The G20 summit got underway in China’s eastern city of Hangzhou on September 5, where the focus is expected to be on global economics and finance.
While policymakers and central bank governors from the world’s 20-largest economies – Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom and the United States, along with the European Union – continue to struggle with the slow recovery of the world economy, the theme of this year’s summit will be “Building an innovative, invigorated, interconnected and inclusive world economy.”
For Saudi Arabia, which has remained an active part of the group since its inception in 1999, the meeting comes at a time of record low energy prices and heightened political instability across large parts of the Middle East.
The meeting also serves as an important opportunity for the Kingdom to gain a better understanding of what monitory policies the largest three economies – the United States, China and Japan, – intend to pursue for the remaining quarter of 2016 in order to foster stronger economic growth, which in turn will help Saudi decision makers better adjust to the volatility of world markets.
Historically, Saudi Arabia has been a rather quiet member of the G20, but given its present equations with Iran, Riyadh has chosen not to use its influence in the Organization of Petroleum Exporting Countries (OPEC) to move the cartel to curb production and reverse the free fall of global energy prices.
Analysts believe, this strategy has served as an important tool to deny Iran additional revenues from oil exports as the economic sanctions applied by the international community over its controversial nuclear program is gradually being lifted. With this policy in place, Iran is expected to earn significantly less from oil exports than it did before the sanctions were applied.
This change in Saudi petroleum strategy coincided with the succession of King Salman bin Abdulaziz al-Saud following the death of his brother, King Abdullah bin Abdulaziz al-Saud in January 2015. This is said to have begun the present era of Saudi Arabia’s assertiveness in which it moved away from a status-quo power into one that seeks to shape regional events.
Between lifting of sanctions against Iran and uncertainty pertaining to the US presidential election, it is unlikely that Saudi Arabia will signal at the G20 summit any intention to alter its petroleum price strategy.
Nonetheless, Saudi growth strategy is expected to contribute to the G20 objectives of strong, sustainable and balanced growth through the following actions: Contributing to the global and G20 economic growth and stability by continuing the adoption of positive and balanced policies to play its systemic and stabilizing role in the global oil market.
National Transformation Plan
In light of current global geopolitical uncertainties, the high-profile summit is expected to serve as an important opportunity for the Kingdom to present its National Transformation Plan to the G20 as part of its strategic vision to reduce its dependency on oil, its most valued resource.
As part of that vision, Deputy Crown Prince Mohammad bin Salman announced in March plans to dedicate a $2 trillion budget for a post-oil economy in an interview with Bloomberg. He has also signaled that an IPO for Aramco, which will put 5 percent of shares on the market, could happen in 2017.
In light of the Prince’s ambitious quest to transform the Kingdom’s economy, the G20 summit will serve as an important venue for Saudi decision makers to adjust monitory policies as part of an orchestrated strategy to ulitamately improve the country’s investment climate.
Analysts and investors are therefore likely to scrutinize any statement released by the Saudi-delegation following the summit in order to gain a better understanding of where its monitory policies may be heading which also may be indicative of how far the government’s National Transformation Plan has come.
This article was originally published by Al Arabiya.