He was the man who sold the world on his vision of a Saudi economy no longer dependent on oil.
Now Crown Prince Mohammed bin Salman could become the biggest risk to
his own project. Everything changed when Jamal Khashoggi walked into
the Saudi consulate in Istanbul on Oct. 2 and didn’t come out.
Allegations rapidly spread that the Washington-based journalist was
murdered by a hit team sent from Riyadh. And suspicion naturally fell on
the oil-rich kingdom’s de facto ruler, the 33-year-old heir to the
throne.
Prince Mohammed, who’s denied any knowledge of Khashoggi’s fate,
still has his defenders -– notably Donald Trump. The U.S. president and
his top diplomat have cautioned against putting America’s decades-old
Saudi alliance at risk while they await the results of a Saudi
investigation. But that’s in sharp contrast to a growing chorus of
outrage, putting pressure on the White House to act. In Congress,
lawmakers from Trump’s own party denounced the prince personally and
demanded sanctions.
And, crucially for Prince Mohammed’s economic plans, the global
business leaders he courted are distancing themselves. The bosses of
JPMorgan Chase & Co., Ford Motor Co. and Uber Technologies Inc. are
among dozens of executives and policy makers scrapping plans to attend
the prince’s business forum next week.
‘Official Complicity’
For a leader who’s staked his country’s future on a surge in foreign investment, that’s an ominous indicator.
“What appears to be Saudi official complicity in Jamal’s
disappearance, and perhaps death, sends all the wrong signals to the
people and groups MBS needs to change Saudi Arabia in the direction he
wants,’’ said Gregory Gause, a Saudi specialist at Texas A&M
University.
The investors the crown prince needs were already wavering. They were
fine with showing up at lavish summits, at least until Khashoggi
disappeared -– but the money wasn’t flowing.
Foreign direct investment slumped more than 80 percent last year. In
an interview this month, the crown prince said early data suggested a
partial rebound in 2018. But to meet his 2020 targets, FDI needs to
soar.
Instead, even before the Khashoggi scandal, business leaders had seen
enough in Prince Mohammed’s rule to unnerve them. At home, Saudi Arabia
detained dozens of prominent local entrepreneurs as part of a supposed
crackdown on graft. Abroad, it launched a boycott of Qatar, and got
embroiled in disputes with Germany and Canada that threatened commercial
deals with those countries.
When his father King Salman ascended to the throne in 2015, Prince
Mohammed began to leapfrog a generation of more experienced uncles and
cousins, and eventually became heir to the throne. On the way he grabbed
control over the key levers of the economy, including the central bank
and oil giant Aramco, as well as the Defense Ministry.
War in Yemen
The crown prince set out to change a strict religious culture, and he
delivered on some promises, allowing women to drive cars and loosening
Saudi social life by permitting cinemas and concerts. Those measures won
him fanfares in the West.
Meanwhile, Prince Mohammed was abandoning a traditionally cautious
foreign policy and seeking to assert Saudi power –- which led him to
intervene in Yemen’s civil war. More than three years of Saudi bombing,
directed against rebels said to be backed by Iran, has left thousands of
civilians dead.
On the economic front, the prince wanted to ditch a model based on
state handouts of oil cash, and build a new private sector. A key driver
was Saudi Arabia’s slowdown after the crude-price shock of 2014. The
economy contracted 0.9 percent last year, and while the government
expects growth of 2.1 percent in 2019, that’s still only about half the
average pace between 2000 and 2014.
Prince Mohammed worked hard to court U.S. executives who could
potentially help meet his goals. During a visit earlier this year he met
Amazon.com Inc. Chief Executive Officer Jeff Bezos and Microsoft
Corp.’s Satya Nadella. But Prince Mohammed had to backtrack on some
policies. His efforts to cut salaries and allowance met with signs of
public opposition.
‘That Has Consequences’
And opposition to any of his initiatives hasn’t been tolerated, in a
climate of fear. An economist who questioned the Aramco sale plan was
arrested. So were women activists who’d campaigned for an end to the
driving ban. So were dozens of people accused of collaboration with
Qatar –- a charge also leveled at Khashoggi, before he disappeared.
“Was it a planned, horrendous killing, or an operation that has gone
badly wrong?’’ said James M. Dorsey, a Middle East scholar at Nanyang
Technological University in Singapore. The Saudi response to the crisis
has been “abysmal,’’ he said, as authorities responded first with
blanket denials and then with “conspiracy theories.’’
“They have lost any high ground,’’ Dorsey said. “That has consequences for MBS.’’
--With assistance from Ziad Daoud (Economist).
To contact the reporter on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net
To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Ben Holland, Bill Faries
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