Sembra che il sovrano saudita de facto, il principe ereditario Mohammed bin Salman (MBS), sia in missione per distruggere il gigante mondiale del petrolio, prendendo, una dopo l'altra, decisioni economiche mal concepite. Ora, mentre MBS ordina nuovi tagli disperati ai prezzi del petrolio saudita, la sua economia sta implodendo da tutte le parti, dallo stupido piano Vision 2030 fino al settore petrolifero tradizionale, la fonte per l'87% del bilancio del Regno. Il declino economico dell'Arabia Saudita avrà enormi conseguenze geopolitiche al di là del Medio Oriente.
As if it had learned
nothing from its 2014 oil price war, then targeting the growing USA oil
shale industry, Saudi Prince MBS ordered a new oil price war in March.
That was after Russia, not an official OPEC member, declined to accept
an added 300,000 barrel a day cut in output. The Russian argument was
that doing so in a very uncertain world oil market would be foolish and
counter-productive. The Russians were right. Saudis flooded world
markets with an added 3 million barrels a day by early April. That was
just the time when the global panic around the COVID-19 coronavirus
spread led to a de facto shutdown of world airlines, auto and truck and
ship fuel demand. MBS forgot to take that into account, and oil prices
plunged. With it, the Saudi oil revenues to the state budget fell too.
Within two weeks
following the March Saudi oil war, this against both Russia and USA,
world oil prices had plunged from near $60 a barrel to below $30. A
catastrophe to put it mildly. Saudi Arabia needs oil at $90 a barrel to
balance its state budget according to Fitch Ratings. By April as the
coronavirus lockdowns were in full force around the world, Saudi oil
export revenue was down a whopping 65% from April 2019. To put this into
perspective in 2012 Saudi oil export earnings were some $350 billion.
For 2020 estimated earnings may not reach $150 billion.
By early April global
oil demand had plunged by an unheard-of 30% as the coronavirus
lockdowns took their toll on the world economy. Only because of an
unprecedented temporary OPEC cut then in oil production of 10 million
barrels daily, led by Saudi, and this time joined by Russia, did world
prices slowly rise from lows nearly $20 to around $40 a barrel, still a
far cry from recovery. However prices are again going lower in
mid-September as the world economy, including China and the USA, are far
from recovered in oil demand.
This situation is a disaster for the mid-term project of MBS to leapfrog Saudi Arabia from oil dependency into the 4th Industrial Revolution. MBS took a report prepared for him by the controversial McKinsey consultants and called it Vision 2030.
To call the Saudi
Vision 2030 an unrealistic pipe dream is putting it mildly. The
blueprint, unveiled by MBS in late 2017, calls for making an advanced
high-tech nation out of the desert Kingdom in little more than a decade
The overall Vison
2030 plan is little more than a grab-bag of neoliberal proposals that
will do little in the current environment to bring the promised new
economy. In reality it will likely destroy what oil-based economic
stability there is and greatly aggravate income disparities within Saudi
Arabia where an estimated 20% live in poverty despite decades of oil
Explicit goals as of
2016 included three main pillars to create a “vibrant society, a
thriving economy, and an ambitious nation,” whatever that means. Out of
the 33 headings in the Vision, 14 deal with the economy, 11 with social
issues, and eight with administration. With a population 70% officially
overweight, MBS’ “vision” includes a goal of “doubling the number of
Saudis exercising each week.” Other goals include raising personal
savings, and having three cities among the top 100 ranked globally. Neom
is not one.
Then the plan states
lofty goals such as to increase non-oil GDP from 16 percent to 50
percent of GDP; reduce unemployment from 12 percent to 7 percent;
attract $1 trillion in foreign investment. Then incredibly, the vision
aims to attract 1.2 million (non-religious) tourists, and 30 million
pilgrims a year and to “raise the Public Investment Fund’s assets to $2 trillion.” In
2018 Saudi attracted a mere 200,000 tourists aside from religious
pilgrimages. Last year, some 2.6 million pilgrims went on Hajj, with
religious tourism generating $12 billion. This year due to coronavirus
all pilgrimages were cancelled.
The Saudi state PIF
(Public Investment Fund) currently has some $320 billion. Goal is $2
trillion. Simply said, the Vision 2030 that should lift Saudi Arabia out
of the petroleum era into the high-tech era with 5G, AI, gene-editing
and such, has planned to open up the country, one of the most
religiously conservative in the world, by privatizing chunks of the
valuable state sector, cutting government oil and other subsidies (de
facto a tax on the population who can least afford it) , and somehow
attracting foreign investors. That was in 2018. The website officially
has not been updated since.
The heart of the
“vision” of MBS is creation of an entirely new city, Neom, which means
“new future” in Arabic, about the size of Belgium. The official website
describes the plan, “Neom will include towns and cities, ports and
enterprise zones, research centers, sports and entertainment venues, and
tourist destinations. It will be the home and workplace for more than a
million citizens from around the world.” As a euphoric MBS told
Bloomberg in a 2017 interview: “We want the main robot and the first
robot in Neom to be Neom, robot number one. Everything will have a link
with artificial intelligence, with the Internet of Things – everything.”
The planned location
for Neom is on a barren patch of desert on the Red Sea near to southern
Israel, Egypt and Jordan. The closest Saudi town is Tabuk. As the
official description notes, the planned one million residents will not
likely be native Saudi engineers and IT rocket scientists. They must
import the high-tech talent.
The estimated $500
billion futuristic Neom is the pet project of MBS within the Vision
2030. It is to be financed by the Saudi PIF chaired by the omnipresent
Crown Prince Mohammad bin Salman Al Saud. The PIF is to finance the
Saudi “great leap forward.” It even included a Saudi-financed scheme to
incorporate Egypt’s town of Sharm el-Sheikj as part of the Neom luxury
tourist and economic zone.
How? Here it gets
sticky. In 2016 Saudi foreign reserves were at $700 billion. This April,
as oil prices collapsed, they stood at $448 billion. To meet rising
state budget deficits the government has tripled VAT consumer taxes and
doubled the price of gasoline, hardly winning public support. VAT went
from 5% in 2018 to 15% this year.
The Public Investment Fund headed by MBS has fared none too well either.
source that was expected to raise another $100 billion for the PIF was
the privatization of the huge ARAMCO state oil company. In the current
oil environment, it flopped. Instead of the initial five percent to be
floated, and raise over $100 billion, the IPO was scaled down, with 1.5
percent sold for $26.5 billion, most internally, as foreign investors
were not interested in the prospect. Now with their latest oil war,
foreign confidence in ARAMCO as an investment is gone. “They’ve lost
including those that invested in Aramco, as they started a price war
and cheated them all [of expected profits],” said Hugh Miles, editor of
Arab Digest, in Cairo. Future sales of Aramco stock were intended to transform PIF into a $3 trillion fund. Not likely at present.
Another hope of MBS
to pump up the assets of his PIF fund was to sink billions into the
Japan SoftBank. That has also turned out badly. In May, SoftBank
announced that during the fiscal year 2019-2020, the Vision Fund, in
which Saudi Arabia’s PIF invested $45 billion, incurred a loss
calculated at $17.7 billion. According to reports Saudi Arabia’s PIF has
also cancelled plans to join with SoftBank in a $200 billion solar
More recently the
Saudi central bank, SAMA, loaned another $40 billion to the PIF to take
advantage of what it hopes are bargain buys amid the COVID-19 lockdowns.
They are betting on a future recovery of the global economy, including
of the troubled Boeing, that is looking ever more dubious.
With the hopes for
transforming the Saudi economy tied to the state oil giant ARAMCO
prospects amid corona lockdowns and declining oil prices are grim. To
make matters worse ARAMCO must pay a dividend of $75 billion as it
promised when it listed 5 percent of its stock in December 2019. The
company has to keep up these annual payments for the next five years.
At this point not
only is Neom dead in the water, but also with it the entire Vision 2030
is a shambles. Saudi Arabia is struggling as never since 1945.
Now that her allied
neighbors, the UAE and Bahrain, have formally agreed to recognize
Israel, MBS is under significant pressure to join the US-brokered
initiative. All indications are that world oil demand, especially in the
industrial countries of the EU and North America will decline as
pressure for a green agenda politically grows. That has already created a
serious global oil glut that Saudi is able to do little to change.
The recent 25-year
Iran-China strategic partnership which apparently includes a significant
military component, increases the pressure on MBS and the Saudis to
devise a new geopolitical strategy beyond the series of proxy wars in
Yemen and elsewhere that have been a significant failure for the Saudi
side, with Iran-backed Houthi rebels able to regularly lob missiles at
Riyadh and other Saudi targets. Several months ago the UAE intervened in
Yemen to effectively partition the country along old Cold War lines,
effectively ending the fruitless, destructive war against Saudi wishes, a
clear humiliation of MBS.
Three years ago MBS
declared an economic embargo against Qatar based on the latter’s close
ties to the Muslim Brotherhood, now banned in Saudi Arabia, Egypt and
other Gulf monarchies. As MBS is being pressed to openly join UAE and
Bahrain in recognition of Israel, something already well underway behind
the scenes, Washington this week urged Saudi Arabia to heal its rift
with Qatar in order to increase pressure on Iran. Were that to happen,
with Saudi Arabia today in a far weaker economic position, a new
strategy of dealing with Iran might emerge. What would be the future of
China’s Belt, Road Initiative that once envisioned extending to Turkey
and Israel is unclear amid strong US counter-pressures. At this point,
as the entire Middle East is in flux, the once mighty Saudi monarchy is
looking like a giant with feet of clay as it sees the twilight of its
power over world oil.
F. William Engdahl is
strategic risk consultant and lecturer, he holds a degree in politics
from Princeton University and is a best-selling author on oil and
geopolitics, exclusively for the online magazine “New Eastern Outlook.”