Mohammed bin Salman, who is Saudi Arabia's new crown prince, could have a big impact on Exxon Mobil (XOM), Lockheed Martin (LMT) and other U.S. companies' relations with the kingdom, as the 31-year-old is expected to add volatility to oil markets and push for buying more U.S. weapons.
U.S.-Saudi relations cooled under President Obama, but President Trump has rekindled the relationship and announced weapons deals valued at $110 billion during his May visit, which was orchestrated in part by Salman.
"Trump seems to be in good with the Saudis," said Ivan Eland, senior fellow and director of the Center on Peace & Liberty at the Independent Institute. "They are one of his favorite dictatorships. U.S. business will definitely benefit from the military/political alliance we have there."
During Trump's visit last month, General Electric (GE) said it had agreements for $15 billion worth of projects in the kingdom, Dow Chemical (DOW) said it would build a polymer and coatings plant, and National Oilwell Varco (NOV) announced a joint venture to make specialty drilling rigs and equipment in Saudi Arabia.
Eland sees more infrastructure and tech deals on the horizon, and Salman is a key architect of the Saudi Vision 2030 program to diversify the economy and end the kingdom's dependence on oil revenues.
Salman is somewhat of a known quantity in energy circles, making his mark in the spring of 2016, when he scuttled an oil deal at the last minute.
"Oil traders are already aware of MBS and his brash personality," said Phil Flynn, a senior market analyst at the Price Futures Group, using Salman's initials in his daily energy report Wednesday. "Last April, the 31-year-old basically pulled out of the Doha oil accord, angering both friends and foes alike, as they all came to sign an oil agreement that was already agreed to before seasoned OPEC and non-OPEC ministers came to sign on the dotted line."
Still, Salman has an incentive to lift oil prices, at least in the short term, as the kingdom shops around its state-run oil company, Saudi Aramco, for an initial public offering next year.
Aramco is also reportedly looking to Chevron (CVX) to help develop gas reserves, and Exxon has a history of petrochemical joint ventures in Saudi Arabia.
As defense minister, Salman has pushed for a stronger stance against Iran and increased air strikes in Yemen, and pushed for sanctions against Qatar.
Arms sales to Saudi Arabia would go "up, up and away" under the hawkish young Salman, said Mark Bobbi, an aerospace, defense and security analyst at consultancy IHS.
But business deals could come with a catch. Saudi Arabia will want foreign companies building products in the kingdom so Saudi Arabia can get licenses and jump-start its own industries, especially in defense, Eland said.
Unlike defense orders to Asia with strings attached in the form of technology transfers, sales to the Middle East historically tended to be simpler, with Gulf allies shopping for off-the-shelf technology that they could use right away. In addition, cost was of little concern, especially when oil was more than $100 a barrel.
Saudi Arabia still needs arms, but is now seeking tech transfers in the wake of crashing oil prices.
During Trump's visit, for example, Lockheed signed a letter of intent with Saudi tech firm Taqnia to form a joint venture to support the completion of 150 S-70 Black Hawk helicopters.
Over time, as Saudi Arabia develops a home-grown industrial base, fewer U.S. exports may be needed to fill demand.
U.S. companies also might not have a monopoly on Saudi sales. Flaring tensions in the region has Riyadh looking at an unlikely ally as it plans to increase military spending by nearly 7% this year.
"Keep an eye on Saudi relations with Israel," Bobbi said. "I look at Israel as the silent broker in the Middle East, thanks in no small part to their technical prowess."
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