Saudi Arabia Replaces its Central Bank Governor and Oil Minister

Oil & Gas
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Saturday, May 07, 2016 9.46PM / News


Ahmed AlKholifey, named to the role in a royal order from King Salman, was previously deputy governor for research and international affairs at the central bank, the Saudi Arabian Monetary Agency.


The announcement comes as the world’s biggest crude producer reorganizes ministries to “focus and clarify responsibilities and ease procedures to offer better services,” Saudi Press Agency reported.


Al Mubarak was named central bank governor in 2011 and was previously chairman and managing director of Morgan Stanley Saudi Arabia. He oversaw Saudi monetary policy during a period of stress as the oil price slump depleted the government’s main source of revenue, led to a budget deficit of nearly $100 billion last year and ate away at the kingdom’s currency reserves, still among the largest in the world.


The governor had repeatedly reiterated Saudi Arabia’s commitment to pegging its currency to the dollar as the central bank’s net foreign assets declined by $115 billion last year.


Twelve-month forward contracts for the Saudi riyal hit their highest level in two decades in January, reflecting growing bets by traders that the kingdom would allow its currency to weaken, though the speculation has since subsided. 


Oil Ministry Set for Reorganisation

Changes include replacing longstanding oil minister Ali Al-Naimi on Saturday, marking the departure of one of the industry’s most powerful figures, with Khalid Al-Falih, chairman of the Saudi Arabian Oil Co., as the kingdom grapples with weak oil prices. The collapse of oil prices has hit the world’s biggest energy companies hard and has hurt the budgets of oil-dependent countries. In Saudi Arabia, the world’s largest oil exporter, petroleum accounted for almost three-quarters of state revenues last year.


The royal decree, announced via state media, was part of a wider government reshuffle that includes a restructuring of the oil ministry, which has been renamed the Ministry of Energy, Industry and Mineral Resources. It comes less than two weeks after Saudi Arabia unveiled an ambitious economic reform program aimed at reducing the kingdom’s dependence on oil revenue.


The 80-year-old Mr. Naimi had for some time wanted to retire.


His departure and Mr. Falih’s appointment were widely expected, suggesting market reaction to the moves is likely to be calm, said Jason Bordoff, director of Columbia University’s Center on Global Energy Policy. “Khalid al Falih has been a key part of the team making these decision for many years,” he said. “It represents a continuation of the path they’ve been on.”


Mr. Falih has been within the inner circle of Saudi oil policy-making for a long time. He was being groomed for months, according to people familiar with the matter. The decree said Mr. Falih was relieved from his other post of health minister.


“They need a ministry that can take a more holistic approach to energy in the kingdom,” said Mr. Krane. “They’re working to rationalize their energy policy.”

Mr. Naimi, known in oil industry circles as a technocrat’s technocrat, appeared to be losing his grasp on power when a meeting of major oil producers aimed at reaching an output freeze agreement collapsed less than a month ago, apparently because of the influence on Saudi policy of the deputy crown prince.


Throughout his career, Mr. Naimi has worked to avoid a repeat of the mistake of his predecessor, Sheikh Zaki Yamani, who was dismissed in 1986 as he unsuccessfully tried to fight an oil price collapse by unilaterally reducing Saudi output. He became president of Saudi Aramco in 1984 and chief executive officer in 1988. He was named oil minister in 1995 by Saudi King Fahd bin Abdulaziz Al Saud.


He took office at an uncomfortable time for the Kingdom and OPEC, which it dominates. At the time, depressed oil prices had failed to rise enough to save oil producers from a continuing cash crisis. But Mr. Naimi soon carved out an identity and transformed himself from a competent manager into one of the world’s key economic policy makers.  

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