Saudi Arabia’s first alcohol store aims to tackle booze smuggling

Saudi Arabia’s first alcohol store has opened in the diplomatic quarter of its capital Riyadh, accessible to non-Muslim diplomats. 

While it only affects a select group, it’s a big change for the highly conservative Muslim kingdom, where alcohol has been banned since 1952 after a Saudi prince murdered a British diplomat in a drunken rage. Drinking is also forbidden under Islam, and most of Saudi Arabia’s local population is religiously observant.

That hasn’t stopped alcohol from flowing into the kingdom over the years — it just happened behind closed doors.

Foreign embassies are able to import alcohol under specified agreements with the Saudi government, while some have snuck booze into the kingdom in secure “diplomatic pouches” that can’t be inspected.

From there, bottles are often sold on the black market at huge markups, according to expat and local residents of the country. All those who spoke to CNBC did so on condition of anonymity due to the sensitivity of the topic.

“Everyone knows which embassies sell booze … some of them have made a whole side business out of it, selling on the black market at four, five, even ten times the normal price. It’s gotten ridiculous. The government had to do something,” one Saudi investor based between Dubai in the United Arab Emirates and Riyadh told CNBC. 

A one-liter bottle of vodka, for instance, typically costs between $500 and $600 on the black market, sources said, while they described a single bottle of Johnnie Walker Blue Label going for between $1,000 and $2,000. At-home booze making has also taken place in the kingdom for decades, according to expats who’ve previously lived there. 

The new shop in Riyadh comes with strict rules: authorization for entry and shopping must be validated through an app called Diplo and approved by the Saudi Foreign…