The real reason Theresa May went to Saudi Arabia

British Prime Minister Theresa May is often, and superficially, compared to the late Baroness Margaret Thatcher, who led the country at a time when arms sales to Saudi Arabia were very much in vogue.

On 11 August 1987, the first two aircraft of the infamous Al-Yamamah deals were delivered by BAE Systems to their new clients in Saudi Arabia. Thatcher celebrated, as did BAE Systems, who had found itself winning “the biggest sale of anything to anyone” in UK trading history. Over the course of the next 20 years, BAE Systems earned £43 billion in contracts. Then it all got a bit awkward – as it so often does with Britain’s relationship with Saudi Arabia. Corruption allegations that had bubbled in the background for those same decades resulted in a Serious Fraud Office investigation. Then – as again so often happens with Saudi Arabia – the British establishment stepped in to shoo away the naysayers. It fell to Thatcher’s ideological successor, Tony Blair, to call off that investigation – although reported threats of withdrawing intelligence on terrorists threatening Britain, blackmails put about by menacing Riyadh intelligence chiefs, no doubt played a hand too.

So many of the themes present then are still present today. Theresa May is back in the Gulf, her second trip since taking office, and she is emphasising that the intelligence-sharing co-operation is one good reason to stay close to the Saudis. In a statement issued by Number Ten last week, May’s spokesperson claimed that “security relationships” between the two countries had saved “many lives in the UK”. As I have argued elsewhere, this is a relatively sound proposition.

Read: Caged birds can’t fly, Mrs Theresa May

Arms sales are still a strong theme. This time around, and after so many decades, the Saudis have actually started using the fighter jets we have been selling them and training them on for so long. Now the emphasis is on providing munitions for the Saudis to use in their paranoid war in Yemen. It turns out the House of Saud has that classic problem, more often experienced by middle-aged converts to golf or angling or racing cars. These well-heeled hobbyists are happy to splash cash on top class gear, but falsely believe that their investments in shiny kit necessarily make a good golfer or fishermen or amateur race-track driver. In other words, the Saudi military is well-equipped, to a tee, but ill-experienced.

Arms sales are an important part of the current UK-Saudi relationship May is encouraging – if dead Yemeni children count as a positive, but the British prime minister was also on the hunt for something else; post-Brexit market confidence. The chief of the London Stock Exchange (LSE) was on the trip, and pitched post-Brexit investments in Britain to the head of Saudi Arabia’s sovereign wealth fund. He was also trying to convince their state oil company, Saudi Aramco, to list publically on his stock exchange.

Facing competition from Tokyo and New York, this is a huge prize to go after. Aramco’s crude reserves of about 260 billion barrels are ten times those of Exxon Mobil Corp. Bloomberg reports that its daily production of ten million barrels is “more than the domestic output of every US oil company combined”. So large is this company that Exxon, Apple, Berkshire Hathaway and Google taken together would look small in comparison.

A few months ago, I wrote about how British politician and former oilman Alan Duncan had missed out on becoming Middle East minister because of his strong views on Israel. The man who kept the job, and remains in it today, was Tobias Ellwood. Ellwood happens to be not only a former army officer, but a former senior business manager at the London Stock Exchange. It will be him dealing with the follow-ups from whatever polite exchanges took place this week. On top of Ellwood’s professional experience with stock market listings, Chancellor Philip Hammond, Secretary of State for International Trade Liam Fox, and Foreign Secretary Boris Johnson, are all expected to visit Saudi in coming months.

The IPO is now “expected in 2018”, according to Arab News, and could be worth “around $100 billion,” according to Saudi officials. They also say it will involve multiple exchanges, not just London, which is fair considering the size of the proposition. Still, the London Stock Exchange winning the listing will be a welcome confidence boost to the precarious post-Brexit economy. Put another way, if for whatever reason the Saudis don’t decide to repay the multiple favours they owe the UK and somehow list elsewhere, it will look very bad for May. Perhaps this is why her statement published here in Britain didn’t mention the possibility of a Saudi Aramco listing at all, or that the chief of the London Stock Exchange was even on the trip. Better not to set expectations too high.

There is however a horrible inconsistency at the heart of pitching for Saudi Aramco, because May’s team had something else on offer; providing economic advice on moving Saudi Arabia to a post-oil economy. Experts are being dispatched from Britain to deal with this.

That reform programme necessarily means the Saudi Aramco listing will be a less appealing proposal for investors – a contradiction in terms. May’s spokesperson earnestly promised that “as a world leader across a range of sectors, the UK is well placed to help Saudi Arabia deliver these vital reforms.”

Vital they may be, but the lingering question is how much oil is really left in Saudi Arabia. One clutch of reputable academics think “peak oil” could come as early as 2023. At that point -British support for Saudi Arabia will surely have run its course.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.