Tehran and Riyadh: Two Rivals with Two Different Paths and Perspectives

The dismissal of Ali Al-Naimi, the 80-year-old Saudi oil minister, by King Salman, and his replacement by Khalid Al-Falih, the health minister and a long-time member of Aramco, has initiated Mohammed bin Salman's ambitious plan (Vision 2030) for economic modernization and reducing the country's dependence on oil revenues. The 30-year-old son of King Salman, the crown prince and defense minister of Saudi Arabia, aims to strengthen Riyadh's economic base and enhance the competitiveness of his country in the region through the implementation of diverse economic programs previously experienced in other Gulf countries. The plan to eliminate the country's reliance on oil revenues for current expenditures was first introduced in Iran before the revolution and pursued through substantial investments in advanced European industries (Krupp of Germany, Eurodif of France, and a 50% ownership stake in the offshore gas field in the UK, 400 kilometers from Aberdeen). The goal of the Iranian government at that time was to shorten the path to advanced technologies and create lasting revenue from diverse sources instead of spending the income from crude oil sales. After the 1979 revolution and structural changes in Iran's economic patterns and foreign relations, Kuwait was the first country in the Gulf region to utilize Iran's oil economy experiences, so that at the beginning of the 1990s, during the military occupation by Iraq, Kuwait's foreign investments were estimated at $150 billion, and its non-oil revenues were equivalent to its crude oil export revenues. Qatar and the UAE also moved in this direction after Kuwait and before Saudi Arabia, aiming to reduce reliance on fossil fuel revenues. Despite being a pioneer in utilizing oil revenues for productive and lasting investments, Iran has spent more than 80% of its foreign exchange revenues on current expenditures over the past decade, effectively depleting them. The recent reduction in the annual budget's reliance on oil revenues is also due to a decrease in export volumes and falling oil prices, leading to a change in the consumption pattern of oil revenues. The Saudi 15-year outlook emerged with the rise of Mohammed bin Salman, the 30-year-old son of the Saudi king, and his desire for generational change in the government. The document published last month in this regard is considered Mohammed bin Salman's first roadmap for outlining the objectives of his vision. The crown prince, who enjoys full support from his father in diversifying the Saudi economy and rejuvenating the ruling body, is expected to officially assume the presidency of the cabinet as well. He intends to gain the support of the country's youth by implementing new plans within an old administrative structure and traditional governance. Simultaneously with the announcement of the 15-year vision objectives, Saudi Arabia announced its intention to sell 5% of Aramco (the state oil company) and restructure this large institution. The first action of Aramco after announcing structural changes was the acquisition of shares from Shell and complete ownership of the largest oil refinery in the United States, 'Port Arthur,' with a refining capacity of 600,000 barrels of oil per day in Texas. With the sale of Aramco shares, transforming it into an 'industrial-investment' entity valued at a minimum of $2 trillion, and creating a foreign exchange reserve fund worth $3 trillion, Saudi Arabia is compelled to change its social and economic infrastructure and adjust behaviors in a traditional society. Mohammed bin Salman has announced his intention to increase the share of women in the workforce from the current 22% to 30% alongside the implementation of the vision plan. The reputable research institute 'Chatham House' in London recently expressed doubts about the likelihood of achieving the full objectives of the vision, stating that the realization of the foundational goals of the plan depends on opening Saudi society, increasing foreign visitors, readiness to open doors, clearer audits, greater transparency, and readiness for broader participation with the outside world. The recent decision by the Saudis to issue a 'green card' and permanent residency for foreign nationals is considered a step in this direction. Saudi Arabia has not overlooked military and security measures in implementing these new changes, intending to increase its military budget share, which is the third-largest military budget in the world after the US and China, from the current 2% to over 50% within the next 15 years for the purpose of producing military and defense equipment domestically. Iran's outlook began in the early 1980s when the Expediency Council of the Islamic Republic drafted an economic document outlining Iran's 20-year development vision. The vision for the Iranian society, which is set to be realized by the year 1404 in the Iranian calendar (2025 in the Gregorian calendar), states: 'A developed society, compatible with cultural and historical requirements, based on ethical principles and Islamic and revolutionary values, emphasizing religious democracy, legitimate freedoms, equal opportunities, appropriate income distribution, free from poverty, corruption, and discrimination, committed to the revolution and the Islamic system... achieving the first economic, scientific, and technological position in the region of Southwest Asia, including Central Asia, the Caucasus, and neighboring countries, and producing rapid economic growth.' The start of the vision's implementation was announced in 2005 in the form of four five-year development programs, but at the end of the first five-year plan, the results achieved fell far short of the set goals. The pursuit of nuclear development priorities overshadowed the development of fossil resources (oil and gas), leading to the exit of foreign companies and investors from Iran, the imposition of sanctions, the expansion of administrative and political corruption, increased conflicts among government factions, and the previous government's inability to control inflation, all contributing to the failure of the Islamic Republic's vision plan. Signs of failure in the implementation of the vision plan can be seen at the end of the first five-year plan when Iran suffered from the highest unemployment and inflation rates in the Southwest Asia region, the per capita income growth rate remained negative (the people became poorer each year), and the national GDP growth rate, according to the current government's confirmation, was between 3% to 6% negative at the end of the first five-year plan (contradictory statistics). Iran ranks 75th in terms of foreign investment risk, and the industrial share of Iran's GDP has decreased to 16%, while advanced countries have a share of up to 70%. The per capita income in Iran is reported to be $1,400, while the per capita income of neighboring Qatar exceeds $100,000, Turkey is nearly $6,000, and in industrial countries, it ranges between $35,000 to $40,000 annually. Iran's non-oil exports (excluding gas condensates and petrochemical products) are estimated at about $20 billion, whereas Turkey has over $250 billion in exports, Malaysia over $260 billion, and South Korea over $750 billion in annual exports. With the announcement of unilateral punitive sanctions by the US and Europe since the beginning of 2012, the destructive trend of Iran's economy accelerated, but the necessary economic measures to counter the effects of backwardness were not taken by the government. With the rise of Rouhani's government, the trend of economic decline, rising inflation, increasing unemployment, and decreasing industrial and agricultural production continued, albeit at a slower pace, to the extent that the government is only hoping for zero economic growth this year under the best conditions. In a move different from the government's views, the Supreme Leader of the Islamic Republic introduced 'resilient economy,' which, like the 20-year vision document, merely defines goals without formulating practical programs. The resilient economy favored by the Supreme Leader is inward-looking and, more than being economically oriented, its guidelines have political objectives and a desire to counter the 'domination of the hegemonic system' and strengthen 'jihadist culture.' A significant portion of Iran's economy is state-controlled, and financial and commercial institutions linked to foundations and entities dominate Iran's economy, many of which have free rein in exports and imports and even evade paying taxes. While even the most conservative government systems like Saudi Arabia link their economy to foreign resources, utilize oil and gas sales revenues for productive and lasting investments, and open their economies and trade to foreign partners, Iran, without a clear and structured plan for growth, joining the global community, and developing cooperation with neighbors, insists on maintaining 'principles and values' and continues down a path that has so far prevented the country from realizing its growth potential.