Importance of the

Kingdom of Saudi Arabia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Saudi Arabia’s Role in World Affairs 

  The Kingdom of Saudi Arabia occupies a unique position in terms of its strategic location, abundant mineral resources, and as the birthplace of Islam. The Kingdom is home to Islam's two holiest cities- Makkah and Madinah as well as hosting the headquarters of the Organization of Islamic Conference (OIC). The Kingdom has endeavored to act as a moderating and unifying force amongst Islamic nations.

  All this places an enormous degree of responsibility on Saudi Arabia to meet conflicting demands to adopt policies that are sometimes contrary to its own long term interests.  It is the lynchpin of the world’s oil production,  with a quarter of proven oil reserves and the fifth largest gas reserves.  Its mineral reserves have hardly been touched, and its hydrocarbon based industries now account for 15-20% of the world’s total production and are rising rapidly.  

  Strategic choices are being made by Saudi Arabia today.  King Abdullah’s visit in February 2006 to China, India and other East Asian countries such as Malaysia and Pakistan may yet herald a move by the Kingdom to integrate its economic well-being with the fortunes of these newly emergent economic giants.  At the same time, old friends and allies are not forgotten.

  Saudi Arabia is investing heavily in its upstream oil industry, to double its oil output capacity within the next 15 years, making it the undoubted arbiter of oil prices and the economic well being of oil consuming nations.  It has opposed pressure from fellow OPEC members to raise oil prices and benefit economically in the short run, despite the Kingdom having ran successive budgetary fiscal deficits for many years until 2001 when oil prices began to rise sharply.

  This restraint caused domestic economic hardship and could have been one cause for the domestic terrorism that the Kingdom has witnessed. Saudi oil policy has always been far sighted,  knowing very well that the mistakes of the late 1970’s and the oil price shocks of that period did not help Saudi Arabia in the long term, and should not be repeated. 

  This voice of moderation has been met with skepticism by some, and open calls by others to wean industrial nations from “oil addiction”.  As such, the Kingdom finds itself at the cross roads again, of having to support the economic well being of other nations, by sacrificing current potential higher oil revenues, and leaving itself vulnerable by investing in long term infrastructure to double oil production, only to be faced in the future by lower demand for its oil as alternative energy sources and more “reliable” energy partners are found.

   It is a credit to the Kingdom that it continues to pursue its moderating policies on oil markets, but a sense of realism has also crept into Saudi foreign and economic decision making, that now calls for the diversification of the Kingdom's international trading partners and new strategic relationships.  The next twenty years might herald the emergence of a new global “developing” world axis that comprises India, China, Brazil and Saudi Arabia on the “outer ring”, and other developing economy "tigers" such as Malaysia, Pakistan and Dubai in the “inner ring”.  When this materializes, Saudi Arabia will be able to play a decisive influencing role on the global world economy that it will be entitled to, but has so far shied from seeking. 

   Saudi Arabia has come a long way from those early days, only a few decades ago, when in 1940 it had a basic economic infrastructure, dependent on pilgrimage revenues and some modest oil exports. In December 2005, it had six Saudi Companies listed amongst the FT Global 500 Companies. Who knows how many more will be there in 2025, as the Saudi economy begins to reap the benefits of globalization and an accelerated pace of economic reforms under King Abdullah.

Saudi Arabia, Economy, Kingdom of Saudi Arabia, Economic Developments, Islam, Makkah, Madina, Organization of Islamic Conference (OIC), oil reserves, OPEC, domestic terrorism, alternative energy, strategic relationships, FT Global 500, globalization, economic reforms, King Abdullah, Saudi Economy, Dr. Ramady, Mohamed A Ramady, FCIB, oil policy, Middle-East, The Saudi Arabian Economy: Policies, Achievements and Challenges, economic planning, Saudi budgetary framework, oil income, Saudi Arabian Monetary Agency’s (SAMA), Islamic financial services, capital markets, Saudi women, Saudization, youth unemployment, Gulf Cooperation Council, GCC,

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