Oil has fueled the economy of the Kingdom of Saudi Arabia for the past 84 years and turned what was previously a strategically negligible desert wasteland into one of the world’s wealthiest nations and most important power brokers.
With the price of oil at 10-year lows, however, and a series of stinging foreign policy defeats, Saudi Arabia is looking to diversify its economy – and prepare for the day when its petro-power will no longer be enough to sustain it.
On Monday Saudi Arabia formally announced the adoption of the “Vision 2030” plan, a radical departure from the Islamic kingdom’s economic policy since the founding of the state in 1932.
Among other things, “Vision 2030” looks to cut wasteful spending, encourage entrepreneurship and private sector business, and nurture other industries, allowing Saudi Arabia to evolve beyond an extraction economy.
The plan is intended to immunize the Saudi economy from the repercussions of falling oil prices, which are anticipated to decline to around $30 a barrel in the near future.
From 2011 to 2014 the price of crude oil hovered at around $100 a barrel, but over the past year and a half the price has fallen to the lowest level in more than a decade, sinking to $32 a barrel before rising slightly to just over $42 today. Increasing production by the United States and Canada, partially the result of fracking, have helped drive down the price of oil, and are likely to turn the decline into a long-term trend.
But Saudi’s pivot away from oil was more than a matter of fiscal security. With Saudi Arabia’s nemesis Iran on the rise across the Middle East, with growing influence in countries like Syria and Yemen, the Saudi royal family feels increasingly threatened. And with US President Barack Obama’s support for the Iran nuclear deal, the Saudis are concerned that their primary arms-supplier cannot be relied on in the future.
Speaking on Monday, Defense Minister and Prince Muhammad Bin Salman discussed the kingdom’s plans to develop its own arms industry, allowing the Saudi military to become fully independent from America weapons sales.
“We’re about to establish a holding company in the weapons industry that will be owned 100% by the government, and will eventually be registered on the stock market.”
Bin Salman noted that Saudi Arabia is the world’s third largest weapons importer and had the third largest military budget in the world, and dedicated more of its GDP to military spending than any other nation on earth.
“Is it logical that despite this we have no military industry? We spend more than Britain and France and we have no [arms] industry. We have a huge demand that we need to fill inside of Saudi Arabia.”