Deputy Crown Prince Mohammad bin Salman announced Monday in Riyadh that the kingdom would begin a massive effort to diversify its economy and its global investments away from oil - a recognition that an economy too dependent on a single commodity is vulnerable to major shocks.

One such shock was the collapse in the oil price that begin in mid-2014, not least because Saudi Arabia, the world's low-cost swing producer, refused to cut back crude oil production despite an excess of supply over demand. More recently, Iran and Russia have rejected calls to rein in oil production in their turn, which means oil prices may remain weak for some years. Moreover, if electric vehicles start to gain serious market share in the 2020s, that will present a permanent downward pressure on oil prices.

"I think by 2020, if oil stops, we can survive," Mohammad said. "We need it, we need it, but I think in 2020 we can live without oil."

Influential favorite son

Mohammad bin Salman, a son of Saudi Arabia's eighty-year-old King Salman and the king's third wife, is thirty years old. Upon acceding to the throne in January 2015, Salman immediately appointed Mohammad - known in the kingdom as MbS - to several of the kingdom's most important Cabinet-rank offices, including defence minister and head of the country's economic council.

Oil sales revenues remain the predominant economic driver in the kingdom, accounting for 72 percent of total revenue last year

Almost immediately after becoming defence minister, MbS launched a war against Shiite tribes in Yemen that had taken control of much of the country and recruited other Sunni powers to join in. The war has been inconclusive in military terms, and has caused a humanitarian catastrophe. Peace talks are now underway.

MbS's profile is now being raised by emphasizing his role in pushing forward economic reforms. Monday's announcement of the kingdom's new economic reform plan, termed Vision 2030, was made at MbS's first nationally televised interview since taking office as head of the economic council early in 2015.

As part of Vision 2030, MbS proposed to restructure the state-controlled Public Investment Fund to make it a hub for Saudi investment abroad, financed mostly by oil revenues, but also by raising extra money through sales of shares in national oil giant Saudi Aramco.

"We restructured the fund. We included new assets in the fund, Aramco and other assets, and we fixed the problems of the current assets that the public investment fund owns, both in terms of companies and other projects," he said.

Strained budget

Low oil prices last year meant the kingdom ran a budget deficit of 15 percent of GDP. If low prices persist, it will be more difficult to set aside money from oil revenues for the Public Investment Fund, which helps explain the Saudi rulers' decision to raise extra money by selling shares in Saudi Aramco.

"Initial data say the [Public Investment] Fund will have control over more than 10 percent of global investment capacity," Prince Mohammad added.

Saudi Arabia spends vast amounts of money on weaponry. Its rulers, committed to a fundamentalist Sunni version of Islam, believe themselves to be locked in a great struggle for regional primacy with Shiite Iran

MbS said increased efforts at mining minerals would be made in the kingdom in future, and the scope of domestic weapons production would also widen. The kingdom was the third-largest arms purchaser in the world last year - it spent $87 billion (77 billion euros). Among other military engagements, Saudi Arabia is fighting a war of choice in Yemen at MbS's direction, and supplying weapons to Sunni groups in Syria that are fighting President Assad's secular government.

MbS also said a green card system would be launched within five years, to allow expatriate Arabs and Muslims to live and work in Saudi Arabia long-term. It's a significant policy shift for the kingdom.

Oil geopolitics

By selling a small part of the shares of the world's most valuable oil company - MbS has said the company is worth perhaps 2 trillion dollars, and that less than 5 percent of its shares would be sold - the royal family will raise additional money which it can invest in buying a diversified portfolio of foreign companies and revenue streams. Beyond that, it may also be motivated by geopolitical calculations.

Until now, Saudi Aramco has been 100-percent-owned by the Saudi state. By letting foreign business interests buy some shares, the Saudis are implicitly giving influential global investors an incentive to help support stable institutions in the kingdom - and that means, above all, the continuing rule of the al Saud family.

nz/hg (Reuters, AP)