Ali Al-Naimi has worked tirelessly over the last decade to maintain the stability of global oil markets during an era of extraordinary price swings. Throughout his tenure as Saudi oil minister, Al-Naimi has wielded Saudi Arabia’s massive 25-30% share of OPEC production to great effect, bringing the organization and the oil price back from the brink after the 1997 Asia crisis, and laying the foundations for today’s boom that has helped empower key emerging economies along the way.
“Al-Naimi has come to have the biggest influence among all the oil ministers,” says Dr Muhammad Ali Zainy, economist at the London-based Centre for Global Energy Studies. It almost goes without saying that this is largely down to the sheer weight that Saudi Arabia carries among producers. “From this he can market his viewpoint when he wants to do so,” says Zainy.
Despite endless speculation that the 72-year-old will retire “soon”, he shows no sign of having lost his appetite for leadership. In early September 2007, Saudi lobbying unexpectedly forced through a 500,000 barrels per day production increase over objections from more hawkish OPEC member countries Iran, Venezuela, Libya and Algeria. Fears of a US recession quickly turned what was expected to be a regular meeting into a test of OPEC’s ability to remain united – and Al-Naimi delivered.
“Saudi Arabia wants to be seen as the country that serves the interests of the consumer, as well as the producer,” says Zainy. “Al-Naimi follows a moderate stance in terms of supply; if he sees a forthcoming crunch then he advises that Saudi Arabia increase production. Being the kingpin in OPEC they can influence it.” He adds that “Saudi Arabia’s stance is usually a moderate one because they are influenced by the United States – so it doesn’t wish to take an extreme stance regarding oil prices”.
Difficult decisions
Al-Naimi was made minister in 1995, at a difficult time for Saudi Arabia and OPEC. With oil prices falling, Riyadh was suffering from a cash crisis and there was dissent in the cartel’s ranks. Some analysts saw the appointment of the technocrat Al-Naimi as a sign that the kingdom wished to focus on its domestic oil industry rather than dominating OPEC diplomacy.
That assessment was wide of the mark. If anything, Saudi Arabia’s role in OPEC has grown on Al-Naimi’s watch, especially following the Asian financial crisis. But his initial handling of oil quotas in the run-up to that period was inauspicious. A decision to increase the OPEC production ceiling at the 1997 Jakarta meeting, to generate higher revenues, had the reverse effect. It aggravated the fall in prices through 1998 and part of 1999 as world economic growth stuttered. “He got it completely wrong – OPEC was overproducing, but he kept his job in a cabinet reshuffle [in June 1999], when many thought he would go,” says a regional analyst at one international oil company. “Those who don’t understand the Saudi system said that Al-Naimi would be sacked, but it’s important to note that he only negotiates within the parameters set by the ruling family.”
The crisis was the anvil on which his eventual success would be forged, as he kept OPEC’s discipline. Al-Naimi “brought an oil market savvy” to a difficult situation, PFC Energy’s head of oil markets Fareed Mohamedi tells Emerging Markets. “This was finally able to galvanize OPEC and all the different ministers into managing the market in a fundamentally different way.” As a result, says Mohamedi, Al-Naimi “made a more profound contribution than just getting the oil price back up”.
The road up
Like the revival of world oil prices, it has been a long personal journey for Al-Naimi, from the sort of humble beginnings that have not, traditionally, produced Saudi leaders. “His is a real rags-to-riches story – he was Aramco educated, and remains a very loyal servant to the interests of the Saudi state,” says the oil company analyst.
When Al-Naimi was appointed oil minister in 1995 following a major cabinet shake-up, some Saudi-watchers were surprised. His predecessor, long-serving OPEC minister Hisham Nazer had been a political animal who had served in government for several decades. In contrast, Al-Naimi was a son of Saudi Aramco, most usually described as a respected and shrewd oil technocrat.
He worked his way up from the bottom in the state oil giant, joining Aramco in 1947 as a 12-year-old office boy, filling a slot vacated by the death of his elder brother. The pre-teen office boy advanced to take degrees at the American University of Beirut, Lehigh University in Pennsylvania and Stanford University. He returned to Aramco, and in 1984 became company president and then chief executive – presiding over a huge period of transition as the company adjusted to lower revenues, while starting to bring Saudi nationals into the seats vacated by American management.
Come 1995, Al-Naimi knew Aramco intimately, but he had little experience of the manoeuverings involved in high-level international oil politics. According to the oil company analyst, he is “a career industry man, not a political appointee. He bases decisions on technical and business factors rather than on politics, delegates authority to subordinates rather than closely holding information and power, and evaluates staff primarily on their business skills rather than on their family backgrounds”. This independent-minded approach is a remarkable reflection of the authority he has come to hold in the power structures of the world’s largest oil producer.
This profile is one in a series of twenty, published in a special commemorative edition to mark the 20th birthday of Emerging Markets newspaper. The profiles canvass twenty of the figures who have had the most impact on the rise of the emerging markets over the past two decades.