Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman sees “elements” of Mark Zuckerberg in himself. The deputy crown prince has a much harder job, though: He has to move fast and not break things.
Which is why this weekend’s reshuffle in Riyadh, including the departure of long-standing petroleum minister Ali Al-Naimi, shouldn’t be read as heralding an about-face on oil policy. Such a turn would risk jeopardizing the very strategy on which the prince has gone all-in.
It is hard to overstate the challenges involved in pulling off the prince’s “Vision 2030” reforms. Saudi Arabia has been built on the income flowing from its geological accident of birth. But those oil rents carry a price, suppressing the impulse to innovate and, by funding patronage, helping bureaucracy grow like a weed.
The latter was on full display in the long list of royal orders published this weekend. While the one announcing Al-Naimi’s ouster generated most headlines, there were 73 others. Number 10 was less eye-catching, but instructive nonetheless:
The amendment of the name of the Public Education Evaluation Commission to become Education Evaluation Commission; and shall undertake the tasks and responsibilities relating to the evaluation of public and higher education at the Ministry of Education and the Technical and Vocational Training Corporation; and shall combine the National Commission for Academic Accreditation and Assessment, the National Center for Assessment in Higher Education, and the Technical and Vocational Accreditation and Assessment Centre; the chairman of its board of directors shall be appointed by a royal order.
Give yourself a gold star if you made it to the end of that without your mind wandering to more interesting subjects like organizing your laundry. But award yourself two more if you marveled even for a second at the sheer byzantine splendor of Saudi Arabia’s higher education institutions.
This gets to the heart of the prince’s challenge.
His desire for reform is sound. The shale boom and growing momentum on limiting carbon emissions have upended the old assumption of Saudi Arabia’s oil reserves simply growing in value over time like money in a bank account. The economy must change, and productive jobs must be found for a relatively young population. In the long term, consolidating overlapping fiefdoms in education is just as important as bringing together the oil ministry with industrial responsibilities under Khalid Al-Falih, chairman of Saudi Aramco.
In changing the country's direction, however, the prince must be sure the wheels don’t fall off. It is notable that in the weekend’s extensive reshuffle, only four of those relieved of their positions were not immediately announced as having been appointed to run something else or remain in the royal court as an advisor. That’s called helping people deal with change.
Above all, though, the prince has to maintain momentum. Stasis, or backsliding, kills reform. And nothing would encourage that more than a sudden increase in oil prices.
This isn’t to say Saudi Arabia suddenly loves $40 oil. Equally, though, a big jump in prices would carry big risks of its own. It would relieve the pressure to shift away from relying on those oil rents in favor of new industries. It would also offer succor to both rival producers -- such as the shale operators who see $50 as an invitation to start drilling again -- and conservationists.
As I wrote on Friday, a big reason why the oil market isn’t freaking out about the Canadian wildfires is because Saudi Arabia’s current policy acts a tranquilizer.
Yet production outside of OPEC is clearly declining in the face of low oil prices, and many expect bloated inventories to start draining later this year. This is the moment Saudi Arabia will be watching for as proof its policy is working.
With that prospect so close -- and the country's National Transformation Plan due soon -- it would be odd for Saudi Arabia to push for a supply cut at OPEC’s meeting next month. Besides derailing the oil market’s rebalancing, it would be a step back for a prince who now has to keep moving forward.
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