Saudi Arabia is going through one of the most difficult periods in its modern history. Oil prices have dropped from a July 2014 high of $115 per barrel to less than $30 per barrel in January this year. The country is surrounded by failed states: Iraq, Libya, Yemen, Syria and, arguably, Lebanon. It has a demographic bulge of ambitious, but exceedingly frustrated, young men and women whose expectations differ dramatically from those of their parents. And it faces an emboldened Iran eager to interfere in the affairs of Arab countries, and with the financial wherewithal to do so, via proxy armed militia.
Any one of these challenges would be hard enough to tackle on its own. Saudi Arabia is having to deal with all of them at once.
Since the Third Saudi State was founded by King Abdulaziz Ibn Saud in 1932, it has largely been risk averse, cautious and non-confrontational. The same cannot be said about today's Saudi Arabia, however.
Shortly after the death of King Abdullah in January 2015, King Salman embarked on a comprehensive reshuffle of the government. With an energetic and ambitious young prince, Mohammed bin Salman, playing a leading role, the kingdom is asserting its regional power as it engages militarily on two fronts: combating the militants of Isis inside and outside its borders on the one hand, and fighting the Iranian-backed Houthi rebels in Yemen on the other.
Last month in his first televised interview, Prince Mohammed announced a plan called Vision 2030. The project has several goals. These include near-total government independence from oil revenues, the building of a viable defence industry, the establishment of a significant tourism sector and the reform of immigration laws, including the introduction of a green card system.
Some aspects of the proposal have been criticised for being unrealistic, for example, the suggestion that Saudi Arabia might be able to survive without oil revenues as early as 2020. But what critics fail to acknowledge is that visions are, by their very nature, idealistic and ambitious.
More important even than the detail of this vision is the team behind it, which appears to have been selected on the basis of merit rather than political considerations. One member is Mohammad al-Sheikh, a young Harvard-educated lawyer who previously worked for the World Bank. Another is Yasir al-Rumayyan, an investment banker credited with turning many of Prince Mohammed's ideas for transforming the Saudi Public Investment Fund into workable proposals.
These and other members of the team have bet their reputations and careers on the success of Vision 2030 and are driven by a desire to help Saudi Arabia "rid itself from its oil addiction", as Prince Mohammed put it. They are young, they understand how the modern world works and, most important of all, they understand the fears and aspirations of the majority of young Saudis.
To support the plan, a series of royal decrees was issued on May 7. The most notable of these announced the merger of the industry portfolio with the old ministry of petroleum and minerals to create a ministry of energy, industry and mineral resources. This is to be headed by Khalid al-Falih, a hard-working and uncompromising ex-health minister and former chief executive of Saudi Aramco, the state oil company, who has vast experience of implementing large and complex infrastructure and industrial projects.
The move is seen by many as authorising Mr Al-Falih to implement policies designed to widen the country's industrial base from one reliant on petroleum extraction to one that includes more downstream and other diversified industries.
Critics have seized on specific parts of Vision 2030 rather than seeing it for what it is: a plan that will inspire and mobilise action to change the country. The plan, together with other recent developments, should not be viewed as evidence of a state losing its way but rather as signs of a country on the cusp of transformation.
There is a great deal at stake in making Vision 2030 a success. Some would say nothing less than the future of Saudi Arabia. What can be said with certainty is that the plan has clearly identified the questions that need to be addressed if the kingdom is to transform itself from an oil-dependent economy to a modern, diversified one.
The challenge ahead is to develop and implement the policies needed to turn Vision 2030 into reality. If that formidable task is achieved, we will look back on this time as the era when the Fourth Saudi State was born.
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U.S. EIA - Energy companies’ free cash flow—the difference between cash from operations and capital expenditure—was $119 billion for the four quarters ending June 30, 2018, the largest four-quarter sum during 2013–18 Companies reduced debt for seven consecutive quarters, contributing to the lowest long-term debt-to-equity ratio since third-quarter 2014
OPEC - Total oil demand for 2018 is now estimated at 98.82 mb/d. In 2019, world oil demand growth is forecast to rise by 1.41 mb/d. Total world oil demand in 2019 is now projected to surpass 100 mb/d for the first time and reach 100.23 mb/d.
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PLATTS - The International Energy Agency expects the US to account for 75% of the global growth in natural gas exports over the next five years, a bullish outlook for LNG developers facing challenges at home getting projects off the ground and abroad with tariffs affecting trade flows.