The outbreak of coronavirus has so far left highly negative impacts on the global economy, increasing the pressures on governments that take preventive actions and controlling measures to reduce the economic vulnerability in their countries.
One of the countries that received negative effects even before the COVID-19 hit its borders is Saudi Arabia. The coronavirus is not only taking its toll on the Saudi economy, however. It is also going to influence the future political developments in the Arab kingdom.
Coronavirus and dim Saudi Vision 2030
It is not a long time has passed since Saudi Arabia held its global investment and economic summit, dubbed Davos in the Desert as it takes the name from World Economic Summit held every year in Davos village, Switzerland. At the summit, the young Saudi Crown Prince Mohammed bin Salman addressed the world’s industry, investment and capital titans with promises of bright future of investment in the highly ambitious Saudi Vision 2030, which was unveiled by the de facto ruler bin Salman in 2016 and meant to cut the kingdom’s reliance on the hydrocarbons exports’ income.
The final aim of the initiative is to transform Saudi Arabia into a regional economic and trade hub and cut its economy’s reliance on the oil money in a 10-year program. Scoring such a goal takes huge finances which are heavy to access even for a country as super-wealthy as Saudi Arabia. This was the reality behind the October 2019 economic summit arrangement and also some so-called anti-corruption arrests and purges that affected rich Saudi royals who were forced to pay billions in freedom deals to bin Salman.
However, the efforts to attract foreign investments were hit hard by the crisis caused by the assassination of the bin Salman’s vocal critic and Washington Post author Jamal Khashoggi by a hit squad reportedly sent by Prince Mohammed himself at the Saudi consulate in Istanbul. Khashoggi disappeared at the Saudi consulate when he entered in the diplomatic place to get his marriage papers in October 2018. After weeks of denials, Saudi officials admitted he was killed and dismembered by state agents but his body was not found.
To bin Salman’s frustration, coronavirus added salt to injury as it hit the kingdom like other parts of the world, making the outlook for the success of the Vision 2030 look dim. To push forward with the program, Saudi Arabia needs to sell its oil beyond $60 per barrel. Even if this aim is realized, adequate funds will not be raised to propel the program and so they need to sell part of their oil giant Aramco. Initially, the Saudis priced the company’s whole value at $2 trillion, five times larger than Exxon Mobil’s. So, they priced its 5 percent at $100 billion. But they failed to sell at this price.
Amid coronavirus crisis and also the competition of major oil producers like Saudi Arabia and Russia the oil prices unprecedentedly fell to a 20-year record low in a matter of few days. This crisis will certainly delay partial Aramco selling, which is not good news to bin Salman.
The sagging oil prices along with skyrocketing costs of the five-year war on neighboring Yemen, along with the rivalry with Turkey over regional cases like Libya put heavy strains on the oil-reliant economy.
The COVID-19 outbreak has dealt a blow more painful than what it was thought to the king-in-waiting’s plans and it is the damage to the country’s tourism industry. According to the planning of the Vision 2030, the kingdom should attract 30 million tourists a year, part of which is the Muslim victors traveling to tour the holy sites in Mecca and Medina. The two holy cities, hosting millions of visitors a year, make up a key part of the tourism incomes.
Saudi Arabia is already a destination to 20 million religious visitors. In 2019, according to figures, some 2.5 million tourists visited the country for Hajj in from around the world.
But now the pilgrimage is shut down by the Saudi Hajj authorities as the coronavirus continues to spread across the country. The decision to close off the holiest Muslim sites a month before the start of the holy month of Ramadan comes while the Muslim month is one of the months in which the holy sites see their most crowded days.
While its public budget suffers a growing deficit due to the tumbling oil prices and the spread of the novel coronavirus, the Saudi Ministry of Finance revealed that the kingdom has sold local bonds (Islamic debt bonds) worth 15.568 billion Saudi riyals ($4.15 billion) in March. The plan to borrow from the local market indicates that the Saudi rulers are bracing for difficult financial days in the upcoming months.
Coronavirus, the driving force behind power transition
The spread of the fatal virus also leaves considerable influences on the country’s political horizon, including prompting the complicated power transition process in the absolutely-ruled kingdom. The succession is rising high on the ruling family’s agenda as aging King Salman bin Abdulaziz is in delicate health conditions.
The entry of the county to unordinary conditions and also the government’s restrictions on public gathering and traffic to deter the further spread of the virus and the uncertainly of the end of crisis appear to provide appropriate conditions for the prince to realize his ambition of unseating his father and ascending the throne.
Prince Mohammed in a recent move that is translated by the global media and political analysts as a preparation to succession detained a number of famous figures of the royal family including Ahmad bin Abdulaziz, the brother of the king, and Mohammed bin Nayef, the dismissed crown prince, for treason and coup charges.
From another dimension, the coronavirus risks foiling the efforts of the US President Donald Trump, as one of the staunchest supporters of bin Salman ascension to the throne, towards reelection. To put it differently, Trump’s presidency’s economic gains, which are his key to reelection, were destroyed overnight by the coronavirus spread, giving his Democratic rivals a bigger chance to beat the president. Joe Biden and Bernie Sanders, Democratic Party’s hopefuls, recently have been attacking hard Trump’s way of handling the pandemic crisis.
In these conditions, bin Salman, whose image is largely damaged among the Western leaders and public opinion due to his crackdown at home and the atrocities against Yemeni people in the war, knows that he should not spare any effort to seize the chance of Trump being at the White House towards succession.