Saturday, July 17, 2010

Watch out for Saudi Arabia!

Two recent articles discuss the situation in the Saudi monarchy. One says the situation is bad, the other says the situation is much worse than that. A Forbes magazine commentary recently painted the following bleak picture of Saudi Arabia:
Turki bin Abdul Aziz Al Saud, a prominent dissident now in exile in Cairo, issued an open letter to his fellow royals, urging them to abandon their desert fiefdom for greener pastures. According to the prince, the current social compact between the House of Saud and its subjects had become untenable, with the government no longer able to "impose" its writ on the people and growing grassroots discontent at the royals "interfering in people's private life and restricting their liberties." His advice? That King Abdullah and his coterie flee the Kingdom before they are overthrown--and before their opponents "cut off our heads in streets."
Grassroots prosperity, meanwhile, has headed in the other direction. Since the oil boom of the 1970s, per capita income in Saudi Arabia has constricted precipitously, falling from $28,000 in the early 1980s to below $7,000 in
2001. In other words, average Saudis have experienced a devastating reversal of economic fortune, even as the royal cohort that rules over them has become more numerous, indulgent and bloated.
In contrast a recent Economist article, When kings and princes grow old,  about the Saudi succession, studiously and apparently deliberately ignores Turki Bin Abdul Aziz Al Saud's warning  entirely and paints the following fairly rosy picture:
... Its $420 billion economy faces little risk of losing its place as the biggest in the Middle East, given steady oil reserves and production, around $150 billion in annual energy exports and a strengthening world oil market. The country's net foreign reserves still nearly equal its GDP. Economists expect growth to accelerate slowly from around 4% this year, ensuring steadily rising living standards.
These are seemingly impressive figures. Indeed, the Saudi economy is expected to grow 3.8% in 2010, but that is evidently in nominal terms. Since there is inflation of 5%, the economy is actually shrinking as the population grows.
By any measure, the Saudi GDP is not the largest in the Middle East, as the Economist states. Following are some CIA estimates prices for 2009:
Iran:         Real GDP: $876 bil. Exchange Rate GDP: $336 bil. Real Growth:  2.6%
Turkey        Real GDP: $863 bil. Exchange Rate GDP: $608 bil. Real Growth: -5.6%:
Saudi Arabia: Real GDP: $586 bil. Exchange Rate GDP: $384 bil. Real Growth:  0.2%
Israel:       Real GDP: $207 bil. Exchange Rate GDP: $196 bil. Real Growth:  0.5%
Qatar:        Real GDP: $101 bil. Exchange Rate GDP:  $94 bil. Real Growth   9.5%
Turkey has a larger economy than Saudi Arabia any way it is measured. Iran has a larger economy in terms of purchasing power. In terms of real per capita GDP, Qatar, with $121,700, is second in the world. Saudi Arabia with a GDP of about $20,000 is ranked 60, but Israel, with only  7.5 billion people, and (until 2010) no developed energy resources, has a GDP of over $200 billion and a per capita real GDP of about $28,400 and is ranked 48 in the world. There are no data on the distribution of wealth in Saudi Arabia. That is probably the most problematic and threatening aspect of Saudi economics. There is evidently a very large income differential between the royal family and the poorest classes (see also this NYT article from 2008).   
It may be true, as the Economist notes, that Saudi Arabia sent 200,000 students to study abroad. But that is perhaps because of the highly unsatisfactory state of Saudi universities. Only 85% of males and 70% of females over the age of 15 are literate according to the CIA estimate.  
The Economist article does caution that the succession is uncertain, but it claims:

Most Saudis expect that their ruling family will, as it usually has, reach quiet consensus on whom to crown, assuming that King Abdullah and Prince Sultan depart in reasonably short order. Aside from the 1992 royal decree tipping the "best qualified" prince to rule (a term that in Arabic can mean either the most virtuous or the most capable), there are some established guidelines. Traditions of Muslim kingship suggest that the line should pass through brothers of one generation in order of age, before descending to the next.

Yet with their unique political system looking increasingly anomalous in the modern world, Saudis are beginning to worry about what might follow if the al-Sauds fail to agree...

Neither analysis mentions some other ominous factors. The specter of Shi'ite Iran has frightened the Saudis, not least because of a restive Shi'ite minority in south-east Saudi Arabia, where its oil reserves are concentrated. Not only Shi'ites threaten Saudi stability. From the first, it seems that the main goal of Al-Qaeda and Osama bin Laden may have been to overthrow and supplant the Saudi monarchy. Bin Laden's 1996 Fatwa was significantly entitled "Declaration of War against the Americans Occupying the Land of the Two Holy Places". In it he writes, among other things,

They stood up tall to defend the religion; at the time when the government misled the prominent scholars and tricked them into issuing Fatwas (that have no basis neither in the book of Allah, nor in the Sunnah of His prophet (Allah's Blessings and Salutations may be on him)) of opening the land of the two Holy Places for the Christian armies...

Both analyses agree that there are problems and signs of increasing instability in Saudi Arabia,. This cannot be good news for the United States, because Saudi Arabia is its prime ally in the Gulf region, and the Americans count on Saudi backing in the war in Afghanistan and in Iraq, though they don't always get such backing.

Someone in the U.S. should be devoting much more time to considering the problem of Saudi Arabia. After there is an Iranian-style revolution there, and U.S. admistration officials will again be "surprised" as they were by the Iranian revolution, it will be much too late.

Ami Isseroff

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