the following reasons:

  • Military spending. Saudi Arabia uses military purchases to buy favour from superpowers rather than for defence needs. Saudi Arabia is the world’s third largest customer for weaponry and spends far more on it’s ineffectual military than it does on education. As military hardware has an effective use-by date of 20 years, most of their hardware will rapidly become obsolete.
  • Support for ‘rebels’ has been expensive and failed to dislodge Bashir Assad.
  • Taking Lebanon’s prime minister ‘hostage’ united Lebanese society against Saudi Arabia.
  • Blockading Qatar failed and pushed them towards Iran and Turkey.
  • Oman and Kuwait. Qatar’s bullying alienated Oman and Kuwait who fear being next.
  • Saudi Arabia’s military has performed humiliatingly and has made MBS a war criminal.
  • Anti-corruption shake-down. MBS’s arrest of corrupt businessmen was seen for what it was – a shake-down for ransoms used to plug budget deficits. This move scared off foreign investors and probably killed the partial-privatisation of Aramco.
  • Israel is Saudi Arabia’s only ally of convenience in the region. When ordinary Saudi citizens eventually realise this there will be a backlash against the Saud royal family.
  • Neom City. MBS’s futuristic $500 billion city belongs in the Matrix, rather than reality. If developed this single project will bankrupt Saudi Arabia.


Ordinary Saudi Arabians are ill equipped for physical labour, academic effort or military service. For generations Saudi society has outsourced decisions and labour to foreign workers, while they relax and enjoy the unearned income that oil delivered. Without a psychological change in the Saudi mindset, the elaborate plans of Vision 2030 will remain just  that; plans. Vision 2030 is not a vision, but delusion which risks bankrupting Saudi Arabia faster than it otherwise would have. Saudi Arabia’s future is not bright.

By Paul Warner Dobson

New Zealand based analyst and filmmaker


Mohammad bin Salman’s Days Are Numbered: The Times

September 14, 2018


“Hopes that the Saudi Crown Prince Mohammed bin Salman would be a reformer who could heal the region have come to nothing,” wrote Michael Burleigh in his article published by the UK newspaper The Times.

“First came the hype, with millions spread around like muck by western PR companies and lobbyists to trumpet Crown Prince Mohammed bin Salman’s world tour last March. He was the coming Saudi strongman, you will recall, all at the age of 32.”

The writer went on to say that six months on, the realities of his soaring ascent look more uncertain, with even his father, King Salman, beginning to show signs of doubt, adding that all the media campaign launched to highlight bin Salman’s alleged economic reforms does not match the facts.

Burleigh pointed out that the Saudi war on Yemen costs $5-6 billion, adding that it has been involving KSA in a quagmire for three years.

The writer also stressed that bin Salma’s attempt to impose isolation on Qatar has failed, noting that this policy led to the destruction of the Gulf Cooperation Council in favor of the duo, Saudi and Emirates.

The slogan of modernization raised by bin Salman has almost faded away in light of the ongoing oppression against the Shia Muslims in the east of the country.

Source: The Times

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Turning Sanctions to Iran’s Own Advantage: Opportunity vs. Crisis

Nour Rida

When the US began a series of sanctions against the Islamic Republic of Iran in the 1980s, Iran replied with a multiple track strategy, turning sanctions to the country’s own advantage by strengthening its indigenous production capabilities and its sovereignty. Today, and after a few months from Trump’s tearing up the nuclear deal, Iran’s currency sees a sharp decline in value and suffers economic woes. Iran is not the only country to suffer from US sanctions, however, the most vicious and longest of US economic wars has been against Iran; a nation which has been under US pressure for decades for not complying with America’s dictates. Today, according to some analysts, Iran can turn the sanctions and US economic war into an opportunity to stand in a stronger position and try its best to carry out reforms in the country.

Meanwhile, the US with a national debt of $21 trillion (which has been growing at a rate of a trillion dollars per year) has been targeting nations over the years, including China, Russia, Iran, Venezuela, Pakistan, Turkey, Cuba, Sudan, Zimbabwe, Myanmar, the Democratic Republic of Congo, North Korea as well as others. With such aggressive foreign policies, the US, according to some analysts, seems to bring a sooner than expected end to the dollar hegemony with its unwavering commitment to remain as a supreme power. With new emerging powers, mainly China and Russia, the US might create a dollarless market in the future that is out of its reach.

Iran political winner in n-deal

Iran recently plunged into harsh economic woes, especially after Trump’s harebrained attitude towards Iran and the nuclear deal. However, such an economic incline cannot be attributed only to the US ending of the deal and the new sanctions, but rather because of other reasons that combined altogether leading to this situation.

According to Political economist Dr. Elaheh Nourigholamizadeh, the US’s withdrawal from the deal is nothing but a continuation of the same previous US regime’s sanctions and aggressive policies towards Iran. The analyst said their effects on Iran’s economy are pretty negative. However, she explained that

“economically speaking, although the JCPOA was a step for protecting Iran’s economy against sanctions, the deal, from the beginning has not defined a clear strategy or certain policies for countering the negative effects of US sanctions imposed on the Islamic Republic of Iran or for bringing prosperity to the country.”

Accordingly, Nourigholamzadeh told al-Ahed news that even before the temporary relief of the nuclear sanctions, many countries were still skeptical about investing in Iran or signing economic agreements with the country.

“For example, as we see in the airlines sector as well as the banking and financial sectors, these all remained under sanctions. In many cases, these sanctions in the banking and financial sectors even increased. From the beginning, the JCPOA was more of a political, legal and technical deal rather than an economic one.”

So the deal was not meant to bring about real change on the economic level. However, the analyst pointed out that

“politically speaking, we cannot say that Iran did not have any gains from the deal. The Western viewpoint on Iran as an allegedly nuclear threat and their rhetoric on the matter has changed. Iran being allegedly a threat to world order is also not part of their narrative anymore.”

Nourigholamzadeh underscored that

“Nowadays, the West talks about Iran’s compliance of the terms and conditions of the nuclear deal and the IAEA on the one hand, and about the US’s unilateral and unethical position on a deal which is internationally respected.”

The deal has also shown the US’s inconsistency and deception on the international arena, she reminded.

“It must be considered that from the beginning, the US’s behavior has shown that the JCPOA is not supposed to resolve Iran’s economic problems and its withdrawal from the deal reveals the untrustworthy nature of the US and its hostility against the Iranian nation,” the scholar pointed out.

Many European officials see the Trump administration’s foreign policy as a dangerous “mix of unilateralism and isolationism” that he combined into “unisolationism.”

Measures for a better economy

To talk about the measures that Iran could take to manage its actual situation, the economist said these measures can be divided into two aspects, domestic and international.

“Domestically speaking, Iran must pay more attention to its economic affairs. It should be focused on improving and reforming the economic management of the country, strengthening its economic infrastructure and supporting its national producers, especially in sectors such as agriculture and manufacturing.”

According to the expert on economic affairs, the country has to provide opportunities for the proper use of its human assets, who are mainly educated, talented and skilled. Importantly they could encourage the economic activities of the country.

“Internationally speaking, I think that Iran should not let the unfair regime of sanctions hurt its international position and its bilateral or multilateral relations with other countries of the world, because Iran believes in an economically interdependent world and that countries need each other in order to satisfy their economic needs,” Nourigholamzadeh further explained.

“Therefore; I think that Iran should increase its economic relations with new emerging economies such as Russia and China. It also needs to improve its relation with regional economic partners such as Turkey, Qatar and India. I also think that Iran should pay more attention to the point that it needs to decrease its economic dependency on oil and the result of this kind of thinking is focusing more on non-oil exports and diversification as well as adopting policies that could help Iran’s economy such as having other ways than oil to increase its internationally presence in economic sectors,” the economist told al-Ahed news, pointing out that these measures in fact are in line with the resistance economic policies that Imam Khamenei had introduced.

Iran deserves to be independent

Commenting on the leader of the Islamic Republic Imam Ali Khamenei’s clear message when he said that Iran will not go to war with the US and will not sit for talks either, the analyst said

“Iran has nothing to do with an untrustworthy power like the US. As long as it tries to dictate Iran and denies the inalienable rights of its people in terms of growing their economy in a way they deserve, the message is clear; the US should not interfere in the domestic affairs of the Islamic Republic of Iran.”

She assured that “historically speaking, Iran has not initiated any war against any other country in the world and has respected the sovereignty of all nations of the world. Iran has been going on with these anti-war policies so it does not intend to do so. Iran will also not sit for talks with a country that has become famous for deceit and untrustworthiness.”

Harmonizing economic behavior, internal economic policies

Furthermore, Dr. Nourigholamzadeh told al-Ahed news that despite the fact that the sanctions and outside pressure does have an effect on the situation in Iran, however she underscored that currency devaluation is not a new problem in Iran that could be attributed to new economic phenomena or new economic reasons.

“I think this is not the perfect place for economic theories, however, I think that impossible trinity or unholy trinity, which means it is impossible for a country to have free exchange rate, free capital flow and sovereign monetary policy at the same time is a concept we should keep in mind.”

To explain it in simple terms, Dr. Elaheh said that when the economy is free, the main reason for currency fluctuation is the difference between domestic interest rate and foreign interest rate; this means that when the people of a country try to maintain their economic power purchase (the international power purchase), they assess the difference between domestic interest rate and foreign interest rate and prefer to buy assets that are more profitable to them.

“Indeed, in case of the Islamic Republic of Iran, Iranians prefer to buy foreign assets because they find it more profitable. Also, unfortunately in the country the principle of foreign asset available to the people is fine money, in this case dollars and euros. So, Iranians see the currency fluctuations a chance to buy dollars or euros in order to maintain their international power purchase, which in turn increases currency devaluation.”

Touching on the economic situation and currency devaluation, the economist clarified that despite the US unfair sanctions, there are many different economic reasons to the problem.

Nevertheless, she pointed out that

“the main answer to why is the economy in such shape would be that there are many factors such as sanctions in first place, people economic mal behavior and economic mismanagement of the country which is mainly dependent on oil combined together to create Iran’s actual economic situation.”

The best solution, she concluded,

“is not to rely solely on one factor (by that meaning oil), it is rather better to find a way to harmonize people’s economic behavior with internal economic policies, or finding a way to manage the negative economic effects imposed by sanctions. By that, she assured that internal policies on economics should be reformed, which has already began to see light in Iran.

Iran’s parliament has voted to remove Minister of Economic Affairs and Finance Masoud Karbasian from office. A total of 137 MPs voted for Karbasian’s removal while 121 voted in favor of him remaining in office. He followed Ali Rabiei, Iran’s former minister of labor and social welfare, who was voted out by the parliament early August. MPs sought impeachment for the minister over a range of issues that included the inability to manage the country’s economic affairs, failure to implement policies for bolstering resistance economy, lack of proper supervision of financial transactions and the inability to promote economic transparency.

Dollar decline inevitable

Finally, touching on the end of a dollar era, the analyst said that despite the fact that some systematic issues slow down this declining process (since almost 65 per cent of world monetary reserves held in central banking systems are in dollars and almost 40 per cent of world debt is issued in dollars), however the decline of the dollar and its market is inevitable in the future.

“First of all, the dollar is in competition with Euro and Yuan in international markets, and there are increasing cross-border and financial activities of new emerging powers like China and Russia.”

“Second of all, the end of dollar domination is an enduring process, when talking about the end of dollar domination, we talk about alternatives such as precious metals and natural resources since these are considered as national wealth. But there are details that need to be discussed in terms of these factors. For example, although the US has a significant gold reserves, however we do not live anymore in the cold war era, which means there is no communist trade anymore and actually many countries such as Germany are repatriating their gold reserves and this shows there is an economic shift in the world system,” she explained.

“Now when we talk about oil and gas, Iran and Venezuela are the main suppliers of oil but they have sanctions imposed on them by the US. When we talk about natural gas, it is Russia that is the main supplier of natural gas and its main market is the EU, but the US intends to bring EU in support to its sanctions against Russia which in turn affects Russian gas export to the EU,” Dr. Nouri elaborated.

She highlighted that these systematic factors of US hegemonic attitude serve as a hindrance to the end of dollar domination. However, its attitude ironically also serves to isolate it on the international level and this might help in the acceleration of the dollar declination.  So the dollar dominant position is declining, but the present systematic obstacles slow the process down.

Dr. Elaheh finally concluded that

“the arrogant attitude of the US has also contributed in making major world players wary of the future with a US having hands in every state actor across the globe, and emerging economies such as China and Russia are trying their best to provide an alternative to the dollar in global banking and financial market.”

Source: News Agencies, Edited by website team

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Saudi Arabia Banned from Promoting Reform on UK TV

Local Editor

The UK media regulator Ofcom has banned Saudi Arabia from paying to promote its so-called reform agenda on British television.

The move was prompted after revelations that Saudi Arabia had breached British broadcasting law by buying television adverts that promoted the reform policies of the country’s crown prince, such as the lifting of long-standing bans on women drivers and cinemas.

This is while Saudi reforms have been accompanied by heavy-handed crackdown on dissent against the kingdom’s critics, ranging from clerics to some of the very female activists who campaigned for years to end the bans.

In one case cited by Ofcom in the Guardian, Riyadh had paid to air a minute-long advert which included images of old and contemporary Saudi Arabia, women driving, cinemas being reopened, entertainment, cultural events and members of the Saudi royal family.

The advertisement was aired 56 times on Britain’s Sky One channel back in March, around the time Saudi Crown Prince Mohammed bin Salman made an official visit to the UK.

Ofcom said the ruling was made after it found that Riyadh had been attempting to “influence public opinion in the UK on matters of public controversy,” and had broken Britain’s strict ban on paid political advertising on television and radio stations.

Ofcom stressed that it did not consider the ads were of “a public service nature.”

The media regulator said it had taken into account the controversy around “freedom of speech, human rights and women’s rights” in the Arab country when making the ruling, in addition to issues concerning “the sale of UK weapons to the kingdom and the kingdom’s involvement in the Yemeni civil war.”

The Saudi crown prince has reportedly threatened to target women and children in Yemen irrespective of international criticism of strikes against civilians.

Source: News Agencies, Edited by website team

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Saudi Arabia’s Mega-City Project Is Doomed to Failure

By Jerrod A. Laber

June 24 marked a historic occasion in Saudi Arabia, as the government finally granted women the right to drive a car. The change was announced in September 2017, and women started receiving licenses in early June. The reform is part of a larger modernizing agenda set by Crown Prince Mohammed bin Salman (MbS), the heir apparent to the throne, who hopes to transform the country and diversify its economy.

Central to his agenda is “Vision 2030”, an initiative to transform the Saudi economy through privatization and restructuring, in the hope of lessening its reliance on oil production. Vision 2030’s main attraction is “Neom”, a 26,000 square kilometer city to be built on the coast of the Red Sea, near the border with Egypt.

The Saudi government is banking on Neom to transform the country into an economic powerhouse. An official press release says the city will help “the country develop into a pioneering and thriving model of excellence”. On its face, this all sounds very exciting and progressive. But previous efforts by the Saudi government, as well as economic and institutional constraints, cast serious doubt on whether the project will succeed.

What makes Neom, and Vision 2030 generally, problematic is that it’s a top-down, centrally-directed plan — an attempt by the Saudi government to steer the economy in a specific direction. Saudi Arabia will front $500 billion to support Neom’s construction, with the hope of attracting other investors from around the world. It will be a special economic zone (SEZ), with a unique legal and regulatory environment, autonomous from the rest of the country.

SEZs are most notably associated with China and the success they had in the 1980’s as part of the country’s economic reforms. One of the most stunning cases illustrating a SEZ’s transformational power is the city of Shenzhen, a small town of less than 30,000 in the late 1970s. In 1980, various districts of the city were designated as SEZs. Shenzhen’s population now exceeds 10 million and it is a major financial center. Not every economic zone is created equal though and emulating the Chinese success stories requires more than copying and pasting a low-tax regulatory environment in another region.

What made the Chinese SEZs successful was their more decentralized, bottom-up nature, according to Lotta Moberg, a macroeconomic analyst at William Blair and author of The Political Economy of Special Economic Zones: Concentrating Economic Development. “What you had in China were business interests and others who wanted to do business between China and Hong Kong,” she told me in an interview. “They managed to lobby the right people who would reach the upper echelons of the government to grant these kinds of concessions.”

Shenzhen’s reforms were not driven by the central state, instead, it was a product of local interests and local lobbying. “The institutional foundations of the Chinese examples created different dynamics from what is likely to occur in Neom, which is largely directed by the government,” said Moberg. Shenzhen was a response to demand, whereas Neom is an attempt to solve the ruling family’s political problems.

We’re already seeing signs that should give the Saudis some pause. Foreign direct investment, which is essential to financing Neom in the long term, is at a 14-year low. It shrank to $1.4 billion in 2017, from $7.5 billion the year before.

King Abdullah Economic City (KAEC) offers another warning. It was the only one of six mega-city projects announced in 2005 that actually ended up being built, but has struggled to bring in foreign investors and is described by the FT’s Ahmed Al Omran as “eerily quiet and empty”. By 2035, the Saudi government wants KAEC to be home to 2 million people. According to Omran, its population currently sits at just 7,000. KAEC will need to add roughly 120,000 people a year consistently to hit its target.

Neom represents a “hail Mary pass” by the Saudi government, says James Gelvin, a professor of modern Middle Eastern history at UCLA. “There is a sense of insecurity on the part of the Saudi ruling family,” he told me. “One reason for that is the collapse of the price of oil between 2014 and 2016. Although that is rising at the present time, the Saudis see the writing on the wall”, with regard to the long-term ability to rely on oil revenue.

More than half the Saudi population is under 25, and economic prospects for the young are grim, according to Gelvin.

“There are not enough jobs for them, the educational system is not very good and there has to be revitalization, particularly at a time when the future of oil is insecure,” said Gelvin.

Ultimately, Saudi Arabia is not well-equipped to transform into a market economy, which means Neom’s lofty goals look unattainable.

“80 per cent of the economy is dominated by the government, and obviously the largest revenue is oil,” said Gelvin, and “on top of that, corruption is already legendary in Saudi Arabia”.

Although MbS recognizes the need to transition away from the economic status quo, development requires more than a lax regulatory environment and tax breaks. Business climates have to be complemented by institutions conducive to growth, both formal and informal, which Saudi Arabia sorely lacks. The state-driven nature of Neom also makes it ripe for under-performance. MbS can’t eliminate decades of institutional path-dependence, history and basic economic reality just by carving out some land in a scenic locale and saying “we’re open for business.”


Reform in Reverse in Saudi Arabia

26-05-2018 | 14:41

Since rising to power as the crown prince of Saudi Arabia, Mohammed bin Salman has cultivated a reputation as a savvy young reformer, dragging his hidebound country into the modern age with a new vision.

Cartoon MBS

Much of his focus has been on economic change, but the prince, a 32-year-old son of the Saudi king, has also promised more enlightened social policies, including for women, and drawn praise for this in the West.

In just a few weeks, on June 24, Saudi Arabia is set to lift the longstanding ban on women drivers, putting into effect the most visible social reform that Prince Mohammed has championed.

All to the good, right? Not so fast. Over the past two weeks, the prince reversed course, unleashing and then expanding a crackdown on the very activists who had promoted the right of women to drive.

The government rounded up an initial group of activists and then after an international uproar, redoubled its efforts. At least 11 people, mostly women but also a few men, have now been arrested and interrogated without access to lawyers. One woman was said to have been held incommunicado.

Saudi prosecutors have not disclosed the names of those arrested or the charges filed against them. But news reports said the list includes one of Saudi Arabia’s most high-profile feminists, Loujain al-Hathloul, who was previously detained for more than 70 days in 2014 for trying to post an online video of herself driving into the kingdom from the United Arab Emirates.

Late Thursday, Amnesty International reported that Saudi authorities had released four of those arrested, but Ms. Al-Hathloul apparently was not among them.

Saudi analysts say the reversal is a reflection of Saudi politics and the prince’s desire to portray the lifting of the driving ban as a gift of the monarchy to Saudi women rather than a concession to international or domestic pressure.

But the crackdown also raises doubts about the prince’s commitment to women’s equality and freedom of movement. Pro-government media outlets publicized photos of the detained activists and accused them of being traitors, a shocking attack on a group whose only apparent offense was peaceful protest. They should be released immediately.

The episode also calls into question Prince Mohammed’s ability to deliver on his promises to bring fundamental change to a patriarchal society where men exert legal control over women.

The clerical hierarchy that administers Saudi Arabia’s ultraconservative version of Islam, known as Wahhabism, oppose allowing women to drive and other proposals to soften Saudi culture and religion that are part of Prince Mohammed’s plans.

If Prince Mohammed cannot take the heat for lifting the driving ban, one can only imagine how much harder it will be for him to deliver on tougher promises. Chief among them is getting rid of the guardianship law, which says that every woman must have a male guardian – husband, father, brother, even a son – who can make critical decisions on her behalf including applying for a passport, traveling outside the country, studying abroad on a government scholarship and getting married.

This is not the first time Prince Mohammed has undermined the reformist credentials on which he is trying to build a new image of his country. Last year, he oversaw the arrest of dozens of writers, intellectuals and moderate clerics who were seen as critics of his foreign policies.

Prince Mohammed also engineered the detention of about 200 wealthy princes and businessmen, forcing them to surrender significant amounts of their wealth, in exchange for their freedom in a questionable anti-corruption campaign.

By raising doubts about the kingdom’s commitment to human rights and the rule of law, such behavior is unlikely to be attractive to the foreign companies the prince is wooing to invest in his country.

Then there’s this: Studies show that economies that exclude half the population, which is to say women, can’t reach their full potential. It will be impossible for Prince Mohammed to legitimately claim the reformist mantle and achieve his economic goals as long as women are prevented from taking their full and rightful place in Saudi Arabia’s future.

Source: NYT, Edited by website team

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