Ali al-Naimi’s fate was decided way back in October 2011. With the death of the Crown Prince Sultan bin Abdulaziz came the ascent to power of Mohammed bin Salman.
The once powerful Saudi oil minister Al-Naimi didn’t know it then but he does now: Prince Mohammed, ‘Mr Everything’, is determined to do whatever it takes to see Saudi Arabia win the “brutal battle for market access against arch regional rival Iran.”
The royal decree came on Saturday when the Kingdom’s powers announced al-Naimi was being replaced. He had held the position since 1995, had been viewed as untouchable, all-powerful, in complete control. Until he wasn’t. And then he was gone. The writing was on the wall the moment the meeting in Doha ended without an agreement to freeze oil production and support oil prices around the world. Iran, standing outside the group, was too much for some to bear. That al-Naimi was sacked unceremoniously comes as little surprise from the man who unilaterally decided to wean his fellow countrymen off subsidies for electricity, fuel and water.
“This is a historic one. He’s the guys who, for all intents and purposes, has been the global oil market for the last 30 years,” said Price Futures Group’s senior market analyst Phil Flynn in an interview with mMarketwatch.com. He praised al-Naimi for turning “the biggest oil cartel in the world into a respectable organisation.” He had his own, less sinister, nickname – Greenspan, after the former Fed chairman Alan Greenspan, owing to his similar habit of acting in the market‘s interest, as he saw it – either increasing or reducing oil output.
The man who could shake oil markets with a few words during one of his famous early morning jogs in Vienna came from an inauspicious beginning. He tended lambs with his mother’s tribe as a boy and his brother died when he was just 11 years old. The young al-Naimi took over his job at Arabian American Oil Co. He received an education as a result – from school in the kingdom to Stanford University in the States. He later came back to Saudi Arabia and worked with what is now called Aramco. In 1995 he was appointed Oil Minister, an honour he found out about while fly-fishing in Alaska.
He believed that it was possible to do a deal in Doha even without Iran – an option that the young prince could not contemplate. Perhaps he remembered his history lessons too well – in 1983 a similar dilemma led to Saudi Arabia reducing OPEC output only for non-OPEC member to expand. Oil prices collapsed to $7.90 pb and Saudi production fell from 10.3m bpd to 3.6m. The Financial Post points to the benevolence al-Naimi would have enjoyed under King Fahd and King Abdullah to set policy as he wished. In Doha the influence of his new boss was clear. Although Russia was prepared to move ahead without Iran’s agreement, Prince Mohammed stopped al-Naimi in his tracks and the talks ended in vain. From that moment there could only be one outcome.
Al-Naimi may say there should be no surprise that as an 81 year old, he is finally retiring but insiders knew of the discord within the leadership. He will be replaced by Khalid al-Falih, head of the country’s state oil company Saudi Aramco, who experts say is also well respected by oil industry leaders. While he is viewed as a continuation of the path al-Naimi has taken there is little doubt who will be running the show. It is unlikely he will be tempted to risk the wrath of Prince Mohammed as al-Naimi had apparently tried to do.