Saudi Arabia: Where Money Is Expected To Buy Anything And Everything

One of the hardest things about being an analyst is figuring out what I don’t know. Former US Defense Secretary Donald Rumsfeld was made the butt of innumerable jokes when he told a press conference in 2002 that:


[T]here are known knowns; there are things we know we know.
We also know there are known unknowns; that is to say we know there are some things we do not know.
But there are also unknown unknowns – the ones we don’t know we don’t know.


He was actually presenting a very profound problem that people trying to comprehend our complex world find very daunting.


But what I would like to discuss is a simpler matter—I hope. What does it mean when people choose to stop thinking about a known matter—especially when that known matter has a profound impact on their lives?


Specifically, have you noticed that after a brief flurry of news reports about women protesting to be permitted to drive themselves, demonstrations by some Shiites, the sending of Saudi Arabian troops into Bahrain to put down the rebellion there, and the appointment of a new crown prince, that the Saudi governments’ activities have all but disappeared from the newspages?


If you look closely, this kind of coverage falls into a well-established pattern. News about Saudi Arabia almost invariably amounts to a rash of front page headlines—and then little more.


And yet, Saudi policies affect almost everyone on the planet—particularly our cost of living, the subject that led to the mass protests and food rioting in many parts of the world over the years.


And it’s not as though many of the things that the Saudis are doing haven’t been documented.


Part of the reason for the silence about Saudi Arabia has been the Saudi government’s very carefully planned policy of keeping peeping eyes away from the kingdom. But another no less important reason has been the media’s lack of interest in dealing in depth with the supposedly inscrutable Saudi leadership.


So what I would like to do is to try to help you to penetrate that screen and to introduce you to the mindset of the Saudi leadership.


In Egypt, the important thing to remember is that none of the political groups there has an agenda for action that is designed to solve the nation’s problems. And when I wrote about Syria, I emphasized the social, ethnic and religious divisions there. So, in the case of Saudi Arabia, the main thing to keep in mind is that everything that the government there does is directed at one thing: preserving and stabilizing the power of the House of Saud—even when that means destabilizing anyone and everyone else on earth.


At the heart of that strategy is a belief by the Saudi leadership that oil, and the money acquired from selling oil, can buy anything and anyone. One thing that money and oil certainly have bought is a very specific image of Saudi Arabia in the media.


Saudi Arabia is usually referred to in the media as being pro-Western. Nothing could be further from the truth. As I will show in just a moment, if anything, the Saudis are virulently anti-Western. The only thing that the Saudis are “pro” is “pro” the House of Saud. In all other areas that interest the Saudi government, it has adopted the most cynical anti-Western approach imaginable. Any relationship between Saudi values and Western values is purely coincidental.


The base of the House’s power lies in a pact agreed to in 1744 between a tribal chieftain in the centre of the Arabian Peninsula named Muhammed bin Saud, and Muhammed ibn Abd al-Wahhab, who had founded a particularly puritanical and extremely strict branch of Sunni Islam. In effect, Saud offered Abd al-Wahhab protection, while Abd al-Wahhab enabled the Saudi family to claim that its decisions are all being sanctioned by God. Being able to claim that God is on your side has always been a big political asset everywhere.


But as the years passed, the royal family’s fortunes ebbed and flowed. It was only in the wake of the First World War, with the destruction of the Ottoman Empire and the military defeat of the competing el Rashid tribe, that the House of Saud could make its final dash for absolute power.


The thing is that the royals since then have had good reason to be concerned about their hold on power. The kingdom could only be founded in 1932 after Abdul-Azziz Saud’s forces had destroyed an even more religiously-extremist Bedouin army called “the Ikhwan,” and massacred its leaders.


Even then, though, being a royal was not without its dangers.


Abdul Azziz’s son and successor, King Saud was deposed by his brother, Faisal.


And Faisal was assassinated by his nephew in 1975.


Faisal’s successor was his half-brother, King Khalid. And it was really he who succeeded in guiding his relatives to previously unheard of wealth in the wake of the 1976 oil shock.


But even with all its wealth, the Saudi royal family has nonetheless had to face many of the same problems that have beset all the other authoritarian Arab leaders. It is inherently a repressive, autocratic regime. For that reason, its security forces are basically divided into two groups—a small corps, the National Guard, that is personally loyal to the leaders; and the regular army, which is deliberately less well-trained so that it cannot launch a coup. In other words, the regular army is basically canon-fodder and a job placement service. It cannot really defend the country. For that, the Saudis have always relied on others.


This, by the way, is the same military structure that was present, for example in Libya and Syria.


So, it is therefore no wonder that in 1979, when King Khalid faced two great challenges—the revolution in Iran, and the takeover of the Grand Mosque in Mecca by mystic Moslem extremists—he had to call in his real military reserves. The immediate threat of an attack by Iran was resolved by relying on an American air umbrella.


The mosque, though, was only retaken after a siege of more than two weeks and the deaths of dozens of Saudi soldiers. When the Saudi soldiers failed to achieve their objective, the real guardians of the regime, the folks who eventually retook the mosque—a group of French commandos—were called in to do the job. Since non-Moslems are forbidden entry into the holy cities of Islam, the French soldiers were quickly and conveniently converted to Islam for the purpose. I don’t know for sure, but I assume, that they renounced their conversion as soon as they had left Saudi soil.


Parenthetically, I wonder whether that would make them subject to Saudi Arabia’s penalty for apostasy—the death sentence—if they ever returned to the country on a visit.


But that wasn’t the end of the threats to the Saudi regime. Beginning in the 1990s, the country became beset by a wave of home-grown terrorism—including the well-known attacks on the foreigners’ Khobar Towers compound in Riyadh—which has continued to this day.


As a result of that growth in Islamic terrorism, the Saudi system of governance was tweaked a bit, but not substantially altered.


These tiny tweaks are often, inaccurately, mislabeled as “liberal reforms” in the media.


One of the reasons for most peoples’ misunderstanding of the country, and one of the reasons why Saudi Arabia is so rarely discussed in real depth in the foreign media, is that its government’s decision-making processes are said to be so opaque. But it’s not so much that the decision-making process is opaque, it’s that the system of governance is so unfamiliar to most people that they have difficulty in comprehending it.


For example, everyone has been talking recently about the dictatorships and monarchies that run Arab states, but none of these countries has a name quite like the country whose capital is Riyadh. No one I know of has ever referred to Mubarak Egypt or Assad Syria. Even Jordan is called the Hashemite Kingdom of Jordan.


But I don’t know if you have ever thought about it, but the very fact that the oil-rich country is called the Kingdom of Saudi Arabia means that the entire country and everything in it is considered by its rulers to be the personal possession of the House of Saud.


So, before I go any further, here is a very brief outline of how the country is run


It is an absolute monarchy, and the constitution is declared to be the Koran.


In other words, the king is the supreme authority in all secular matters, but his decisions must be vetted first by the religious leadership to ensure that they are in keeping with Sharia law. That is the procedure that gives the decision the sanction of God.


The king is also the prime minister and the judge of last resort. And since there are neither elections nor a parliament, all laws are issued by royal decree only. To ensure that the king’s orders are carried out, most of the important positions in the civil service are held by the 7,000 princes, while the most senior positions, such as government ministerships and the regional governorships, are usually allotted to the two hundred or so direct male descendents of King Abdul Azziz.


The king personally hires and fires the ministers.


This system has led to the entrenchment of one of the most corrupt governments in the world. The Saudi princes have become fabulously wealthy, not because of whatever salary they may receive from the state, but because they can and do influence government loans to businesses and government purchases of goods and services. This has made bribery endemic throughout the kingdom.


There is a consultative assembly of tribal leaders, wealthy individuals and members of the royal family, known as the majlis a-shura; but all the members are appointed by the king and the body has no legislative power.


Decision-making, therefore, involves a long, drawn-out process. First, there is an attempt to create a consensus within the royal family. Then, the ideas are passed by the tribal sheiks and the wealthy urban businessmen, before finally being vetted by the ulema—the council of Islamic scholars.


In other words, any proposed decree is first approved by all the important power centres in the country before the public is even told.


Since the country has been beset by extremist Islamic terrorism, approval by the ulema has become crucial to maintaining the House of Saud’s legitimacy. And despite its reputation for being reactionary in the extreme, the ulema has shown itself to be extraordinarily flexible when its own interests are at stake. The agreement to bring in the French commandos is but one example.


The great test of the Wahhabi/Saud alliance in modern times came in 1990, when Iraq invaded Kuwait. The royal family was afraid that their country would become Saddam Hussein’s next target. They needed a protector and patron, and so, with the ulema’s approval, the king invited American forces into the country for the first time. This decision was met by very considerable opposition from the more extremist Islamic ranks, which were appalled by the idea that heretics, who hadn’t been converted, were being invited into the home of Mecca and Medina. But the ulema’s blessing also then enabled the royals to crack down on any and all dissidents


Despite the government’s actions, though, domestic terrorism continued to grow. In fact, the rise of local terrorism and the growth of al Qaeda can be traced to this one decision. So too can the decision in 2003 not to join the coalition that took part in the invasion of Iraq in the wake of 9/11.


In return for agreeing to the king’s desires, the ulema has been granted far-reaching powers—including the right to approve or veto the ascension of any member of the royal family as king.


Since all the potential candidates for the kingship invariably hold ministerial positions first, this gives the clerics an enormous capacity to influence day-to-day affairs in the kingdom. Maybe the ulema’s greatest influence can be seen in Saudi Arabia’s foreign relations, where almost all the foreign aid and much of the country’s diplomacy are directed at promoting the extremist, intolerant, Wahhabi form of Islam.


There are a lot of popular misconceptions about Saudi Arabia. Probably the most common one is that the country itself is wealthy. That is simply not true. Saudi Arabia’s per capita GDP is about 24,000 dollars—only about two-thirds of that of Israel. And the vast majority of the country’s wealth is concentrated in the hands of the royal family and its cronies.


Because of its almost total reliance on oil, the state has always been very vulnerable to alterations in world oil prices. For example, in 1980, after the oil shock, the Saudis were left with 180 billion dollars in financial assets. But then the price of oil began to fall, and by the end of 2002, because of their profligate spending, they had ended up being in debt to the tune of 176 billion dollars.


One of the primary reasons why Saudi Arabia has not developed a more broad-based economy is that it, like Syria, has had a largely rentier economy. That is, it has extracted natural resources from its soil, but the bulk of the money earned from oil has gone into consumption and investment abroad, rather than into investment in the country that would produce jobs for the Saudis themselves.


The second major problem is the education system, which focuses on rote learning, memorizing the Koran, and the study of how to apply Koranic teachings to modern life. Even in university, religion is a compulsory subject—and is based on a hate of unbelievers such as Jews, Christians, Hindus and non-Wahhabi Islamic sects. As an article in the Guardian newspaper puts it, the primary goal of the education system is “to maintain the rule of the absolute monarch by casting it as the ordained protector of the faith, and that Islam is at war with other faiths and cultures.”


This same curriculum, by the way is used in all the madrassas supported by the Saudis outside their country—such as those in Pakistan, which has led to the steep rise in religious extremism there.


Domestically, this means that Saudi university students usually lack the critical analytical skills needed to compete in a modern economy after they graduate.


Another reason is that the country, for religious and xenophobic reasons is basically inhospitable to foreign investment. Naturally, foreign companies that are involved in the petroleum business are welcome. So too are companies like Alcoa, which has set up a huge aluminum smelter to take advantage of the cheap fuel available.


But not only are these companies viewed by many as heretic-owned colonial enterprises, the legal framework they are expected to operate in is difficult for Westerners to even begin to comprehend or cope with.


I’m now talking about Sharia Law. When Westerners and even Arabs talk about Sharia Law, they tend to think only about how it oppresses women, and about some of the punishments such as stoning, beheading in the public square, public lashings and the amputation of hands of serial thieves.


But there is another aspect of Sharia law that I have never seen described in the press, but it has been one of the crucial lynchpins that have been use to maintain national stability and the clerical/royal family alliance.


In Sunni Islam, there are four schools of religious law. However, there is no code of law as such, such as the Torah or British common law. Therefore, no one can know in advance how a judge will decide a particular matter for which there is no tradition. This particularly affects things like modern commerce, where contracts, and the penalties for breaching the terms of a contract, are expected to be inviolable.


Even more confusingly, though, Islamic law is not bound by the idea of precedent. In other words, no judge is required to take into account the reasoning and the decision of any other judge when dealing with a similar case. And here is the kicker. Judges are not even bound by their own previous decisions.


So, naturally, people with influence try to get their cases tried before a judge whom they know or believe will be sympathetic to them. This then leaves the judges open to bribery, pressure and corruption—especially by the royal family.


In Saudi Arabia, the kings have promulgated decrees dealing with issues not covered under Sharia Law, but these are referred to as “regulations,” not “law” to indicate that they are subservient to any arguments that can be brought under Sharia Law.


As well, there are no jury trials. In many cases, those arrested are not even told which crimes they have been charged with. Most are not allowed to see a lawyer. Instead, they are often tortured until they confess. Most trials are held in secret, where the accused are presumed guilty until proven innocent. Many of those arrested can be held indefinitely without a trial—and their families are often not even informed about their incarceration.


A problem that is endemic to this judicial system is that the accused often cannot prove their innocence because they are not even allowed to cross-examine witnesses, present new evidence, or use a legal defence.


The death penalty can be imposed for crimes such as apostasy, sorcery and witchcraft. And public lashings can be imposed for crimes such as the failure to pray or neglecting to fast. When witnesses are allowed to testify, the word of one man is given the same weight as that of two women.


One of the major problems that the kingdom will face in the coming years is the same one that has affected all the Arab states—a growing youth bulge in a country with what is basically a static economy. And many of these young people come from the poorest socio-economic segments of the population.


This could cause the same kind of unrest that we have seen in Egypt and Tunisia—which the Saudis are doing everything they can to avoid. I’ll say more about that in a moment.


As I noted at the outset, conventional wisdom has it that Saudi Arabia is pro-Western, pro-American, and an American ally.


I would now like to spend most of the rest of my remarks challenging that thesis.


To begin with, the value systems in the West and in Saudi Arabia are totally different. I’ll give but two easy examples. We believe in equality of the sexes. In Saudi Arabia, women are not even allowed to leave home without the permission of a male guardian. We cherish freedom of religion and freedom from religion. In Saudi Arabia, there are about 25 million people. A fifth of them are foreigners. And about 1 million of those foreigners are Christians. But while those Christians are required to observe Ramadan, they are forbidden to celebrate Christmas and Easter—even in the privacy of their own homes. The last Catholic priest in the country was expelled in 1985 for having celebrated mass in a private home. Even celebrating St. Valentines day, through the areligious purchase of red roses or red plush animals is forbidden.


The Western nations have basically accepted this form of oppression in order to assure oil supplies—even when this acceptance undermines other Western interests.


As I have intimated up to now, the Saudi system of governance has evolved a peculiar, self-supporting triangular relationship between the Saudi royalty, the clergy and the rest of the world. The royal family relies on the clerics for power. The clerics, however, spread religious extremism. The West tolerates this spreading of extremism at the very time that it has launched a massive war on the terrorism that this religious preaching engenders—in order to preserve its access to Saudi oil. The Saudi family then uses these revenues from the oil it sells to support the clerics, who support the growth of terrorism against everyone except the House of Saud…and on and on.


You should also remember that 15 of the 19 hijackers during 9/11 were Saudis. Saudis make up the largest foreign contingent fighting with the Taliban and Saudis make up the second-largest group of prisoners being held in Guantanamo. Furthermore, as Hilary Clinton put it in 2009, “Saudi Arabia remains a critical support base for al Qaeda…and other terrorist groups…Donors in Saudi Arabia constitute the most significant source of funding for Sunni terrorist groups worldwide.”


But there are many areas other than religion, when Saudi policies are at odds with Western interests. Because of time restraints, I’ll deal with only two of them—the policies designed to deal with the armed threats to the House of Saud, and water.


I’ll start with water. Water is as important an issue in the Middle East as is oil. Everybody talks about the concept of “peak oil”—the point where fossil fuel production will no longer be able to keep up with demand. But almost no one mentions the idea of “peak water.” But that is precisely where Saudi Arabia is at today. As I have already noted, Saudi Arabia is suffering the same kind of growth in population and youth bulge that the other many other Arab states are going through. A big difference, though, is that the Saudis also use an average of 950 cubic metres of water a year per person—twice the world average, and three times as much as Israelis use.


But, and this is a big “but,” only 10 cm of rainwater falls on the country each year.


Just to give you some idea just how acute the water shortage is, despite having spent more than 20 billion dollars, or about 20 percent of Saudi oil revenues in the construction of a water infrastructure and the supply of water during the past decade, Riyadh still only gets drinking water once every two and a half days and Jeddah gets it only once every 9 days.


When I have discussed the economics of the region in other blog posts, I put a heavy emphasis on current account deficits—the difference between export earnings and import costs. Saudi Arabia also suffers from a deficit—a water account deficit. Some of the deficit is made up through desalination. But that doesn’t help many areas in the country’s interior—with the exception of Riyadh, which is fed by a 476 km-long pipeline that brings it desalinated water from the coast.


All told, Saudi water demand has increased by 500 percent in 25 years, and it is now expected to double again in the next 20 years. One of the major problems with desalination, is that not only it is a heavy polluter because it demands a lot of fuel, and thus creates climate change, the salt waste from desalinating has meant that parts of the Arabian Gulf are now 8 times saltier than normal, and this has affected marine life and fishing catches—an important source of protein.


The difference between what Saudi Arabia uses and what it gets in the form of rainfall or from desalination is covered by dipping into what is called “its fossil aquifer”—an underground reservoir that was laid down during the last ice age 15,000 years ago. As in Syria, any water that is taken out of that aquifer is literally irreplaceable.


Part of the problem is that agriculture uses up more than 85 percent of the country’s average annual water usage. As happened in Syria a couple of decades ago, the Saudis began planting huge areas with wheat—and had to use huge amounts of water from the fossil aquifer for irrigation. The idea was to provide food security. But this was hugely wasteful of an irreplaceable resource. So, in 2008, the government decided to phase out wheat growing and to end it by 2016.


But then new problems arose. The farmers began planting date palms and growing more forage for animals—both of which need more water than does wheat. Since date-growing and the raising of livestock have a strong pull on the Saudi national psyche, the government was hard-pressed to prevent this shift in agricultural production.


To make up for lost domestic wheat production, the Saudis began importing water in the form of crops grown elsewhere. Beginning a few years ago, the Saudis began following the initial example of the Chinese, Indians and South Koreans and started leasing huge tracts of land in Africa from corrupt governments for a pittance. In some cases it has paid little as 75 US cents per hectare. Crucially, that price has included the water rights to the property as well.


That has had a major impact on the region and the world. First of all, almost all the land that was leased is in Sudan and Ethiopia, which control the headwaters of the Nile. But Egypt too is now suffering from a peak water crisis and needs every drop of Nile water that it can get. Any water used upstream is no longer capable of being used downstream in Egypt. In other words, in their search for food security, the Saudis are not above weakening the poor Egyptians—their ostensible allies.


But that’s not all. A few figures should give you some idea of what is involved. The latest statistics indicate that Saudi businessmen, using Saudi government loans, have bought or leased 5,520,000 hectares of land in Sudan and Ethiopia. All these properties come with water rights. To give you some idea of what that means, in Israel the total amount of land under cultivation is only 300,000 hectares, and only 190,000 hectares of that is farmed with irrigation.


Not only that, the Saudis not only use the land to grow wheat, vegetables and cut flowers for sale in the Arabian Peninsula, they also use the land—and the water—to grow a lot of rice. And while it takes 1400 litres of water to produce 1 kilo of wheat, it takes 3,400 litres –two and a half times that amount to produce an equivalent amount of rice. The Saudis now say that they intend to grow 7 million tons of rice over the next 7 years. That means that they will be effectively imported 2 quintillion, 380 quadrillion litres of water from growing rice alone.


But that’s not all. In order to give the Saudis that land, the governments in Africa had to declare the properties as “state lands”—even though they had been in the hands of the same families for generations. This has turned hundreds of thousands of people, especially the pastoralists, into serfs—a sure recipe for eventual social unrest in a strategic part of the world where rebellion is already endemic.


And to top it all off, the terms of the leases permit the Saudis to repatriate 75 percent of all the produce. So, in 2011, after a devastating drought in the region, because the food the Saudis grew was being exported instead of being consumed locally, Western taxpayers had to send relief supplies to the affected region through the UN World Food Program in order to prevent famine. Nonetheless tens of thousands of people are still estimated to have died from hunger.


It’s a nice deal if you can get it, isn’t it?


But now let’s get on to how the regime gets everybody else, including you and I, to pay for protecting the House of Saud.


As the Saudi regime perceives things, The House of Saud faces only two real security threats—from Iran and from its own people.


The Saudis got a real scare when the so-called “Arab Spring” broke out. To counter the threat, the government launched a huge crackdown on the Saudi Shiites, who happen to be concentrated in the area that also contains the largest, most productive oil fields. Fortunately for the government, it is also the area that is also the least inhabited by foreign journalists; and so the brutal techniques used to suppress the Shiites went largely unreported.


As well, as part of its quest to damp down unrest, the government decided to buy off the most restive parts of the population by increasing the budget by 130 billion dollars over 5 years. This meant, among other things, flooding the civil service with incompetents who couldn’t otherwise get jobs in the private sector.


The Saudis also gave 4 billion dollars to Egypt, 400 million dollars to Jordan; and promised Bahrain 10 billion dollars over 10 years. That meant, though, that the Saudis needed oil to be priced at 85 dollars a barrel, instead of 63 dollars as had previously been the case. The Saudis did have the option to increase production in order to bring the price of oil down and still maintain the country’s revenue flow. But even though its production capacity is about 12.5 million barrels of oil a day, it has still been pumping only 9.8 million barrels. So it needs high oil prices to pay for its expenditures—which affects everyone.


And as a signal of future intent, it announced that its plans to increase production capacity from 12.5 million barrels a day to 15 million barrels, were being cancelled—even though domestic oil consumption in the next few years is expected to exceed the amount exported. In other words, as time passes, there will be less and less Saudi oil available on world markets to halt the rise in oil prices—one of the main reasons why Western countries have always been so quiescent about the human rights violations in the Arabian Peninsula.


So, in effect, as I said, we are now all being taxed to help the Saudi regime try to prevent domestic unrest. And the irony is that while the Saudis depend on high oil prices, that also makes their own food production more expensive. And so that is another reason for the move to Africa. Once the subsistence farmers in Africa have been turned into serfs, their pay is only a dollar a day—so that makes the Saudi factory farms particularly profitable, while other farmers, elsewhere  in the world, struggle to pay their fuel and fertilizer bills.


This decision not to expand production appears to be a long-term policy to maximize profits even if this weakens Western economies. As I mentioned and cannot emphasize enough, one of the reasons for the Saudi’s clout in the West has not only been its huge oil reserves, but its production reserves. In other words, the West has been under the belief that when the crunch comes, the Saudis will dump more oil on international markets in order to keep prices from getting totally out of hand and causing a world depression.


The Saudi’s decision not to increase its production reserves should undermine those fundamental Western assumptions, especially because the Saudis own use of oil is rising at a dramatic pace. Gasoline in Riyadh costs only about 60 US cents a gallon. There is therefore no incentive in Saudi Arabia to save energy, and so much of it is wasted. But gasoline usage is not the only problem. The Saudis are using increasingly prodigious amounts of oil to desalinate water and 1.2 million barrels of oil a day to provide electricity for, among other things the massive increase in the use of air conditioners.


And that is why, despite the recession in the West, oil continues to be expensive. Expensive oil means not just higher gasoline prices, but also higher costs to everyone for everything from food to electricity—in effect another consumption tax on consumers everywhere in the world.


Again, that is a super deal if you can get it. But, again, that’s not all.


We know from Wikileaks, that the Saudis told the United States to “cut off the head of the snake” in Iran. You should note that the Saudis used the word “you” not “we.” That is because the most effective sanction that could be imposed on the Iranians would be to cut the price of oil. Iran used to base its budget on oil at 115 dollars a barrel. But in 2011 it acted drastically and cut all sorts of subsidies in order to create a budget based on oil at 83 dollars per barrel—less than what the Saudis now need. Anything above 83 dollars automatically provides additional funding for Iran’s nuclear efforts.


Why hasn’t there been an outcry from those Western governments who are now fighting the possibility of another recession, but whom the Saudis expect to take on Iran for them? The answer is simple, but based on a clever premise. The Saudis, as before, when there have been high oil prices, are in the midst of buying 70 billion dollars worth of arms—60 billion from the US alone. Arms purchases provide not only profits to Western companies that operate strong lobbies with their governments, they provide something that Western politicians value even more during a time of economic crisis—jobs, especially at a time when unemployment is high and the Western countries are cutting back on their own arms purchases.


Nonetheless, the Saudis decision to emphasize immediate issues instead of long-term planning is having an effect. Relations between Riyadh and Washington are at a low ebb because of the American’s support for the democracy movement in the Arab states, while the Saudis are trying to build and strengthen a federation of Arab monarchies. This tension may very well increase if the revolutionary movement in the Arab world spreads.


But there are other factors also coming into play. While the Saudi’s budget needs are growing quite dramatically, at about 10 percent per year, the world economic crisis, which the Saudis have fostered because of their oil policies, is, ironically, putting an effective lid on an increase in oil prices.


The problem the Saudis face look basically like this: The Jadwa Bank in Riyadh now estimates that if the Saudi budget keeps growing as it has, the Saudis will need oil at 320 dollars a barrel by 2030.


But, new production capacity, especially in Libya and Iraq, will soon be coming on line. And the legal problems I already mentioned, and the high cost of Middle Eastern oil, are driving Western oil companies to focus their oil searches elsewhere. New discoveries have already been made off the coast of Angola and Brazil. And the oil companies have has major technical successes in extracting oil more efficiently from American shale deposits and the Canadian tar sands. Both these sources will soon be adding billions more barrels of oil and natural gas to the world’s energy reserves.


This shift to other oil production centres cannot but have an effect. Domestically, while 2.2 million jobs were created in Saudi Arabia between 2005 and 2009, only 9 percent went to Saudi citizens—despite the rapid growth in population and the need to create jobs for Saudi youngsters. And the Saudis refusal to countenance a rise in oil production and a drop in oil prices, has prevented those countries that fear Iran’s nuclear programme from delivering a short, sharp blow to the Iranian economy that might lead to greater domestic unrest and the possibility of an overthrow of the mullahs there. A Saudi attempt to drive down the price of oil would undoubtedly be painful in the short term, but it is the most effective tool available against Iran. But the Saudis are unwilling to take on that burden.


All these issues are compounded by a uniquely Saudi problem. Up to now, the succession to the monarchy has been based on transferring rule in the country, not to the sons of the recently dead ruler, but to one of his brothers or half-brothers, according to their age. And while Abdul Azziz sired at least 30 children by multiple wives, the remaining children are now quite old.


Therefore, one of the most urgent matters facing the House of Saud now is how will the future kings be chosen.


One of the ways the family was able to preserve unity was by alternating the kingship between the different clans within the royal family—in other words, between the children of the different wives that Abdul Azziz had. But now, as the need to chose a king from the third generation of Abdul Azziz’s progeny approaches, this system can no longer work.


Unless an agreed new system can be decided upon, divisions and competition within the royal family may increase. And that could lead to the thing the royal family has always feared most—instability within the family itself. In other words, even with all their oil wealth, there may not be enough money available in the future to pay off all those princes seeking power. And if there isn’t enough money to satisfy them, there certainly won’t be enough money available to satisfy the aspirations of the masses.


Reform in Saudi Arabia has always moved at a glacial pace. But the window available for launching true reforms is now closing. Protest within the country has so far been limited by the ulema’s fatwah that any rebellion against the government is a breach of Sharia law and is forbidden by God. But without reform, the Saudi royal family may have to face revolts from too many quarters for it to cope with—from disgruntled members of the royal family, from ordinary Saudis wanting real jobs, from Islamic extremists, from the Africans who have become neo-colonial serfs, and maybe even from Western oil consumers who are now finding alternate sources of fossil fuel energy.


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