House of Saud Wants Better Relationship with U.S.

House of Saud Wants Better Relationship with U.S.

The Obama administration just got a friend request from the House of Saud. Recently, Saudi Arabia’s deputy crown prince, Mohammed bin Salman, showed up in DC for a full day of talks with lawmakers. All parties are hoping to thaw what has become an increasingly frosty relationship between the two world powers, particularly when compared to the Bush years.

Salman Meets with Obama

Salman met with Obama last Friday. At this point, no details of that meeting have been made public, but it’s clear both sides are hoping to help Salman pursue a plan that will move the kingdom, at least slowly, away from an oil-based economy.

Early reports indicate House Speaker Paul Ryan met with Salman to talk about a deadline of 2030 for moving the country completely off oil. Most folks, in and out of Washington, have their doubts.

Just the thought of a nation like Saudi Arabia considering an oil-free future have some on both sides of the debate freaking out, some in excitement others in rage. The big sales pitch for proponents of what’s being called the Vision 2030 plan, is the idea that the Saudis will not be abandoning oil, they will be privatizing it. It’s an interesting gambit. At this point, the government controls the lion’s share of the nation’s oil business. This keeps the royal family incredibly wealthy. In turn, they provide their countrymen with a very comfortable, and comparatively wealthy, lifestyle as well.

Challenges on Every Level

This scenario creates a multilayered web of challenges—economic, political, and cultural. Proponents will have to convince the government it’s in their best interest to relinquish control while also convincing the populace the risk of losing their lavish lifestyle is worth the reward of a potentially even more lavish lifestyle as the fruits of the free market bring even more wealth to the kingdom.

And, for Americans, there is another wrinkle. Russia has been exerting major force, politically and militarily in the Middle East in recent years. This has led some countries to seek stronger relations with Moscow, a move that never benefits the U.S. The Saudis could do the same, and that threat could serve as a major stick for the kingdom to wield in any further negotiations.

It will be interesting to see how all this plays out and learn who are the real power brokers in the region.

David Milberg is a NY credit analyst.

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