Saudis on the Hunt for Investors Before Iran Sanctions Are Lifted

A meeting with Macron was a first step, and until Biden calls, Crown Prince Mohammed bin Salman is trying to emulate what the UAE did to become an economic force

A photo of Dr. Zvi Bar'el.
Zvi Bar'el
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Saudi Crown Prince Mohammed bin Salman with French President Emmanuel Macron in
Saudi Crown Prince Mohammed bin Salman with French President Emmanuel Macron in Jeddah, on Saturday.Credit: BANDAR AL-JALOUD - AFP
A photo of Dr. Zvi Bar'el.
Zvi Bar'el

Saudi Crown Prince Mohammed bin Salman can now be satisfied. A senior Western leader finally visited his country for the first time since the 2018 assassination of Saudi journalist Jamal Khashoggi at the Saudi consulate in Istanbul. French President Emmanuel Macron, who was in Saudi Arabia December 4 after visiting Qatar and the United Arab Emirates, may not be Joe Biden, but it’s a start.

The visit featured several agreements on renewable energy and recycling. There were handshakes and photo ops as well as a joint communique in which the two leaders expressed their intention to solve the “Lebanon problem.”

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Historically, Lebanon is the apple of France’s eye in the Middle East. Macron was the first foreign leader to visit Lebanon following the Beirut port explosion of August 2020. France has also been the primary source of pressure on the Lebanese political elites to form a consensus government, so reconstruction aid can be sent to the devastated country.

But shortly after that government began showing signs of life, a Saudi sledgehammer landed on it. When then-Lebanese Information Minister George Kordahi condemned the war in Yemen and accused the Saudis of being responsible, the latter were quick to impose sanctions, including a ban of Lebanese imports.

The Lebanese government dug in its heals by refusing to dismiss the minister, but following French intervention and pressure in advance of Macron’s visit to Saudi Arabia, Kordahi “resigned.” That paved the way toward reconciliation between Beirut and Riyadh.

Now, Saudi Arabia hopes that Washington will also be grateful and that Crown Prince Mohammed might be accorded a friendly phone conversation with President Joe Biden and maybe even a visit to Washington following a three-year absence.

The crown prince isn’t relying only on Macron’s mediation. Last week, he acceded to a request from a high-level American delegation to boost oil production not only on the part of Saudi Arabia but also from the 23 counties in the so-called OPEC+ group, following months of refusal.

An oil refinery in Saudi Arabia.Credit: Bloomberg

The price of gasoline at the pump in the United States has been of concern to the White House and the prospect of additional price increases this winter required the Biden administration to release large quantities from America’s national petroleum reserve. But that step didn’t really help keep prices down. Now, after Saudi Arabia and its OPEC partners have agreed to increase output by 400,000 barrels a day at the beginning of 2022, concern over an oil shortage and additional price increases has eased.

The White House took the unusual step of praising the Saudis for their cooperation, but it still refrained from explicitly mentioning Crown Prince Mohammed’s contribution. In Saudi Arabia, the expectation is that the frosty relations with Washington will soon begin to thaw because, as one Saudi commentator put it, “the White House understands that it needs the Saudis to advance its regional and economic policies.”

The Arab coalition against Iran fell apart when the UAE began holding high-level contacts with the Iranian leadership and when the UAE’s national security adviser, Tahnoun bin Zayed, the brother of Crown Prince Mohammed bin Zayed, visited Iran. In addition, there were rounds of talks between senior Saudi and Iranian officials in Baghdad. It could turn out that Saudi Arabia and the UAE, which opposed the original Iranian nuclear agreement, are beginning to establish a base of support for a new nuclear accord with Iran. Commentators aren’t entirely excluding the possibility that these two wealthy countries could be the driving force pushing Iran to sign an agreement.

Saudi Arabia, the UAE and the other Gulf states have to rethink their attitudes toward Iran – whether or not a new nuclear agreement is signed. Without an agreement, Iran will continue to pose a threat, mainly because it could drag Israel into attacking, which would lead to an Iranian response not only against Israel but also against its neighbors. No matter what, it would transform the Persian Gulf into an area that is not secure

If an accord is signed, the Gulf states would have to come to an agreement with Iran on oil production, examine the agreements that they have with the countries that they supply and compete for foreign investment. To move all this forward, Saudi Arabia and the UAE are taking a series of steps designed to attract long-term foreign investment. Both countries understand that if Iran signs a nuclear accord, it would become a magnet for foreign investment, as was seen after the signing of the original accord in 2015.

The courting of corporations is already heating up. Reports from Saudi Arabia indicate that the kingdom is in touch with about 7,000 international companies that it is attempting to convince to center their Middle East business operations in the Saudi capital, Riyadh, or in the country’s planned city of the future, Neom, which is being built on the Red Sea.

Riyadh, Saudi Arabia.Credit: Fedor Selivanov / Shutterstock.c

Up to now, there have only been reports involving roughly 44 major companies, including Unilever, Siemens and Philips and others in the food, technology and electronics sectors.  In a bid to convince the foreign companies to come, Saudi Arabia is threatening that as of 2024, foreign firms that don’t establish a center of operations in the country could lose out on government contracts.

That decision was taken primarily with the UAE in mind. The UAE has long been a magnet for foreign investment, mainly due to the quality of life and the level of services that it offers the companies and their employees. Saudi Arabia, which is trying to emulate the Emirates, has announced a series of concessions related to the issuance of visas and residency permits and even citizenship for individuals whose professions and skills are in demand.

The declared aim is to secure direct investment worth $100 billion a year and 100 million foreign tourists by 2030. That’s an ambitious plan, but it’s doubtful that it’s realistic. Over the last four quarters, direct foreign investment amounted to $18 billion and over the past decade, total investment has been about $92 billion

If Saudi Arabia is to fulfill its vision of $100 billion in annual investment, its economy will need to grow by 150 percent by 2030. This is coming at a time when optimistic forecasts project growth next year of 7 percent, followed by a bit less than that in 2023.

To attract foreign firms, Saudi Arabia will have to provide a skilled workforce that doesn’t exist in most fields. Either that or it will have to give up on the principle of the “Saudization” of labor, which has become one of Crown Prince Mohammed’s fundamental economic policies.

In a country in which more than 60 percent of the country’s population is 30 or under, there is no appropriate employment horizon for the coming generations. That’s because in addition to efforts to reduce the number of foreign workers in the country, education programs and professional training that would produce local professionals are lacking.

The crown prince understands the need to look after the quality of life of the country’s citizens and of foreign workers from the West, and he has devoted the past two years to constructing movie theaters and playgrounds and organizing entertainment spectacles and concerts. But the country’s financial legislation still lags behind what is accepted in the West. Transparency is a theoretical concept, proper judicial procedures are not assured, and arbitrary decision-making puts off investors, particularly new companies that could consider investing in Saudi Arabia.

Jared Kushner and Mohammed bin Salman, in September.Credit: Saudi Press Agency/Reuters

And beyond all that, the kingdom needs to rebuild its ties with the U.S. administration because that’s what putting foreign investors at ease requires – and not only American ones.

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