Economic diversification a necessity for Saudis

London

SAUDI Arabia's move into recession is the clearest sign yet of potential upheaval and the need for reform. The arrests this past weekend of numerous senior officials on corruption charges are a foretaste of further radical change in the Arab world's largest economy.

The likelihood that oil demand will peak in the next 10 years, as well as increasing competition from US shale producers and renewable energy, makes economic diversification not merely an ambition but a necessity for the kingdom with an ailing private sector, rising unemployment and average age of less than 30. Latest data show that GDP shrank for the second straight quarter between April and June.

The initial public offering of Saudi Aramco, the state-owned oil giant, on an international exchange was intended to offer something of a remedy. A listing in either London or New York of only a small portion of Aramco's business was expected to raise more than US$100 billion. But comments made last week by the Saudi ministry of finance confirm that the only certainty, for the time being at le…