Saudi Crown Prince Mohammed bin Salman speaks at a meeting of the Islamic Military Counterterrorism Alliance in Riyadh on Nov. 26. (Saudi Press Agency via AP, File)
Mohammed bin Salman bin Abdulaziz al Saud, the Crown Prince of Saudi Arabia, will be leaving his kingdom next month for a three-week charm tour. His agenda hasn’t yet been revealed, but sources say MbS (as he’s known) will start his tour March 7 in London, then head to New York, Washington, San Francisco and maybe even Texas. It was supposed to be his father, King Salman bin Abdulaziz al Saud, 82, visiting the United States, as agreed in a phone call between him and President Donald Trump last September. But the monarch has allowed himself to be sidelined, to underscore that his 33-year-old crown prince is the one running the show.
Prince Mohammed is handsome, charismatic and sports a luxurious beard. He’s imposing, like his 6’4” grandfather, Ibn Saud, the founding King. The last time the prince came to the U.S., in 2016, he traded his traditional robes for a blazer and blue jeans and test drove the latest virtual reality gear with his Facebook pal Mark Zuckerberg. At the White House, we can expect Trump and MbS to yuck it up, recalling the fun they had last May when Trump made his first-year pilgrimage to the Kingdom. He joined with King Salman, Prince Mohammed and Rex Tillerson to perform the traditional Bedouin sword dance. Later they visited the Saudis’ new Global Center for Combating Extremist Ideology and posed for a striking picture, their hands reaching out together to grasp a mysterious glowing orb. The highlight for Trump: $350 billion in deals reached between the kingdom and the U.S., including $100 billion or so in arms sales and a $20 billion allocation to Blackstone’s private equity fund targeting American infrastructure. Blackstone CEO Stephen Schwarzman will likely make an appearance; he recently lauded the “extraordinary” pace of Saudi reforms under the crown prince; “It’s happening so fast and is so bold.” A little bit of "M.A.G.A." virtue signaling will work wonders. But His Royal Highness is not coming with the intention of investing in America, rather in hopes of wooing western investors to inject capital into Saudi Arabia.
“His message will be that Saudi is a safe place to do business,” says Kristian Coates Ulrichsen, a Middle East scholar with Rice University’s Baker Institute. His ambitious Vision 2030 plan aims to help diversify the kingdom away from oil (before it’s too late) with $500 billion or so of investments like a new high-tech city called Neom; a Red Sea luxury resort where women will be allowed to wear bikinis; and an entertainment city with a Six Flags theme park. Alcohol remains prohibited kingdom-wide.
What does MbS need American capital for? Over the past 50 years Saudi Arabia has become synonymous with endless wealth. But they’re no longer loaded. Since oil prices collapsed in 2014 the Saudis have had to burn through $200 billion of their $700 billion in foreign reserves in order to make ends meet. Austerity measures included cuts to the salaries of government workers, subsidies slashed for gasoline and electric power, and the imposition of a value-added-tax. Another source of funds: state oil monopoly Saudi Aramco. The Prince in 2016 proposed an Aramco IPO — at a $2 trillion valuation.
As thrilling as it would be for Trump and MbS to announce at a joint press conference that Aramco will be listed on the NYSE, it's not going to happen. The grief of satisfying the requirements of a U.S. or U.K. listing are simply too stringent. Aramco would be wading into a minefield on the issues of corporate governance, transparency, gender equity, pay equity, sustainability, and carbon emissions. The company would also risk opening itself up further to lawsuits brought by the families of 9/11 victims. Besides, investors are already unimpressed with the returns from publicly listed state oil companies like Petrobras, Rosneft and Petrochina. Does the world really need another?
MbS has other options. Most likely is a local listing of Aramco on the Tadawul, plus negotiated private placements from strategic partners like Sinopec or Rosneft. The Chinese company has been a partner with Aramco since 2012 on the Yanbu export refinery.
MbS has made clear where he’d like to reinvest any Aramco payout. Last fall MbS hosted an Riyadh confab dubbed Davos in the Desert. The 3,500 guests included Blackstone’s Schwarzman, Richard Branson, Peter Thiel, Treasury Secretary Steve Mnuchin, Apollo Group’s Leon Black, and Masayoshi Son, founder of Japan’s SoftBank group — to which MbS in 2016 committed $45 billion for investments in the likes of WeWork, SoFi and Uber. The most bizarre development was MbS granting Saudi citizenship to an artificially intelligent android named Sophia. He wants robotics and A.I. to be the cornerstone of a new $500 billion city called Neom that he has envisioned for the sparsely inhabited Red Sea coast near Egypt’s Sharm el Sheikh resort area.forbes
Trump, Salman (2nd left) dancing with swords at Murabba Palace, Riyadh, May 20, 2017. (Photo by Bandar Algaloud / Saudi Royal Council / Handout/Anadolu Agency/Getty Images)
Neat plan — but after a chaotic few months, investors are nervous about taking on too much Saudi exposure. Since Trump’s trip to the kingdom, MbS has been busy. He overthrew his last rival to the throne (former Crown Prince Mohammed bin Nayef), blockaded Qatar, escalated the war in Yemen, handled Houthi missile attacks on Riyadh and granted women the right to drive. And his biggest headline grabber: the shocking extra-judicial detention of several hundred tycoons and princes for two months at the Ritz-Carlton Riyadh.
Calling it an anti-corruption campaign, MbS launched his purge on Nov. 4. The initial round up included Lebanon’s Prime Minister Saad Hariri, who while under detention made a televised address in which he appeared to resign from office. On that same manic weekend Prince Mansour bin Muqrin, son of a former crown prince, died in a helicopter crash. Other captives included the kingdom’s mass media billionaires, Saleh Kamel, head of Okaz Press, Walid Al Ibrahim, head of broadcaster MBC, and Prince Alwaleed bin Talal, who controls Rotana Media. For two months they lived in the gilded cages of the Ritz, confronted with dossiers of evidence recounting their supposed wrongdoings, and encouraged to negotiate secret settlements of undisclosed charges or face public trial and personal ruin. A shake-down.
Within weeks, another one-time contender to the throne, Prince Miteb, son of former king Abdullah (d. 2014), was freed after agreeing to fork over $1 billion. Bakr Binladin, half-brother of Osama, was reportedly still among the captives when in early January the government announced that it would be taking over certain assets of Binladin Construction. The government said in January that the anti-corruption campaign had raked in $100 billion. That number was later reduced to $5 billion. A spokeswoman at the Saudi Embassy in Washington declined to clarify, or to field any questions regarding the cases of individual detained in the campaign.
King Salman, though now reportedly suffering from dementia, was for nearly 50 years the powerful Governor of Riyadh province. He was also appointed by his brothers to be family enforcer and keeper of the secrets — dossiers of information useful to a young crown prince looking to solidify his grip on power.
It’s tough to calculate a tycoon’s fortune if he’s subject to indefinite, extrajudicial detention and the confiscation of his assets. Prince Alwaleed, in a video interview with Reuters the day before his release from the Ritz, praised the quality of his accomodations, saying that he was allowed his own barber, his vegan food, and even a mug with his picture on it. All the comforts of home, he told Reuters. "I will not leave Saudi Arabia, for sure. This is my country." A representative for Al Amoudi, who decades ago built Saudi Arabia’s strategic oil storage network, indicated that negotiations are ongoing. Among those believed to be awaiting trial is Adel Fakeih, former mayor of Jeddah, who has been accused for almost decade of overseeing a fraudulent public works project that resulted in a Potemkin stormwater system featuring manhole covers with no works underneath — resulting in a deadly 2009 flood.
Rooting out corruption is great politics. Half of the Saudi population is under 35, and they were more likely to laugh than be shocked when MbS detained 11 minor princes who dared protest having to pay for water and electricity for the first time in their lives. The campaign “resonates with the young people,” says Shibley Telhami, professor at the University of Maryland and fellow at the Brookings Institution. “They’re rooting for him to succeed.” Ibn Saud is said to have had 45 sons. Since then the royal family has grown to thousands. “It’s unsustainable to have an economy dominated by a network of royal family members who live off the state,” says Graham Griffith, managing director with Control Risks, in Dubai. But pruning away the gladhanders carries the risk of creating enemies.
As has the Ritz-Carlton circus. Extrajudicial indefinite detention with no due process is a tough concept for many Western capitalists to swallow. If a legend like Prince Alwaleed can spend decades working to build a business empire only to have his 33-year-old nephew hold him captive and extract (what’s said to have been a $6 billion) ransom with no due process, then how can any investor feel safe there? Sometimes Machiavellian is what’s needed? “How else do you show you’re serious about changing a culture of corruption without taking years?” says Bernard Haykel, professor of Near Eastern studies at Princeton University. “People who haven’t stolen have nothing to worry about.”
Meanwhile, MbS in 2015 famously bought the 440-foot yacht “Serene” from Russian billionaire Yuri Shefler for $500 million. He added a French chateau for $300 million. A spokesperson denies that MbS used a straw buyer in last year’s $450 million purchase of Da Vinci’s “Salvador Mundi.”
From what accounts did those funds come? Best not to ask. MbS will not tolerate dissent. The kingdom beheaded more than 100 people last year, some for dealing drugs or for publicly voicing the opinion that maybe the citizens of the kingdom should be free to consider a form of government other than absolute monarchy. In 2016 Sheikh Nimr Baqr al-Nimr and dozens more were executed en masse for supporting anti-government protests. Al-Nimr’s teenage son has also been sentenced to death. Another guy got 2,000 lashes in 2016 for claiming to be an atheist on Twitter. Communications in the kingdom, including social media, are monitored and media outlets censored. Jamal Kashoggi, a journalist, wrote in a Washington Post op-ed last year that MbS is acting like Putin. He told me he dare not go to the kingdom for fear of being detained for thought crimes.
“All regimes in the region consider themselves more fragile because of the Arab Spring. They know there’s a need for reform or you will face popular uprising,” says Edward Djerejian, former ambassador to Israel, now of the Baker Institute. “As long as his father is king, he has running room.”
He’s got to try. “You can criticize the policies, but going back to what we’ve been doing is out of the question,” says Omar Ahmad Al-Ubaydli, a professor at George Mason University and the Mercatus Center. “You have to remember there is an existential threat.” That threat comes both externally, from Yemen and Iran, as well as internally, from Sunni Wahhabi fundamentalists as well as their Iran-backed Shia rivals.
The best thing MbS can do to ensure a long and fruitful reign is to keep the masses pacified. That was easier when oil was at $100 a barrel. More than half of the kingdom’s 32 million people are under the age of 30. MbS has promised them more jobs, growth, and freedom from religious police. Women will soon be allowed to drive, and start their own businesses without getting permission from their male guardian. Restrictions on public dress have been somewhat relaxed (ladies can now cover themselves in something other than black). Coming next: public movie theaters. This year's government budget, at $261 billion, is Riyadh's biggest ever.
Ulrichsen, of the Baker Institute, declares that the current time qualifies as one of the most significant in Saudi history, right up there with the meeting of FDR and Ibn Saud in 1945, the 1953 settlement after his death, the 1964 abdication of King Saudi to his brother Faisal, and Faisal’s assassination by a disgruntled nephew in 1975. “He sees himself as a 21st century Ibn Saud,” says Ulrichsen. He has the same presence, same stature, and he ascends to absolute power at roughly the same age. “He has absolute confidence; his grandfather built it, and he will rebuild it.”
So much to do, as quickly as possible. If you believe BP’s latest prognostications in its 2018 Energy Outlook, rapid adoption of electric vehicles will displace enough gas guzzlers to bring about Peak Oil demand by 2040. It would be tough enough for the Kingdom to diversify away from oil that quickly if it already had an open society with freedom of speech, gender equality and the rule of law. “He’s a force of nature, working all the time,” says Haykel. “If you want to understand why he’s in such a hurry, go drive a Tesla.”forbes