Saudi Arabia; Kingdom at the Crossroads..

From Dr Hamid Hussain

Overview of challenges faced by Saudi Arabia and role of Crown Prince Muhammad Bin Salman (MBS). His meteoric rise from obscurity in an interesting phenomenon.

“Men in great fortunes are strangers to themselves, and while they are in the puzzle of business they have no time to tend to their health either of body or mind”.  Francis Bacon’s Of Great Place




Kingdom at Crossroads

Hamid Hussain

“We always take criticism from our friends.  If we are wrong, we need to hear that we are wrong.  But if we are not wrong, we need to hear support from our friends.  What I request is that the thing you actually believe, to say it”.  Saudi Crown Prince Muhammad Bin Salman interview with The Economist, January 6, 2016

External environment of Saudi Arabia changed dramatically in the aftermath of murder of Saudi journalist Jamal Khashoggi in Saudi consulate in Turkey in October 2018.  It made international headlines and many started to ask questions about Saudi Arabia and the royal family.  This event also strained relationship of Saudi Arabia with its western allies as governments came under increasing pressure to raise this issue.

Saudi Arabia operates in a zone of opacity and not much is known about royal family dynamics and Saudi public opinion.  Crown Prince Muhammad Bin Salman (nick named MBS) moved rapidly to consolidate all power centers under his own personal command since the ascension of his father King Salman Bin Abdul Aziz to the throne in 2015.  Very little is known about how MBS consolidated his power inside the Kingdom.  He also broke with the tradition of family consensus and removed many powerful royal family members and their sympathizers from important centers of power.

MBS was first appointed Defence Minister and in this capacity, he gradually took control of all branches of the military. Defence procurement and defense construction contracts are a major source of patronage and in June 2017, MBS took control of this cash cow of patronage.  He established Saudi Arabia Military Industries (SAMI) and made it a defense subsidiary of Public Investment Fund (PIF).  PIF is country’s sovereign wealth fund under direct control of MBS. In August 2017, General Authority Military Industries (GAMI) was established and made responsible for all defense procurement.  SAMI and GAMI are controlled by an inter-ministerial committee headed by MBS.  In July 2017, commander of Royal Guard was removed, and six months later Chief of Staff of land forces and air force and air defense commanders were also removed.  Within few months of becoming heir apparent, MBS was in full control of operational and economic aspects of all defense establishments.

Parallel to these developments, interior ministry; a potential rival power center that had become a behemoth patronage center of deposed Crown Prince Muhammad Bin Nayef was gradually neutralized. In July 2017, a new ministerial level agency named Presidency of State Security (PSS) was established that reported to Crown Prince.  Counter-terrorism, internal surveillance, cyber-intelligence and national information center functions of interior ministry were transferred to PSS. MBS also took control of all economic activities as Chairman of Council of Economic and Development Affairs.  In this capacity, he cancelled and revised many previous civilian contracts most likely creating new networks of patronage loyal to him.His agenda of reform in social and economic sectors was welcomed by Saudi youth and international community. His high-profile visits to London and Washington in early 2018 portrayed him as the reformer that Middle East had been waiting for a long time.  However, these positive developments were quickly eclipsed by the negative fallout from his actions in other arenas. Flashy slogans like Vision 2030 and National Transformation Program (NTP) 2016-2020 were high on rhetoric but very low on substance. Few examples will show that no serious thought was given before policies were announced.  When King Salman ascended to the throne in 2015, he decreed a cash bonus of two months’ salary for all government employees costing national exchequer $32 billion.  In 2016, bonus payments (usually 15-20 percent of the salary) of public service workers (two thirds of Saudi work force are employed by the government) were cut but when widespread grumbling was echoed in Saudi Arabia, decision was hastily reversed.  In the fall of 2016, subsidies on gas, power and water were slashed.  When irate public looking at their new utility bills took to social media, government fired its water and electricity minister.  It was announced that five percent of Aramco will be put up for public offering but later the idea was quietly dropped.  One important goal of Vision 2030 is to double foreign investment by 2020.  There are no specific plans for how it will be done?  Compare it with reality on ground.  Foreign investment in Kingdom dramatically dropped to mere $1.7 billion in 2017 from previous year of about $8 billion.  Jordan and Egypt attracted more foreign investment than Saudi Arabia in 2017.

A decade ago, King Abdullah bin Abdul Aziz inaugurated plan for King Abdullah Financial District (KAFD) announcing that this will be the pillar of non-oil economy.  That block after an estimated cost of $ 8 billion and many delays due to funding issues stands as a ghost town today.

Anti-corruption drive against the powerful Saudi elite was the right move but done so clumsily that it looked like a mafia style shakedown. No institutional mechanisms were put in place to encourage transparency and accountability of corrupt practices.  One day Saudi billionaire Prince Walid Bin Talal was put in the gilded cage of Ritz Carlton on charges of massive corruption.  Few months later and few billion dollars poor at the same glitzy hotel, he was sitting next to MBS for an investment extravaganza in the desert. Such measures do not instill confidence among international investors.

MBS departed from well-established norms of the royal family in handling internal and foreign affairs issues. Al Saud royal family has used the instrument of patronage and co-option to keep family united and relied on ‘checkbook diplomacy’ to handle foreign affairs problems.  It avoided severe punishment of errant royal family members and avoided direct military involvement in conflict zones.  Internally, al Saud had usually co-opted dissenting voices rather than severely punishing them.  During King Abdullah’s reign many such reconciliation efforts were initiated towards disgruntled clerics, youth, females and Shia and Ismaili minorities.  MBS embarked on the reign of fear to keep everyone in line rather than consensus. He has opened several internal fronts by arresting clerics, female activists and Shia.  In January 2016, execution of Shia cleric Nimr Baqir al Nimr has widened the sectarian gulf inside Saudi Arabia that will be very difficult to bridge.

On the foreign policy fronts, military intervention in Yemen, clash with Qatar and direct involvement in internal fractious affairs of Lebanon and Palestine has rattled even close allies of Saudi Arabia.  Boycott of Qatar, clumsy handling of inviting Lebanese Prime Minister to Riyadh and having him announce his resignation on Saudi television, insulting pressure on Mahmud Abbas to sign on Trump’s Middle East plan, undermining King Abdullah of Jordan’s authority in Jerusalem and rude treatment of Kuwait in dealing with disputed territory is making everyone nervous. Oman is trying to keep its distance from Saudi foreign policy in the region and Kuwait is quietly working with Turkey to address its security concerns vis a vis Saudi Arabia.

Turkish President Recep Tayyip Erdogan has used Khashoggi’s brutal murder for his own gains.  Erdogan is no boy scout and after the failed coup of 2016, thousands have been put behind bars without any trial.  Turkey has the distinction of being the largest jailer of journalists. Saudi Arabia sent Prince Khalid Bin Feisal al Saud as emissary.  He met Erdogan that was not reported in the press and allegedly offered a financial package and promise of lifting blockade of Qatar in return for dropping the murder investigation.  Erdogan rejected the deal that suggests that Erdogan has bigger ambitions in using this opportunity to his advantage.

Erdogan has used the incident to rehabilitate himself in Europe and America. He is now working overtime to change the balance of power in the Middle East.  He is partially successful in taking the steam out of Washington’s efforts to align all Sunni countries behind Saudi Arabia.  Erdogan now wants to convince the world that MBS is a ‘fake reformer’. He is trying to portray himself as ‘true reformer’ and worthy of leadership of Sunni world.  Thanks to rash foreign policy decisions of MBS, in a fractured Gulf Cooperation Council (GCC), Turkey has been able to build close relationship with Qatar and working quietly with others such as Kuwait to penetrate flank of Saudi Arabia.

American and Western interests include a steady flow of oil, Saudi market for its arms and consumer goods and Saudi Arabia acting as counter balance to increasing Iranian influence in the region.  American defense industries have many lucrative contracts with Saudi defense sectors.  Contrary to widespread belief, it was during Obama presidency that major arms deals were signed.  According to Congressional Research Service (CRS) figures, the proposed major defense sales to Saudi Arabia from year 2009 to 2016 were around $138 billion.  The contract with Saudi Arabian National Guard (SANG) alone is worth about $4 billion. Saudis have steadily increased investment in American financial sector and pumped $20 billion into a new investment fund managed by American Blackstone Group.

Britain’s economic interest in Saudi Arabia has become important in view of looming Brexit. British defense industries have a good share of Saudi market, but it is now looking for new markets for its service industries. During MBS visit to England in February 2018, an ambitious $90 billion target was set by both countries.  In addition, both countries signed a letter of intent of buying 48 Typhoon jets worth $ 7 billion.  France has sold to Saudi Arabia arms worth one billion Euros per year for the last decade.  French oil giant Total has signed a nine billion Euro petro-chemical deal with Saudi Arabia. Saudis have pledged $45 billion investment in the technology sector in Japan.

A cursory look at these numbers is enough to show that no country will be willing to sever these lucrative ties for the murder of a journalist. These crucial foreign policy and economic interests will trump all other consideration.  However, public opinion will have impact on policy towards Saudi Arabia.  After Khashoggi’s murder, European Union parliament voted 25-1 to ban all dual use surveillance systems that could be used to suppress local population.  Similarly, public anger forced change in U.S. Congress and many Republican law makers supported the bill rebuking MBS.  Using an old law, Senate also ordered a federal investigation that will force administration to report to Congress if MBS was involved in Khashoggi murder. However, domestic political and economic problems of Western European countries and United States will dominate news cycle of 2019 and Saudi Arabia will likely recede into the background.

Concerns about modus operandi of MBS will necessitate a two-pronged approach.  First, London and Washington will like to have some modification of behavior of MBS and later coming under harsh international criticism may decide to modify his approach.  The other piece of the puzzle is that if MBS faces a serious leadership challenge or unnatural death, then Washington wants a seat at the table of house of Saud to make sure that knives don’t come out and that new leadership is in line with their priorities.  Human and electronic and signal penetration in all major security establishments of Saudi Arabia in training, support and advisory capacity allows Washington to gauge the pulse of the Kingdom.

MBS missed some important sign posts in pursue of his policies.  Clash with Qatar cost him Arab public opinion as Al Jazeera beamed embarrassing reports about the kingdom to every Arab home. Arab public opinion about MBS is very negative.  Public demonstrations against MBS during his visit to Argentina and Tunisia were unprecedented.  Friction with Turkey resulted in Erdogan ambushing him. Public embrace of President Trump and close personal relationship with Trump’s son-in-law Jared Kushner entangled him into the toxic environment of American politics.  Saudi Arabia also misread many signals from Washington.  In 2016, Congress passed Justice Against Sponsors of Terrorism (JASTA) with bi-partisan support that could hold Saudi Arabia responsible for financial damages.  President Obama vetoed the bill, but Congress overturned Obama’s veto and it was the first time that Congress took this extraordinary measure during Obama’s presidency.  This should have got Saudi Arabia’s attention.  There are many more land mines of American legislative process in American-Saudi relations.

MBS needs an innovative approach to cover internal and external fronts.  First step is to get out of the news cycle as quickly as possible.  On domestic front, bringing estranged uncle Ahmad bin Abdul Aziz is a step in the right direction where he can mediate with royal family members and rally all members of al Saud around the wagons. He needs to mend fences with moderate clerics as well as youth.  Releasing popular clerics and especially females as well as allowing some outlets of expression will calm that front. This will give him some room to address real problem of his country and that is alarmingly rising unemployment of Saudi youth. To date, no one has questioned the legitimacy of al Saud family, but this cannot be taken fore granted.

On regional issues, cessation of air airstrikes in Yemen and signing on UN brokered peace negotiations will help in rehabilitation of public opinion.  Even a modest humanitarian aid package to starving Yemen population will also generate some good will.  Fast track negotiations with Qatar to end the blockade will ease regional pressure.

Saudi Arabia has strategic relations with Washington and while continued efforts are needed to work with the administration on critical issues, Saudi Arabia needs to keep a safe distance from Trump.  The last thing Saudi Arabia needs is to be dragged in domestic American political fight.   Democratic control of House of representatives in mid-term elections means that starting from January 2019, democrats will beat President Trump with Saudi Arabian cane.  There are already signs that Congress will not be kind to Saudi Arabia.  In March 2018, Senator Bernie Sanders vote in senate failed 55-44.  In November, administration was concerned enough that it sent Secretaries of State and Defence to brief senators.  However, senators were not impressed and in a bipartisan move approved a bill curtailing US cooperation with Saudi Arabia in Yemen.  Senators were also angry at the absence of CIA director Gina Haspel.  She finally met some senators and gave them a classified briefing.  Two senior Republican senators told reporters after the briefing that they had no doubt that MBS ordered the killing.  In November, Republican leadership of the house defeated the Saudi chastisement bill by 201-187.  Next year, results will be different.  In my view, from initial investigations, special counsel Robert Mueller has gathered enough material and I’ll be not surprised if he has opened investigation into Trump’s son-in-law Jared Kushner’s dealing with MBS.

  Lobbying efforts to curtail hostile attitude of legislatures on the hill may help limit the fall out but it will be an uphill battle.  Saudi Arabia does not have an effective ambassador and it relies mainly on influential United Arab Emirates (UAE) ambassador to Washington Yusuf al Utaiba who is doing most of the fire fighting.

MBS needs time for self-reflection; a rare commodity among rulers especially monarchs.  During their whole life they are surrounded by people who are there to fulfill wishes of the master.  Native and foreign advisors simply nod at royal wishes rather than challenge assumptions or give honest opinion if it is contrary to the master’s wishes.  He needs to mend fences inside as well as outside the kingdom. In the absence of it, he as well as his country will suffer.

“We must be clear sighted in beginning, for, as in their budding we discern not the danger, soon in their full growth we perceive not the remedy.”    Montaigne

Hamid Hussain

December 25, 2018

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Omar Ali

I am a physician interested in obesity and insulin resistance, and in particular in the genetics and epigenetics of obesity As a blogger, I am more interested in history, Islam, India, the ideology of Pakistan, and whatever catches my fancy. My opinions can change.

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5 years ago

I think Saudi Arabia is lacking seasoned political leadership at a time of great transition in the Middle East. The US is formally looking to reduce its deployment of active forces in the Middle East. The expectation is that some sort of a balance of power will emerge between Iran, Turkey, Saudi Arabia and Israel. This has been playing out for a few years now with the US drawdown of troops from Iraq. Trump has begun the exit from Syria, while also looking for a face saving way out of Afghanistan.

Of the four powers mentioned above, Saudi Arabia is the most dependent on the US, and is finding itself being pushed into an alignment with Israel. Something that does not sit well with the average Saudi citizen.

There are two core strengths of the Saudi monarchy/elite – oil resources which fund all programs and buy peace internally and abroad, and (B) its hold over the holy cities of Mecca and Medina. The adventures in Yemen, the confrontation with Qatar, the proxy wars in Iraq and Syria, are all bleeding Saudi coffers. This cannot continue indefinitely without the Saudi government having to back away from some of its domestic social programs. This will create unrest that MBS would rather not deal with. As custodians of Mecca and Medina, the Saudi monarchy was always aligned with Wahhabi orthodox elements. MBS’s actions such as allowing women to drive, encouraging their involvement in the public sphere, etc., is creating real tensions in Saudi society. If there is domestic unrest for economic reasons, the Wahhabi elements will join the unrest for entirely different reasons.

We may have passed “peak oil” despite the increase in demand from China and India. The US has emerged as a major supplier of oil and natural gas, and the automotive industry is in the throes of making a transition to electric power while the industrialized world as a whole is trying to reduce its carbon footprint. It is hard to see how Saudi Arabia can avoid a budgetary squeeze as oil prices stay down for the foreseeable future

The recent moves on the part of MBS (and Saudi Arabia) are tactical and not well thought through. Which leaves me very pessimistic about the prospects for a Saudi Arabia led by MBS.

Brown Pundits