Brexit seen boosting UK-Saudi Arabia trade ties

In March 2018, the UK and Saudi Arabia agreed a goal of £65 billion ($90 billion) of mutual trade and investment in the coming years during a meeting between the UK’s Prime Minister Theresa May and Crown Prince Mohammed bin Salman. (AFP)
Updated 11 July 2018
0

Brexit seen boosting UK-Saudi Arabia trade ties

  • UK and Saudi Arabia agreed a goal of £65 billion ($90 billion) of mutual trade and investment in the coming years
  • Addressing Saudi Arabia’s Vision 2030 reform plan, Innes-Hopkins described the Kingdom’s blueprint for its future as a “win-win” for both countries

LONDON: Brexit will lead to stronger trade and investment opportunities between the UK and Saudi Arabia, and attracting listings such as Saudi Aramco would be among a string of important deals Britain hopes to secure after it breaks with Europe, according to a leading business connector between the two countries.
Chris Innes-Hopkins, UK executive director for the Saudi British Joint Business Council (SBJBC), said it is not a question of the UK choosing whether to have trade with Europe or the rest of the world — it aims to have both, and Saudi Arabia is uppermost in its sights.
“Brexit does provide many opportunities for the UK and Saudi Arabia,” he said, speaking to Arab News after his address at the 12th BMG Economic Forum at the London Stock Exchange Group on Wednesday.
“I think it also has led to a change in perception on the Saudi side that we are raising our horizons.
“We are clear in that we are looking to develop our relationship with Saudi Arabia, and that was highlighted with the forming of the UK-Saudi Arabia Strategic Partnership Council that was launched following the crown prince’s visit here earlier this year.”
In March, the UK and Saudi Arabia agreed a goal of £65 billion ($90 billion) of mutual trade and investment in the coming years during a meeting between the UK’s Prime Minister Theresa May and Crown Prince Mohammed bin Salman.
On attracting the mega-float of part of the oil giant Saudi Aramco, Innes-Hopkins said the London Stock Exchange is a key of member of the SBJBC and they are “very keen to cooperate” with Saudi Arabia.
“This includes the proposed IPO,” he said. “There are lots of areas where they and the Saudi Stock Exchange (Tadawul) can work together. Obviously, post-Brexit, we are very keen for the UK to continue to attract investment from across the board — including from Saudi Arabia which is a very important source of investment to us. Within that context we are very keen to work with the Public Investment Fund of Saudi Arabia to attract more Saudi investment into new sectors in the UK.”
Addressing Saudi Arabia’s Vision 2030 reform plan, Innes-Hopkins described the Kingdom’s blueprint for its future as a “win-win” for both countries.
“I think the Saudi Vision 2030 is a turning point,” he said. “It does represent a realization that there is no alternative to diversify the economy and grow new sectors because Saudi Arabia can no longer rely on oil revenue. We all realize the goals of Saudi Vision 2030 are very ambitious but, in the longer-term, there is no alternative to the vision that has been set out.
“This can provide a win-win situation; there are a lot of new sectors including education and health care reform, smart cities — and not forgetting entertainment and tourism — where UK companies can help and get involved to implement new projects and provide the assistance needed.
“Infrastructure and financial services have traditionally been out bread and butter but now the opportunities are so much wider. We see that as very positive development and one in which the UK can play an important role.”
The UK in particular has a strong part to play in some of the expertise and growing the human capacity needed to implement the reforms set out under the Saudi Vision 2030.
But Innes-Hopkins said UK companies should be looking to build long-term links with Saudi Arabia and playing a central role in making its development vision a reality, rather than just “selling things and going away.”
“What is needed is not such much consultants going in and doing long reports — that may have been necessary to frame the vision — but what we are looking at now is implementation,” he said.
“We as a country, and as a business council, see a big opportunity for UK professional advisers, companies and the British government to provide some of the expertise that is needed working in partnership with our Saudi colleagues to implement these reforms.
“Business in Saudi Arabia is now much more about partnerships; it is not just about British companies trying to sell things and going away — it is about getting companies who can maintain a long-term presence in Saudi Arabia, who can share technology, share skills and invest for the long-term and create a win-win partnership.”
He said an immediate target of the SBJBC is helping build the infrastructure that will support the grown small and medium sized companies (SMEs) in Saudi Arabia, which are important to all economies around the world but will specifically play a major role in the non-oil-reliant Saudi economy.
ELITE, London Stock Exchange Group’s international business support and capital raising program for high-growth companies, announced earlier this year that it has partnered with the Small and Medium Enterprises Authority in Saudi Arabia (Monhsa’at) to support the launch of ELITE in Saudi Arabia.
“I think we do have a good record in the UK of small business creation,” said Innes-Hopkins. “What we think there is room for cooperation is on things like is access to finance for SMEs and access to mentoring and the necessary advice to grow your company. There is definitely room for cooperation and ultimately we want to bring these businesses — and our countries — together.”


Iran looms large over OPEC summit

Updated 22 September 2018
0

Iran looms large over OPEC summit

  • Saudi Arabia only country in Mideast, and perhaps world, with enough capacity to keep market supplied, say experts
  • At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies

LONDON: The Opec summit in Algiers on Sunday meets amid widespread fears of a supply crunch when a forecast 1.4 million barrels a day of crude is lost from Iran in November when US sanctions kick in.
If, on top of that, more supply shocks hit the market in worse-than-expected disruption from Libya and Iraq, the price of crude could surge, said Andy Critchlow, head of energy news at S&P Global Platts. “At the moment, the market looks finely balanced,” he said.
There isn’t a lot of slack in the system. As Critchlow points out: “Upstream investment in infrastructure and new wells is historically low and it will take a long time to turn that around.”
At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies. The gathering comes after a tweet by President Trump on Sept. 20 calling on Opec to lower prices. He said on Twitter that “they would not be safe for very long without us, and yet they continue to push for a higher and higher oil price.”
Critchlow reckoned KSA still had spare capacity of about 2 million bpd. And KSA would get oil back as they go into winter as it had needed 800,000m bpd merely to generate electricity for the home market to meet heightened demand for air conditioning in the summer.
But there is uncertainty about what will come out of Algiers. For a start, the Iranians say they will not attend. That could be tricky in terms of an Opec communique at the end of the meeting as statements need unanimous support from member nations. And Iran has indicated it will veto any move that would affect Iran’s position, ie, one where other countries absorb its market share as sanctions bite.
Jason Gammel, energy analyst at London broker Jefferies, said: “The magnitude of the drop in Iranian exports is likely to be higher than any hit in demand as a result of problems linked to emerging market currencies, or trade wars. That’s why we expect oil prices to continue to strengthen. The Saudis and their partners will keep the market well supplied, and I think the issue is that the level of spare capacity in the system will be extremely low. Any threat or interruption will mean price spikes. Possibly by the end of the year demand will exceed supply; for now, the market remains in balance, but threats of supply disruption will bring volatility.”
Under the spotlight in Algiers is a production cuts accord forged by Opec and 11 other countries in 2016 which has been extended to the end of this year. The agreement helped reboot prices and obliterate inventory stockpiles that led to the crash in crude prices nearly three years ago. But how long will the agreement last? Algiers may kick that one into the long grass.
Thomson Reuters analysts Ehsan Ul-Haq and Tom Kenison told Arab News: “OPEC members would like to maintain cohesion within the group around supply ahead of Iran sanctions and declining Venezuela production, However, they are expected be in favor of maintaining stability in prices while doing so. On the other hand, they need to find a consensus around how their market share would be affected by a decision to pump more oil in the market. Any decision around production will likely be offset until the November meeting.”
Critchlow said that it is what KSA and Russia say and do that matters. “They speak for a fifth of the global oil market, producing a combined total of 22m bpd.” Together, they are the swing producers when it comes to crude production and supply.
Another factor about Algiers is that it is a meeting of the Joint Ministerial Monitoring Committee, which is not a policy-making forum. Big policy statements may have to wait for the main Opec summit in Vienna at the end of year. That said, there will be some very high-level delegations in Algiers, including the Saudi oil minister and his Russian counterpart.
A statement about the demand picture could emerge, especially as there are fears about the impact on the global economy from the US-China tariff war.
Looking to the future, Critchlow thought the Opec production cuts accord would carry on into 2019. “Oil priced between $70/bbl and $80/bbl is a sweet spot for Middle East producers. Its’s good for Saudi as it helps stop further drainage of their foreign reserves and moves the budget back toward balance. Do they want (the price) to go higher? I think that would cause a lot of political problems for them.”