DUBAI: The signing of new investment deals reportedly worth $30 billion between Saudi Arabia and Oman is no doubt a positive development for solidifying cooperation between the member countries of the Gulf Cooperation Council. Yet the first questions that spring to mind are: Why Oman and why now?
From a geopolitical perspective, Saudi Arabia’s move is important as the Kingdom is now using its immense economic clout to support its smaller neighbors, starting with Iraq to the north and now Oman to the southeast.
It is broadly accepted that the region’s future social and political stability require economic stability. Many of Saudi Arabia’s neighbors are oil-producing nations whose journeys towards diversifying their economies to embrace other industries and markets are only just beginning.
Investment is seen as an effective way to help these countries move away from oil and generate more jobs in other sectors. But for Saudi investments to be of any long-term positive significance, they must align with the national and strategic goals of both countries.
Much like Saudi Arabia, Oman has its own reform agenda known as Oman Vision 2040, which aims to turn the Sultanate into an economic powerhouse with a sustainable fiscal and economic base. What Oman needs to make this bold vision a reality is access to the financial capital needed to expand its economy.
With its aging wells and reservoirs, Oman’s oil industry will require massive investment to maintain current capacity. The Sultanate is clearly aware that oil will not be its sole source of revenue in the future. In fact, its 2021 budget was drafted on the basis of oil costing a paltry $45 per barrel.
To help Oman realize its post-oil potential, Saudi Arabian companies have signed a raft of trade and infrastructure deals with their Omani counterparts that will not only increase foreign direct investments into the Sultanate, but also enhance its economic diversification.
Looking at energy investments in particular, the first agreement entails replicating what Saudi Arabia is doing in NEOM — its new high-tech smart-city on the Kingdom’s western Red Sea coast.
Omani energy provider OQ Group signed three of the agreements, the first of which was with Saudi Arabia’s ACWA Power and Air Products in the fields of petrochemicals, renewable energy and green hydrogen.
With this deal, Saudi Arabia is expanding its green hydrogen plan beyond its own borders and into Oman, which will boost the overall supply of hydrogen coming from the GCC.