Israel-Hamas Clash Upsets Saudi Arabia's Image Makeover, Indian Corporate Hopes Dashed

On his recent visit to Saudi Arabia, Anand Mahindra, the Indian billionaire and chairman of the Mahindra Group, exclaimed on X (formerly Twitter) that NEOM – which is projected by the Arab nation as a futuristic city and “a cutting-edge industrial powerhouse and a revolution in urban living” – appears to be something out a George Lucas movie. Lucas, an American filmmaker, is famous for his Star Wars movies and for conceiving futuristic settings.

NEOM, according to the website of the ambitious project, offers “both sun-soaked beaches and snow-capped mountains” and is seen as a visionary effort that will transform the Red Sea coast of northwest Saudi Arabia into the smartest of all smart cities.

Notwithstanding tales of his notoriety and disproportionately stern action on dissenters, Mohammed bin Salman, the 37-year-old Crown Prince of Saudi Arabia who is popularly known as MBS, has set in motion a revolution of sorts in a country that used to be known predominantly for its proximity with the US, Mecca and Medina, and Wahhabism.

His so-called Vision 2030 envisages changes in law, and huge investments in high technology and urbanisation. Most importantly, MBS wanted to take his country beyond the sect-obsessed viewpoint of his predecessors and was working hard to normalise relations with Israel.

But the October 7 attack by Hamas on Israeli settlers and other targets, and the brutal ongoing retaliation by Tel Aviv on Gaza, where more than two million Palestinians live under siege, and on its neighbours Lebanon and Syria, has brought back what the region has battled for decades: bloody violence and political uncertainties.

Saudi Arabia, one of the world’s largest producers and exporters of oil, has been on a path of reforms on multiple fronts. It no longer wants to be seen as a vassal state of the US, fighting the superpower’s wars and serving the latter’s interests in the Middle East. Neither does it want to stick to the religious dogmatism that it is often identified with, especially after the 1979 Islamic Revolution in Iran, its arch-enemy. The country, which houses two of Islam’s holiest sites, Mecca and Medina, is also pursuing new allies and seems to be moving away from American foreign policy as a guiding principle for its relationship overseas.

Not long ago, the Saudis accepted China as a mediator to build ties with Iran, a country seen as pivotal for Shia Islam, which Wahhabism had problems with. Having China broker peace is a huge departure from the past when the Saudis often looked to the US for mediation – it is also a confirmation of its new priorities in the changing world order amidst the shifting sands of geopolitical power.

For his part, MBS has made all the right noises and moves. He is a votary of enhanced women's participation across all streams of life, a marked difference from his conservative predecessors. One of the recent visitors to Riyad and Jeddah, the main cities in the country, told me that most of the employees at immigration counters in airports are exclusively women, a prospect unthinkable a decade or so ago.

Now, the towering presence in the country of moderate religious leader Mohammad bin Abdulkarim Al-Issa, former Minister for Justice of Saudi Arabia and Secretary General of the Muslim World League, who was in India recently to meet with top officials and religious leaders, is proof of vast reforms MBS has been spearheading since becoming crown prince in 2017. Al-Issa also had overseen major legislative reforms in the rights of women and inter-faith relations.

Pro-Wahhabist groups in India that used to be funded by Saudi Arabia are already feeling the pinch of the changes taking place in Riyadh. Ahl-e-Hadith and Deobandis, organisations that used to be beneficiaries of Saudi largesse, are now short of cash.

All this is in line with Saudi Arabia diversifying beyond oil industrially by embracing greener technologies and making landmark changes in education. The stress now is on the coexistence of faith and larger economic cooperation even with nations once treated as enemies.

The reforms had been in the offing long before MBS, but nobody had shown the iron will to make massive changes until he took over. IMPACT-se, the organisation that reviews schoolbooks and curricula for compliance with UNESCO-defined standards on peace and tolerance, notes that Saudi textbooks have now been purged of or have toned down negative “portrayals” of Jews, Christians, infidels, and polytheists.

Unsavoury references about the Shias and Sufism have also been removed.

Education authorities in the country have also emphasised the “importance of peace and tolerance and a new approach to gender roles”. Textbooks also criticise radical religious ideologies such as the Hezbollah, ISIS, al-Qaeda, and Houthi militias, and the Muslim Brotherhood.

Besides, Saudi Arabia has reopened cinemas and abolished the Commission for the Promotion of Virtue and the Prevention of Vice, also known as mutawa or morality police. Reports suggest that mixed audiences and dating in public are now allowed. The announcements made during the month of Ramadan last year were largely unexpected. Microphones are disallowed and even in Mecca and Medina, the volume of loudspeakers has to be kept low. The initiatives are aimed at avoiding stark displays of religious identity in public and to bring a cosmopolitan character to the cities. The country’s rulers want to turn it into a global hub for finance, entertainment, and sustainable development – it plans to host the first-ever carbon-negative World Expo.

Notably, the crown prince’s announcement last year changing the founding date of the country from 1744 to 1727 is a clear indication of how things really are changing. That decision was more than mere symbolism. The Saud family came to power in parts of what is now Saudi Arabia in 1727 and forged a pact later in 1744 with Muhammad bin Abdul Wahhab, a reformist Sunni Islamic scholar, promising to fund Wahhabism in exchange for legitimising the family's rule. The decision by MBS is widely seen as an uncoupling of that alliance between the clergy and the state. It wants to be much less anchored to religion than it once was.

The country continued along the path of that alliance long after petroleum was discovered in March 1938 until reforms, step by step, were initiated at the beginning of this century and later fast-tracked under MBS.

Meanwhile, the sheikh is also betting big on state-of-the-art technology, including AI. Recently, he launched a $200 million fund to “invest in domestic and international high-tech companies as part of the kingdom’s economic diversification plan”. Initiatives include the launch of the National Transformation Institute for Applied Research (NTI) to boost technology development and commercialisation, and the restructuring of research centres to align with national priorities for research, development, and innovation. It also includes the creation of the new fund, said a report in The National. The Crown Prince was upbeat last year when, in a nation whose economic mainstay is fossil fuels, he launched Ceer, the kingdom's first electric vehicle (EV) brand. He exuded pride saying that the venture simply “ignited a new industry".

With the country tirelessly creating urban spaces and industrial bases to attract foreign companies and overseas tech experts, Saudi Arabia expects more than $9 billion in investments in future technologies, including by Microsoft and Oracle Corp, which are building cloud regions in the kingdom, Reuters quoted a top official as saying. Authorities are also spending millions of dollars on culture and sport, especially football as part of an exercise at image makeover. Proving that they are ready to settle only for the best, Saudi club Al-Nassr first hired iconic player Cristiano Ronaldo and then ace manager Luís Castro as coach.

Although it will take long for gender disparities to disappear and for the local population to get used to reforms, especially in small towns and the countryside, analysts of the Middle Eastern economies are gung-ho about Saudi Arabia, with its 30 million population (thrice that of the current financial and industrial hub, United Arab Emirates), playing a phenomenal and pivotal role in what they describe as the “new Middle East” where there are fewer hostilities along sectarian lines. Despite murmurs about human rights and various other concerns, hopes were high among the international community of entrepreneurs like Mahindra, too.

Much more than all such worries, what has hit the country out of the blue is the crisis involving Israelis and Palestinians in which Saudi Arabia was expected to take sides. So far, Saudi Arabia has castigated both Israel and Hamas. Saudi prince Turki Al Faisal, who had served as the head of his country's intelligence division, recently spoke about the right of the Palestinians to resist oppression and said, "I condemn Israel's stealing of Palestinian lands." He also accused Tel Aviv of targeted killings of Palestinians and jailing civilians. He wanted the Palestinians to follow Gandhi's example. "I do not support the military option in Palestine. I prefer civil insurrection and civil disobedience. This brought down the British Empire in India," he said.

The mayhem in the region has thrown a spanner in the works for Saudi Arabia's ambitious business and technology collaborations, at least in the medium term.

As much as Saudi Arabia is at its wits' end, businesses from across the world, including those from India looking to geographically diversify their interests in the Middle East, are in despair.