There’s always plenty to talk about when a member of Saudi Arabia’s ruling clan comes for a visit. After all, almost every important U.S. endeavor in the Middle East – from seeking paths to end the Syrian war to the nuclear deal with Iran – draws in Riyadh in one way or another.
The conversation is about to get a little different, however.
When Saudi Arabia’s deputy crown prince, Mohammad bin Salman, begins meetings this week in Washington and New York, he will be pitching an audacious idea: How the kingdom wants to reinvent its economy and move away from its dependence on oil sales to keep everything afloat.
The 30-year-old prince – the son of King Salman and third in line for the throne – has emerged as the front man for the so-called Saudi Vision 2030, which is nothing short of a top-to-bottom rethink of how the kingdom takes in money (more investments, new taxes) and how it spends it (fewer subsidies, less government largesse).
There are significant obstacles in the way. It’s unclear whether the kingdom’s powerful and ultra-conservative religious establishment will be happy with a more Western-style economic model. And then there’s a major youth bulge. More than half the country is under 30 years old, and many have grown up with the expectation of easy government jobs and a lifetime of generous handouts.
“Structural reforms could prove to be tricky,” the London-based research firm Capital Economics wrote in a note to clients, the Bloomberg news agency reported. “History suggests that it’s best to take reform announcements in Saudi Arabia with a large pinch of salt.”
Yet Saudi leaders are doing everything they can to show they are serious about a pivot from oil, which has clawed back to around $50 a barrel. No one, however, foresees a big jump in crude prices in years to come.
So oil-centric nations have been busy looking for different ways to bring in cash. Qatar has been on an international buying spree for years with its huge sovereign wealth fund. The United Arab Emirates has an open-door policy for big investors and well-heeled tourists.
OPEC’s top producer is now trying to catch up. The Saudi economic retooling began in April with plans to sell shares in the centerpiece of the kingdom’s oil economy, the petro-giant Saudi Arabian Oil Co., universally known as Aramco.
Then Prince Mohammad sketched out bold proposals to create the world’s largest sovereign wealth fund, which could sink money into everything from property to business ventures worldwide. The prince’s U.S. visit could be something of a scouting trip – and a mission to reinforce Saudi warnings.
The Saudis have threatened a massive sell-off of their U.S. holdings if Congress passes legislation that could clear the way for lawsuits against the kingdom by families of victims of the Sept. 11, 2001, terrorist attacks. Fifteen of the 19 hijackers were of Saudi descent.
The White House has said President Obama would veto it. For good reason. In May, a Treasury Department report said Saudi Arabia held $116.8 billion in U.S. debt, Bloomberg reported.
In an opening salvo of the Saudi economic changes, rulers last month dumped their veteran oil minister, Ali al-Naimi, and replaced him with the Aramco chairman. Also shaken up was the leadership of the central bank, which has a key role in managing the kingdom’s sovereign wealth fund.
Lots more is on the drawing boards and could be raised by Prince Mohammad in his U.S. meetings.
Saudi leaders want to start a new property boom by working with private developers to build on state-owned lands. Visa procedures could be streamlined and paths smoothed to ease foreign investment, the deputy crown prince has said.
On Saturday, Aramco and General Electric announced a partnership to build Saudi Arabia’s first wind turbine.
The goal, Saudi officials say, seeks to more than triple non-oil revenue to about $141 billion by 2020. But that ambitious target would still be dwarfed by oil sales even if crude prices stay low.
At the same time, rulers want to trim costs. Possible moves include reducing some of the subsidies for Saudi citizens, such as low-cost water and electricity, and imposing more taxes and fees on the kingdom’s extensive foreign workforce, the backbone of nearly every industry from construction to retail.
But there’s more than just macroeconomics in play. The front-line role for Prince Mohammed is yet another sign of the generation shift in motion.
The current Saudi king, Salman, will be the last ruler from among the many sons of Abdul Aziz, the founder of the modern Saudi state. Salman’s direct heir, Prince Mohammad bin Nayef, is his nephew.
Picking the younger Prince Mohammed as the public face of the economic plans appears part of a wider image-building campaign to boost his leadership credentials and test the waters of potential reforms.
In April, he told Bloomberg: “We believe women have rights in Islam that they’ve yet to obtain," suggesting it could one day extend to ending the kingdom's male-only driving rules. For the moment, however, the only specific provisions for women in the economic blueprint are plans for a slight increase in jobs.