Saudi Arabia’s $12 Trillion Desert Dream: Crown Prince’s Ambitious Megaproject Faces Major Setbacks

The ambitious vision of Saudi Arabia’s Crown Prince for a dazzling, high-tech city in the desert has hit a major setback.

Known as the Neom project, this eco-friendly metropolis has been promoted as a model of innovative and sustainable urban living.

The centerpiece of Neom, called The Line, was envisioned as a 170-kilometer-long, 500-meter-high “smart city” designed to accommodate 9 million people.

According to a report by The Wall Street Journal, internal documents leaked that the estimated expenses for The Line had ballooned to a staggering $8.8 trillion USD (approximately $12.3 trillion AUD) by 2080.

However, new reports have surfaced indicating that Neom, the state-owned company managing the endeavor, has halted all progress on The Line until at least 2030.

The global news outlet Semafor suggests a strategic shift by the kingdom’s sovereign wealth fund.

It’s redirecting cash flows affected by the Iran War and global energy transition towards more critical infrastructure, such as ports and AI data centres.

And Crown Prince Mohammed bin Salman’s vanity projects are paying the price.

Adelaide has already fallen foul of the cost-cutting exercises of MbS’s sovereign wealth fund. Its $US5 billion carrot for the breakaway LIV Golf tour has been cut.

Neom Stadium, an integral part of The Line’s first construction phase, was being sold as a prime venue for the 2034 FIFA World Cup. But the future of the 46,000-seat sports field is yet to be confirmed.

And the $1.6 billion Neom Industrial City Connector (NICC) high-speed rail link to The Line has just had its contract terminated.

Then there’s the Trojena mountain resort.

Work on this vast artificial snow field slated to host the 2029 Asian Winter Games has been halted. The swirling engineering marvel was supposed to produce a luxurious, year-round haven 2km above the surrounding desert sands.

Market forces

Semafor, citing “people familiar with the matter”, reports that Neom funding is being restricted to its most productive components. This includes $US3 billion for the Oxagon industrial port city on the Red Sea.

This has suddenly become a strategic imperative.

Most of Saudi Arabia’s ports are in the Persian Gulf. These remain cut off from the rest of the world as the US/Israeli war against Iran struggles to find resolution.

The Crown Prince’s cash splash has become unaffordable.

Saudi Arabia’s enormous investment projects have failed to generate the expected excitement. Foreign investment and involvement have been poor. And expenditure has soared.

That’s despite the Iran war driving crude oil returns to a three-year high.

Oil revenues reached $US24.7 billion after the first month of the war as Saudi Arabia diverted some flows through its East-West pipeline, bypassing the Strait of Hormuz. And its network of high-quality highways is carrying thousands of tonnes of fertiliser, diverted by truck across the desert, to its Red Sea ports.

But the nation’s economy is being hit hard in other sectors affected by supply chain disruptions.

“For Saudi Arabia, each month of fighting costs about 1.5 per cent of GDP in extra spending,” writes Bloomberg Economics analyst Ziad Daoud.

“For most of its neighbours, the bill is probably higher.”

So savings remain a necessity.

Severed dreams

“The decisions are the result of a strategic review conducted by Neom’s chief executive Aiman al-Mudaifer after his appointment last year,” reports Semafor’s Matthew Martin.

Work on The Cube (Mukaab), a $50 billion skyscraper project in Riyadh, was suspended in January. The massive 400m box design had been intended to dominate a new city centre.

And construction work on the 57km high-speed rail interconnector between The Line and Oxagon ended this week, at about 20 per cent complete.

Work began last year on redesigning The Line’s twin linear skyscrapers to cut costs. They had been envisaged as ultra-green, energy-efficient, AI-connected structures, filled to the brim with all the mod-cons.

It was ultimately supposed to house nine million people. And all transport along its 170km length was to be by an advanced internal electric shuttle system.

The future of this redesign work is also unknown.

“NEOM has also further scaled down ambitions for how many people will live in NEOM by 2030: the target is now up to 100,000 people,” Martin writes.

“At one point, NEOM executives had envisioned 1.5 million residents by the end of the decade before revising the forecast down to 300,000 two years ago.”