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tv   Saudi Aramco The Company The State  ALJAZ  February 6, 2019 3:00pm-4:01pm +03

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one of them self proclaimed interim venezuelan leader on why don't. stew al jazeera. i'm richelle carey and for the top stories on al-jazeera u.s. president donald trump call for political unity in a state of the union address to congress and a wide ranging speech he told of how black and some democrats they must try and force us to confront what he's calling a security crisis on the border with mexico also confirmed he will hold a second sam met with north korean leader kim jong un at the end of this month south korea and japan are welcoming the news but they want the meeting in vietnam to be and their words more maining full specific and practical rob mcbride has more from the south korean capital. after their first historic meeting in singapore last
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june all now looks set for round two vietnam it's a neutral choice acceptable to both sides it's also symbolically important as a former enemy of the us that now enjoys normalized relations and economic prosperity a possible path for north korea to follow since single pole negotiations have stalled but both leaders seem determined to meet again. much work remains to be done but my relationship with kim jong un is a good one german kim and i will meet again on february twenty seventh and twenty eighth in vietnam. negotiators from both sides have been meeting knowing the next summit will have to produce something of substance following criticism that singapore was little more than
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a photo opportunity it probably won't be anything big maybe the decommissioning of some nuclear facilities under international monitoring in return for the security guarantees that north korea craves and just possibly some relief from sanctions after the stalemate of the past half year anything that moves the process forward will counter success even partial being equal or freezing it's a better then or to having nothing test though waiting for ever for north korea to agree on completely which is almost impossible for a totalitarian regime whether this process is moving towards full denuclearization the more immediate need for trump and kim seems to be maintaining the narrative that it is broad al-jazeera sole trump also spoke about trade with china the world's biggest economies are at odds over trade imposing tariffs on billions of
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dollars worth of each other's products. to build on our incredible economic success one priority is paramount reversing decades of calamitous trade policies so bad we are now make it it clear to china. that after years of targeting our industries and stealing our intellectual property theft of american jobs and wealth. has come to an end. the taliban have reportedly said that the u.s. about to pull out house of its troops from afghanistan by april that's according to russian media this apparently happened during the talks between taliban representatives and u.s. officials and qatar last month. but as well as opposition is accusing the military of blocking a bridge on the border with colombia and aid shipment is meant to be delivered
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after self declared president was white oh call for help. the u.n. says that push for an agreement between yemen's government and who the rebels is beginning to pay off it says the days of talks between the warring sides or bring them closer to a deal to hold back their forces from the city if you data that port is crucial for getting food aid into the country. footballer came out alright b. is being warned. he faces six months longer in bangkok prison while he fights extradition to bahrain for any requested his arrest while on honeymoon in thailand the twenty five year old says he'll be tortured and be sent back to serve a ten year prison sentence for vandalism all right he says he fled bahrain to become a refugee in australia because of political repression so the headlines keep it here on al-jazeera saudi aramco the company in the state is up next.
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it seemed like a great idea the world's largest oil producing company pumping millions of barrels a day to become the world's largest ever traded stock can have just met the how i see it how good for you how were you not a little soft. and over ambitious prince eager to make his mark as a reformer wanted to partially trade saudi aramco for a fellow you ation of two trillion dollars but the venture failed to get off the ground and the prince's vision twenty thirty now seems blurry. saudi aramco is almost like the basis of politics in saudi arabia they are always intrinsically tied everybody in saudi arabia in one way or another is a beneficiary saudi aramco a strong saudi arabia it needs a strong rand paul and vice versa as well the history of saudi aramco is the
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history of saudi arabia transforming itself from an isolated tribal society into a global presence. get it right you reap a windfall get it. and the risk is huge the whole saudi economy was at stake that all the balance be done how did you face that and. living. in the world they run the risk of being toppled the royal family could be running for the. issue is really you know is an i.p.o. best for the company and when you look at graeme coke the company you have to realize that unlike other companies. ram co operated for years without ever
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imagining and i p o. so they've never had to make decisions with the thought of oh maybe going to be publicly listed or we'd like to publish this here's how we need to have our finances a great here's the kind of growth that we need to be showing in our financial statements to make investors see our value. analysts have never followed around because it was never seen as a potential investment and now that's changing around for many years to have a strategy of form term growth and long term revenue because their idea was that they were making money for the benefit of the saudi state if they're going to i.p.o. then they've got a sudden they think about their quarterly reports and that may change how they invest and that may not be the best strategy for saudi arabia or the kingdom holds about sixteen percent of the world's oil reserves it's the largest exporter of petroleum among opec countries and that means its economy relies heavily on oil
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ninety percent of exports eighty seven percent of budget revenues and nearly half of g.d.p. is from oil. towering over these numbers is the company which digs out refined and exports that oil it pumps one out of every eight barrels of oil in the world and it's the only company which can produce a barrel of oil for less than ten dollars. says it employs sixty five thousand people but creates direct and indirect work for hundreds of thousands in the came so if it's doing so well why let it go. i think there was a strong case for the i.p.o. and there still is for the selling off the stake of saudi aramco and there are lots of reasons for it now it's been talking about diversifying its economy for years i think the specter of. climate action has finally made the saudis get serious about
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it and really the only way to diversify is through aramco i mean aramco is the source of revenues that saudi state needs to build other economic sectors even though he said his big and i to countries you know in the middle east but still if he put the police officers some day a sample of the oil will be depleted pretty exhausted so they have to thing that you know you have to be fired there and have to get the economy was kind of ironic you're going to be relying on oil to diversify away from fossil fuels so if you think about saudi risk it's one hundred percent owner of this company that supplies almost one hundred percent of its government budget ok if they if it sees a risk to to that company going to far off risk it's do you need to start diversifying that risk and passing some of that along to foreign investors is one way of doing it. concerns about radical changes in strategy put
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a spanner in the works for saudi aramco public listed for the first time in its history the company would have to disclose everything i think when you consider the size and scope of the opportunity there's a lot of emotion and also a lot of momentum and sometimes a momentum and emotion get rolling you may lose sight of the reality of what you had to do when it came to. affectively being now an open public company. vision twenty thirty was unveiled as a master plan for socio economic reforms as a result women can drive cinemas have begun to pop up. mohammed bin solomon's aim was to reorient the saudi economy away from oil and reassure investors that saudi arabia is stable and progressive. a lot has changed since the prince's international public relations drive the efforts to convince businessmen to feel
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comfortable working in the kingdom also faced a blow when top saudi business kingpins were put under arrest in an opaque anti corruption drug and as a cascading effect there has been flight of capital reduced foreign investment increased saudi borrowing and a halt saudi aramco its i.p.o. . the increase in internal repression inside the kingdom in a locking up of folks inside the the ritz carlton a lot of those were heads of family businesses or large companies or big conglomerates you know that gives foreign investors pause. the murder of one journalist has washed away the veneer of change and quashed investor confidence in the north. sea i'm asking for people to be allowed to speak. we need to make. the interest of
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a stakeholder never get priority over the kingdom the privatization process would mean saudi oil reserves will be up for scrutiny and to ramp those finances will be in the public eye. you go from running a business where you have endless resources and no oversight to one day having to register your company with the exchange and have to disclose every single number. the company's had over the last five to ten years every piece of cap ex every decision that's been made every partnership every single thing you've done is now in the public purview why the move. i begin by. if you're a private company this runs so well it's painful because you have answer
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a lot of question but not nearly as painful as after you take people's money. those saudi economists who dared to raise concerns about the prince's ambitious twenty thirty plans are in jail. you know that's not the kind of couldn't know that you had. a day before the murder prominent economist is samo samo was indicted on terrorism related charges his crime was providing analysis some of which explained that a high valuation of aramco could mean that the kingdom will not get any oil revenue for decades because all of it will go into a ramp controlled by shareholders. in the beginning stages you have to take anyone's money because it is just disclosing to the exchanges here's how we run our business here's why you should be comfortable listing us you then go out to raise capital and once you're taking someone else's money. they own those shares and
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you're a company for the people by the people you not a company for the management management or the or the king. and the transitions massive. that changeover from state control to a public list which began in two thousand and seventeen is now shelved for years to come kia ram co-executors have also left or been moved. so that process for a company like this probably a year and a half so like a tech start up for you have a slide presentation and some hope you have a business that changes global markets for decades and decades it's a process that will be expansive it will be intrusive. and it will be transformative. saudi aramco places the kingdom's reserves at
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two hundred sixty one billion barrels of oil but that magic number with no real third party audit has remained more or less constant for nearly thirty years since the one nine hundred eighty s. there have been rising production changes in technology and no announcements of major oil discoveries in the kingdom other oil giants such as shell and exxon have revised down their reserves during this period. if on average saudi production was at nine million barrels a day in the last thirty years aramco has pumped out nearly one hundred billion barrels without a dent in its two hundred sixty one billion reserves and the jury's out on how much they actually have and what it's worth. looking at their reserves figures you know makes if you look too closely at it you start to wonder how it can stay roughly constant from year to year when they're they're producing an export and so much oil every year disclosure of the reserves it's
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a top secret in saudi arabia and i think that's a significant concern on the part of a ramp executives they treat their reserves with kid gloves their duty is to get the most out of these reserves in the best way possible the reserve confidence will only be consistent with third parties verifying the information that's got to be done through regulatory fashion and evidence come forward it can't just be something a company says and and hopes is the case you've got to verify whatever other qualities god may have given the saudis he gave them a lot of wealth in the ground and that's not going to go away so we want might quibble over the over the reserves. but you know the saudis have the ability to do fracking they haven't even started basically. but would the possibility of higher reserves be enough for investors to finance or impose i.p.o.
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probably the biggest downside is the transparency that would have resulted around saudi reserves saudi oil reserves that doesn't change very much from year to year and really hasn't changed much over the past couple of decades it doesn't give much insight beyond the single number you know around two hundred sixty billion barrels if saudi aramco would have listed shares in the new york stock exchange or the london stock exchange the regulators were forced saudi arabia to come clean on all of its reserves you know how much of that is proven probable or otherwise i think that's a tough sell within the kingdom within saudi aramco and within the ministry and all the way up to the head of state i don't think so do you arabia is. not trustworthy when it comes to their reserves i think their reserves are there but the capacity is another question the saudi aramco has never produced twelve and
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a half million barrels a day and has never come within about a million barrels a day of that aramco says that it can reach that level of capacity after a period of about six months of additional investment right so it can't just twist a few valves and crank up an extra two million barrels a day i can remember on one occasion. sitting in the office of of. mr petroleum who did not know that i understood arabic. when one of his hades came rushing in. and said we've got we've proved the reserves in this particular new field they'd found and he said well how much is it and they said three billion barrels and he said no it's too small cap it well that's twice the alaska reserve if you had full access to to ramp those reserves
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figures and you know other inside details about its revenue streams and whatnot you know anybody with a smartphone could could second guessed saudi minister you know right now when the when the oil minister goes to vienna to speak in public at an opec meeting and you can see him just surrounded by hordes of reporters each you know shoving their voice recorder in his face to catch a cold you know snippet of you know what he says about you know saudi plans saudi reserves saudi oil production. you know sod it saudi market strategy the world would be as quite as dependent on the oil minister for information you know sort of on the walk the. you know the secrets of what america was going to do also you know you put those those that information out there it's out there for everyone. we should just be dynamic in the response to the reserves matter because the reserves and output give saudi arabia the regional and international clout as the largest
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producer in the oil producing club of nations known as opec vacation travel lodging billions and billions and billions of dollars of industry get moved by opec . and opec being. a saudi driven organization they have to be meticulous the company is so good at what it does that that also brings its leaders a certain amount of political clout when it comes to opec and when it comes to other dealings with other countries a practice not the top down and. really wants to stir belies the oil price at the some extent in the do you need therefore bag i think is still embodied then how then we can bring the good guys of the prize back it's not the prize that benefits are going to produce or the prize that also benefited the producer and
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consumer. has to be a for the good in the comic organization with everything focused on fundamentals focused on addressing the global markets needs to put a reliable supply is the petroleum saudi arabia is the keystone in opec it is the big dog it's the ringleader if you will within opec opec members maintain a little bit here and there no one has more than one million barrels per day of spare oil production capacity than that i know but may teams that that kind of level of spare capacity. you know as as a policy that saudi arabia saudi aramco typically maintain you know a million two million barrels two million barrels a day of oil production capacity that they don't use ok so no profit oriented firm would ever do this you wouldn't invest all the billions in developing oil fields and pipelines and storage facilities and production infrastructure and then
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just leave it dormant saudi aramco has done it at the behest of the saudi state. and you know it's the key aspect in the saudi u.s. power. or shift the ramp those ability to bring more oil production on line and its willingness to cut back at times and markets are oversupplied let's go to the crux of the the u.s. and saudi strategic partnership. saudi arabia if we broke with them i think your oil prices would go through the roof i've kept them down they've helped me keep them down right now we have lower oil prices or relatively i'd like to see it go down even lower. billions of dollars are traded of the world's largest stock exchange it's business as usual on wall street but like other exchanges around the world it also tried to sway saudi aramco to live in new york even the us president
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weighed in on his preferred medium of communication but the strict requirements remained a deterrent for the i.p.o. which was being called the world's largest offering it would be a double whammy for mohamed been sold to not get the two trillion dollars valuation and having to compromise on not listing on the world's largest stock market. here the world's largest oil producer and you don't list in the world's largest stock exchange that's definitely something i definitely lesser access to capital new york is terribly complicated by virtue of with nine eleven hangover so i thought from the beginning it was quite. a nice thing to dangle before the americans but it was probably not going to come to us you know there aren't that many exchanges that can do this so that london and new york were the two main ones that they could really handle something like this both of which have pretty stringent transparency requirements new york's more so. london was
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signaling that it was willing to roll back. some of its transparency requirements and make a special deal for aramco the princes i.b.m. . hit the brakes from a lofty two trillion dollar valuation to uncertainty about the size of saudi reserves for litigation risks to stringent requirements from stock exchanges but the reality was different from the political statements. i think the two trillion dollar number of is significant for the saudis but not significant for the rest of the market talking about a business that dwarfs almost every business in the us and p. five hundred i would say two trillion dollars is a high valuation it's not unachievable when you look at what the size of it is whether it's a trillion trillion after two trillion the scales all relative it's massive and so if you have a business earning two hundred three hundred four hundred billion dollars
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a year there's a multiple put on it and the market's going to say well even though you're a trillion dollar business give or take whether you're one trillion or three trillion is going to be dependent on your earnings and your decline curves and your gross strategy what type of growth percent is going to put on your business it's a huge number there's no question about it whether you look at the high level or you look at the low level it's huge it's a huge i.p.o. huge company and so i guess what you're asking me is how do they expect to sell it i think there's enough money out there that can cover it but if on the other hand the global economy should begin to tick down would then it's going to be a hard sell they would have to lower the price putting a line in the sand is is strong and smart from your own perspective but the
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market's going to determine what they feel comfortable about buying. your stocking that's worth what someone tells you it's worth but we hope it's so when my heart when someone announced the remco i.p.o. and he basically said we're looking for a valuation of two trillion dollars that's the largest valuation of all time for any company and that's of those for the whole company they were never talking about selling any more than five percent so it seems like they're looking to raise one hundred billion dollars which is a large amount but not that much so quick but the question is really is a ram co valued at two trillion dollars what are their oil reserves which is really tends to be the bulk of what makes up an oil company valuation now we're also has a lot of other assets around the world not oil not upstream oil assets but they own shares in refineries in china in south korea they own oil storage facilities in
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japan that they own the largest oil refinery in the united states and they also have a lot of research and development things going on they've also got petro chemical and oil refineries in saudi arabia so the company is worth more than what they dig out of the ground and sell them. but does that get us to two trillion dollars the answer also depends on what the price of oil is at the time of the i.p.o. and when they announced the i.p.o. we were in the midst of a very period of very low well prices so you can see i would be very hard to reach a two trillion dollars valuation in say two thousand and seventeen when the price of oil was you know fifty or fifty five dollars a barrel. it's an indirect devaluation of the saudi economy which is reliant on a whim cup. so it's not just a company with a proposed two trillion dollar price tag there's a major problem with valuing the company. what is it that's being offered some
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slice of the overall company i guess but no direct ownership of any part of it how much are the reserves after all are they understated or overstated what level of efficiency does saudi aramco have in comparison with other oil companies. where is the future market. mohamed been so months vision was to take the money from the i.p.o. to revamp the saudi public investment fund which would play a leading role in developing non oil industries but that fund has already started borrowing money instead of stacking up oil revenues the tens of billions expected from a ram code never arrived and global banks provided their first ever loan of eleven billion dollars the i.p.o. it seems to be from what people say was designed to generate cash for the public
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investment fund of saudi arabia which is designed to make investments for the future not to use for the saudi budget not to use for those kind of projects but really a sovereign wealth fund to rely on you know when oil is no longer foreign commodity here you have a company which has been deliberately nontransparent is now listed on any market that has no shareholders other than the kingdom itself to which to report in saudi arabia is not a notably free press environment and it is not a democracy and accountability is uncertain. again it has the geology and all resources and you're a bird why are they so you're measuring you guys we're finally form a government. that toxin went essentially nowhere and the more we would push them
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the more they push back we knew it was coming depression was to be sent in wait or do we surprise them with a preemptive strike. on the. i'm richelle carey and a ha these are the headlines right now on al-jazeera yes president on a call for political unity in a state of the union address to congress and a wide ranging speech he told republicans and democrats they missed join forces to confront what he calls a security crisis on the border with mexico trump also confirmed he'll be holding a second summit with north korean leader kim jong un at the end of this month south korea and japan want the meeting in vietnam to be more meaningful specific and practical and spoke about trade with china the world's two biggest economies are at
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odds over trade imposing tariffs on billions of dollars worth of each other's products to build on our incredible economic success one priority is paramount reversing decades of calamitous trade policies so big we are now make it it clear to china. that after years of targeting our industries and stealing our intellectual property the theft of american jobs and wealth. has come to an end. the taliban have reportedly said the u.s. about to pull out half of its troops from afghanistan by april that's according to russian media and this apparently happened during talks between taliban representatives and u.s. officials in qatar last month. and israel's opposition is accusing the military a blocking a bridge on the border with colombia and aid shipment is meant to be delivered
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after self declared president call for help. the u.n. says its push for an agreement between yemen's government and who the rebels are beginning to pay off says days of talks between the warring sides are bringing them closer to a deal to pull back their forces from the city of data port is crucial for getting food aid into the country. footballer. warranty faces six months longer in a bangkok prison while he fights extradition to bahrain. requested his arrests request of his arrest rather while on honeymoon in thailand the twenty five year old says he'll be tortured if he sent back to serve a ten year prison sentence for vandalism. says he fled bahrain to become a refugee in australia because of political oppression are the headlines keep it here river target out of saudi aramco the company in the state.
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the kingdom is home to the most important religious sites for muslims but saudi arabia is a real source of power is its oil wealth and remco converts that black gold into dollars and real. many academics experts. who refused from speaking to us as soon as they heard it's about the kingdom's most potent economic firepower. the saudis can use oil as a weapon. in one nine hundred seventy three. they put it in embargo and what happened to the price of oil. it shot up over one hundred dollars a few years ago we saw oil prices tumble. create it that. it was the saudis. they flooded the market. why they wanted to put shallow oil out of business well it backfired.
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the partnership between the u.s. and saudi arabia rests on linked interests many of which have either disappeared or are now problematic they basic bargain of. preferred access to energy in return for security protection but the united states is now the string producer internationally for oil given fracking and we are an energy exporter not dependent on the gulf the support that the saudis provided by making american foreign policy how loud. acceptable to most things. now the muslim world is so divided and the united states is so islamophobia that bargain is gone. saudi arabia also controls of vast media empire for decades it's been tens of millions of dollars to lobby cultural institutions think tanks
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universities even government all to improve the kingdom's image that's jumped from ten million dollars spent in two thousand and sixteen to more than twenty seven million dollars today used to fuel a sophisticated saudi influence machine that money shapes policy and perceptions and it also covers up criticism of the kingdom. much of this was revealed in twenty fifteen when wiki leaks published thousands of cable exchanges between saudi diplomats posted abroad and the foreign ministry. houston texas is an oil town. it's a testament to saudi soft power and how big saudi money is securely invested in the us regardless of what saudi arabia is accused of or even a local marathon here is sponsored by a ram car but whether it's nine eleven or the murder of the saudi journalist jamal
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khashoggi it all continues to cast a shadow over the kingdom's image abroad. in terms of jasta which is the law that was passed basically saying that citizens can sue the saudi government for the role and nine eleven. that has been put forward as a reason not to list on the new york stock exchange. i'm not a lawyer but it would not be a real concern at all evidence that at least that's available if the u.s. government has presented an declassified is not significant enough to probably convict or to get. a ruling you know to be able to sue the saudi so there's that but say it was. then the question is ok so what kind of assets can you go after and if you're saying that aramco is an asset of the saudi government and therefore should pay well there's already
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a lot of aramco investment in the united states that they can go after they can go after motive of the largest refinery they have research centers all over there is around headquarters services company in in america i think that that's a convenient excuse to give but if they wanted to list on the new york stock exchange it's not really a significant barrier. motif as the largest refinery in the united states which goes through a whopping six hundred thousand barrels a day it's more than two thousand employees work near the gulf of mexico but this behemoth facility isn't u.s. it's a subsidiary of the centerpiece of saudi crown prince mohammed bin vision twenty thirty he wants to expand the petro chemicals business instead of the kingdom's heavy reliance on oil sales motif is so influential in port arthur goodwill tiva security sent a policeman to stop us from filming they even called the police to hold us until
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the very question of why journalists were filming their facilities. despite tight control over media and any opinion which doesn't fall in line with that of the kingdom. efforts to privatized had been a hard sell at home. with very little accountability of the ruling family radical changes are viewed with suspicion by many ordinary saudis. one of the major objections by people in the kingdom was their fear that the money would go into the pockets of the royal family rather than be used in a transparent way to provide government services to the people in other words waste fraud and mismanagement are a concern on the part of the public they're also concerned by foreigners i think the conference is trying to create an environment conducive to foreign investment but events things keep happening questions keep getting raised. that make that
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difficult saudi arabia's geo political power is to is the exclusive access to information about saudi reserves they hold that information very close and they let it out and in dribs and drabs it's almost like the strategic ambiguity around the israeli nuclear weapons capability they release what they choose to release when they choose to release it that's a source of power very similar with the oil reserves in saudi arabia. this is not the first time reforms have been promised in saudi arabia or the first time when those promises have been left up by western powers and lauded by the media. since the one nine hundred fifty s. the new york times which likes to be called the newspaper of record has given similar coverage to saudi kings and princes the media has given them titles such as trailblazers and performers similar to the current crown prince even the glitzy
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twenty thirty roadmap hints at all those promises. well the vision itself is hardly new this was largely drawn out i gather by consultants mckinsey in particular. and they were able to do that quickly because the ministry of planning in saudi arabia had all these ideas. there to be gathered up so the vision isn't new. the drive for change in the kingdom transformative drive is also not new in many ways i had been so. resembles his grandfather abdulaziz of different methods bless these united kingdom with tribal marriages bewildering number of marriages and divorces brought different groups and this is sidey him into his family he conducted a war in the saudi south. which is on
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a sea of which. took land from yemen and maybe if you did a report of saudi arabia you suppressed religious operatives there are many similarities one could say and it worked whether the current dr who work or not is unknown and certainly not the first time claims of reform have been made in saudi arabia for example king faisel when he became king he made a lot of very important changes and reforms in saudi arabia that before that the government had been spending very recklessly and carelessly under king his brother king so it was reported actually that he would carry around in his pocket to the budget and whenever he would see a minister say in the halls or something he would question them and say how are you spending this money and what are you doing with it so this is not the first time that that reforms have been tried probably every previous king in saudi arabia has announced it to some extent and there have been one of the key aspects i think that
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a lot of the reform plans always include megaprojects. and in my mind those mega projects never really pan out and so those that's always something to be wary of you can hold up the ramp or i.p.o. is the key example of that but there were lots of other privatisations that would have really helped kind of. move saudi arabia's economy from varies state status based shoe a much more diverse and vibrant private economy so for example they wanted to sell parts of the airlines of of different national companies and it really almost seems like there were bursts is happening that the state is actually more involved in the economy as opposed to last and balk and that i think is probably not a good sign for developing a diverse and vibrant private economy but at the same time there are ships. and social expectations that have to occur in saudi arabia and so those changes
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i think a setting a year of twenty thirty is probably very. ambitious i think the saudis realize that the time has come that they must change the way they run the economy through the business otherwise what would happen in. iraq look what happened with iran look what happened with libya it's not too far fetched to think that that can happen with saudi arabia. yemen the gentleman a woman a year on the new york times that could tell you the good work that even you know overall it's also the d.o.b. element and the leadership just not the spotlight but they went back to this one with him one hundred the she kind of the time of them that are now that she come to help on the other she turned to dust or maybe you just. didn't look at the
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health. the ongoing mourning in yemen is not just creating global pressure but also a strain on the saudi economy in addition tens of thousands of foreign workers have been expelled from saudi arabia. the government's reduction in subsidies for fuel and utilities has become a burden it's had to borrow aggressively to plug the budget deficit. well the budgetary crisis is not new i did have a conversation with the late then crown prince abdullah later king abdullah who made a real effort in the late ninety's had to institute a tax system other than that. and the conversation went like this i said to him you know i think you have a problem here because for example in the united states if i take
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a section of desert that's a part of nevada and i either invest my own money or i borrow money from a bank and i build an industrial estate a park and a related community and i don't doubt the government for anything the government still has to come up with all sorts of services police education and waste water management road maintenance even if i build the roads initially and so forth. and the same is true in saudi arabia if except even more so because at that time at least saudi arabia was heavily subsidizing electricity and water and other things that people needed so i said you know the difference is that in nevada every cent will come back in the form of increased government revenue. so that the very the debt will be replaced by
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a stream of revenue that makes the government whole it enables higher level of service whereas in saudi arabia not on how it comes back basically you have a sister and i said in which private prosperity impoverished is the government the opposite of normal economics. so i've said to people. i'll give you a real nigel if they're real parliament and a role in allocating tax resources but in order to do that you've got to pay taxes and he said i came very close to getting a consensus on this in the end i failed the merchants particularly in the western province would not agree so it's difficult to rationalize a big investments in a country that's already a hard sell for investors anyway because of you know the visa requirements and red tape and you know lifestyle issues in saudi arabia a lot of
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a lot of foreigners it's not a you know considered a great destination for you know second homeowners or for. foreigners who are looking to move their families and put their kids in the local schools you know they would go to buy a new dobby or doha to go to the region. so it's you know sat here has never been a real easy sell for foreign investment for the size of its economy f.d.d.i. flows there aren't proportionally as big as they are for some of the more open economies around the region. perhaps the biggest challenge to the saudi economy comes from the wave of change in the way the country is being run through the muḥammad been so mom's pursuit of vision twenty thirty has upset the traditional order in twenty fifteen when the. king said and i ascended the throne in short order within a year old power was essentially transferred into the hands of his favorite son
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prominence of mine this destroyed the consultative tradition within the royal family and more broadly in the kingdom here you had a young man with great ambition drive imagination. determined to change things impatient and not willing to wait for consultation. so a lot of egos have been bruised a lot of interests have been shaken many people have lodged objections to this fundamental change in the constitutional order in saudi arabia this is before you get to things like. the added corruption drive which. exacted huge amounts of money from the wealthy elite in the king of. kings on mon will be the last king of his generation it had always passed from brother to brother to brother and it's clear even though there are still some living brothers or sons of up to ozzy's it has been decided that samadhi will be the last of that
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generation next generation there are a lot of princes there and a lot of them have a great deal of control and in certain segments of the economy and and of saudi society and there's always been kind of a balancing act that went on between these different segments of the royal family there's been a lot of tensions produced basically traditionally in saudi arabia and in gulf arab societies general lady. of the king or the or the i mean here the leader has the same responsibilities as the sheriff in a tribe there's really two responsibilities one is to. ensure that decisions are taken by consensus after consultation he proclaims a consensus does not. make a decision then imposes a second responsibility is to ensure that the less fortunate the poorer share
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of the wealth so it's the government or the this case the leader must distribute alms charity to the needy the saudi state is built on these principles. the first one has been badly compromise as power has been gathered into one man's grounds or perhaps to. the proud prince and his father the members of the family the ruling family who were previously consulted or feel excluded in many cases from the decision making process they would have all be and had to agree together on things almost like different shareholders and it does appear that that process is changing i would be cautious of of saying well it's now different everything is different now it's a one man show that may be the image that they'd like to present to everyone but
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that doesn't mean that all of the other sources of power have necessarily been eliminated and that you know if enough brothers decide that. is not the right way that that couldn't be changed i think where it's too early to write off that process and to say that he has fully consolidated power. you know i think at least that is what was said to be a good five hundred thirty three million dollars five hundred forty five million dollars there's been a three year period we've heard from lucrative military contracts to support for each other's wars there is a special relationship between the us president the saudi king and mohamed been some all right right. but that special relationship has been under stress like i love the king solomon king. protecting you you might not be there
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for two weeks without us you have to pay for your diligence. we filmed this during the period when the saudi government was officially denying that its agents murdered journalist jamal khashoggi the government later confessed to the killing of the saudi consulate in istanbul and admitted it was a premeditated murder. a lot of fingers are pointed at the crown prince for allegedly ordering the killing in turkey but the u.s. president still has unwavering support for muhammad bin salma i don't know if anyone's going to be able to conclude that the crown prince heard it but i will say this i don't know i don't know but whether he did or whether he did he denies it vehemently his father denies it the king family. the case remains open regardless of saudi denials and criminal sentences it risks the prince's grip
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on power for an investment vision twenty thirty and aramco i.p.o. . despite several attempts to remco and its subsidiaries did not respond to our request for interviews. and. the killing of the saudi journalist that has put them in the spotlight and if they come forward and tell the whole truth of what happened then that will be a sign that they're really ready for change if not. they may be faced with harsh. economic sanctions. and if that's the case the market. seems to be saying well saudi arabia's economy is going to fall off a cliff on the foreign policy front the kingdom has flirted into
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a series of adventures none of which have turned out well it is stuck with a garrison along with others from the go gulf cooperation council in bahrain. where unrest continues and shows no sign of abating. it is it has become. really battered by syria which has been a transformative situation in the middle east brought the russians back in is the major foreign player for example. saudi arabia is relationships with turkey have been badly damaged by this it has. seen fit to divide itself from qatar. and conducted blockade which again shows no sign of going away and rich essentially divides the gulf cooperation
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council irreparably and finally of course it is a gauged in a war in yemen with no clear objective that is feasible and no war terminations strategy. saudi aramco said failure to launch and the young leaders stumble from one crisis to another are directly linked there is an urgency to rush into things but also a lack of experience. that is really like planning for the growth of a nation. not the. exit of an i.p.o. and the growth of a nation takes a lot more planning. than a couple months and ultimately you see they've pulled back i would guess because they recognize that this is a transformational moment it's going to take. a lot more time and energy to get into the realm of the public markets if they ever get comfortable they may never
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become for with i know there are elements within so decided who don't want to see that change and they feel that this is too much and too soon and too big and the pushback from the government has been they need to be dragged kicking and screaming into these changes and best is the way it's going to be i see that as a much bigger backlash than even the religious or conservative people is really unemployment and saudis not taking jobs or on they've made a big push to get rid of foreign labor in saudi arabia but the problem is that if you're not replacing that with saudi labor then you're not going to have. an economy people aren't taking jobs and unemployment remains high despite there being then you've got a significant problem and i see that really as the biggest threat to the changes they can make all the decrease they want but if people don't work people aren't working and making money and they don't see that as
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a valuable part of their lives than going to pacify people with movie theaters. it's all to me a function of how fast they want to get to their group and goal which none of us know that the more they're in the street is obviously toil but they need to be more open and that's to keep saudi arabia has to make it on its own or an extended never do and so far it seems to be having difficulty right now there's no substitute for oil so it's not going to go away in the short term you know the writing is on the wall and the saudis have have read it. the saudi crown prince is adamant that he is the whole bonjour of change he may have the desire but what he can actually achieve with me the big question. that. but you open up that. this was the media savvy prince's first public appearance
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three weeks after the murder of jamal khashoggi at an event widely referred to as davos in the desert. hello again welcome back to international weather forecasts where across bolivia this past weekend we saw some very heavy rain which led to deadly mudslides and landslides in the area the good news is as we are in mid week and towards the end
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of the week we're going to be seeing some better weather conditions across much of the region in terms of the rain it's really going to be to the north as well as to the west as we go from wednesday as well as into thursday down here across argentina well it's going to be a warm day across borders that is at thirty degrees there and up here towards a sense in about thirty eight degrees is going to be your high across the caribbean not much in terms of rain we do have some partly cloudy conditions across the region maybe over here towards the turks and caicos but for van it is going to be a nice day if you are the tempter of twenty seven and that is also going to continue as we go towards thursday and then here across the united states it is going to be a wintry mix we're talking about rain as well as a lot of snow across much of the area and even ice warnings are in effect here in chicago now that is going to make its way over here towards the east but down here across the south in these very heavy rain showers we do expect to see the possibility of severe weather that is going to continue over the next day and the snow is also going to continue up here across parts of canada but for new york you're going to be out of the rain we do expect to see
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a temperature few of about seven degrees there. the weather sponsored by qatar and . there's no one way of telling a story key thing is to write and to be respectful it's great to get to know the person for he tells. this is zero. by michelle kerry this is the news hour live from doha coming up in the next sixty minutes victory is not winning for our party. victory is winning for our country. president calls for unity across party lines as he outlines his priorities in a state of the union address.

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