Mutual investment is a significant part of Europe's relatively long, relatively peaceful recent history: a war between the great powers will only create losers.

Similarly, if you have no significant relationship (and internationally, the only relevant relationships are of the trading variety), you have no leverage for change. If I wanted to alter your behavior, isolating you won't do much. Trading with you and then, when you see the value of our trades, ask for small, incremental change is much more effective.

Granted, the West hasn't done that a lot with Saudi Arabia (though otoh, women are now allowed to drive etc - would that have happened if China was SA's primary trade partner?), it has been mostly about "sell us oil, buy our weapons, and we'll look the other way when you commit some atrocity", but that doesn't mean that the idea is always wrong.

A diversified economy would also most certainly make Saudi Arabia a better place. Right now, natural resources are pretty much the only relevant industry, and typically, that industry is controlled by a small minority. A modern economy that consists of more than one sector would change the power balance and a change in the power balance would likely curb the Wahabi fundamentalism that the royal family uses to keep their population in check.

It can be a good idea, but that's not to say that it will be successful, or that it will even be intended to be.