Jareer Elass is a Washington-based energy analyst, with 25 years of industry experience and a particular focus on the Arabian Gulf producers and OPEC.

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  • King Salman’s Asia trip designed to boost Saudi Vision 2030

    The person with the most to win or lose in Saudi Arabia’s planned fiscal revamping is King Salman’s son.

    High stakes. Saudi King Salman bin Abdulaziz Al Saud (R) and Japanese Prime Minister Shinzo Abe walk together at Abe’s official residence in Tokyo, on March 13th. (AP)

    2017/03/19 Issue: 98 Page: 10

    Washington - Much is riding on the outcome of Saudi King Salman bin Ab­dulaziz Al Saud’s Asia tour. Not only is Riyadh interested in securing new investment opportunities in Asia, it is seeking critical support from Asian countries for the kingdom’s ambitious economic restructuring programme known as Saudi Vi­sion 2030. The success or failure of that expansive economic overhaul could affect the line of Saudi royal succession.

    The lengthy seven-country tour is prompting some Gulf trackers to reassess the state of the 81-year-old Salman’s health and mental acuity, given that he has met several heads of state during the month-long trip that began February 26th.

    One focus of the king’s Asian trip has been strengthening geopolitical and economic ties with the Sunni Muslim countries of Malaysia, In­donesia, Brunei and the Maldives, all of which joined the Islamic Military Alliance, the organisation founded by Riyadh in late 2015 to fight global terrorism.

    During King Salman’s stops in Malaysia and Indonesia, the Saudis secured $13 billion in downstream investments for state oil conglom­erate Saudi Aramco, which will help strengthen the company’s prospec­tus as Riyadh prepares for its hotly anticipated initial public offering (IPO) scheduled for 2018.

    The other focus of the trip — visits to Asian heavyweights Japan and China — serves multiple purposes for Riyadh. As a leading supplier of oil to both Tokyo and Beijing, the Saudi regime is intent on secur­ing and expanding market share as Asian demand for oil continues to lead the growth in global demand. Most concerning for Riyadh is hav­ing been edged out by Russia as the top oil supplier to Beijing in 2016.

    Equally as important are the Sau­di regime’s efforts to entice Japa­nese and Chinese investment in the kingdom. After a meeting in Tokyo on March 13th between King Sal­man and Japanese Prime Minister Shinzo Abe, the two governments announced the formation of Saudi- Japan Vision 2030, which includes studying the merits of establish­ing special economic zones in the kingdom to attract Japanese invest­ment.

    Abe’s government was also hop­ing to take advantage of King Sal­man’s visit to persuade the Saudi leadership to list shares of Saudi Aramco’s IPO on the Tokyo stock exchange.

    The person with the most to win or lose in Saudi Arabia’s planned fiscal revamping over the next few years is Salman’s son, Deputy Crown Prince Mohammed bin Sal­man bin Abdulaziz, the architect and chief promoter of Vision 2030. Observers said that even a limited success of the programme could prompt King Salman to alter the line of succession, demoting his nephew, Crown Prince Mohammed bin Nayef bin Abdulaziz, in favour of his son.

    The Asia trip is of keen interest to the deputy crown prince, who wants to drum up regional interest in the Saudi Aramco IPO as well as investments in the kingdom’s non-oil sector that will be critical to the success of Vision 2030. However, he left that salesmanship to the ministers who accompanied King Salman to Asia while he travelled to Washington for meetings with US President Donald Trump and senior officials.

    It is the low-profile Crown Prince Mohammed bin Nayef who has been left in charge in the kingdom as King Salman and his son venture abroad. Though the crown prince is not as publicly visible as the deputy crown prince, the Saudi popula­tion did get a reminder recently of Crown Prince Mohammed bin Nayef’s extensive intelligence ex­perience:

    During a February visit to Riyadh, Mike Pompeo, newly installed di­rector of the US Central Intelligence Agency, awarded the crown prince the George Tenet Medal in recogni­tion of “his excellent intelligence performance in the domain of counterterrorism and his unbound contribution to realise world secu­rity and peace.

    With high expectations for Depu­ty Crown Prince Mohammed bin Sal­man’s economic overhaul agenda, the young Saudi royal must not have been pleased to hear a recent valua­tion of Saudi Aramco in the lead-up to partial privatisation next year. In April 2016, Mohammed bin Salman declared that his government ex­pected Saudi Aramco to be valued at $2 trillion, a figure that Saudi offi­cials have continued to use.

    British-based energy consultancy Wood Mackenzie, respected for its analysis and valuation of oil firms and their assets, however, report­edly told clients in February that its rough valuation of Saudi Aramco’s core business was about $400 bil­lion. Should Wood Mackenzie’s es­timation prove correct, the Saudi government will reap substantially less than the $100 billion it had fore­cast from the limited sale of Saudi Aramco, which could have a ripple effect on the deputy crown prince’s economic reforms.

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