King Salman’s wild ride

Saudi King Salman’s month-long tour of Asia marks a rare occurrence for Saudi monarchs, who rarely engage in such prolonged diplomatic activities. The arc of the King’s sojourn takes him through a range of regional middle and lesser powers, with stops in Malaysia, Brunei, Indonesia and the Maldives. In addition, the monarch is seeking to extend olive branches to two Asian great powers – Japan and China. The tour, while diplomatic in nature, has not been without peril, with reports that the King was the target of a foiled assassination plot in Malaysia by either Houthi or ISIS militants.

Motivations behind the trip are numerous. Naturally, there is the ever-present Saudi desire to shore up foreign energy markets and ensure continuing demand for Gulf oil. China and Japan represent the number one and two customers for Saudi oil respectively, between them generating the Kingdom around $US90 billion in 2014 alone.

The kingdom’s newly articulated Vision 2030 plan, championed by Salman’s 31-year-old son, is aiming to diversify the Saudi economy, move the national budget away from its traditional extreme reliance on oil, as well as push many Saudis out of the bloated public sector and into the private job market. At a more fundamental level, the initiative seeks to rewrite the basic Saudi social contract/ruling bargain, moving away from a rentier model of governance to one based on open and competitive market forces, while somehow maintaining the essential authoritarian rule of the monarchy.

Needless to say, the Vision 2030 initiative is extremely ambitious in its intentions. One example of this bravado is the plan to significantly expand local defense industries to accommodate more than 50% of indigenous defense needs. Currently, local production fulfils just 2% of such requirements and the material produced is known for neither sophistication or high quality.

In order to have a hope of achieving such a dramatic restructure in such a short amount of time, the Saudis will need capital investment and lots of it. In this regard, a key objective of Salman’s charm offensive is to court investors for an economy that has traditionally been closed to most international business and assuage any fears they might have over the uncertainty of such a venture. For such investment, China and Japan represent the most obvious targets for potential patrons, but the smaller regional states may also provide opportunities to attract cash.

In a seemingly paradoxical move, the Kingdom is also seeking to diversify its own investment portfolio. One of the major new impetuses for the country’s Public Investment Fund (PIF) under Vision 2030 was a growth in international strategic investments. In response, Riyadh is seeking new opportunities for returns abroad, with an eye on the so-called tiger economies and all the potential for growth contained therein. The Saudis cannot ignore Indonesia in particular, which is predicted to be nearing the top 10 of global economies by 2030. In such an environment, the opportunities to deploy the PIF to Saudi benefit seem rife. This is nothing to say of the private and uncounted resources held by the royal family, which has gained considerable notoriety for owning considerable foreign assets globally. Some family members are no doubt looking for new entrepreneurial ventures.

One interesting development on the trail was the suggestion of a large Saudi investment into the Maldives. Although details on the nature of this deal in such a remote part of the world remain extremely scant, it is clear that Riyadh is looking for new opportunities to expand its global reach and influence. Regardless of the details of the deal, it seems the Maldives may represent the first major target of the PIF since its recalibration.

No doubt further motivating the Saudi diplomatic drive are concerns over the status of its relationship with Washington. Coming off eight years of relatively frosty relations with the Obama administrations, the Saudis are undoubtedly worried their long-standing security guarantor in the region may no longer be the steadfast supporter it once was. While President Trump has made some positive noise towards Riyadh - and appears to share the Saudi goals of confronting ~~Iraq~~ Iran and quashing instability in Yemen - the former reality TV star’s temperament and tendency to whimsically alter policy course do not appear to offer a strong foundation upon which to rebuild a dependable security relationship. In such an environment of uncertainty, it would be natural for any state to seek to cultivate other options with great and emerging powers.

Ben Rich