WEBVTT - Saudi Arabia's IPO Drama 0:00:12.000 --> 0:00:15.880 Hello, and welcome to another episode of the Odd Thoughts podcast. 0:00:16.079 --> 0:00:20.479 I'm Tracy Alloway. My co host Joe Wisenthal can't be 0:00:20.720 --> 0:00:23.479 with us today, but maybe it works out for the 0:00:23.520 --> 0:00:26.880 best because today we're going to be focusing on a 0:00:27.080 --> 0:00:32.000 topic that is a very close to UH, something I've 0:00:32.000 --> 0:00:34.360 been doing for the past couple of years, which is 0:00:34.960 --> 0:00:39.360 living in the Middle East, in Abu Dhabi specifically, and UH. 0:00:39.760 --> 0:00:43.000 My move to Abu Dhabi was in the spring of 0:00:43.120 --> 0:00:47.000 two thousand and sixteen. It coincided with a very very 0:00:47.080 --> 0:00:50.320 big event in finance and markets, and that was when 0:00:50.360 --> 0:00:55.720 Saudi Arabia first started talking about the potential to list 0:00:56.080 --> 0:01:01.920 part of its giant state owned national oil company, Saudi Aramco. 0:01:02.640 --> 0:01:06.120 Now fast forward two years later, we've seen those plans 0:01:06.360 --> 0:01:10.160 UH really start to get walked back. And in the meantime, 0:01:10.280 --> 0:01:14.760 we've had all sorts of developments in Saudi Arabia, including 0:01:14.920 --> 0:01:19.479 a new Crown Prince, Mohammed bin Salman, the thirty two 0:01:19.560 --> 0:01:23.880 year old Crown Prince. We've also had a diplomatic rift 0:01:24.280 --> 0:01:29.920 between the Gulf Cooperation Council nations including Saudi Arabia and 0:01:30.040 --> 0:01:34.440 catar so really a action packed two years when it 0:01:34.440 --> 0:01:37.320 comes to Middle East politics with Saudi Arabia really at 0:01:37.319 --> 0:01:40.639 the center of it all. I've now left the region, 0:01:40.720 --> 0:01:43.959 so just to book end my time there, today we 0:01:44.000 --> 0:01:47.400 are going to be diving into all things Saudi and 0:01:47.440 --> 0:01:50.040 we're going to do that with one of the best 0:01:50.080 --> 0:01:53.000 analysts on the topic. I think his name is i 0:01:53.200 --> 0:01:56.120 Him Kamel. He is the head of Middle East and 0:01:56.240 --> 0:02:00.000 North Africa research over at Eurasia Group. So I Him, 0:02:00.040 --> 0:02:03.200 thank you so much for joining me today, a pleasure 0:02:03.240 --> 0:02:05.920 to be here, and thank you for allsteeing me. So 0:02:06.600 --> 0:02:09.760 I gotta say when I think back to the start 0:02:10.080 --> 0:02:13.760 of UM let's say May two thousand and sixteen, and 0:02:13.800 --> 0:02:19.280 how much excitement we had over Saudi Arabia, the transformation 0:02:19.360 --> 0:02:23.120 of Saudi Arabia from an oil dependent economy into potentially 0:02:23.160 --> 0:02:26.400 something different, and it was all pegged to the notion 0:02:26.520 --> 0:02:32.239 of the ARAMCO listing. Things have changed so quickly over 0:02:32.280 --> 0:02:36.480 the course of two years. Just remind everyone why the 0:02:36.560 --> 0:02:40.040 ARAMCO I p O was important in the beginning and 0:02:40.280 --> 0:02:44.440 what the rationale was for actually doing the listing. Well, 0:02:44.440 --> 0:02:50.000 I think Tracy the big attraction for the powerful leader 0:02:50.120 --> 0:02:53.400 of Saudi Arabia at the time, or the emerging a 0:02:53.520 --> 0:02:57.560 new leader in the kingdom, Crown Prince Mohammad and Sandman 0:02:58.600 --> 0:03:02.040 wants to create a lot of excitement. He he needed 0:03:02.160 --> 0:03:07.000 flashy ideas. He needed bold ideas to change the kingdom, 0:03:07.040 --> 0:03:10.720 to change its dependency on oil and transform what has 0:03:10.760 --> 0:03:15.200 been relatively a large scale economy that is outside the 0:03:15.240 --> 0:03:19.760 international system or international economy. In many respects, it's a 0:03:19.800 --> 0:03:25.079 closed economy. The major players are domestic and the dependency 0:03:25.200 --> 0:03:29.000 on the government and energy revenues was high. He needed 0:03:29.000 --> 0:03:33.040 to change that, and he needed to present ideas that 0:03:33.480 --> 0:03:38.520 would create a sense of excitement internationally. Implicitly, the Crown 0:03:38.600 --> 0:03:42.000 Prince didn't only focus on the economics. I think that 0:03:42.200 --> 0:03:46.360 m Haammed binson Man wanted to present ideas that would 0:03:46.400 --> 0:03:52.720 have him present Hammed Bensman as a young, bold leader 0:03:52.840 --> 0:03:57.440 capable of changing what the Saudi system has represented for 0:03:57.520 --> 0:04:01.960 many many decades, transitioning and way from a conservative kingdom 0:04:02.000 --> 0:04:06.400 into not necessarily a liberal one, but certainly more open 0:04:06.560 --> 0:04:11.560 social society or or or open kingdom when it comes 0:04:11.640 --> 0:04:15.400 to liberal rights for women, when it comes for the 0:04:15.560 --> 0:04:21.160 rights of employment, when it comes to just social liberties. 0:04:21.600 --> 0:04:24.919 Also economically, he wanted to change what was an an 0:04:24.920 --> 0:04:28.640 e stagnating engine. Oil prices were low. He needed the 0:04:28.680 --> 0:04:32.800 oil income from around Care or from a potential sale 0:04:32.800 --> 0:04:37.200 of around Call, to fund other ventures in the Kingdom. Right, 0:04:37.520 --> 0:04:40.320 this is something I completely forgot to mention in the intro. 0:04:40.480 --> 0:04:43.200 But of course it was really a driving force of 0:04:43.240 --> 0:04:45.599 a lot of the stuff that we've seen happen in 0:04:45.640 --> 0:04:49.520 the Gulf. And that's the fact that in early twenty sixteen, 0:04:49.640 --> 0:04:53.120 of course oil prices were still relatively low. Eventually you 0:04:53.200 --> 0:04:57.400 had OPEK get together and agree to curb their crude 0:04:57.520 --> 0:05:01.279 production in order to boost prices, so kind of a 0:05:01.320 --> 0:05:04.839 different environment. I'm still curious though, when it comes to 0:05:04.839 --> 0:05:09.080 the listing itself. You know, Mohammed bin Salman MBS as 0:05:09.200 --> 0:05:14.520 we often call him, he didn't have to pursue an 0:05:14.520 --> 0:05:17.600 I p O. Did he. He had this big set 0:05:17.880 --> 0:05:21.320 plan vision twenty thirty that really set out how he 0:05:21.360 --> 0:05:24.920 wanted the Saudi economy to look like in a fifteen 0:05:25.080 --> 0:05:28.359 or fourteen years time. So why the element of the 0:05:28.440 --> 0:05:34.159 listing specifically, Well, I absolutely agree, Tracy, and in part 0:05:34.279 --> 0:05:37.719 the vision was comprehensive. They didn't really need to make 0:05:37.760 --> 0:05:41.279 the I p O or core part of that plan. 0:05:41.800 --> 0:05:45.520 But oil prices were low, and Mahammad bin Salman needed 0:05:45.640 --> 0:05:49.640 to find a way to generate income to invest in 0:05:49.680 --> 0:05:54.159 the local economy, to have the public investment fund that 0:05:54.240 --> 0:05:57.120 really the sovereign fund Wealth Fund of Saudiary. We have 0:05:57.240 --> 0:06:01.359 more money to invest both domestically and internationally, and that 0:06:01.400 --> 0:06:04.240 would have have been possible with oil around forty or 0:06:04.279 --> 0:06:08.800 fifty dollars a barrel. It's really the opaque non opaque agreement, 0:06:08.880 --> 0:06:12.839 primarily a deal between hammadans and Man and President Putin 0:06:12.920 --> 0:06:17.279 of Russia that allowed oil prices to jump high into 0:06:17.320 --> 0:06:21.440 the seventies and really touched the eighties. Today, Saudi Arabia 0:06:21.520 --> 0:06:23.880 doesn't necessarily need to rush with an i p O. 0:06:24.360 --> 0:06:26.880 They have the income they're breaking even when it comes 0:06:26.880 --> 0:06:30.600 to their budget, they don't need to rush with an 0:06:30.600 --> 0:06:34.080 i p O. But the environment was different. I think broadly, 0:06:34.120 --> 0:06:38.480 I agree with you that Saudi Arabia did not have 0:06:38.640 --> 0:06:40.880 to make the i p O or core part of 0:06:41.040 --> 0:06:44.680 Vision twenty thirty. They could have separated the vision and 0:06:44.760 --> 0:06:48.479 the transformation plan from the I p O. The attachment 0:06:48.640 --> 0:06:52.240 was probably not appropriate at the time, and I think 0:06:52.279 --> 0:06:56.560 they're probably paying a price for that connection right right now. 0:06:57.800 --> 0:07:02.280 So what's your sense of how much domestic support there 0:07:02.480 --> 0:07:07.480 is for the transformation plan, including the around co listing, 0:07:07.520 --> 0:07:09.360 because of course, you know, every once in a while 0:07:09.400 --> 0:07:12.320 we would hear a little bit of Saudi grumbling that 0:07:12.440 --> 0:07:16.360 maybe the country, the kingdom was selling off it's it's 0:07:16.480 --> 0:07:21.760 prized assets at an inopportune time. Is that still the 0:07:21.840 --> 0:07:25.760 case and where those um where those grumblings ever serious 0:07:25.880 --> 0:07:30.960 enough to force the authorities to rethink that plan. I 0:07:31.000 --> 0:07:34.920 think that that there was and there still remains resistance 0:07:35.200 --> 0:07:38.440 in Saudi Arabia. True I p owing or or putting 0:07:38.480 --> 0:07:40.880 any piece of around called the crown jewel of the 0:07:40.920 --> 0:07:44.320 country as many people see it floated, be it in 0:07:44.440 --> 0:07:48.800 internationally or domestically. There are two elements of this. I 0:07:48.880 --> 0:07:51.600 think the public part of the public has been against it, 0:07:52.000 --> 0:07:55.520 but also members of the ruling family that's so disclosure 0:07:55.680 --> 0:07:59.720 or more transparency as a threat to their income sources. 0:07:59.720 --> 0:08:04.480 It's very clearly an engine that funds the Saud family 0:08:04.560 --> 0:08:08.280 in the kingdom, and members of the ruling family did 0:08:08.320 --> 0:08:12.560 not want to see those numbers exposed or how much 0:08:12.600 --> 0:08:15.840 they would receive on an annual basis from the state. 0:08:16.240 --> 0:08:19.360 So I think the pressure was probably higher amongst members 0:08:19.400 --> 0:08:22.080 of the ruling family, but the public also did not 0:08:22.240 --> 0:08:25.600 see what the rationale was, at least at the very beginning. 0:08:27.000 --> 0:08:30.080 So definitely not not a popular move, and I think 0:08:30.120 --> 0:08:34.000 the the leadership in Saudi Arabia reconsidered partly because they 0:08:34.000 --> 0:08:37.160 don't need it, and partly because the political cost of 0:08:37.720 --> 0:08:40.559 putting around call on on the talk exchange would have 0:08:40.600 --> 0:08:44.600 been relatively high. What I would emphasize over here, I 0:08:44.640 --> 0:08:47.080 don't think that this is out of the way completely. 0:08:47.800 --> 0:08:50.760 I think that Mammad bunsan Man doesn't need it right now, 0:08:51.440 --> 0:08:54.400 and he's going to reassess whether he needs it three, 0:08:54.520 --> 0:08:57.959 four or five years down the line, if the appropriate 0:08:57.960 --> 0:09:01.560 conditions emerged, if he needs the money, and if there's 0:09:02.040 --> 0:09:05.400 a right global stock exchange that can host the I 0:09:05.559 --> 0:09:07.960 p O. And that has been a big problem for 0:09:08.000 --> 0:09:13.000 the company right well in terms of the messaging on this, 0:09:13.200 --> 0:09:16.440 you know, even though we've had several stories not just 0:09:16.480 --> 0:09:19.520 from Bloomberg but elsewhere in the world talking about the 0:09:19.559 --> 0:09:22.520 Saudi's really scaling back plans for the I p O, 0:09:24.040 --> 0:09:27.640 the authorities there have been sort of reluctant to admit 0:09:27.840 --> 0:09:30.400 that it might be on ice, at least for the 0:09:30.559 --> 0:09:34.480 time being. Why do you think that is Is the 0:09:34.600 --> 0:09:38.480 i p O so essential to um you know the 0:09:38.640 --> 0:09:42.840 Saudi story at the moment, This this notion that here 0:09:42.880 --> 0:09:45.079 you have a market that was to date very very 0:09:45.120 --> 0:09:48.040 closed and now it's beginning to open up. Is it 0:09:48.200 --> 0:09:52.199 that important that they can't walk it back? No, I don't, 0:09:52.240 --> 0:09:54.760 I don't. I don't necessarily think so. I think the 0:09:54.960 --> 0:09:59.160 core idea here is that the leadership hasn't fully thrown 0:09:59.240 --> 0:10:02.440 these plans in the bin, and they're not convinced that 0:10:02.520 --> 0:10:05.840 they might not have to resort to some form of 0:10:05.840 --> 0:10:08.560 of a sale of part of around calling the future. 0:10:09.040 --> 0:10:12.040 But they certainly don't see the conditions right now, be 0:10:12.120 --> 0:10:16.360 at the market conditions or the political conditions in Savidi Arabia, 0:10:16.480 --> 0:10:20.679 primarily the resistance to the i p O as appropriate. 0:10:20.920 --> 0:10:26.720 Right in the future, they might have to still do 0:10:26.840 --> 0:10:29.720 some form of i p O or sale of around 0:10:29.720 --> 0:10:33.559 called completely abandoned in their plans, and then a few 0:10:33.640 --> 0:10:36.640 years down the line announcing an i p O would 0:10:36.640 --> 0:10:39.880 not make any sense. There is there is really very 0:10:39.960 --> 0:10:43.120 limited cost to saying that this i p O is 0:10:43.240 --> 0:10:47.960 on but not now, as in not fully abandoning the plans, 0:10:48.280 --> 0:10:50.360 and if they need to do so in the future 0:10:50.360 --> 0:10:52.520 three or four or five years down the line, and 0:10:52.840 --> 0:10:55.320 to really say that an I p O is no 0:10:55.360 --> 0:10:58.280 longer part of our reformed story. We don't need it. 0:10:58.360 --> 0:11:01.880 We have alternatives. They certainly do that, but at in 0:11:01.920 --> 0:11:06.120 the meantime there is very little value add politically or 0:11:06.160 --> 0:11:11.320 economically to announce the di PO is off. Alright, Well, 0:11:11.400 --> 0:11:15.240 let's zero in on the man behind the I p O, 0:11:15.720 --> 0:11:19.040 Mohammed bin Salman. It's so rare that we get to 0:11:19.040 --> 0:11:22.160 talk about palace intrigue on the Odd Thoughts podcast, So 0:11:22.320 --> 0:11:25.120 I'm going to take every opportunity that i can get here. 0:11:25.960 --> 0:11:28.760 But you know, this really interesting figure thirty two years 0:11:28.840 --> 0:11:34.640 old has a very specific economic and social policy, a 0:11:34.720 --> 0:11:39.080 social policy that many people would um describe as liberalizing 0:11:39.200 --> 0:11:42.040 at least compared to what other Saudi rulers had in 0:11:42.080 --> 0:11:46.920 place before. But on the foreign policy side, quite hawkish, 0:11:47.000 --> 0:11:50.200 quite aggressive. Saudi has been fighting this war in Yemen 0:11:50.320 --> 0:11:54.920 for some time now. How would you characterize Mohammed bin 0:11:54.960 --> 0:11:59.800 Salman's ruling style over the past two years or so. 0:12:01.320 --> 0:12:04.880 I would say that Mohammad batson Man's character is evolving. 0:12:04.960 --> 0:12:07.840 It is changing the man that we've known two years 0:12:07.840 --> 0:12:12.679 ago is probably a different one today. He has made mistakes, 0:12:12.760 --> 0:12:15.400 and in private conversations he would even admit that he 0:12:15.480 --> 0:12:20.600 has made some in Yemen or elsewhere. I think part 0:12:20.640 --> 0:12:23.400 of the challenge here from Hammad binson Man is that 0:12:23.480 --> 0:12:27.920 he's trying to do so much in a very short 0:12:27.960 --> 0:12:31.280 period of time. I think he recognizes this that the 0:12:31.360 --> 0:12:34.599 system in Saudi Arabia is broken, and he does not 0:12:34.800 --> 0:12:39.520 like people or advisors or counselors that tell him no. 0:12:40.120 --> 0:12:44.040 He wants bold ideas and he wants to move forward 0:12:44.080 --> 0:12:47.720 with these ideas as fast as possible. I think part 0:12:47.760 --> 0:12:52.520 of his the challenge or the problems with his plans 0:12:52.640 --> 0:12:58.120 is that their contradictory. Uh. That's certainly the case when 0:12:58.200 --> 0:13:02.239 it comes to the foreign policy agenda that directly contradicts 0:13:02.640 --> 0:13:07.280 the domestic agenda. Saudi Arabia needs for investment, needs to 0:13:07.400 --> 0:13:15.040 liberalize its economy, and is diversifying effectively in very small steps. 0:13:15.080 --> 0:13:18.120 But the foreign policy agenda, which is very hawkish, as 0:13:18.160 --> 0:13:22.120 you have mentioned, beat against Iran or against the Hothy 0:13:22.240 --> 0:13:27.640 rebels in Yemen, that is compromising regional stability or creating 0:13:27.679 --> 0:13:31.480 additional tensions. Very difficult to in my view, to convince 0:13:31.559 --> 0:13:36.160 the investors to put more money in Saudi Arabia or 0:13:36.160 --> 0:13:40.280 put any money at all given these challenges. So I 0:13:40.320 --> 0:13:45.040 think part of really the critical problem that the Saudi 0:13:45.120 --> 0:13:48.600 leadership and Hammad Binson Man needs to address is how 0:13:48.640 --> 0:13:53.600 effectively is he going to manage these contradictions. And you 0:13:53.600 --> 0:13:56.320 can find these contradictions across the board, even in the 0:13:56.400 --> 0:14:00.840 local economy, so there are no easy solutions or Saudi Arabia. 0:14:01.040 --> 0:14:04.560 That's something that he has, I think, to begin to 0:14:04.600 --> 0:14:08.040 accept as a reality for the kingdom. The kingdom is 0:14:08.280 --> 0:14:12.600 clearly a big energy producer, but getting it to become 0:14:13.040 --> 0:14:18.280 a diversified economy is going to be a completely different 0:14:18.320 --> 0:14:21.760 transformation than anything Saudi Arabia has witnessed in the last 0:14:22.080 --> 0:14:24.960 five or six decades, and he needs to accept that 0:14:25.240 --> 0:14:27.960 there will be painful steps along the way, and in 0:14:28.760 --> 0:14:33.360 certain times he needs to recalibrate or reconsider elements of 0:14:33.920 --> 0:14:37.960 his his strategy. Right, what do you think is the 0:14:38.520 --> 0:14:43.800 biggest roadblock when it comes to that transformation or diversification project. 0:14:43.880 --> 0:14:47.560 And do you think NBS has a sort of end 0:14:47.680 --> 0:14:52.920 state goal in mind or an idea of what he 0:14:53.040 --> 0:14:57.880 wants Saudi to look like in terms of an entertate. 0:14:58.000 --> 0:15:00.400 I think he does have an idea here. He wants 0:15:00.440 --> 0:15:04.160 to see a more powerful Saudi Arabia regionally, he wants 0:15:04.200 --> 0:15:08.240 to see a more open and diverse economy, one where 0:15:08.520 --> 0:15:11.680 the Saudi labor force is not actually employed by the 0:15:11.760 --> 0:15:16.000 government only, but also by the private sector. He wants 0:15:16.040 --> 0:15:20.240 to see a more open society, but not necessarily open 0:15:20.320 --> 0:15:22.320 in a in a Western way. He wants to see 0:15:22.400 --> 0:15:25.600 women at work, but he also realizes that there are 0:15:25.640 --> 0:15:30.040 conservative values in the kingdom that he needs to preserve himself. 0:15:30.400 --> 0:15:34.800 So it's really about modernizing the state rather than liberalizing it. 0:15:35.000 --> 0:15:38.080 So he has an idea on on what he would 0:15:38.160 --> 0:15:41.360 like Saudi Area to be, not now, but ten fifteen 0:15:41.480 --> 0:15:44.600 years down the line. What I think he does not 0:15:44.800 --> 0:15:48.720 appreciate at times is the challenge or the series of 0:15:48.840 --> 0:15:53.200 challenges he faces. The country hasn't changed much over the 0:15:53.280 --> 0:15:58.000 last three or four decades, and the steps, the series 0:15:58.040 --> 0:16:01.840 of reforms and that he's introduced, you see or divisit, 0:16:02.080 --> 0:16:06.760 they're creating enemies for him. They're creating or exposing contradictions 0:16:06.760 --> 0:16:10.960 in Saudi society, and that's something that that he has 0:16:11.000 --> 0:16:14.080 to manage very carefully. So in my view, it is 0:16:14.080 --> 0:16:17.760 not really about the strategy, but it's how he gets 0:16:17.800 --> 0:16:20.920 there and whether he accepts that along the way there 0:16:20.920 --> 0:16:23.560 would be no voices or there'll be voices that tell 0:16:23.920 --> 0:16:27.280 tell him to slow down, that things cannot be done 0:16:27.360 --> 0:16:31.000 that quickly. It's finding the right balance of pushing your 0:16:31.040 --> 0:16:34.440 head but also moderating when he needs to do so. 0:16:37.280 --> 0:16:41.120 So it's interesting that you mentioned making enemies just then, because, 0:16:41.160 --> 0:16:44.840 of course a large part of the Saudi economy and 0:16:44.880 --> 0:16:49.200 society basically operates on the principle of a social pact, 0:16:49.280 --> 0:16:53.080 which is that Saudia's get a lot of money from 0:16:53.120 --> 0:16:56.200 the state, either in terms of gifts or you know, 0:16:56.320 --> 0:17:02.520 guaranteed employment at large government firms or entities. And I 0:17:02.560 --> 0:17:06.680 remember when they announced that Mohammed bin Salman was becoming 0:17:06.720 --> 0:17:09.400 Crown Prince. It was a few months after the king 0:17:09.520 --> 0:17:12.879 had decided to roll back some of the payments for 0:17:13.000 --> 0:17:16.680 government workers, which of course was very controversial, and when 0:17:16.680 --> 0:17:20.760 they made the announcement, they said they were reinstating those payments, 0:17:21.400 --> 0:17:24.440 so they seem to, you know, on the one hand, 0:17:24.520 --> 0:17:27.560 they were promoting this prince who had a very strong 0:17:28.040 --> 0:17:31.000 agenda of economic reform, but on the other hand, that 0:17:31.119 --> 0:17:34.639 same day they were going back to the old ways 0:17:34.760 --> 0:17:38.159 of just sort of dolling out government handouts. It seems 0:17:38.160 --> 0:17:43.639 like a really difficult line to be walking. Absolutely. I 0:17:43.640 --> 0:17:46.840 think that's where you see some form of contradiction between 0:17:46.880 --> 0:17:52.119 the domestic agenda and the really the economic agenda. Hammad 0:17:52.160 --> 0:17:55.240 Bin Saman wants to be king of Saudi Arabia. It's 0:17:55.280 --> 0:17:58.840 not popular for a new emerging leader, even a new 0:17:58.920 --> 0:18:02.800 crown prince, to begin to to really cut the benefits 0:18:02.840 --> 0:18:06.399 for Saudi citizens across the board. So I think he 0:18:06.520 --> 0:18:10.399 walked those back, or the leadership did walk those back, 0:18:10.960 --> 0:18:15.880 because it would have compromised his domestic standing and made 0:18:15.880 --> 0:18:19.840 it very difficult for Saudis to support him or to 0:18:20.000 --> 0:18:25.600 support his rise over the long term. I think what 0:18:25.680 --> 0:18:29.200 he needs to do is begin to introduce more concrete 0:18:29.280 --> 0:18:34.680 changes to the Saudi welfare state. Now, there is a 0:18:34.760 --> 0:18:38.960 problem here, which is that Saudi Arabia's citizens are also 0:18:39.080 --> 0:18:41.639 not ready to hear the message that there is less, 0:18:41.680 --> 0:18:44.119 that there is less now and there's going to be 0:18:44.240 --> 0:18:47.800 less in the future, and that the welfare state cannot 0:18:47.840 --> 0:18:51.160 survive over the long term, be it in Saudi Arabia 0:18:51.280 --> 0:18:53.880 or any other economy, any other country in the world. 0:18:54.200 --> 0:18:57.640 I think it's very difficult to break that message to 0:18:57.640 --> 0:19:01.440 to your citizens or for the leadership to promote an 0:19:01.480 --> 0:19:04.280 idea that we have to live with less, not more 0:19:04.320 --> 0:19:07.359 in the future. Certainly much more difficult for a leader 0:19:07.400 --> 0:19:10.680 that wants to become king. Is there anything he can 0:19:10.720 --> 0:19:15.119 do to soften that blow to the domestic population? Is 0:19:15.119 --> 0:19:20.280 there anything that could offset that. I think part of 0:19:20.320 --> 0:19:25.160 it could could offset that is really the social liberalization measures, 0:19:25.240 --> 0:19:29.280 which don't appeal to everyone, certainly not to conservative Saudi Is, 0:19:29.720 --> 0:19:34.160 but part of the youth population sees that as a positive, 0:19:34.440 --> 0:19:40.080 having more liberty and ability to experienced life entertainment. The 0:19:40.240 --> 0:19:46.080 social reforms aren't aren't really something that the government needs 0:19:46.119 --> 0:19:50.080 to fund, but they do matter for for a big 0:19:50.119 --> 0:19:53.840 part of Saudi Arabia's population, the youth population, So I 0:19:53.880 --> 0:20:00.119 think that might help along the way incrementalism. The the 0:20:00.160 --> 0:20:04.800 benefits were reintroduced, but only on a temporary basis, So 0:20:04.840 --> 0:20:06.880 I think he has to deal with it in terms 0:20:06.960 --> 0:20:11.720 of shocks, doing it over a few steps rather than 0:20:12.200 --> 0:20:14.760 one big one along the way, and at the end 0:20:14.760 --> 0:20:16.520 of the day, I think it's going to be still 0:20:16.600 --> 0:20:20.800 challenging even if you create them very clear strategy and 0:20:20.920 --> 0:20:24.520 implemented perfectly. I think the message is going to be 0:20:24.560 --> 0:20:27.720 difficult and it's it's certainly not going to be popular 0:20:27.800 --> 0:20:31.600 for a large base of Saudi Arabia society that is 0:20:31.640 --> 0:20:36.000 not ready for modern employment in some respects or I 0:20:36.200 --> 0:20:40.240 don't necessarily see as this as a good deal from 0:20:40.280 --> 0:20:42.520 this state, or that the state should be cutting their 0:20:42.520 --> 0:20:47.040 benefits in the future. Right as we're talking, all these 0:20:47.520 --> 0:20:51.920 big Saudi or GCC developments are sort of um filtering 0:20:52.040 --> 0:20:55.120 up in my mind and jogging my memory. And one 0:20:55.160 --> 0:20:57.880 thing that I just remembered is we are coming up 0:20:58.080 --> 0:21:00.879 pretty close to the one year and a versary of 0:21:01.080 --> 0:21:06.280 the corruption crackdown, or the alleged corruption crackdown. This is 0:21:06.320 --> 0:21:10.879 when Mohammed bin Salman and the Saudi authorities arrested a 0:21:11.000 --> 0:21:15.479 bunch of Saudias, lots of businessmen, lots of royals and 0:21:15.600 --> 0:21:19.480 accused them of corruption in various ways and stealing from 0:21:19.480 --> 0:21:23.440 the state, imprisoned them in the Ritz Carlton where they 0:21:23.440 --> 0:21:26.639 had just been having a big investment forum that was 0:21:26.720 --> 0:21:29.760 largely aimed at foreign investors getting them to invest in 0:21:29.800 --> 0:21:34.119 the country. A year on from that, or almost a 0:21:34.200 --> 0:21:37.359 year on from that, what do we think the point 0:21:37.520 --> 0:21:41.520 of that exercise was Was it about rooting out corruption, 0:21:41.680 --> 0:21:44.679 Was it about sending a message about dissent. Was it 0:21:44.760 --> 0:21:48.880 about recouping some money, because of course the authorities were 0:21:48.880 --> 0:21:51.360 said to have gotten about a hundred billion dollars as 0:21:51.400 --> 0:21:56.640 a result of those actions. What do we think? I am? 0:21:57.000 --> 0:22:00.399 I think this is about dealing with corruption. It is 0:22:00.440 --> 0:22:04.040 about sending a message to Saudis society that there's a 0:22:04.080 --> 0:22:07.520 new leader in town, Hammad binsan Man, that is willing 0:22:07.560 --> 0:22:11.639 and able to consolidate power. And it is about finding 0:22:11.760 --> 0:22:16.200 revenue or new sources of of funding that could help 0:22:16.280 --> 0:22:19.720 the Public Investment Fund put some money in the domestic 0:22:19.760 --> 0:22:25.280 economy and into international projects. But I think what matters 0:22:25.320 --> 0:22:28.600 here more than anything is that Saudi Arabia isn't trying 0:22:28.640 --> 0:22:33.760 to build a Western style capitalist society. I think that 0:22:34.000 --> 0:22:36.879 when when it comes to Hammad binsan Man, he doesn't 0:22:36.920 --> 0:22:40.040 look at the U S or Europe as examples. He 0:22:40.119 --> 0:22:44.720 wants to build a state capitalist structure in which he 0:22:45.240 --> 0:22:50.480 or the state have influenced over the decision making process 0:22:50.520 --> 0:22:55.840 of the private sector. Think China or Russia, one where 0:22:55.880 --> 0:23:00.840 the leader of the state isn't necessarily outside the private 0:23:00.880 --> 0:23:05.200 sector and has extensions and has an ability to influence 0:23:05.560 --> 0:23:10.399 what the private sector does in its everyday affairs. So 0:23:10.440 --> 0:23:14.400 it's I think the idea that Saudi Arabia was ever 0:23:14.520 --> 0:23:18.840 going to be a European style economy or US study 0:23:18.840 --> 0:23:22.720 economy was probably a mistake. And we can see that 0:23:22.840 --> 0:23:27.360 already with Hammad bunsen Man and the style that he's introducing. Well, 0:23:27.440 --> 0:23:31.720 let's focus on the the US relationship for a second, 0:23:31.800 --> 0:23:34.960 because even if Saudi Arabia doesn't want to replicate the 0:23:35.040 --> 0:23:40.120 US economic model, it's certainly seems to be developing closer 0:23:40.119 --> 0:23:43.280 ties with the US as a political ally, or maybe 0:23:43.320 --> 0:23:47.520 I should say with um with one US politician in particular, 0:23:47.640 --> 0:23:50.920 and that is, of course Donald Trump. And we saw 0:23:51.000 --> 0:23:55.000 him make that visit to Saudi Arabia where we had 0:23:55.040 --> 0:23:58.760 a lot of memorable imagery such as him holding the 0:23:58.840 --> 0:24:04.040 glowing or the king. And there's a sense that Donald 0:24:04.080 --> 0:24:08.639 Trump and his friendship with the Saudi rulers may have 0:24:08.920 --> 0:24:14.240 emboldened some of Saudi's foreign policies, certainly the anti Iran 0:24:14.440 --> 0:24:20.199 part of it. Do you think that view is justified? Absolutely? 0:24:20.280 --> 0:24:23.520 I think it would be very difficult to imagine Saudi 0:24:23.520 --> 0:24:30.640 Arabia introducing adopting and committing to such hawkish policies against Iran, 0:24:30.760 --> 0:24:34.359 the Yemen War included. Had it not been for an 0:24:34.440 --> 0:24:40.159 explicit message of support from President Donald Trump. There's a 0:24:40.240 --> 0:24:45.040 marriage of convenience here. Trump was hosted in Saudi Arabia, 0:24:45.200 --> 0:24:51.440 was presented with multiplion dollar arms agreements that helped him domestically, 0:24:51.960 --> 0:24:55.600 and the Saudis wanted something back or in return, And 0:24:55.640 --> 0:24:59.480 we do have a relationship that works at least between 0:24:59.520 --> 0:25:05.560 these leaders. Transactional politics is effective. It's not necessarily about 0:25:05.680 --> 0:25:09.760 long term strategy or stability in the Middle East, but 0:25:09.960 --> 0:25:13.720 certainly the two sides see something to win from each 0:25:13.720 --> 0:25:16.480 other over the short term, and that that means that 0:25:16.520 --> 0:25:20.000 the relationship with the US has improved, at least with 0:25:20.080 --> 0:25:23.800 the current administration. I wouldn't necessarily say that over the 0:25:23.880 --> 0:25:28.800 long term the Saudi US relationship does not face critical challenges. 0:25:28.920 --> 0:25:33.000 We still have that, but certainly over the short term 0:25:33.040 --> 0:25:37.600 it's working with the US and the Trump Mohammad binsa 0:25:37.680 --> 0:25:41.680 Man relationship is very positive. It's not just the real visit. 0:25:42.080 --> 0:25:45.679 It's coordination between the two sides on a host of 0:25:45.800 --> 0:25:50.600 different issues, and the Iran strategy the hawkish Iran anti 0:25:50.640 --> 0:25:54.840 Iran strategy that we're seeing from Saudi Arabia really was 0:25:54.880 --> 0:25:57.919 just an introduction to what we've seen from the US. 0:25:58.080 --> 0:26:01.479 The US with rowal from the nuclear agreement with Iran 0:26:01.960 --> 0:26:06.560 and the introduction of sanctions against Tehran. This is this 0:26:06.640 --> 0:26:09.840 is the era of the return of containment against Iran, 0:26:10.280 --> 0:26:13.160 and what the Saudis did would have not been possible 0:26:13.240 --> 0:26:17.560 without US support. Just to try to tie everything together. 0:26:18.240 --> 0:26:24.200 Is there a oil price component in that transactional relationship 0:26:24.320 --> 0:26:27.680 between the US and Saudi, because, of course we saw 0:26:27.800 --> 0:26:31.760 Donald Trump tweeting about the oil price recently that gas 0:26:31.880 --> 0:26:34.479 prices at the pump were too high as a result 0:26:34.560 --> 0:26:38.679 of the OPEC production cut agreement, And then we did 0:26:38.800 --> 0:26:41.720 see the Saudi's respond or appear to respond to that 0:26:42.040 --> 0:26:45.359 tweet with the energy minister. They're saying that they would 0:26:45.359 --> 0:26:48.720 do whatever it takes to balance the market. Is there 0:26:48.800 --> 0:26:53.080 a sense that Saudi is now be holden maybe two 0:26:53.320 --> 0:26:56.760 US wishes when it comes to gas prices. Well, I 0:26:56.840 --> 0:27:01.840 think that the Saudi leadership has always been careful in 0:27:02.040 --> 0:27:05.280