The crisis of globalism has undermined the Saudi model of the economy and threatens a new war in the region
The US Secretary of State discussed the situation in Yemen with the Minister of Foreign Affairs of Saudi Arabia. What it was about specifically – officials express themselves very streamlined. Mike Pompeo and Adel Al Jubeir exchanged views on a wide range of issues, including Syria, Iran, Lebanon, Libya, Afghanistan and Yemen.
However, judging by the coincidental agreement of the Kingdom to cease hostilities and contribute to the achievement of a peace agreement between the government of a neighboring country and the Hussite rebels in the talks in Jordan, we can say with confidence that the main topic of the meeting was the end of the war. Being the only fundamental basis of the anti-Hussite coalition, the refusal of Riyadh to continue the hostilities actually means an early official final disintegration of the coalition created by the Americans.
The second indirect confirmation of the assumption is the resignation of the former General of the Marine Corps, Anthony Zinni, who until recently was responsible for the creation of an ‘Arab NATO’ from the Middle Eastern states.
All together means that the richest monarchy of the Middle East did not bear the burden of financial expenses. This highlights the question of possible prospects for the development of events. Unlike many other countries, the Kingdom is not just one of the leading energy suppliers on the world market, it has been closely linked with the outcome of the globalist economic revolution. In a sense, the current Saudis repeat the path of French rentiers of the late XIX – early XX century. Only then the history of globalism has just begun, and today it is at its twilight.
Riyadh has a plan that promises the possibility of a radical modernization of the national economy, guaranteeing the preservation of leading positions on the world stage. What will come of it – becomes a matter that determines not only the fate of Saudi Arabia itself, but also the ability to drastically influence political events in the entire Middle East.
It is called Saudi Vision 2030 and was officially presented in April 2016. It is believed that the idea of the project belongs to the current Crown Prince of the Kingdom Mohammed Ben Salman Al Saud. According to the authors, after a decade and a half, Saudi Arabia intended to get a strongly diversified economy that depended little on oil revenues, with absolute non-resource dominance, including industrial sectors of the economy.
Achieve the desired was intended by the interconnected solution of several basic tasks. First, dramatically expand private business, bringing its share in GDP from 37 to 67%. Secondly, to reduce the contribution of oil revenues to a third of the total state revenues, while raising the volume of oil and gas revenues by a factor of one and a half.
Thirdly, create a competitive and export-efficient industrial cluster. Including capable of producing ‘at home’ at least half of the weapons systems used by the country (today the share is only 2%). Fourthly, to build in the country (first of all on the coast) five super-modern cities for two million inhabitants each, where all supporting functions will be performed by computers, automatic systems and robots controlled by artificial intelligence.
Fifth, create an innovative cluster of advanced medical products. Sixth, become the center of Middle Eastern tourism. And in two forms. Islamic tourism, associated with the implementation of the Hajj and visiting the Muslim holy cities of Mecca and Medina, should expand from the current 2.5–3 million pilgrims per year to at least 10 million.
In addition, it was planned to create a special tourist area with significant relaxation of Sharia norms for foreign tourists, including with the permission of alcohol. According to calculations, this should have brought the country up to 5 million more rich and super-rich tourists a year. And so on the little things, like the empowerment of Saudi investment funds, raising the level of education and even granting additional rights to women, including the right to work.
Theoretically, by the end of 2020, the Kingdom intended to “get off the oil needle”, reduce unemployment from 11.6 to 7% and create at least 2 million new jobs, with the prospect of gross domestic product to at least double by 2030, bringing the share of non-oil exports is up to 64%. More than a dozen years remain before the deadline, but too much indicates that the result will most likely be completely opposite. At least, the “National Turn 2020” program, which is a kind of the first key stage of the “big plan,” is clearly critical.
At the moment, nothing is heard about any progress in the deployment of Boeing and Lockheed Martin corporations in KSA, announced as key elements of the future high-tech cluster. The situation is similar with the factories of Intel, Apple and AMD. Prince Salman visited Facebook headquarters and also met with the creator of Twitter, but apart from general expressions about the convergence of positions and the improvement of mutual understanding, the final press releases contained nothing more.
Judging by the activity shown by the country’s leadership in attracting foreign companies to domestic projects (by the way, including Russian ones), in the basic behavioral principles, the Saudis remain true to their old traditions. To realize all the declared magnificence is supposed, as always, by proxy. 85% of jobs in the country are occupied by specially imported foreign labor, while KSA citizens consider only military service, middle and top management in private companies, and also the civil service worthy of themselves.
As a result, there was a noticeable bias, when 5/6 of, at first glance, not very high (11.6%) unemployment in the country falls mainly on young people, whose unemployment reaches a quarter. All jobs created by state programs are usually associated with low-skilled labor, which is traditionally unacceptable for Saudis.
In other words, while appealing to Saudi Vision 2030, the ruling elite of the Kingdom is actually implicitly trying to buy its future. Literally. For money. And this creates a dead end, fraught with the collapse of the state in the perspective of the next quarter of a century. For the simple reason that the Saudis are running out of money.
At first, the invasion of Yemen was too expensive. According to Harvard University, Riyadh spent an average of $ 200 million a day on it. From April to December 2015, the total amount of expenses, according to Forbes magazine, amounted to 725 billion, and by the summer of 2017 the bar had already risen to 1.5 trillion dollars. This is despite the fact that the KSA budget deficit in 2015 was estimated at 98 billion, and from next year, the country had to resort to external loans to finance the budget.
Then a ‘big drop in oil’ happened. There are some fairly reasonable opinions about the authors and performers of the process, but what is important now is another thing: in the end, a decrease in quotations more than three times hurt the incomes of the Kingdom very hard. If in 2011 King Abdullah bin Abdul Aziz managed to extinguish the growth of the company’s public outrage by allocating more than 121 billion rials to benefits for the poor and the unemployed, Prince Salman is now forced to act the opposite – through a reduction in the number of officials, a reduction in domestic prices fuel (gasoline went up 1.8 times), electricity and water.
With new cities, too, somehow not wondered. Of the five initially announced today in the media space, only one is still commemorated – NEOM – with an area of 26.5 thousand square meters. kilometers of total estimated budget of $ 500 billion on the northwest coast of the Red Sea in the Gulf of Aqaba. The project is headed by the former head of Siemens AG Klaus Kleinfeld, by the way, a member of the steering committee of the Bilderberg club. At one time, he also headed the work of the US-Russian Business Council and was a member of the consultative council under the Chinese Prime Minister.
In addition to the city itself, the cluster will have its own power supply from the world’s largest solar power station and will be provided with fresh water from desalination plants (possibly NPPs built with Russian participation), as well as a high-tech zone for the production of robots, both for the needs of the city itself and for export.
The first stage of construction work is promised to be completed by 2025, that is, there is still time, as it were, but I would like to note that with the absolute beauty and avant-garde of the stated goal, but so far the wind between the age-old dunes still walks at the construction site. Moreover, back in 2006, the Saudis announced a very similar financial and business center named after King Abdullah, at a much lower cost – just 10 billion – which was also eventually abandoned at the talk stage. Although then the possibilities and money of the country was not like the present one.
Thus, of all declared dreams, Saudi Arabia remains the only potential source of future wealth – investment funds that have accumulated decent money in times of oil well-being. And that’s all the Kingdom has today. Moreover, the determination with which Prince Salman extorted the money ‘to the Saudi Vision 2030 fund’ during a big sweep among the other princes (more than seventeen members of the royal family were arrested and, so to speak, ‘dispossessed’) Funds are really not that much.
Especially since the main source of potential funding, Saudi Aramco’s IPO, ultimately did not take place. As they say in business circles, influential international auditors invited to prepare a primary placement estimated the asset to be about three times lower than the minimum price designated by the Kingdom.
Ultimately, Saudi Arabia remains, albeit not yet poor, but still the most ordinary rentier. In addition, with the money invested in poorly managed and often even weakly controlled assets.
For example, by blackmailing ‘allowing American citizens to file lawsuits against KSA for the’ September 11, 2001 terrorist attack. ‘
One of the outcomes of Pompeo’s visit to Riyadh was a statement that the Kingdom would finance the rehabilitation of the economy and infrastructure of the war-torn Syria. Only Saudi funds from the United States will have to do this, that is, investment income will go first to America and only then what remains will be the Saudis.
However, the main risk lies elsewhere. The era of globalism is ending.
Even China, which has relied on it, is forced to think about a serious
revision of plans. And America, which is building its own closed
cluster, is frankly robbing all of its foreign investors. Is that the
runaway Russian oligarchs in line for dispossession were facing the
So, in the coming decade, the amount of rental income will inevitably fall, and this will put the planet’s last largest absolute monarchy in front of the difficult prospect of a deep internal crisis. In essence, they can build there as many “highest skyscrapers in the world” as they like, but oil was the only basis keeping local clans as part of a single Saudi state. While it is still there, Saudi Arabia exists. Its exhaustion will be the end of the whole Saudi kingdom.
Although it will happen, of course, not yet tomorrow. While wells continue to give oil. Another question is how long it will last. The credibility of Saudi official figures on available reserves is becoming increasingly questionable. But the essence is different. As you know, politics is always a concentrated expression of the economy and is directly dependent on the size of the available financial resources. The magnitude of the former influence of KSA in the Middle East at the end of the nineties – the beginning of the zero years was based on the vast reserves of capital provided by oil. Now their money lake is clearly drying up significantly, which inevitably leads to fundamental changes in the overall balance of forces in the region.
The case may even turn into a war, since its own weakening of Saudi Arabia and the ambiguous position of Turkey leads to a significant elevation of Iran. And any significant political reinforcement of one of the parties there has always traditionally turned into an attempt to exchange political weight for control over neighboring territories, which was not without weapons. And then there is the unresolved problem of Israel looming on the horizon.