Saudi royal tour highlights reform and geopolitical risks

Saudi Arabia’s Crown Prince Mohammed bin Salman (known as MbS) is in the midst of a global tour, which has highlighted the challenges facing his Vision 2030 economic reforms as well as ongoing geopolitical tensions in the region. Reports suggest that the centrepiece of Vision 2030 – the sale of a stake in the stateowned oil company, Aramco – has been pushed back to 2019. Meanwhile, comments attributed to the crown prince have dashed hopes of a resolution to the diplomatic crisis with Qatar. The crown prince is due to fly to the US next week, where he will meet with President Trump on Tuesday in the wake of the dismissal of US Secretary of State Rex Tillerson. There have been suggestions that Mr. Tillerson’s departure will pave the way for the US to pull out of the nuclear deal with Iran, which could kick off a nuclear arms race in the Middle East. So far, markets have glossed over these developments. Equity markets have been broadly stable over the past month. And interbank spreads in the Gulf have narrowed further – interbank rates in Saudi Arabia are now below those in the US for the first time since 2009.