As President Donald Trump begins his first international tour since taking office with a visit to Saudi Arabia, it is logical to expect that issues such as counterterrorism and Iran will top the agenda at Saturday’s US-Saudi Summit. Nonetheless, the economic issues are equally important for both sides. President Trump, given his “America First” slogan, is looking to bring more jobs to US citizens, while Saudi Arabia is seeking to make its Vision 2030 diversification program a success.
From the Saudi perspective, maintaining good relations with the US remains the key foreign policy objective. The US is still seen as a global power and is the world’s largest economy; American companies play an important role locally, particularly in the energy sector, which is still the lifeblood of Saudi Arabian economy. This is in addition to the US still being the favorite destination for students from Saudi Arabia, with an estimated 80,000 studying there in 2016.
Meanwhile, Washington sees the importance of Saudi Arabia through its membership of the G-20 club of the top world economies, and as the largest economy in the Middle East and North Africa (MENA). The Kingdom is also the world’s largest exporter of oil, at an estimated rate of 10.39 million barrels of crude per day, and the world’s fourth-largest holder of foreign-exchange reserves — behind China, Japan and Switzerland — according to the latest data from the International Monetary Fund (IMF).
Trade between both sides is also significant. Last year, the US was Saudi Arabia’s second biggest trade partner, and the fourth-largest export market — after China, Japan and India — according to the IMF.
For the US, Saudi Arabia was the largest trading partner among the Arab countries, and the second behind Israel in the MENA region. Saudi Arabia also remained among the 20 top markets for US exports in 2016. Importantly, the Kingdom is one of the biggest customers of American military hardware and is already America’s second-largest source of crude, behind only Canada, according to official US statistics.
American companies are big investors in the Kingdom, pumping in around $40 billion between 2003 and 2015, according to Arab Investment & Export Credit Guarantee Corporation. The Organization for International Investment estimates that the cumulative foreign direct investment in the US by Saudi Arabia reached over $11.5 billion in 2015.
With the ongoing economic transformation in the Kingdom, US investments are likely to increase in Saudi Arabia. Indeed, the Kingdom is planning to raise around $200 billion through its privatization programs in 16 sectors, ranging from energy to health care. Importantly, the ongoing reforms of the Saudi Stock Exchange (Tadawul) could also result in access to the MSCI Emerging Markets Index by 2018, which may lead to an increase in American capital flows into the Kingdom.
Perhaps the most important…