Is The Al-Naimi Exit A Saudi Oil Policy Shake-Up? Not Likely

This weekend’s announcement that veteran Saudi oil minister Ali al-Naimi would be stepping down from the position he has held since 1995 drew a flurry of media speculation. Digital media outlets claimed that al-Naimi was ousted by Deputy Crown Prince Mohammed bin Salman in order to consolidate power or that he was fired to clear out opposition to Saudi Arabia’s move towards its new National Transformation Plan.  These oil shake-up theories may translate into digital click-bait, but they do not reflect the reality of Saudi Arabia. Investors should not read volatility, policy reversals, or quick changes into this move. Here are four reasons why.

1) Retirement not termination:

Ali al-Naimi is in his 80s, and although he is in particularly good health for his age (a video of him after his daily 10K walk recently made the rounds on Twitter), his fatigue with demands of the job has been evident this year. Last January, after the death of King Abdullah, reports surfaced that he wished to retire, but King Salman reportedly convinced him to stay during the transition period. Perhaps King Salman’s abrupt announcement of the ministerial change—issued by royal decree—was less diplomatic then the West might expect, but the Saudis are nothing if not blunt.

2) No single bureaucrat runs Aramco:

Historically, Saudi Arabian policy depends on wide agreement between the King, his advisors, and major bureaucrats. Ali al-Naimi had been oil minister for twenty-one years and therefore enjoyed significant influence. However, oil policy was never his alone. He worked with CEOs of Aramco, directors of Aramco, various bureaucrats, royal advisors, members of the royal family and—not least—the three different kings who ruled the monarchy during al-Naimi’s long tenure as oil minister. No oil policy, not even the current policy of high production and low prices, has been dependent on al-Naimi.

3) Heir apparent in waiting:

Born in 1960, Khalid al-Falih, the new oil minister, has been al-Naimi’s presumptive successor for several years now. His move into the job of oil minister was clearly telegraphed by the Saudi monarchy. He was CEO of Aramco from 2008 until 2015 and as CEO was expected to succeed al-Naimi. As CEO, he was expected to succeed al-Naimi in the oil ministry, just as al-Naimi had been Aramco CEO before becoming oil minister.

In a slight deviation, when King Salman came to power last year, he moved al-Falih to the Ministry of Health. In Saudi Arabia it is commonly known that if you want a job done right, you hire Aramco to do it, and al-Falih was brought in specifically to bring Aramco-style efficiencies to a ministry that had been suffering from systemic management problems that were exposed during its poor response to the MERS outbreak.

However, al-Falih’s connection to the oil industry remained strong all along. While serving as Minister of Health, al-Falih stepped down as chairman of the board of Aramco, and al-Naimi took his place. Al-Falih also continued to travel and speak for Saudi Arabia’s oil policy with key media outlets like the Wall Street Journal and the Financial Times.

4) Generational continuity:

The expanding role of young Deputy Crown Prince Mohammad bin Salman has generated significant speculation as to whether he was responsible for the recent changes. Is he trying to clean house and install new ministers loyal to him and his potentially radical policies?

This is unlikely given how many long-time and influential bureaucrats and advisors remain. Ali al-Naimi will remain in government as one of King Salman’s trusted advisors and of course, al-Falih was previously CEO of Aramco and a long-time member of the inner-circle. There is no indication that these long-serving Saudis display any specific loyalty to Mohammad bin Salman or that they have a predilection towards any new policies he might prefer (further, it has not been shown that he does prefer any significant change in oil policy).

Naturally, the oil market fears the untested youth and inexperience of Mohammad bin Salman, as do many Saudis. This is why talented technocrats like Ali al-Naimi, Khalid al-Falih, and Amin al-Nasser (Aramco’s current CEO) remain some of the most trusted advisors of King Salman, Crown Prince bin Nayef, and young Mohammad bin Salman. The latter two, both in their 50s, will help guide the Kingdom’s oil policy for years to come.