She added: “The wealth brought in through OPEC’s control of oil prices significantly changed the Kingdom’s buying power in the world, and its ability to mold its own future.”
Anthony Harris, a Dubai-based businessman who was a diplomat in Saudi Arabia, recalled the economic spirit of the decade in which global oil prices rose tenfold as OPEC solidarity and global crises combined.
“Suddenly, some Saudis were among the richest people on the planet,” he said. “It was a time when many of the big family businesses were set up, and they’re still around today. That money started to flow down, and ordinary Saudis began to feel much better off.”
It was the birth of the Saudi consumer economy, with cars and electric goods coming into the country on an unprecedented scale. “The outside world came in to Saudi Arabia,” said Harris.
Oil was at the heart of that transformation. The decade witnessed the birth of Saudi Aramco — still the Kingdom’s most important asset — when control of the oil company was bought back from its original American owners in a series of share purchases.
The Saudis called the process “participation,” in distinct contrast to the outright seizure of foreign oil assets by other Arab states, such as Libya and Iraq, in the same decade.
The Saudi government paid good hard cash in a series of share transactions that were described as “amicable.”
The price it paid has never been revealed, but informed speculation at the time put it at $1.5-$2 billion — roughly one-thousandth of the value range that Aramco hopes to realize in the forthcoming initial public offering.
The 1970s also saw the first moves toward a national, coordinated economic and industrial strategy in the Kingdom, with the mid-decade founding of the Saudi Arabian Basic Industries Corp. (SABIC), and the establishment of the Royal Commission for Jubail and Yanbu.
For the first time, the enormous wealth generated by the soaring oil price was being planned and directed centrally.
When SABIC was set up by royal decree in 1976, it could legitimately be called the Kingdom’s first attempt to diversify away from oil dependency.
It aimed to convert the by-products of crude oil production into commercially viable products such as chemicals, polymers, fertilizers, and a whole range of other industrial materials essential for a modern economy.
Back then, there was virtually no large-scale industrial plant in the Kingdom beyond the exploration, production, refining and shipping infrastructure necessary for the oil market.
SABIC, as a Saudi company from the outset under the chairmanship of Ghazi Abdul Rahman Al-Gosaibi — a technocrat, businessman, diplomat and novelist once described as the “godfather of innovation” — laid the foundations for that industrial infrastructure.
Suddenly, some Saudis were among the richest people on the planet. The outside world came in to Saudi Arabia.
Today, SABIC is the world’s third-biggest chemicals company, with offices around the globe and more than 34,000 employees in 50 countries. It is the most valuable quoted company in the Middle East through its Tadawul share listing.
It is in the process of reaffirming its roots in the oil business via the $70 billion merger with Aramco, regarded as a vital part of both the latter’s global market listing plans and the Vision 2030 strategy to further reduce oil dependency.
The other crucial element to 1970s economic policy was the Royal Commission for Jubail and Yanbu, which was set up in 1975 and was the first government body to look to plan a national industrial economy.
In the 1970s, the Eastern Province was separated from the Hijaz by roadless tracts of inhospitable desert, linked by Bedouin trails but little else.
The commission — which is still in business as an economic and industrial planning and investment authority — linked the two parts of the Kingdom, at first with oil pipelines that today are strategically crucial to the Saudi economy, then by a modern road system.
In the process, the commission created two big industrial maritime hubs out of what had formerly been sleepy fishing ports on the Arabian Gulf and the Red Sea: Jubail and Yanbu.
Both are now crucial parts of the Kingdom’s modern economy, and key to the recently announced National Industrial Development and Logistics Program, which aims to pull in hundreds of billions of dollars of investment to the Kingdom — another vital component of Vision 2030.
An early priority for the commission when it was set up nearly half a century ago was to stop the practice of “flaring” at oil wells (burning off the gas produced during oil production, deemed then to be uneconomic to exploit commercially).
Now, Saudi Arabia has a large and growing gas industry, which it is using to reduce the amount of oil used in domestic power production and, eventually, for large-scale export.
The commission’s projects were an example of another feature of Saudi economic and industrial policy: The need to attract international investment and participation in the Kingdom’s plans.
The American contractor Bechtel Corp., which played a big role in Aramco’s early development, was a major participant in the 1970s projects.
“Yanbu and Jubail were especially successful because they were built around an oil industry that was already strong,” said Wald.
“They had secured international companies’ participation in advance, mostly through joint ventures with Aramco, and they had strong and efficient management from the US and Saudi Arabia.”
Although the echoes of 1970s economic and industrial policy are strong in the Vision 2030 strategy, Wald warns against a direct comparison, mainly because of the scale and transformational nature of current plans.
“Some of the government-supported projects of that decade, especially Jubail and Yanbu, became very successful. But it’s not a simple, natural progression between then and now,” she said.
“Back then, Saudi Arabia was improving on industries in which it had an established and proven track record. Vision 2030 is trying to develop entirely new areas.”
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