In the Red Sea coastal province of Tabuk, where the futuristic city of NEOM was meant to rise from the desert, royals have hunkered down in new construction, the paint barely dry on the palace walls.
On the horizon, Jordan’s Aqaba port and Egypt’s Sinai Peninsula are visible but unreachable. The Arab littoral neighbors, envisioned as bridges to NEOM, are now in varying degrees of lockdown. Israel, surveillance eyes to the monarchy, has sealed itself off.
Movement between Tabuk and other parts of the country is banned, bringing the isolation of the brick red moonscape into stark relief. Work at NEOM has ground to an undefined halt. “There’s a high likelihood it fades into nothingness,” said a Gulf-based economist.
For dreamers: NEOM was supposed to replace Dubai as the Hong Kong of the Middle East, with the target of one million residents by 2030. The local tribespeople would be relocated, allowing Crown Prince Mohammed bin Salman to erect his $500 billion fantasy world of flying cars and Michelin-starred restaurants from scratch, and without societal constraints.
The NEOM pitch, just a few years old, advertises a living lab for “doers … at the crossroads of the world.” It would be accessible to 40% of the world’s population in less than four hours. In other words, reachable by plane. This touted accessibility now sounds like an artifact of a bygone era of nationalities packed in economy class like sardines, and scant consideration of a deadly virus among them.
The 2008 global financial crisis, which saw fleeing expats abandon Ferraris in the Dubai airport parking lot, might have served as a warning. Now, the tremor is twofold: a global pandemic that could alter travel and lifestyle patterns for years to come, and a parallel recession, which has already seen salaries slashed in Dubai. The ravages of Covid-19, coupled with a bruising oil price war with Russia, have pushed the kingdom into emergency mode, the crown prince’s vanity projects pushed to the side.
King Salman on Friday decreed the government would step in to pay 60% of private sector salaries for its citizens for the next three months. The Saudi Grains Organization has meanwhile instructed Saudi investors abroad to supply the homeland with 355,000 tons of wheat. “I don’t see the powers that be prioritizing [NEOM] now … It’s a running cost with no value added,” the Gulf-based economist told Asia Times. “The momentum will likely die out. And it will take a lot to rebuild that momentum,” he said.
Drowning in oil: NEOM, billed as an oasis of sustainability, now seems to embody the vapid fantasies of the jet fuel-guzzling past. The Saudi Public Investment Fund, the crown prince’s intended vehicle to economic diversification, on Monday took an 8.2% stake in Carnival cruises.
Saudi Aramco remains the bedrock of stability in a country now dominated by one man. The state oil giant, arguably the best-run company in the kingdom, was last year listed on the local stock exchange, netting about $25 billion.
The proceeds from the sale were funneled into the Public Investment Fund, which in turn, is meant to bring NEOM to fruition. The futuristic metropolis, egged on by paid teams from McKinsey, Boston Consulting, and Oliver Wyman, would be the jewel in the crown of the post-oil portfolio.
Yet, at present, “there is no clear vision as to what exportable industries the kingdom will build up to replace its near-total dependence on oil and petrochemical industries,” remarked Salem Saif, a writer from the Arabian Peninsula. “Such exportable industries are the ultimate barometer of the health of any capitalist economy in today’s globalized world. And as the 2007-8 crash made clear, sophisticated financial funds are no replacement.”
In recent days, global funds have fled toward safe havens like US Treasury notes, gold and the yen, leaving emerging markets behind. While Saudi Arabia touts the world’s largest proven reserves and lowest extraction cost, the kingdom requires the barrel to be in the mid-$60s to fund its budget. Oil is currently hovering in the mid-$20s as a price war with Russia enters its second month. The protracted game of chicken has resulted in a monsoon of crude with nowhere to store it.