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.
The last ten days were dramatic and, potentially in their own way, historic. The occasion was a visit to the United States by the Saudi Arabian Deputy Crown Prince and Minister of Defense, HRH Prince Mohammed bin Salman. The setting was at once stirring as was the atmosphere laced with a degree of uncertainly given some of the perceived, media-fed strains in the U.S.-Saudi Arabian relationship over the past several years.
Not least among the reasons the visit was so portentous are the following:
First, only days before the Deputy Crown Prince’s arrival the Trump administration had slapped punitive sanctions on half-a-dozen Muslim-majority countries, of which all but Iran are Arab nations.
Second, the visit came on the heels of ongoing uncertainties over the implications of significantly plummeted international oil prices since 2014. What each side will do about this sea change in the price of the strategic commodity that drives the engines of the world’s economies remains to be seen. One of the key dimensions of the likely near-term outcome turns for a greater extent than ever before on discussions between the Arab-led OPEC nations, on one hand, and key non-OPEC countries such as the United States and Russia, on the other.
Third, the Kingdom’s and America’s leaders convened at a moment when the growing encirclement of ISIS in Mosul, Iraq’s third-largest city, is fraught with an uncertain finale. More open to question is what will likely follow the eventual routing of one of the most lethal and debilitating scourges to have dominated parts of the Arab landscape in history.
Similar uncertainty underpins any sound analysis and assessment of the near term future of Syria. Russia, Iran, and Hezbollah, among the foreign forces that have tipped the balance in favor of the Assad regime in Damascus, are undoubtedly riding high at the moment. It remains to be seen, however, what the fate and future will be of the remaining opposition groups, including, in particular, the separatists, or at a minimum pro-autonomy, Kurdish forces in the country’s northeast.
Fourth, the nature, content, and extent of U.S.-Saudi Arabia cooperation in counter-terrorism going forward has, understandably, remained high in the national strategic imperatives of both countries’ needs, concerns, and interests.
Fifth, the two countries remain, for better or worse, locked in an inevitable strategic, national security, and defense cooperation-related relationship of the upmost importance as it pertains to Yemen. This is despite the growing anti-American involvement sentiment regarding this campaign in the media, so-called think tanks, and in rising numbers of members of Congress. Many of those favor, at most, a halt to further U.S. arms exports to the Kingdom, and, at minimum, a cessation of deliveries of munitions and ordnance designated for the two year old multinational coalition campaign to restore the legitimate government of Yemeni President Abed Rabbo Mansour Hadi.
Americans need to know there will be no slackening in this component of the two countries defense relationship. Indeed, there will be likely no slackening in the two countries determination to ensure that the conflict in Yemen, aided and abetted by Iran, does not further threaten the security and stability of the Kingdom. Nor will there be any willingness to further enhance Iran’s Shia-centric objective of expanding Tehran’s appeal to and influence over the region’s Shia Muslim people beyond that which it has already achieved.
Finally, the visit should help to put to rest the unseemly innuendo of the past year in which there were reports that President Barack Obama considered, if not Saudi Arabia itself, then those in its camp “free riders.” In reality, a persuasive argument could be made that the reverse is the case.
For the later perspective, consider those American livelihoods that turn directly on Saudi Arabia’s tens of billions of dollars of purchases of American goods and services. The tens of thousands of full-paying Saudi Arabian students at American universities. The tens of thousands of Americans whose livelihoods are derived from living and working in the Kingdom, versus no comparable number of Saudi Arabians taking money out of the United States. This is in addition to the Kingdom’s rock-solid support, against all competitors, for ongoing reliance upon the American dollar as the instrument of exchange in all of its international economic and financial transactions. The benefits of that alone have aided mightily in the ongoing preeminence of the American monetary banking system worldwide.
These are but a few of the bountiful and poorly-understood American benefits that derive from the eighty-year old, unapologetically special relationship between our two peoples. As Fahad Nazer’s insightful essay thoughtfully illustrates, one ought not to count on any near- or long-term jettisoning of the reciprocal rewards that remain embedded in these extraordinary special ties that remain the envy of practically every other nation in the world.
Dr. John Duke Anthony Founding President and CEO National Council on U.S.-Arab Relations Washington, DC
Over a quarter-century ago, the United States and Saudi Arabia fought side by side in Operations Desert Shield and Desert Storm. They did so to reverse Iraq’s August 1990 aggression against Kuwait. Afterwards, as to whether the United States and Saudi Arabia were friends, both answered “yes” unequivocally.
If the first two months of Donald Trump’s presidency are any indication, bilateral ties might return to their “Kuwait Crisis” heyday. That was when both countries’ officials routinely characterized them as “special.”
Last week, Saudi Arabia’s Deputy Crown Prince and Minister of Defense, HRH Prince Mohammed bin Salman, visited Washington. Accompanied by foreign affairs and defense policy advisers, Prince Mohammed met with President Trump at the White House on March 14 and with U.S. Secretary of Defense General (Ret.) Jim Mattis at the Pentagon on March 16. The visit’s timing and the meetings themselves, as well as the statements issued by the American and Saudi Arabian participants, suggest that both countries’ leaders agree on a wide array of political and economic issues and policies. This bodes well for their future relations. To the envy of many, these ties have endured for the past eight decades. What is more, they have broadened and strengthened on many levels.
The timing of the visit – less than two months after President Trump’s inauguration – was at once indicative and propitious. To critics, it was too soon. To others, it emphasized yet again the importance that the two countries accord their relations. It highlighted the keenness of both countries’ leaders to establish good personal relations early in the Trump administration.
Dr. Harb took issue with President-elect Trump’s allegations that Syria has no strategic significance for the United States. Beyond the numerous rationales to the contrary that Dr. Harb so effectively provided – his line of reasoning is powerful and persuasive – the following are further considerations.
Taken individually, these phenomena do not equal the force of the zeroed-in strategic perspective that is a feature of Dr. Harb’s essay. Considered collectively, however, it would be hard to argue that, beyond the immediate and dire humanitarian issues that cry out for an effective rescue and relief response, Syria, for so many additional reasons, is not of immense strategic importance.
The classical and modern day country that is, or at least was, Syria – which for the longest time was one of the world’s richest open-air museums and which brims with archaeological treasures – remains at once immense and diverse. Buried in its lands are the relics and remains of those who paved the way before modern peoplehood came to be and whom those with ancestries rooted in the so-called West are the descendants of, including the Canaanites, Hittites, Amorites, Elamites, Nestorian Chaldeans, Greeks, Romans, and many, many more.
In my sixteen visits to Syria in the 1980s and 1990s, one curator of its treasures after another declared that, of the nearly 450 archaeological sites in the country, the number that had been opened was only forty. When the dust of the rebels’ defeat subsides and a sense of normalcy returns to the country, it would seem fair to ask what, therefore, awaits humanity in the gems of insight into human history and heritage that lie beneath Syria’s lands?
With the devastation visited upon Syria these past five years still unfolding, the ensuing losses to knowledge echo the tragically near identical earlier and continuing ones tossed to the winds next door. Indeed, they bear an indelible footprint from the ongoing American-induced chaos – in Rafidain, or historical Mesopotamia, the land between the rivers – in the wake of the U.S.-led invasion and occupation of Iraq.
In one of the first acts accompanying America’s trampling of Iraq’s sovereignty and ending its political independence in 2003, U.S. soldiers, ordered to seize control of the Ministry of Petroleum, sped past the country’s unsurpassed historical museum. In so doing, to the delight of vandals, they left not only the museum, but also the priceless remains of numerous other Iraqi archaeological sites, together with numerous weapons depots, unguarded.
The world’s immediate and lasting response was massive and pervasive disbelief. As if in one voice, many asked: “How could such a powerful America be so mindless of the moral and humanistic obligation to protect one of the world’s richest storehouses of knowledge and understanding related to humankind’s destinies and its earliest achievements and limitations since time immemorial?”
The results of the U.S. Presidential Election last month confounded most American political pundits and many professional pollsters. Donald Trump’s upset victory over Hillary Clinton also surprised many observers in the Gulf Cooperation Council (GCC) countries (the GCC is comprised of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates). Almost immediately after the result was announced, though, it became clear that leaders from the region were ready to embrace the new President-elect and prepared to quickly adjust to the new political reality.
Within hours, GCC officials congratulated President-elect Trump. They expressed a desire to strengthen the decades-old partnerships between their respective countries and the United States. According to at least one Saudi Arabian news outlet, President-elect Trump conveyed a similar sentiment to King Salman. The two reportedly spoke by telephone within hours of the election results. Each side appears to be fully aware of what lies ahead. All appreciate how difficult it will be to overcome the unprecedented political violence and insidious sectarianism that has convulsed seven of the 22 Arab countries in recent years.
Numerous observers in the GCC countries have expressed hope that President-elect Trump’s administration will adopt a proactive approach to the turmoil in the region. Others are particularly eager to ascertain what, if anything, he may do differently than the Obama administration regarding the threat posed by militant groups like the so-called Islamic State. Just as importantly, there is anticipation that the new President will take seriously the GCC’s deep concerns about Iran’s policies in the Arab world.
The reference to the latter concern is especially Tehran’s support of militant non-state actors like Hezbollah in Lebanon, the Popular Mobilization Units in Iraq, and the Houthi rebels in Yemen as well as what further assistance it may extend to the government of President Bashar al-Assad in Damascus. It is difficult, of course, at this early stage to ascertain the contours of what may, at some point, become known as the “Trump Doctrine.” Even so, important lessons can be drawn from history.
A seismic change is taking place in the United States while important foreign policy issues confront its ascendant political leadership. From a resurgent Russia to a dangerous Chinese grab of international waters in the South China Sea, and from the troubled Middle East to uncertainties facing Europe, the new Trump administration – as heir to America’s leadership legacy – will have to hit the ground running on January 20, 2017. Among the insanely complicated challenges it will have to untangle and help resolve is the Syrian civil war and tragedy that has caused internal destruction and invited foreign actors to interfere and intervene in the heart of the modern Levant.
Syria the Unimportant?
President-elect Donald Trump made it clear during his improbable presidential campaign that the United States should just cede Syria to Russia and Iran and allow them to help its president destroy whatever opposition he faces. Incorrectly, and ignorantly, he claimed that the trio was fighting the Islamic State in Iraq and Syria (ISIS). However, to the contrary, the evidence is that the brunt of Russia’s, Iran’s, Lebanon Hezbollah’s, and the Iranian-led Afghan Shia’s military action has been against the moderate opposition.
Candidate Mr. Trump also opined that Syria does not constitute an American strategic interest. This claim has actually been bandied about not only by Obama administration officials. Some Republican politicians and members of the foreign policy community in the American capital also adhere to this view. Neither claim – that Russia and its allies’ attacks have been directed entirely against ISIS and that Syria is of no strategic interest to the United States – was or is true. Mr. Trump’s analyses and assessments are therefore not only perilously flawed; in light of the facts, they are downright dangerous, the exact opposite of accurate, and, as such, constitute serious threats to American and American allies’ national security and related interests.
What Must Come
The first imperative the new administration will have to examine about Syria, come next January, should therefore be Mr. Trump’s claims regarding Syria. Some of the more misleading claims admittedly carry a grain of accuracy and for that reason are seductive, but at the end of the day they are half-baked and hardly the grounds for making sound and effective policy regarding the country. These include the assertion that Syria lacks sufficient hydrocarbon resources to make it a pivotal ring within the international economic chain that American global hegemony cherishes, a perception that is buttressed by the fact that, with the advent of shale oil, the United States’ need for offshore sources of energy has decreased dramatically. A second perception that adds to the confusion is grounded in the fact that, notwithstanding Syria’s having long maintained the peace on Israel’s north-eastern border, and despite its having administered the American-approved Syrian condominium over Lebanon during and after the latter’s civil war, no Damascus government has ever been a pillar of American foreign policy in the Middle East.
The National Council is pleased to present the most recent addition to its Analyses and Assessments series: an essay on “U.S.-GCC Relations and the Fight Against ISIS.” The author, Dr. Imad Harb, is a Non-Resident National Council Distinguished International Affairs Fellow.
Dr. Harb has served as an Adjunct Professor at Georgetown University, George Washington University, and the University of Maryland. Earlier, he worked for seven years as a researcher and analyst in the GCC region. He also served as a Senior Program Officer for Education at the United States Institute of Peace (USIP), where, in 2008, he authored a USIP Special Report on “Higher Education and the Future of Iraq.”
The author takes measure of the robust and enduring defense and security relationships between the United States and the GCC countries. In so doing, he takes note of the nature and extent of progress made by the 67-member coalition battling the so-called Islamic State in Iraq and Syria (ISIS).
Dr. Harb examines the need to plan now, not later, for the reconstruction and stabilization efforts necessary for the territories already liberated – and those yet to be liberated – from ISIS control. In so doing, he identifies the numerous but little reported contributions that GCC countries have made in the fight against ISIS. He also highlights the ongoing challenges to domestic security as well as external deterrence and defense that the region continues to face.
In the process, Dr. Harb acknowledges the ways in which robust GCC-U.S. cooperation is working for the respective partners’ and parties’ collective and mutual as well as individual interests and benefit.
In terms of timing, the atmosphere for producing such an essay could hardly be more receptive. The moment, moreover, could hardly be more propitious. The evidence for both is rooted in the extraordinary array of summit-like meetings of late among the coalition’s principals.
The sheer number of these high-level gatherings has been remarkable. So, too, among the participants has been the seriousness and intensity of their deliberations. Together, these endeavors have hardly been mere academic exercises. To the contrary, they have been the opposite.
Conventional Opinions, Thoughts, Wisdoms
They have exposed the purveyors of so-called informed opinion. They have revealed the quackeries of established thought. They have uncovered what otherwise passes, but should not be allowed to pass unchallenged, as conventional wisdom.
As such, they have helped mightily to counter many of the cynics. Among these were the perennial pessimists. Counted among them were those professional naysayers who had never regarded the GCC-U.S. relationship as a serious alliance or even a credible geopolitical arrangement to begin with.
Dr. Harb’s essay therefore refutes the many who had seemed resigned to believe that whatever the parties to such international leadership summits might agree to – in terms of how best to wage the war against ISIS – is likely to be too little and too late.
In the process, the essay’s author underscores how numerous analytical factors are frequently missed or receive insufficient attention in American commentary regarding the Arab countries, the Middle East, and the Islamic world.
In this, one might ask, “Is there nothing new under the sun?” What’s new and exciting is that, yes, there is.
This has arguably been and remains the case with regard to the anti-ISIS campaign’s efforts to come to grips with ISIS’ roots and rise. And it continues, too, to be the case in the battle to free the territories that ISIS has captured.
Aims and Aspirations
In any rational effort to comprehend how ISIS came into being and what is a driving force for many of its members, it would seem unquestionable that one should, and would, focus foremost on first factors, on causal realities.
With this as context, metaphorically speaking, would the phenomenon of there being a “Made in the United States” label in the eyes of so many ISIS’ victims ordinarily be viewed as a commonplace occurrence?
No, researchers and writers would ordinarily regard something of this nature, context, and dimension as no everyday experience but, rather, a reality and insight of profound importance and relevance.
Yet an insight as significant as this, key as it is to one’s knowledge and understanding of the roots, formation, and evolution of ISIS, is frequently overlooked, forgotten, or ignored.
So, too, for many commentators, is the otherwise seemingly inexplicable reason for how and why so many U.S. government policies, positions, actions, and even attitudes have severely damaged key American foreign policy objectives in Arabia and the Gulf, one of the world’s most vital regions.
“Of what objectives is one talking about,” would be a legitimate question. The answer: the maintenance of security and stability, something so basic to any people’s existence and prospects for future development and prosperity – which is arguably just as legitimate – that it could hardly be clearer and more straightforward.
Included among the decisions with the gravest negative consequences was the George W. Bush Administration’s rejection of the United States’ GCC allies counsel not to attack Iraq.
That the United States’ invasion and occupation of Iraq caused the deaths and maiming for life of thousands of Americans and hundreds of thousands more Iraqis and other Arabs, there can be no doubt.
That one group of human beings could and would attack and murder another group of human beings who are not in the process of mounting an imminent attack begs the simplest and therefore the most profound of questions: “Why?”
Truths and Consequences
If this and the mainly American policies, positions, actions, and attitudes towards Palestine from the very beginning fail to provide insight into the raison d’etre and staying power of ISIS, insofar as its leaders and rank and file members from the beginning have been and remain so anti-American, then what would?
In the process of killing a country – of destroying a nation and a people that had not attacked the United States or posed any grave danger to U.S. interests – America cannot say it didn’t know what might happen.
America did know. Its Arab and especially its GCC friends, allies, and strategic partners in the build-up to the invasion and occupation repeatedly said, “Don’t do it; don’t do it; don’t do it – you don’t know what you’re doing! You’ll be in over your heads and not know how to get out.”
Prior to the American-led attack against Iraq, this writer participated in separate meetings with two quite different GCC foreign ministers in their respective countries who reiterated this message. The ministers spoke to members of delegations of American leaders for whom it was my privilege to lead to the GCC region’s countries on fact-finding missions up to the day in March 2003 when the invasion began.
But speak the truth as often and as forcefully as these and many another Arab leaders did, it was all for naught.
Did not the military action that the United States commenced in 2003 unleash the torrents of carnage that continue to this day? And if not, what did?
Does it require a rear view mirror or a replay of the recordings from years past to underscore that the present challenges which the United States’ GCC allies cautioned against more than a decade ago are – surprise, surprise – also the ones that a robust and enduring GCC-U.S. partnership are working to solve?
This latter question is but one among numerous others that Dr. Harb’s essay seeks to address.
Dr. John Duke Anthony Founding President and CEO National Council on U.S.-Arab Relations Washington, DC
Much has been said about the supposedly troubled relations between the United States and the Gulf Cooperation Council countries. Many in Washington have gone out of their way to paint the relationship as weakening in a way and to a degree not previously envisioned. The “evidence”: some cite a desire on the part of the Obama Administration to shift its focus to East Asia to counter Chinese adventurism.
Others point to something else. They cite the brokering by the United States of a nuclear deal with Iran. From this perspective, the latter will purportedly pave the way to a full return of American-Iranian relations but only – and some would claim obviously – at the expense of the GCC.
Still others note the United States’ lukewarm attitude regarding the Syrian quagmire, and/or what appears to be a hands-off approach toward pressing concerns elsewhere, whether elsewhere in the Arabian Gulf or in the wider Middle East.
And yet, the reality is that, in contrast, the nature and extent of political coordination and military cooperation between Washington and Gulf capitals have seen a robustness that proves the exact opposite.
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.