Saudi trading links revived by US groups
|A Saudi pilot gestures aboard an F-15. The kingdom signed a $60bn deal with Boeing for the aircraft this summer|
US companies have won a series of high-profile deals in Saudi Arabia during the past six months, underlining the confident return of US business to the kingdom.
The revival of trading ties that degraded markedly in the wake of the September 11 attacks of 2001 is being strongly supported by the US administration, with Saudi Arabia and other Gulf states seen as a key element of President Barack Obama’s initiative to double US exports in five years.
Saudi Aramco, the world’s largest oil company, last week purchased $500m worth of generators and compressors from General Electric to expand its Shaybah oil and gas field. Last month, Maaden, the Saudi mining company, signed a $1.9bn deal with US Alcoa for phase one of a $10.8bn aluminium project.
In July, the oil-rich kingdom ordered the largest arms deal in history, a $60bn purchase of Boeing’s F-15s and related defence systems, while Saudi Arabian Airlines are paying $3.3bn for 12 Boeing 777-300ERs, with an option for 10 more.
Francisco J. Sanchez, undersecretary of commerce for international trade, this month visited the kingdom for the second time in less than six months, heading a delegation of 16 companies looking to participate in the $400bn five-year plan by the kingdom to develop infrastructure and expand oil production.
Kingdom looks to boost growth
Saudi Arabia says it plans to step up spending in 2011 in an effort to bolster growth and job creation that will leave the oil-rich kingdom facing a deficit of SR40bn ($10.7bn), writes Abeer Allam.
The Arab world’s biggest economy needs to accelerate growth and create jobs for its growing 18m population, 70 per cent of which are under 30. With unemployment at 10.5 per cent, Riyadh faces denting social and security pressure to employ its people. The country’s middle class is eroding and home ownership is less than 35 per cent.
More than a quarter of the 2011 budget will be channelled to education, followed by healthcare, at 11 per cent, and infrastructure at 4 per cent. In 2008, amid the international financial crisis, the kingdom announced a five-year, $400bn investment plan.
“They are locked in a situation where they will have to continue to spend because the banks are very careful about lending to the private sector and there is no rush to borrow either,’’ said Jarmo Kotilaine, chief economist at Riyadh-based National Commercial Bank.
Saudi Arabia’s finance ministry said on Monday
that it expected the country’s gross domestic product to grow by 3.8 per cent in 2010 and inflation to hit 3.7 per cent.
“I have chosen to lead two missions here to underscore the importance of American companies reaching out, strengthening our ties, and offering to be partners in the development, particularly the infrastructure development,” Mr Sanchez told the Financial Times.
“As they develop their civil nuclear sector, [they] will want to have access to the very best technology. GE and Westinghouse have a lot of experience in this area and are both very interested in this market.’’
US exports to Saudi Arabia increased by 8 per cent in September on an annual basis, according to the US government. Mr Sanchez expects trade to grow 10 per cent in 2011.
After the September 11 attacks, perpetrated by a group of mostly Saudis, US suppliers shunned the kingdom, while Chinese and Asian firms rose in prominence.
Still the biggest Saudi trade partner, America’s market share in Saudi trade declined from about 20 per cent in 2000 to 14.2 per cent last year.
The kingdom embraced European, Japanese and Chinese competitors. China was the biggest beneficiary, nearly tripling its exports to the kingdom since 2000 and now controlling 11.3 per cent of the total trade volume, and a key importer of Saudi crude.
Yet Saudi Arabia never deviated from its dollar peg or purchase of US Treasury bills. Since the global financial crisis, it has played a quiet role to stabilise other economies to preserve demand for Saudi oil.
“What we are seeing is the restoration of the pre-9/11 status quo, and more,” said Robert Lacey, author of Inside the Kingdom. “Nine years ago, you would never have dreamt that America would be signing the biggest arms deal in history with the country that provided 15 of the 9/11 hijackers.
“It has massive implications for the US and Saudi Arabia in terms of serious, long-term business linkages and the economic infrastructure in both countries.”