Rabat - Crown Prince Mohammad bin Salman (MBS) arrived in the US on Monday for his first trip since being named crown prince and heir apparent in the Kingdom of Saudi Arabia.
Rabat – Crown Prince Mohammad bin Salman (MBS) arrived in the US on Monday for his first trip since being named crown prince and heir apparent in the Kingdom of Saudi Arabia.
The 32-year-old crown prince has an ambitious agenda to modernize the Saudi kingdom and reshape the Middle East just as numerous factors are conspiring to disrupt a decades-long order.
The crown prince’s photo op session in the Oval Office with President Trump on Tuesday featured smiles and a president keen to brag about US defense contractors who make “the best equipment in the world.” The president immersed the crown prince in his world of superlatives that he relishes unashamedly: “[a] great friendship, the great relationship…probably the strongest it’s ever been.”
The superlatives may put the crown prince in the right mood for the next leg of his American tour which includes the two most populous states, California and Texas, also the two largest state economies in the United States. Oil prices are not where the Saudis would prefer them as the kingdom undertakes a massive and expensive restructuring of both the economy and civil society. But there’s no time like the present. Perhaps MBS will harness some of President Trump’s oratorical abilities to sell American companies and investors on the opportunities that exist in Saudi Arabia. Think big, be big.
In some ways California and Texas signify everything that Saudi Arabia wants to be in the future. California, the Golden State with the world’s sixth largest economy, excels at everything from agriculture to technology to renewable energy. Texas, with an economy just slightly smaller than that of Brazil, is home to what MBS possibly envisions for the kingdom: a petroleum economy that has evolved into a dynamic incubator for other business sectors like medical technology and research, global finance, and transportation.
MBS will meet with leaders from technology industry giants like Google and Apple when he visits Silicon Valley near the Bay Area. It has been reported recently that the Saudi state oil company, Aramco, has been in talks with Google’s parent company, Alphabet, to create data centers in the kingdom. As oil drilling becomes a high-tech endeavor and as new technologies allow oil fields to be more productive for longer periods of time the need for big data will increase.
As part of the Vision 2030 reform plan for the kingdom, the promotion of culture and entertainment will now be a priority. Half of Saudi Arabia’s 33 million citizens are under 25; as the Vision 2030 plan notes, “…the cultural and entertainment opportunities currently available do not reflect the rising aspirations of our citizens and residents…”
The crown prince likely will meet executives from the entertainment industry as he envisions Saudi Arabia becoming an exotic tourist destination and a location for film/TV production. The Saudi government recently announced plans to issue tourist visas beginning next month. While the Hajj attracts nearly 2 million followers each year, demystifying Saudi Arabia is critically important in order to genuinely sell the kingdom as a long-term investment destination and a place worth visiting.
Not Yet Beyond a Petroleum Economy
The oil era is not yet ending. But it is coming eventually. It’s another motivating factor for Saudi leaders to look beyond oil. In the meantime, a revolution has been unfolding for several years which has eroded the unique power of OPEC to set prices unchecked. Sedimentary rocks across North America hold solid organic compounds called kerogen that can be converted to shale oil, a substitute for crude oil.
The shale oil boom has radically transformed the fossil fuel industry. Almost fifty years after the previous peak in oil production in the US, oil production reached 10 million barrels per day in the US late last year, a first since 1970. The International Energy Agency said last month that US production of hydrocarbon products (petroleum oil, shale or natural gas liquids) could reach 17 million barrels a day by 2023.
Back in June 2014, before the shale oil boom, oil briefly reached $112 per barrel. The challenge for oil producers who rely on oil exports to fund government operations is to now diversify the economy. Nations are sensitive to oil price spikes and are actively looking for ways to avoid them. Morocco, for instance, has embarked on a strategy that will likely see domestic renewable energy sources account for forty percent of power generation by 2020.
The crown prince is fortunate, on one level, to have a friend in the White House whose priority commitment is to fossil fuels more than to the warm embrace of renewable energy. As a candidate, Trump vowed to end the “war on coal.” There’s little connection between coal country and oil-rich Saudi Arabia but the embrace of fossil fuels by the Trump Administration will be comforting to the Saudis as they embark on the challenging endeavor to retool their economy.
Additionally, youth unemployment is high in the kingdom—30 percent or higher. As the crown prince rebuilds Saudi Arabia for the digital age, young Saudis rightfully expect a future where professional and personal dreams lead to actual employment opportunities.
Aramco owns the largest oil refinery in the US, located at Port Arthur, Texas. The economies of the two nations are becoming more tightly linked, from oil refining to treasury debt, industrial investment to global finance. How the crown prince juggles the numerous current internal and external challenges facing the kingdom will say a lot about how close the two nations will remain once the oil era really comes to an end.