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OPEC dispute highlights Saudi Arabia's struggle to get rid of oil dependence

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OPEC dispute highlights Saudi Arabia's struggle to get rid of oil dependence

During the reign of Crown Prince Mohammed bin Salman, the Kingdom pledged to establish vital non-oil industries. It did not.

OPEC dispute highlights Saudi Arabia's struggle to get rid of oil dependence


RIYADH - Five years ago, the Saudi crown prince pledged to unshackle the economy from oil by 2020. But as the world's largest exporter of crude seeks to maintain growth and create jobs, the kingdom is doubling down on its commitment to hydrocarbons and moving away from greener energy sources.


Saudi Arabia's move to scale back its long-term plans puts it in conflict with other members of the Organization of the Petroleum Exporting Countries (OPEC), such as the United Arab Emirates. The UAE fears the demand for crude will deplete faster than the Saudis think, and is looking to sell as much as possible to fund the growth of other sectors such as tourism and technology. Saudi Arabia wants to slow down and extend the support it gets from crude oil in the future. Last week, talks in OPEC collapsed about whether to increase crude production.



“The Saudis want to drive at 60 miles per hour and the Emiratis want to drive at 100 miles,” said Ayham Kamel, head of the Middle East at political risk consultancy Eurasia Group. The crown prince has come to realize that panicking away from oil is not actually in Saudi Arabia's best interest.



Under Crown Prince Mohammed bin Salman, Saudi Arabia was aiming to get rid of its dependence on oil now. In 2016, he revealed a plan to attract foreign capital and build non-oil industries, such as manufacturing cars and weapons. The plan, dubbed Vision 2030, aims to transform Saudi Arabia into an industrial powerhouse and pull the kingdom out of boom and bust cycles in global oil markets.


But while non-oil industries grew by 2.9% in the first quarter of last year, the kingdom's oil sector still contributes up to 80% of the country's budget revenue, according to the World Bank. The bank said 88 percent of Saudi Arabia's foreign income comes from oil exports. The share of oil sales in Saudi Arabia's gross domestic product has already increased to 24% in 2019 from 19% in 2016 when oil prices collapsed, according to the World Bank.





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