In Riyadh, Saudi Arabia, 9 December 2018 will witness the 39th summit gathering of an institution without peer. This writer, who is here in the Kingdom’s capital, is scheduled to be present as The Custodian of the Two Holy Mosques, King Salman bin Abdulaziz Al Saud, presides over the 39th Meeting of the Gulf Cooperation Council (GCC)’s Supreme Council, a grouping of Arab rulers and/or their chief representatives.
The GCC was founded in the Emirate of Abu Dhabi in May 1981 at a summit, which it was my privilege also to attend, by the sovereigns of the half dozen countries that line the entire length of the western coast of the Gulf. All six are adjacent to the Islamic Republic of Iran, their maritime neighbor. The GCC’s six member-states are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE).
A Grouping of Strategically Vital States
Among the world’s 130 emerging and former foreign dominated countries, no other grouping of governments can be reckoned to be as powerful and influential as the GCC. The reason? Collectively, they control thirty percent of the planet’s proven reserves of oil, the vital strategic commodity on which the world’s economies rely.
It is of course true that America’s supplies of shale oil in the past several years have made an enormous difference in global energy production. Indeed, their discovery and accelerated output have catapulted the United States to the position of the world’s largest oil producer. Even so, America has long been the earth’s largest user, greatest importer, and most prominent waster of oil and gas.
There’s a compelling reason for the first two of these observations. Without hydrocarbon fuels, the standard of living, material wellbeing, and the overall level of comfort of every person in the United States would be lower. Despite this, the rest of the world’s peoples are puzzled as to why Americans also remain the planet’s single loudest whiner about the prices, usage, and role of such fuels. An abiding reason has to do with how relatively inexpensive many fuels are in the United States compared to other countries. Even so, this steadily depleting natural resource continues to be among the most important drivers of world economic growth.
Saudi Arabia’s Crown Prince Mohammed bin Salman bin Abdulaziz Al-Saud begins a visit to the United States today. He is reported to be planning stops in several cities, including Washington, D.C., New York, Boston, Houston, Seattle, and San Francisco. The occasion will mark his second official visit to the United States since Donald Trump assumed the U.S. Presidency and Mohammed bin Salman’s first official visit since assuming the post of Crown Prince in June 2017.
Roots of the Relationship
In considering the modern U.S.-Saudi Arabian strategic partnership, reference is often made to a meeting the Crown Prince’s grandfather, King Abdulaziz bin Abdul Rahman Al-Saud, had with U.S. President Franklin D. Roosevelt on February 14, 1945. That historic visit had the two heads of state sitting and exchanging views with one another aboard the U.S. Navy’s U.S.S. Quincy in the Great and Bitter Lake of the Suez Canal. Academics, scholars, media specialists, policymakers, and foreign affairs specialists of all stripes have ever since referred to that visit as “historic.”
Yes, that visit was historic in the sense that it occurred on a certain date in time. Except for the fact that those two outsized heads of state met each other for the first and only time then and there, however, the encounter was far less “historic” in the usual sense of the term than countless commentators have since made it out to be. To be sure, a myth about what transpired at that meeting is deeply embedded in the literature and lore of the American and Saudi Arabian peoples.
The truth, however, is that the so-called Saudi Arabian-American love affair dates not from the meeting between the U.S. President and the Saudi Arabian King in 1945. Neither does it stem from the discovery earlier by American engineers, aided by skilled Saudi Arabian Bedouin guides, of a Kingdom-based petroleum bonanza in 1938 the likes of which the world had never seen before and has not seen since.
Rather, the roots of the special relationship date from decades before – from 1917 onwards. The seeds of the extraordinary one-of-a-kind international special strategic partnership of the American-Saudi Arabian alliance that has lasted to this day were laid then by others. None among them were officials of either country’s modern government.
“After 37 years, it would be a shame if all of our efforts and what we have achieved were to come to an end.”
In his opening remarks to the assembled throng, Kuwait’s Amir, HH Sheikh Sabah Al-Ahmad Al-Sabah, spoke from his heart. He did so to a hushed gathering of his peers representing the six member-countries of the Gulf Cooperation Council (GCC): Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE), at the organization’s recent 38th Ministerial and Heads of State Summit.
Had there been a more solid substance than the carpet beneath their feet, one could have heard a pin drop. The muted tones were not merely out of respect for one of the organization’s two longest-serving leaders (the other being HM Sultan Qaboos of Oman). They were also a reflection of the serious juncture at which the summiteers were gathering. For the past six months, the organization has been witness to a crisis the likes of which the six-country grouping has never before experienced between and among the members. In addition, it has also been beset with an unprecedented and extraordinary array of exceptionally difficult issues. The effort to manage and deal effectively with such issues would strain the statecraft skills of any diplomat or foreign policy decision maker.
Yet, despite the moment’s need for context, perspective, and detached analysis, perhaps no previous summit has been as misreported as this one. The phenomenon was apparent from even before it was announced that invitations for the summit had been sent.
As a candidate for the Oval Office, Donald Trump was not shy about criticizing Saudi Arabia. Contexts change, though, and as President his administration has refrained from unjustified, unnecessary, and provocative statements in this regard.
Saudi Arabia, birthplace of Islam and home to the faith’s two holiest places, is a country that is vital to America’s national interests and strategic concerns. It has been one of the foremost U.S. national security partners for the past eight decades – longer than any other developing nation.
If America is to be “great again,” it can and must be greater in very particular ways. One of which is to be far greater than derogatory and antagonistic rhetoric toward a country central to the world’s 1.6 billion Muslims, who represent nearly a quarter of humanity.
By selecting Saudi Arabia as the first stop on his historic visit, the first official one to any foreign country, President Trump has been prudent to seize an opportunity to turn a new and more positive page towards Arabs and Muslims in the region and beyond. The President’s visit has a chance to begin healing wounds that have been inflicted on Muslims the world over.
A Historic Visit
Selecting Saudi Arabia as the first stop on this historic visit – when the American President could easily and without controversy have selected any one among numerous other countries – sends a strong message to the Arab countries, the Middle East, and the Islamic world.
The announcement of his visit to the country has already had a powerfully uplifting and relevant symbolic effect. Its impact has been greatest on the Kingdom and its neighbors.
Peoples of this region include large numbers that have longed for this kind of American leadership for quite some time. The visit speaks volumes as to how vital these countries are to the United States. It underscores their critical importance to America’s friends, allies, and the rest of the world.
Saudi Arabia has begun administering the Kingdom’s boldest, most innovative, and farthest-reaching modernization and development plan in the country’s history. It addresses the near, mid-term, and longer-term needs and challenges that strategists believe the country is likely to face in the next fifteen years. Conceptualized and approved by the country’s leaders, the plan’s name is “Saudi Arabia Vision 2030.”
The plan reflects an extraordinary degree of extended research, analysis, and assessment. It was aided throughout by the input and comment of some of the world’s most renowned and experienced advisors in forward planning, focus, messaging, and communication. The process was launched in 2015 soon after Custodian of the Two Holy Mosques HRH King Salman bin Abdulaziz Al Sa’ud appointed his son, HRH Prince Mohammed bin Salman, as Deputy Crown Prince and Minister of Defense.
In the eyes of his fellow citizens and the Kingdom’s inhabitants, Prince Mohammed is unique. A reason is not only because of his youth. He was 30 years of age on the day “Vision 2030” was officially announced in April 2016. Of special interest and in this century without precedent is that he has been entrusted to oversee, guide, and administer two of the country’s most strategically vital portfolios.
In one, in his position and role as Chairman of the Economic and Development Affairs Council, Prince Mohammed is tasked with protecting and advancing the material wellbeing of the Kingdom’s 30 million people. Not least among his challenges in this regard is how best to address the needs of the country’s burgeoning youthful citizenry. The nature and degree of unemployment among this segment of Saudi Arabia’s population is a matter of mounting and daunting concern, combined as it is with the goal of increasing dramatically the share of private sector and foreign investment involvement in the Kingdom’s economic growth.
The Deputy Crown Prince has also been assigned to head the country’s principal armed forces establishment. The Kingdom’s military is tasked with defending the Arab and Muslim world’s most important and influential country in a region that, to a greater extent than any in the past half century, is laced – not within the GCC region, of which it is an integral part, but immediately beyond it – with an unprecedented degree of tension and turmoil.
In this regard, in close association with his ruling family cousin, Second-in-Command Crown Prince and Minister of Interior HRH Prince Mohammad bin Naif bin Abdulaziz Al Sa’ud, Deputy Crown Prince Mohammed is responsible for aiding the King in his role as Custodian of Islam’s two holiest places, Mecca and Medina. Internationally and domestically, the two leaders are jointly expected to ensure the Kingdom’s ongoing national sovereignty, political independence, and territorial integrity.
Stated differently, the two leaders, assisted by Minister of Foreign Affairs HE Adel bin Ahmed Al-Jubeir, are the primary Saudi Arabians tasked with protecting the country and the legitimate interests of its people. These include first and foremost enhancing the Kingdom’s security, stability, and peace, without which there would be no prospects for prosperity. Were these three interconnected factors to be weakened or lost, the likelihood of the country being able to maintain its present standard of living, let alone strengthen and advance it, would be difficult if not impossible.
It is with regard to this first aspect of the Deputy Crown Prince’s responsibilities that the National Council on U.S.-Arab Relations is pleased to provide an essay asking “Can Saudi Arabia’s ‘Vision 2030’ Get the Kingdom Off the Oil-Economy Roller Coaster?” The author is Dr. Paul Sullivan, a Council Non-Resident Senior International Affairs Fellow. Drawing on the courses he teaches on national security challenges and economic dynamics, and vice versa, at two of America’s leading institutions of higher education, Dr. Sullivan examines the nature and goals of as well as the necessary national material and human resources relevant to the Kingdom’s strategic development plan for the next fifteen years.
In keeping with National Council’s Analyses and Assessments series, of which this essay is a part, the author weighs the prospects for the Kingdom being able to manage and address “Vision 2030″‘s challenges effectively. In so doing, he sheds light on what in his view will be required to achieve even a portion of the plan’s stated goals. In the process, he provides an array of information about, insightful data on, and analysis and evaluation of the Kingdom’s economic development prospects that would otherwise be hard-to-come-by.
Dr. John Duke Anthony Founding President and CEO National Council on U.S.-Arab Relations Washington, DC
The Saudi Arabian economy is dominated by oil and has been for many decades. Oil accounts for about 35-45% of the GDP of Saudi Arabia. It is the source of 75-80% of its government revenues and 85-90% of its export revenues. Petrochemicals, based on oil and a much more recent component of the Kingdom’s economy than hydrocarbon fuels, are Saudi Arabia’s next largest export.
Saudi Arabia’s Oil-Economy Roller Coaster
At times in the past Saudi Arabia’s economy has been like a roller coaster. There was an economic boom due to the October 1973 Israeli-Arab war-induced oil embargo and the 1979 Iranian Revolution’s boost to the price for hydrocarbon fuels. This was followed by the collapse of oil prices and the resultant damage to the Saudi Arabian economy, which began in the early 1980s and continued until the late 1990s. As international oil prices remained stagnate throughout the better part of these two decades until the turn of the present century, so too, in many ways, did the Kingdom’s economy.
As prices began to ramp up in the 2000s, Saudi Arabia’s economy moved up with them until the Great Recession hit in 2008 when they collapsed for a brief period as the 2008 recession took its toll on markets. Soon after, however, prices rose to more than $100 per barrel in 2011, where they would remain until May 2014.
The most recent price collapse – from May-June 2014 until about January-February 2016 – was precipitous. The price since then, however, has risen, albeit in an unstable, bouncy, and slow manner. In short, Saudi Arabia has ridden the good times of oil price booms. It has also ridden the bad times when the price has collapsed.
Saudi Arabia has ridden the good times of oil price booms. It has also ridden the bad times when the price has collapsed.
The average Saudi Arabian’s income and wealth increased dramatically from 2002 to 2014. This was mostly due to the elevated level of oil revenues. The result was an increase in government spending and massive capital expenditures together with public sector investments.
Past Saudi Arabian economic improvements have started with a significant and sustained increase in the price of oil with concomitant increases in government and export revenues. These have been followed by large expenditures and investments in public sector ventures, with corresponding increases in imported labor, in Saudi Arabian employment, in massive building programs, and in contributions to the Public Investment Fund as well as, to a much greater extent, the Kingdom’s foreign reserves.
The economic trials currently facing Saudi Arabia – a fall in oil prices resulting in budget deficits, wars in Syria and Yemen, and social stresses stemming from increases in gas and other utility prices – in reality present opportunities as much as challenges. This is particularly the case because the government led by King Salman and his son, Deputy Crown Prince Mohammed Bin Salman, has demonstrated a clear understanding of these realities and shows promise in confronting them effectively.
The Saudi Arabian government is essentially looking to restructure its economic system and renegotiate its social contract. Prince Mohammed has let it be known that announcements regarding these changes will begin April 25, with specifics to follow over the following months. More details are thus forthcoming, but so far we know that the new vision involves opening up national wealth to more foreign investment as well as further liberalization, deregulation, and privatization. These changes not only promise greater economic stability to the Kingdom – a key regional and global energy, commercial, and security partner to the United States – but also present an opportunity for American companies to invest reliable long-term capital in a wide range of sectors and regions. The Kingdom seeks to maximize returns from these investments in the way that well-managed businesses do.
Gulf Cooperation Council (GCC) oil and gas producers face the long-term question of how much and how quickly global markets will move from fossil fuels toward cleaner energy. With one of the region’s key strategic and economic concerns being long-term energy demand, Gulf oil producers have long acknowledged that they have an interest in being ahead of the game in planning for future demand reductions in their key markets.
The Paris Agreement of December 2015 may provide clues to the future of clean energy in that it incentivizes increasingly ambitious climate targets and actions by participating states. If the accord is translated into lasting policies across different economies, and depending on the extent to which the policies are implemented, it may be that future generations will use and benefit from a cleaner, more sustainable energy supply. What might also occur is that oil and to some extent gas producers will face a progressively uncertain future for their fossil fuel-based exports.
Syria, Yemen, and Libya are clear cases of de-development via destruction and devastation. Each has its own inter-ethnic, tribal, historical, political, resource, and economic stresses that have contributed to its present astonishing violence. One could write a library of books about what brought each country to the state it is in now. There is no one-size-fits-all solution to the multitude of crises each faces.
Post-Conflict, Long-Term Needs
It may be that Syria, Yemen, and Libya will ultimately be divided into smaller countries. While this would be unfortunate, it may be an inevitable part of the region’s transition.
It also may take many years, if not decades, for these countries, whatever they end up being, to reach the point where the guns are silent. But silencing the guns will not necessarily bring stability and peace in the long run. If the underlying causes of the violence are not properly dealt with, these countries will endure recurring nightmares of destruction.
Indeed, if these countries are not developed and their people are not given realistic hopes and dreams for a better future, they will fall back into violence. Syria, Yemen, and Libya have shattered economies. Getting them back to a state from which they can grow with their people will involve massive injections of funds. Syria may need at least $500 billion, Yemen at least $250 billion, and Libya at least $200 billion. These amounts will need to be provided fairly quickly to stave off the demons of war and conflict, but not so quickly that the countries cannot absorb the funds and as a result fall into hyperinflation or worse.
Arab and Islamic societies have a rich trading tradition, one that celebrates markets open even to the humblest members of society. Yet in recent decades, elites in many Arab nations have controlled economic activity for their own benefit. They have used onerous regulation and a corrupt rule of law to deny opportunity for others.
A new economic vision is thus needed for the Arab world to move forward – one of economic freedom and open markets that create hope and opportunity equally for all. Economic freedom is the extent to which one can pursue economic activity without interference from government. It is built upon personal choice, voluntary exchange, the right to keep what you earn, and the security of one’s property rights.