Over Dover sole in Mayfair, Saudi Arabia’s former oil minister talks about his frustrations with Opec, his early years as a nomad — and why he will be proved right.
by: Roula Khalaf
I am just a few minutes into my lunch with Ali al-Naimi and we are thousands of miles away in another era, racing across the sands of eastern Saudi Arabia on his mother’s white camel. It was her dowry in her second marriage and she took it on long trips in the 1950s — just as other Bedouin women now drive trucks and cars on desert tracks; the national ban on women driving, one of the more outrageous aspects of life in Saudi Arabia, is rarely enforced in remote parts of the kingdom. Naimi, Saudi Arabia’s legendary former oil minister, laughs. “In the past you used to see women riding camels, and now you see them driving Toyotas with the camels in the back of the car.”
We are at George, an elegant brasserie and private club in the heart of Mayfair, seated at a small round table beneath a David Hockney print. The diminutive Naimi, 81, is dressed in a three-piece suit, arguably a little too formal for the chic modern setting. For two decades, as the man responsible for the policy of the world’s largest oil exporter, Naimi bestrode the energy markets like a colossus. The “oil king” has never liked reporters. They have chased him relentlessly over the years. At summits of Opec, the cartel of oil exporters, the more determined took to accompanying him on his early-morning runs seeking to dissect his sometimes cryptic words, his mood and even his body language for clues about the direction of oil prices. He could be humorous with them at times and cantankerous at others. Now, six months after retiring, he is in a mellow mood, eager to tell stories.
Having just published a memoir, Out of the Desert, Naimi’s mind drifts back easily to tales of his childhood growing up in a nomad’s tent. I, of course, am keen to press him on the biggest bet of his long career. In November 2014, with the oil price in freefall, he convinced the ruling royal family to take an enormous gamble. For decades, the kingdom’s role had been as a swing producer, taking its output up or down to balance the oil price. On this occasion, Saudi Arabia abandoned that policy and stunned global markets by opting not to cut its production to bolster prices but instead keep pumping oil to protect its market share. The consequences still overshadow the global economy. After roughly four years at more than $100 a barrel, the price of oil tumbled, hitting a low below $30 earlier this year before staging a recovery to about $50.
We are both starting with the yellowtail sashimi. Naimi orders the Dover sole for a main course, while I choose the miso cod. When the mains are served, Naimi is excited at the sight of broccolini. He takes a bite and nods approvingly, telling me he first tasted the lanky vegetable on a trip to Australia. Naimi is a traveller. A geologist by training, he loves hiking — and sometimes indulges in it at curious times. There was, for instance, the notorious disappearing act in the run-up to the 2014 Opec meeting that sent the markets into a frenzy. “I like to climb, I went to Austria,” he says, as if it was just another trip.
As we settle into our lunch, Naimi explains the logic behind his momentous decision. The era of oil selling at more than $100 a barrel had radically changed the market, encouraging new producers with higher costs to join in, and fuelling the US shale revolution. As oil flooded on to the market, countries outside Opec refused to cut their output. Inside Opec, there was resistance, too. Saudi Arabia was not about to act on its own. “It would have been stupid of Saudi Arabia to agree to a cut then,” Naimi says. “More non-Opec production would have come [on the markets]. We had no choice.” As producers pumped more oil after the 2014 decision, however, prices continued to fall, dropping much lower than the range the Saudis had anticipated. The collapse hit Saudi revenues hard and squeezed the state budget. Naimi came in for severe criticism at home. Abroad, many questioned whether his bet would backfire.
Intriguingly, Naimi ends his memoirs just after that fateful Opec meeting two years ago. When I ask why, his eyes twinkle and he smiles. He says, half in jest, that he intends to write another book, and has more to say about people and events. More seriously, he tells me that he knew “it was going to get worse”.
Naimi is haunted by a period in Saudi oil history that he describes in his book as the mistake that had cost one famous predecessor as oil minister — Zaki Yamani — his job. It was back in the 1980s, amid a surge in non-Opec production from Alaska’s North Slope, the North Sea, and Mexico. Saudi Arabia became the swing producer. When it sought to regain its share, prices collapsed.
Naimi learnt a lesson and adopted a different tack, but will his own gambit also go down in history as a miscalculation? After all, his successor Khalid Al-Falih may move towards reversing it. Meanwhile, predictions in Riyadh that lower prices would inflict lasting damage on the US shale industry underestimated the resilience of that sector: some small producers have gone out of business but, as prices have slowly recovered in recent months, others appear to be weathering the storm.
Naimi is known to be single-minded and stubborn and is not about to show me otherwise. There is no hint of hesitation when he declares that he was “absolutely correct” in his decision. “I didn’t think or say we want to take [shale] out. I said we don’t want to lose more market share. Let the price be decided by the market,” he says. “Anybody who thinks he or any country is going to influence the price in today’s environment is out of his mind.” Going back on the policy he recommended to the king at that time would be inadvisable, he insists. “I have no idea why they want a reversal because a high price will definitely bring more crude to the market and Opec will further lose [market] share.”
He has put down his knife and fork; the waitress is giving us a worried look. There’s nothing wrong with the sole, Naimi reassures her gently. “I’m a fisherman and I know good fish, and that’s good fish.” Then he turns to me and, returning to the past, says that the first time he tasted fish was after he married his wife, who is from Bahrain, the small group of islands east of Saudi Arabia whose name in Arabic means “the two seas”.
Naimi’s extraordinary life story personifies Saudi Arabia’s rise to regional powerhouse. Born in 1935, three years after the founding of the modern state, he spent his early years as a poor nomad living in a desert tent. As a child he herded sheep; at 12, he was an office hand, working for Aramco, the oil company then owned by American companies, a post he took on as a result of a family tragedy — he replaced an older brother who had died of pneumonia. Aramco became his home and his family. It sent him to Lebanon for his first formal education and then to US universities; he still speaks with an American accent. He would rise through Aramco’s ranks to become the chief executive.
When he was appointed minister of petroleum in 1995 and imposed his authority on Opec the world took greater notice of Naimi. For two decades he was a dominant force at summits when the world’s markets moved on just about his every word. He has seen oil as low as $16 a barrel, and oil well over $100 a barrel. He has lived through global financial crises, wars and political earthquakes in the Middle East.
Time and again during our lunch I detect his frustration with Opec. He tells me a story about his first meeting in 1995, which was to begin at 10am. “Five minutes to 10, I was in the building. I waited, I waited, I waited. At 11am, hardly anyone showed up. Ten minutes before 12, ministers started walking in, and we convened. I raised my hand and said that, if you want us to meet at 12, please tell us to meet at 12. From then on, people started respecting time.” Some ministers in Opec, he also says, “don’t come prepared … don’t have the facts, don’t have the staff or have staff that are not competent”.
Though in his book he reserves his harshest criticism for Russia, which is not a member of Opec, accusing it of failing to follow through on its pledge to reduce oil production during the financial crisis, he tells me that his fellow Opec members also lie. Given the experience of the past two years, maybe Opec has outlived its purpose, I suggest? “Never,” he insists. “You don’t have another organisation that looks after the business. Before 2014 it was successful but in 2014 everybody had excuses.”
Naimi’s career came to an end this May, when he took a telephone call from Salman bin Abdulaziz, who ascended to the throne of the absolute monarchy last year. A week later, the retirement that markets had speculated on for years was announced, bringing the curtain down on a long chapter in the history of oil. Although it was more than a decade after he had himself mooted the idea of retiring, the timing was awkward. Naimi departed from the oil scene thinking he had unfinished business: he still did not know if his bet on protecting Saudi Arabia’s market share had paid off.
Unsurprisingly, Naimi is a strong believer in the long-term survival of fossil fuels, insisting that technology will find ways of reducing greenhouse emissions, and renewables are too expensive for developing countries. The Saudis signed up to last year’s Paris climate change accord, which committed the world to try to limit global warming, but they were also accused during the negotiations of having tried to undermine it.
“Let us attack the emissions, not the fossil fuels; we have brains, we have technology, we can manage the emissions,” he says. Not for the first time he relates a story from a conference packed with people calling for an end to the era of fossil fuels. “I raised my hand and I said, ‘Gentlemen, I think I hear you very well, I’m going to go back to my country and shut all our wells,’ ” Naimi quips. “There was an uproar — no, no, no.”
I recommend the sticky toffee pudding to Naimi if he’s in the mood for something sweet, and order the seasonal fruit plate for myself. Over coffee, we talk about the future of Saudi Arabia. Since King Salman took over, his 31-year-old son and deputy crown prince, Mohammed bin Salman, has been handed responsibility for the economy, and has brought in a younger cabinet with a radical agenda.
With the rise of MBS, as the prince is known in international circles, the replacement of the octogenarian Naimi seemed a matter of time. He was now out of the inner circle of power, and no longer the only voice speaking about oil policy. Before a meeting of producers in Doha in April, MBS and Naimi appeared to contradict each other, confusing the oil markets. Naimi denies any clash and insists that statements had been misinterpreted.
MBS has pledged to end what he calls the “addiction to oil”. Saudi Aramco is working on a public listing, something that would have been taboo under King Abdullah, the late monarch with whom he has worked most closely. Energy subsidies have been slashed, as have benefits for state employees. I ask Naimi whether this diversification effort will be more credible than previous and largely unsuccessful restructuring attempts over the past 20 years. Watch the oil price, he says. When prices are depressed, Saudi Arabia acts, and when they rise again, it “relaxes”. This time is more serious, though. “The best thing is to quit talking and start acting,” he continues. “I believe that’s where we are now. We are beginning to act.”
Nearly two hours have passed and we are back where we started, discussing Saudi women and driving. Will a kingdom that promotes a puritanical Wahhabi Islam, where clerics exert overwhelming influence, ever modernise? Will it ever let its women thrive, and allow them to drive? Naimi takes me back through history one last time, to the 1979 Iranian revolution. Saudi Arabia’s reaction to the fall of the Shah was to “become holier than thou”, he says. He believes the contract between the monarchy and the religious establishment, which handed the clerics the authority to impose social norms, is fraying, and senior princes who were the main stumbling block to women driving have passed away in recent years. Naimi has five granddaughters and they all have non-Saudi driving licences. “I’m a liberal grandfather, I tell them all, ‘Don’t get married until you graduate,’ ” he says. “The world is changing, let’s change with it.”
Roula Khalaf is deputy editor of the FT
Illustration by James Ferguson