If Saudi’s are Getting off Oil Addiction, Shouldn’t We?
April 27, 2016
It was former Saudi Oil Minister Sheik Ahmed Zaki Yamani who first said, “We did not leave the stone age because we ran out of stones.”
Move away from fossil fuels, and many things start to look different.
More evidence that the Oil industry’s troubles are not just another cycle. Not only are Oil’s most entrenched and privileged tyrants thinking of a world after oil, but cracking the door to a more open society.
What is it about fossil fuels that make governments more closed, insular, and anti-democratic?
Recent news from Saudi Arabia reminded me of this piece from Tom Friedman:
When I heard the president of Iran, Mahmoud Ahmadinejad, declare that the Holocaust was a “myth,” I couldn’t help asking myself: “I wonder if the president of Iran would be talking this way if the price of oil were $20 a barrel today rather than $60 a barrel.” When I heard Venezuela’s President Hugo Chávez telling British Prime Minister Tony Blair to “go right to hell” and telling his supporters that the U.S.-sponsored Free Trade Area of the Americas “can go to hell,” too, I couldn’t help saying to myself, “I wonder if the president of Venezuela would be saying all these things if the price of oil today were $20 a barrel rather than $60 a barrel, and his country had to make a living by empowering its own entrepreneurs, not just drilling wells.”
As I followed events in the Persian Gulf during the past few years, I noticed that the first Arab Gulf state to hold a free and fair election, in which women could run and vote, and the first Arab Gulf state to undertake a total overhaul of its labor laws to make its own people more employable and less dependent on imported labor, was Bahrain. Bahrain happened to be the first Arab Gulf state expected to run out of oil. It was also the first in the region to sign a free trade agreement with the United States. I couldn’t help asking myself: “Could that all just be a coincidence? Finally, when I looked across the Arab world, and watched the popular democracy activists in Lebanon pushing Syrian troops out of their country, I couldn’t help saying to myself: “Is it an accident that the Arab world’s first and only real democracy happens not to have a drop of oil?”
Saudi Arabia is a country near-synonymous with the oil industry, but now the kingdom is moving to end what it calls its “addiction to oil” with a new plan.
The plan, known as Vision 2030, was announced Monday by Deputy Crown Prince Mohammed bin Salman, the fast-rising 31-year-old said to be at the helm of Saudi Arabia’s plans to modernize its economy. In an interview with al-Arabiya news channel conducted in his palace in Riyadh, Mohammed said that under the plan, the country will exist “without any dependence on oil” by 2020 and would soon be a “global player” on the world investment stage.
That would mark a big change. Since large quantities of oil were discovered in the then-nascent Saudi kingdom in 1938, the oil industry has come to dominate the country’s economy. Revenue from the industry earned the Saudi government billions and enabled the ruling royal family to offer generous benefits to Saudi citizens. In recent years, the oil industry had accounted for an estimated 90 percent of the government’s income.
However, as oil prices plunged from $100 a barrel in 2014 to less than half that amount in 2015, the kingdom’s coffers have been hit badly. Last year, the country ran a deficit of $98 billion, about 15 percent of its gross domestic product. There are widespread fears that without reining in its profligate spending, Saudi Arabia risked financial disaster: A report from the International Monetary Fund released in October warned that the government could run out of money within five years.
Historically, oil has accounted for 90% of national revenue. A crash in the oil price since mid 2014 has blown a hole in Riyadh’s budget, forcing it to draw on reserves.
The prince plans to increase the share of the national investment fund holdings overseas from 5% to 50% by 2020, broadening its sources of income.
Generous state welfare provision is also set to be slashed, including consumer fuel subsidies.
In its submission to the UN climate deal signed in New York last Friday, the Gulf state said its economic diversification plans would cut 130 million tonnes of CO2 equivalent a year by 2030.
Middle Eastern analyst Glada Lahn told Climate Home that was a conservative estimate and Saudi Arabia could double the savings by curbing wasteful consumption.
Reforms promised by a young Saudi prince are couched in references to the kingdom’s Islamic tradition but include ideas likely to upset some conservatives, risking future ruptures over the direction of society.
Deputy Crown Prince Mohammed bin Salman’s “Vision 2030” plan, which the 31-year-old announced on Monday, largely aims to transform Saudi Arabia’s economy in an era of low oil prices and made few specific pledges of social change.
However, it also stepped into areas that have long been cultural battlegrounds in a country defined by its religious conservatism.
For the Al Saud dynasty, which has always ruled in alliance with the powerful clergy of the kingdom’s semi-official Wahhabi school of Sunni Islam, that may require care in how far to risk a conservative backlash.
Presenting the plan, Prince Mohammed batted away the question of whether women would soon be allowed to drive. Instead, he turned to the usual formulation of Saudi rulers that their society was not yet ready for this, but he appeared to raise the possibility of change elsewhere.
Seemingly anodyne promises to invest in cultural events and entertainment facilities, to encourage sports and promote ancient heritage and Saudi national identity, are highly controversial among conservatives.
In Saudi Arabia, cinemas are banned and women’s sports are discouraged as promoting sin. The pre-Islamic era is dismissed as the age of ignorance, its relics deemed ungodly, and some clerics even see patriotism as tantamount to idolatry.
“When he talked about quality of life, about entertainment, he is aware of the changes in our culture and that’s what people understood him to be talking about. But at the same time, he showed reluctance,” said Jamal Khashoggi, a leading Saudi journalist.
Prince Mohammed has presented himself as the face of Saudi youth, devoutly Muslim but in a way different from the older generation of clerics, being more open to the outside world and more accepting of its cultural influences.
Who knows? Saudi women may soon be able to drive – in electric cars…