‘Saudi First’: Why kingdom’s bailouts of allies now carry a price tag
| Riyadh, Saudi Arabia; and Amman, Jordan
Since its oil wealth blossomed in the 1960s and ’70s, Saudi Arabia has played an almost paternal role as a financier and safety net for Arab and Muslim states. Responding mostly to simple need, an often-forgiving Saudi Arabia has rushed in dozens of times to throw lifelines to crisis-hit allies, doling out billions with zero conditions and few questions. The Saudi billions didn’t even ensure friendly governments.
Yet as Saudi Arabia sought to build a non-oil private sector from the ground up in recent years, it imposed taxes on its citizens for the first time in generations and undertook a deep rethink of its cash bailout policies.
Why We Wrote This
A story focused onFor decades, Saudi Arabia served as Arab and Muslim nations’ go-to destination for emergency bailouts. But as the kingdom moves toward a post-oil economy, it’s adopting a more transactional approach to aid.
Today Saudi Arabia is replacing its policy of providing unconditional cash aid to allies with targeted investments instead. It’s part of a “Saudi First” foreign policy that puts the interests of the kingdom and its citizens ahead of the geopolitical and domestic interests of its allies – whether they be the United States or fellow Arab countries.
“Investments and economic deals are the way forward,” farmer Abu Nayef says. “Brothers are brothers and business is business. If we give out billions, we as Saudis want to see some return at the end. It’s unfortunate, but economic growth is what drives the world today.”
Abu Nayef remembers a time when, if an Arab country was in trouble, they knew whom to call right away.
“The Kingdom of Saudi Arabia,” says the 60-year-old date farmer. “When any Arab or Muslim state needed financial help, we were always there to fill that need.”
But in 2023, that role has taken on a more self-interested, transactional edge.
Why We Wrote This
A story focused onFor decades, Saudi Arabia served as Arab and Muslim nations’ go-to destination for emergency bailouts. But as the kingdom moves toward a post-oil economy, it’s adopting a more transactional approach to aid.
Today Saudi Arabia is replacing its policy of providing unconditional cash aid to allies with targeted investments instead. It’s part of a “Saudi First” foreign policy that puts the interests of the kingdom and its citizens ahead of the geopolitical and domestic interests of its allies – whether they be the United States or fellow Arab countries.
“Investments and economic deals are the way forward,” Abu Nayef says. “Brothers are brothers and business is business. If we give out billions, we as Saudis want to see some return at the end. It’s unfortunate, but economic growth is what drives the world today.”
While the new approach makes good financial sense, it represents a fundamental cultural shift for Saudi leadership and a change in the way the country sees its role in the region.
And if many newly tax-paying Saudis welcome the move to ensure that their taxes go to ventures that benefit the country’s economy, others remain nostalgic for the days that the kingdom was everyone’s “big brother.”
Shift in philanthropic philosophy
Since the extraction of its oil wealth blossomed in the 1960s and ’70s, Saudi Arabia has played an almost paternal role as a financier and safety net for Arab and Muslim states.
Responding mostly to simple need, an often-forgiving Saudi Arabia has rushed in dozens of times to throw lifelines to crisis-hit allies, doling out billions with zero conditions and few questions.
In the past 12 years alone, the kingdom has given $3 billion to Jordan, $5 billion to Pakistan, and the bulk of the $92 billion in cash and oil that Egypt has received from Gulf countries since 2011.
Yet increasingly debt-riddled Arab governments, rife with corruption and structural issues they refused or failed to reform, kept coming back with the same need – unconditional financial aid. The Saudi billions didn’t even ensure friendly governments.
As Saudi Arabia began transforming its economy under Crown Prince Mohammed bin Salman in 2016, seeking to build a non-oil private sector from the ground up, it imposed taxes on its citizens for the first time in generations and undertook a deep rethink of its cash bailout policies.
Saudi officials started giving hints or private declarations to delegations coming to Riyadh hat-in-hand: The days of unconditional cash were over.
Instead, the kingdom has been offering to put money into tourism, ports, and banks – projects that would offer a return on investment.
In 2022, the Saudi sovereign wealth fund that is the engine for the kingdom’s own transformation made $24 billion in investments and purchases in Egypt, Jordan, Iraq, Bahrain, Oman, and Sudan.
Implementation of the Saudi philosophical shift was slowed by the COVID-19 pandemic, but it was formally announced this year. Saudi Finance Minister Mohammed al-Jadaan outlined the new approach in January in a speech in Davos, Switzerland.
“We used to give direct grants and deposits without strings attached,” Mr. Jadaan acknowledged. “And we are changing that. ... We need to see reforms” before providing assistance.
“We are taxing our people; we are expecting also others to do the same, to do their efforts,” he said. “We want to help but we want you also to do your part.”
Mansour Almarzoqi, director of the Center for Strategic Studies at the Prince Saud Al Faisal Institute for Diplomatic Studies in Riyadh, emphasizes that encouraging allies’ reforms is the goal.
“The idea behind the ‘no free aid’ policy is to help those countries improve their institutional performance,” he says. “One way of encouraging countries to deal with their structural economic developmental problems is to say, ‘We will help you, but in exchange, you need to tackle this problem, you cannot postpone it any longer.’”
Individual buy-in
In Riyadh, meanwhile, many individual Saudis say they have embraced Saudi First, which comes with an emerging “pull yourself up by your bootstraps” mentality. As part of the crown prince’s Vision 2030, most Saudi citizens no longer receive generous state handouts and are instead encouraged to become entrepreneurs rather than expect a state job.
Improvements to daily life and the overhaul of the economy and infrastructure are noticeable, Saudis say, and they accept the trade-off of income tax and a 16% sales tax.
“We pay taxes, we are good citizens, and we want some of our tax dollars to help our allies,” says Hamad, a Riyadh bank clerk. “But we don’t want to see it wasted by other countries’ bad policies and corruption. What does their government and deficiencies have to do with us?
“‘Saudi First’ means that we can all develop and improve together as partners,” Hamad says. “But when it comes to Saudi money, improving our country and realizing the crown prince’s vision is the priority.”
Encouraged by the fast pace of reforms, government financial support for startups, and international companies opening up shop in the kingdom, many have seized this new entrepreneurial spirit with zeal and say their expectations of other Arab states too have evolved.
“If any person, Arab or otherwise, has a business idea, they can come to the kingdom, get an investor, get residency, open shop, be treated like full citizens with full benefits, can get rich, and keep their money and assets,” says Mohammed, a logistics and cargo manager in Riyadh.
“Saudi Arabia is open for business to anyone without any discrimination,” he says, “but at the end of the day it is business. Saudi Arabia is not a charity anymore.”
Regional impact
The change in Saudi policy is already visible in the region.
With Egypt facing inflation, growing debt, and a currency crisis, Saudi Arabia has balked at buying up Egyptian companies, including the planned acquisition of the United Bank of Egypt, over Cairo’s resistance to implementing International Monetary Fund reforms and steps for transparency in the military-dominated economy.
Jordan, meanwhile, seeking assistance to create jobs and alleviate its 20% unemployment rate, has shifted its approach and is offering Saudi Arabia detailed investment opportunities.
Nevertheless, many Saudis aren’t ready to part with the past. Among them is Salem, who, to keep pace with rising costs in the Saudi capital, works as an Uber driver on his daily commute to and from his office at an engineering firm.
“The idea that we are there to help out our Arab and Muslim brothers and sisters is part of our culture, part of our social traditions as tribes, and is encouraged by our religion, Islam,” he says.
Saudi officials and citizens point out, meanwhile, that the kingdom’s large-scale humanitarian assistance has not stopped.
Saudi Arabia is still dispatching aid, including $100 million in earthquake relief for Syria and $100 million for war-torn Sudan. Last year the kingdom gave $5 billion to help Egypt weather wheat price shocks from the Ukraine war, $600 million to flood-hit Sudanese communities, and $1 billion to Yemen to stabilize its currency.
Um Fahed, a young woman who sells farm products from a stand in Riyadh, says this official humanitarian assistance and the hundreds of millions of dollars Saudi citizens donated via private charities to support Arab and Muslim communities are proof that the culture of generosity in the kingdom is alive and well.
“We still have empathetic hearts. We are still giving money and assistance to charitable causes and humanitarian relief,” she says. “But giving money to governments who keep making the same mistakes, keep refusing to reform and improve, and keep coming back to us and asking for more?
“That is not charity,” she says. “That is being taken for a ride.”
