Neom Project Faces Major Setbacks in Saudi Arabia

Plans for a dazzling, futuristic city in Saudi Arabia’s deserts are now facing serious obstacles.

The Neom project, which was pitched as a carbon-neutral urban paradise using leading sustainable technology, has recently run into trouble.

One of its main attractions, a sprawling “smart city” known as The Line, was meant to stretch 170 kilometers and rise 500 meters high, housing around 9 million residents.

Now, internal documents suggest that the costs for The Line could skyrocket to $8.8 trillion by 2080, according to reports.

However, alarming news has emerged that Neom’s state-run development company has put all work on The Line on hold until at least 2030.

International news outlet Semaphore indicated that the Saudi sovereign wealth fund is redirecting investments away from this ambitious project. Instead, the focus is shifting toward more immediate priorities, like ports and AI data centers, particularly due to the ongoing war with Iran and the global energy shift.

This change in strategy means that Crown Prince Mohammed bin Salman’s extravagant plans are losing traction.

For instance, the ambitious City of Adelaide is already struggling to comply with the fund’s cost-cutting measures. They’ve slashed financial support for the LIV Golf Tour, reducing the initial $5 billion commitment.

Moreover, the Neom Stadium, which was marketed as a key venue for the upcoming 2034 FIFA World Cup, is now uncertain regarding its future. The stadium, intended to accommodate 46,000 spectators, faces an unclear path ahead.

Additionally, construction has concluded on the $1.6 billion high-speed rail link to The Line, but what lies ahead for the project remains undefined.

Then there’s the ambitious Troyena Mountain Resort. Originally intended to have an artificial snow field for the 2029 Asian Winter Games, that project has also been canceled. This was supposed to be a year-round luxury getaway, perched 2 kilometers above the desert sands.

Shifting Priorities

Semaphore reports that funding for Neom is now limited to the most feasible projects, which include a $3 billion investment in Oxagon, an industrial port city on the Red Sea.

This shift in focus has become essential as many of Saudi Arabia’s ports, primarily located in the Persian Gulf, are isolated amid the ongoing conflict.

Given these circumstances, substantial funds have become more difficult for the crown prince to access.

The grand investment initiative has not produced the anticipated buzz, with foreign participation remaining low and expenses escalating.

This is occurring even as oil prices have surged to a three-year high because of the Iran conflict.

In fact, oil revenues hit $24.7 billion in just the first month of war, as Saudi Arabia adjusted its operations to reroute flows through the East-West Pipeline, thus avoiding the Strait of Hormuz.

However, the domestic economy is also grappling with challenges, largely resulting from supply chain disruptions.

Costing approximately 1.5% of GDP in additional expenditures, the ongoing conflict is making life harder, not just in Saudi Arabia, but for neighboring regions as well, as suggested by a Bloomberg economic analyst.

A Dream on Hold

This halt in projects follows a strategic review led by Neom’s recently appointed CEO Ayman Al Mudaifah.

Additionally, the construction of Riyadh’s $50 billion The Cube skyscraper has been suspended since January, intended to be a landmark in the new city center.

Meanwhile, the completion of a 57-kilometer high-speed rail link connecting The Line and Oxagon has just wrapped up, though only about 20% of it is done.

Last year marked the beginning of redesign efforts for The Line’s twin skyscrapers, aimed at reducing costs. These structures were envisioned as ultra-green, energy-efficient, and integrated with AI, meant to support a population of 9 million, all while utilizing advanced electric shuttle systems for transportation.

However, the fate of this redesign remains uncertain.

Neom has also scaled back its target population for 2030 to just 100,000 residents. Once, executives had projected 1.5 million inhabitants by the decade’s end, but that estimate was drastically cut to 300,000 two years ago.