LONDON (Reuters Breakingviews) - Britain and Saudi Arabia are having a trade love-in. Crown Prince Mohammed bin Salman received the red carpet treatment in London this week, meeting both Prime Minister Theresa May and Queen Elizabeth. While warm words have been backed up by a pledge for 65 billion pounds of new trade and investment, the two are starting from a low base.
Both countries can benefit from the love-in. May is desperate to show that Britain can forge new trade deals with non-European Union states after it leaves the bloc. The crown prince known as MbS, meanwhile, is pushing his Vision 2030 effort to modernise and liberalise the desert kingdom. The two nations also have a history of striking big agreements. Back in 1985, they signed the 43 billion pound Al Yamamah deal in which Riyadh swapped barrels of crude oil for UK-manufactured fighter jets. That transaction was mired in allegations of corruption. But if MbS succeeds in stamping out graft it could clear the way for cleaner trade in a wider range of goods and services.
The “landmark ambition” for trade and investment announced on Wednesday is short on detail and lacks a definitive deadline. Spread over, say, a decade it would amount to 6.5 billion pounds a year. That’s meaningful in a bilateral context: Britain exported goods and services worth 6.2 billion pounds to Saudi Arabia in 2016, according to the Office for National Statistics, and received imports of 2 billion pounds. But it’s a drop in the bucket when compared with Britain’s total exports of 547 billion pounds and imports of 590 billion pounds in the same year.
MbS wants to increase foreign direct investment from 3.8 percent to 5.7 percent of Saudi GDP by 2030. However, potential suppliers of capital might baulk at his recent detention of fellow Saudi royals in Riyadh’s Ritz-Carlton hotel. His reforms also risk domestic opposition.
Meanwhile, Britain could at some point be led by opposition leader Jeremy Corbyn, who has criticized Saudi Arabia for its intervention in Yemen and called on May to suspend UK arms deals. Just because the two countries’ leaders have embraced a common theme of optimism, doesn’t mean they can help each other.
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