Analysis: House Of Saud A House Of Cards?

To paraphrase the great American author and humorist Mark Twain, reports of the House of Saud’s death have been greatly exaggerated. Saudi Arabia has survived several bouts of insecurity in the past. These include the occupation of the Grand Mosque in Mecca in 1979, being tarred ‘liberal apostates’ by the Sahwa in the 1990s, and the al-Qaeda threat in the early 2000s.

But the Saudi royal family appears to have painted themselves into a relatively tight corner this time around, with ISIS posing a greater threat to the Kingdom in an already unstable Middle East. There is growing pressure on the House of Saud’s two traditional pillars of legitimacy — religious authority and prosperity. At the same time, recent actions by the Saudi leadership have put the unity of the House of Saud into question.

Since his accession to the throne in January 2015, King Salman has consolidated the power of the so-called Sudairi Seven, the clan of seven full brothers of the Kingdom’s founder, by naming his nephew Mohammad bin Nayef the crown prince and his 30-year old son Muhammad bin Salman the deputy crown prince. King Abdullah and previous kings had distributed power more widely among the numerous branches of the royal family.

As in the past, the primary internal threat to the Saudi regime is its more conservative and devout Wahhabi Sunni subjects, rather than discriminated against Shiites in the Eastern Province, where most of the Kingdom’s oil is produced, or so-called Liberals who want more representative government.

In an attempt to thwart the jihadist threat, King Salman is catering to the Wahhabi clerical establishment. To do so, he has taken a number of actions including appointing three members of the al-Sheikh clan, the country’s leading religious family, into his cabinet. King Salman is also ramping up rhetoric and actions against Shiites in the Kingdom, Iran and elsewhere. Wahhabi Sunnis consider their Shiite co-religionists as heretics.

Saudi Arabia’s recent military adventures in Yemen and Syria are directed against Shiite sects in those countries. Although internal repression has increased substantially in all of Saudi Arabia under King Salman’s reign, Shiites in the Eastern Province have been especially hard hit. For example, the prominent Shiite cleric, Nimr al-Nimr, was one of 47 ‘terrorists’ put to death on Jan. 2 of this year.

The Wahhabi clerical establishment has provided the House of Saud and its predecessors moral legitimacy to rule in parts or all of Saudi Arabia since the late 1700s. However, the pact has been breaking down with the export of the Wahhabi ideology since the Kingdom came into immense oil wealth in the 1970s.

The Wahhabi ideology has morphed Frankenstein-like over time, with Salafists calling for the overthrow of the Saudi royal family. This has contributed to increased terrorist activity in the Kingdom and unprecedented domestic criticism of the House of Saud — mostly through social media outlets — for being corrupt and not sufficiently pious.

Making matters worse, ISIS can achieve the persecution of Shiites much more efficiently than the House of Saud. ISIS has been much more successful at defeating Shiite-backed forces in Syria (and Iraq), and through terrorist bombings can kill Shiites with near impunity in the Eastern Province.

In contrast, the House of Saud is constrained in its foreign wars by its allies and international law, while Shiites in the oil-producing region are still its subjects, albeit heavily discriminated against ones.

At the same time, the prosperity of Saudi Arabia is under threat. The Kingdom is heavily dependent on oil revenues for budgetary purposes and foreign exchange. But the global campaign against carbon emissions on the consumption side, and the U.S. light, tight oil revolution on the supply side are both likely to constrain oil revenues in the future. On the demographic front, the youthful Saudi population is rapidly on the rise.

This dire situation has contributed to the Kingdom embracing an ambitious new economic reform program known as Saudi Vision 2030. The goal is to bolster the private sector to increase employment and decrease reliance on oil revenue and financial subsidies to its subjects.

Foreign direct investment is key to the success of the reform program, as the Kingdom’s financial reserves are rapidly declining in the face of relatively low oil prices. To attract the required FDI — McKinsey and Company has estimated the total cost of the plan at US$4 trillion — political stability is a prerequisite.

The importance of Saudi Arabia to the global oil market cannot be overestimated. The Kingdom produced 12 million barrels per day of oil (including natural gas liquids) in 2015, or 13.1 per cent of global oil production. For the sake of comparison, in 1977, before Iranian output began to be disrupted by revolutionary-related events, its 5.7 million barrels per day accounted for 9.1 per cent of the world total.

Vincent Lauerman is president of Geopolitics Central, a Calgary-based consultancy.