Aramco is the world’s largest oil company, and is the main source of Saudi Arabia’s wealth. The profits made by the company not only ensure that Saudi Arabia’s rulers live a life of luxury, they are also used to ensure Saudis have work and welfare – and that megaprojects like Neom are possible.
But the coronavirus pandemic has caused big problems for Aramco. In August, the company’s quarterly earnings dropped by 73% in a year, from $24.7bn to just $6.6bn. Despite this, Aramco has said it will still pay its quarterly dividend of $18.75bn. Experts have suggested that the company is borrowing around $12bn to make up the shortfall.
Projects such as Neom are reliant on oil profits, which means they now have an uncertain future. The company has already dropped several expensive projects, knowing its can no longer afford them. For example, recent months have seen Aramco pulling out of a project to build a $20bn chemical plant in the Red Sea, a $10bn refinery in China and a natural gas export terminal in Texas.
The biggest project of all, Neom, slated to cost $500bn, is therefore on shaky ground. Initially, it was hoped that foreign investment would help pay for the sprawling megacity, some of which built on land occupied by the Huwaitat community. But international awareness of the kingdom’s awful human rights record, and its activities in Yemen, have meant many investors are keeping away. Its current funding crisis will no doubt have a similar effect.
Aramco is also reportedly looking to sell a $10bn share in its oil pipelines.
Saudi Arabia’s crown prince and de facto leader, Mohammed bin Salman, has spent the past few years attempting to raise support for Vision 2030, an attempt to move the Saudi economy away from fossil fuels and diversify. However, in order to do that, using project like Neom, it requires huge amounts of money from Aramco. MBS has bet everything on Vision 2030’s success, but with coronavirus and the already falling value of oil, its future is far from certain.
One thing that might possibly help the beleaguered company and Saudi Arabia’s hopes for Vision 2030 would be to begin embracing basic international norms of human rights and therefore welcome increased foreign investment. However, there are few signs that this central pillar of the Saudi state is up for negotiation.
