Blood and Oil
MBS, the Ritz-Carlton detentions and the PIF's spending spree.
Summary
Hope and Scheck, both Wall Street Journal reporters who had covered the 1MDB scandal, wrote about Mohammed bin Salman's rise to power in Saudi Arabia and the decisions that followed.
The narrative covers his emergence from relative obscurity within a large royal family, the removal of rival claimants including Mohammed bin Nayef, and the consolidation of control over the defence ministry, the economy and eventually the security services. The economic material covers Vision 2030 and the diversification programme, the Public Investment Fund's transformation from a domestic holding vehicle into an international investor including the SoftBank Vision Fund commitment and the Uber stake, and the Aramco listing, which was intended to raise a hundred billion dollars at a two trillion dollar valuation and which was eventually completed on the domestic exchange at a smaller scale.
The political material covers the 2017 detention of hundreds of businessmen and princes at the Ritz-Carlton in Riyadh, presented as an anti-corruption campaign and resulting in settlements transferring assets to the state; the Yemen intervention; the blockade of Qatar; the detention of the Lebanese prime minister; and the killing of Jamal Khashoggi in the Saudi consulate in Istanbul.
The authors' argument is that the concentration of decision-making in one person produces both the speed that the reform programme required and the absence of any check on decisions that turn out badly.
The reporting rests on sources close to the events and the Saudi government disputed parts of it. The book was published in 2020 and the subsequent period, including the improvement in relations with Western governments and the further growth of the Public Investment Fund, is outside it. Readers investing in or operating in the region should note that the property rights implications of the Ritz-Carlton episode are the most directly relevant part.
Key takeaways 7
- Concentrating decision-making in one person produced the speed the reform programme required and removed any check on bad decisions.
- The 2017 Ritz-Carlton detentions transferred assets to the state through settlements negotiated under confinement.
- The Ritz-Carlton episode demonstrated that property rights in the kingdom are conditional on political standing.
- The Public Investment Fund was converted from a domestic holding vehicle into a large international direct investor.
- The Aramco listing raised substantially less than intended and at a lower valuation than the target, on the domestic exchange.
- Vision 2030's diversification depends on oil revenue, which ties the reform programme to the resource it is intended to replace.
- Foreign investors committed capital to Saudi-backed vehicles on relationships with a leadership whose decisions carry no institutional check.
Who should read it
Investors and operators dealing with Saudi capital or operating in the Gulf who need the political risk context behind the investment programme.
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Where it sits in the reference 3
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