Saudi Crown Prince Mohammed bin Salman

GIS Dossier: Saudi Arabia’s transforming role

  • Saudi Arabia has become more active in the region to counter Iran’s rise
  • At home it is conducting social and economic reforms
  • It is also creating new alliances, particularly with Russia
  • All these changes could bring about domestic instability

GIS Dossiers aim to give our subscribers a quick overview of key topics, regions or conflicts based on a selection of our experts’ reports since 2011. This survey reviews Saudi Arabia’s attempts to adjust to rapidly changing geopolitical circumstances in the Middle East.

Saudi Arabia has quickly expanded its role on the global stage over the past half-decade. Previously, it mainly wielded influence as the biggest supplier of oil to world markets, and as the leader of the Organization of the Petroleum Exporting Countries (OPEC).

Two major events forced Riyadh to reevaluate its strategy: the oil-price drop of 2014 and the Iran nuclear deal of 2015. Suddenly, its state finances were put under pressure, while its main rival began to throw its weight around. Saudi Arabia had to change tack.

By June 2016, GIS expert Charles Millon wrote that Saudi Arabia had “reentered the premier league of global geopolitics,” exerting its influence throughout the region from Egypt (mainly through huge investments) to Bahrain (aiding a government crackdown there).

However, its most prominent show of force, he wrote, has been in Yemen, where it is leading a coalition of Sunni states against the Houthi rebels.

Yemen: preventing encirclement

In August of 2016, GIS expert Dr. Samir Nassif noted that the two emerging contenders for Middle East leadership were Turkey and Iran, and Tehran’s rise was “giving Saudi Arabia and the Gulf states jitters.” At a time when the administration of then-U.S. President Barack Obama seemed to be warming to Iran, Saudi Arabia’s rival also held significant sway in Lebanon, Syria and Iraq. If it managed to gain a foothold in Yemen – where it is allied with the Houthis – it would succeed in its goal of creating a “Shia crescent,” effectively encircling Saudi Arabia. For that reason, “Riyadh considers maintaining a pro-Saudi government in Sana’a as crucial to its very existence,” wrote Dr. Nassif.

Yemen is the perfect chessboard for the Muslim version of the Thirty Years’ War that is now taking place

In 2015, Mr. Millon warned that the regional powers were playing with fire by getting involved in the Yemen conflict. “It is the perfect chessboard for the Muslim version of the Thirty Years’ War that is now taking place, in which each regional power moves its pawns into supposedly weaker neighbors.”

Indeed, the war there has dragged on, draining Saudi resources, while cracks in the coalition are beginning to materialize. However, “the ultimate aim of defeating the Houthis and Iran in Yemen will trump any other considerations and will glue the coalition together” in the short term, wrote an anonymous GIS expert in June 2018.

Syria: unexpected partnerships

In war-ravaged Syria, the regime of Bashar al-Assad is aligned with Iran and is therefore opposed by Saudi Arabia. Though this has put Riyadh on the losing side of Syria’s civil war, it has also made somewhat strange bedfellows of Saudi Arabia and Turkey, both of which are “hoping to move their pawns forward” in Syria, wrote Mr. Millon.

The desire to oust President Assad has also led to an increasing convergence in policy between Saudi Arabia and Israel. Both countries want the same thing: an Iranian withdrawal from Syria, or at least to an exclusion zone near the Golan Heights, as Dr. Nassif noted in October 2017.

This alliance has been brought closer by worry over Hezbollah’s influence in Lebanon, which even led Riyadh to hold Lebanese Prime Minister Saad al-Hariri hostage and force him to resign – a decision which Mr. Hariri later “suspended” after returning to Beirut. Hezbollah has actively fought on the side of President Assad in Syria.

A militant and an armed Hezbollah jeep in western Syria
A Hezbollah militant monitors an area in western Syria. The Iranian-backed group supports the Assad government, while Saudi Arabia wants regime change (source: dpa)

If Saudi Arabia and other countries had not initially insisted on the ouster of President Assad as a precondition for peace talks, a solution to the war in Syria might have been found much earlier, wrote GIS founder Prince Michael of Liechtenstein in December 2017. Now, “President Assad will have to pay his debt to Hezbollah by facilitating Iran’s efforts to arm Hezbollah in Lebanon. … All this means that, unfortunately, the Syrian war is now likely to spill over into that country,” he concluded.

Qatar: adding to the quagmire

In June 2017, Saudi Arabia, along with the United Arab Emirates, Bahrain and Egypt, imposed a blockade against Qatar, a fellow member of the Gulf Cooperation Council. At the heart of the conflict is Qatar’s support of the Muslim Brotherhood – considered a terrorist organization by the above-mentioned countries – and accusations that Doha also aids Hezbollah. The tensions had been simmering for some time, and according to GIS expert Ambassador Zvi Mazel, had finally reached boiling point.

He posited that Saudi Arabia and its allies had taken such harsh measures at the time because they had been reassured by U.S. President Donald Trump of his administration’s full support. “Bringing Qatar to heel would help present a unified front against Iran and terror organizations, and ensure American backing in the event of an armed conflict,” Ambassador Mazel added.

Qatar had already been cozying up to Iran, which came to Doha’s aid as soon as the embargo was announced. In a June 2017 comment, Prince Michael said that the feud added to the quagmire in the Middle East, “exacerbat[ing] the conflict between Saudi Arabia and Iran, which already has added to the carnage in Syria and triggered a proxy war in Yemen.”

Sunni monarchies forcing a Sunni ruler to abdicate is risky

It also put Washington in a difficult position, since on the one hand it wants to support its ally Saudi Arabia, but on the other operates a crucial military base in Qatar, Prince Michael pointed out. Riyadh, he warned, may be playing with fire. “If Riyadh’s goal is to force a regime change in Qatar … the Saudis are in danger of setting a precedent for all Qatar’s neighbors, themselves included. Sunni monarchies forcing a Sunni ruler to abdicate is a risky game.”

Closer to Russia

In 2016, GIS expert Bernard Siman examined the strange affinities between Moscow and Riyadh. He pointed out that the two issues central to Russia’s relations with Saudi Arabia are energy markets and Syria. On the former, the two could come to an agreement rather easily; on the latter, the two sides were diametrically opposed: Moscow favored the government of Bashir al-Assad while Riyadh wanted the regime deposed. However, Washington’s strategic disengagement from the region at the time left both sides looking for ways to cooperate with the other.

In June, Mr. Siman explained how the Saudi-Russia partnership was taking shape. Riyadh had lost faith in Washington and had decided to play the “regionalist game,” he wrote. “Contacts between Saudi Arabia and Russia intensified during the summer of 2015, with Riyadh focused on persuading Moscow to coordinate crude oil production levels – essentially an attempt to create a Russo-Saudi oil alliance as a step toward cooperation between OPEC and non-OPEC producers.”

The gambit worked, and after OPEC and Russia cut production (Saudi Arabia bore the brunt of the cuts), oil prices began to rise. It also led to closer cooperation between Riyadh and Moscow on Syria.

Saudi Crown Prince Mohammed bin Salman visited Russian President Vladimir Putin in June 2018
Riyadh and Moscow have drawn closer in recent years. Here, Russian President Vladimir Putin (L) and Saudi Crown Prince bin Salman pose for a photo in 2018 (source: dpa)

“Prince Mohammed’s multiple visits to Moscow last year have led to an understanding on Syria,” wrote Mr. Siman. “Saudi Arabia will move toward Russia on allowing Mr. Assad to head up a transitional government, while Moscow will not insist that he remain in power once Syria stabilizes.”

According to GIS expert Dr. Carole Nakhle, the alliance has a solid foundation and is likely to live on.

Cooperation with Iraq

Saudi Arabia is also working to thwart Iran’s Shia crescent plans in Iraq, previously considered irrevocably under Tehran’s influence. However, the Shia-dominated government in Baghdad found a willing partner to support its vision for a constitutional, rather than theocratic, model of governance in Riyadh, noted Mr. Siman in November 2017.

He pointed out that both influential Shia cleric Muqtada al-Sadr and Iraqi Prime Minister Haider al-Abadi had visited Riyadh in the summer of 2017. “By regional standards, the results have been spectacular. The Iraqi federal government – supposedly Shia-dominated and Iran-influenced – is cooperating on a wide range of political, security and economic issues,” with Saudi Arabia, he wrote.

Iraqi cooperation with Saudi Arabia is ‘a flagrant challenge to Iran’s regional position’

Iraqi cooperation with Saudi Arabia is “a flagrant challenge to Iran’s regional position,” he added. Prime Minister Abadi, with support from Shia leaders like Mr. Sadr and from Riyadh, could take the logical next step and challenge the Iranian-trained and -sponsored militias operating in Iraq. “This would be intolerable to Tehran, which is already fighting on multiple fronts in Yemen and Syria, and may soon be drawn into renewed fighting between Hezbollah and Israel in Lebanon and possibly along the Israeli-Syrian border.”

According to Dr. Nassif, the Saudis again felt encouraged to take this belligerent stance by the supportive attitude of the Trump administration.

Economic overhaul

Saudi Arabia’s new foreign policy has been accompanied by a reform drive at home. After the precipitous drop in oil prices from mid-2014 to early 2016, Riyadh made the decision that it would have to diversify its economy. In April 2016, it published a long-term reform plan dubbed “Vision 2030,” which offered a road map for the kingdom’s economic and social policies.

It calls for balancing the budget, creating jobs, reducing subsidies, diversifying the economy and developing the private sector. In all, the document enumerates a total of 543 reforms with a price tag of $78 billion. In June 2016, Dr. Nakhle called the goals it espoused “probably the most sweeping of any attempted in the Middle East or by an oil-producing developing country.”

Saudi budget revenue: oil vs. non-oil
As oil revenue fell, Riyadh had to rethink its economic policies. The “Vision 2030” plan aims to diversify the country’s economy away from fossil fuels (source: macpixxel for GIS)

While Riyadh had given lip service to such aims before, there are a few factors that indicate this time it is serious, wrote Dr. Nakhle. First, concerns about climate change mean that there is a clear, long-term global trend toward phasing out fossil fuels. Second, and more urgently, Saudi Arabia’s working-age population is growing rapidly. These new entrants to the workforce need jobs – and the oil sector cannot provide all of them. But to develop the private sector, Saudi Arabia will have to improve its regulatory environment, she pointed out.

In July 2018, Ambassador Mazel went as far as to say the Vision 2030 plan was part of a “revolution from above” that the country’s royals – especially newly designated Crown Prince Mohammed bin Salman, frequently referred to as MbS – were implementing. Ambassador Mazel saw several challenges, most importantly, “[g]etting the socially frozen, religiously fundamentalist kingdom to adapt to modern market economy rules and globalization.” Saudi Arabia is not prepared to deal with such challenges, and typically answers disobedience with force, he wrote. This would frighten investors away and stunt the transformation.

Oil competition with the U.S.

Some of Saudi Arabia’s financial problems are a result of its competition with the U.S., which has become the world’s leading producer of oil, fueled by the shale boom. In February 2018, the first supertanker laden with crude oil from America’s Gulf Coast set out for Asia, marking a new era of competition between the two allies for oil markets – at least that is how many media outlets described the development. However, wrote Dr. Nakhle in March 2018, of all the oil exporters to Asia, those from the Middle East should be the least concerned.

There are several reasons for this. First, the oil coming from U.S. shale producers is typically of the light (low density) and sweet (low sulfur content) variety. This means U.S. oil exports are in direct competition with the varieties produced in West Africa and Libya, not Saudi Arabia. Also, there are more attractive export destinations for U.S. oil, especially Latin America and Western Europe.

Social changes

Saudi Arabia’s economic changes are coming alongside social reforms, Ambassador Mazel pointed out. Crown Prince bin Salman has focused on reducing the prerogatives of Islamic institutions (Friday sermons for the mosques are now written in a government ministry) and further easing the traditional corset of restrictions on Saudi women. The latest reforms allow them to drive cars, as well as attend open-air concerts, sports events and cinemas.

MbS also has intensified the country’s anti-corruption drive. In a stunning crackdown, 381 of Saudi Arabia’s wealthiest men were jailed in January 2018. Most of the suspects, who were accused of using bribes and defrauding the state, were detained until they paid vast fines – the total sum reportedly reached $100 billion.

The present regime would ultimately have to adapt to parliamentary government and the division of powers

Together, according to Ambassador Mazel, a more private sector-driven economy and more modern social structure will necessitate political change. “In a modern Saudi Arabia with an expanding private sector, the present tribal and patriarchal regime would have to adapt to the appearance of political parties, civil society organizations and, ultimately, parliamentary government and the division of powers,” he wrote. “That would mean a constitutional monarchy.” Ultimately, he concluded, the many external challenges Riyadh is facing could slow down the implementation of these changes.

Power struggle

GIS expert Dr. Udo Steinbach also pointed to the sweeping social changes, especially the corruption crackdown, as a signal that “the most far-reaching overhaul of the state, economy and society since the kingdom was founded in 1932,” was under way – and that a power struggle was brewing within the royal family.

After the death of his half brother, King Abdullah, in 2015, Salman bin Abdulaziz took over the Saudi throne. Soon thereafter, he shook up the line of succession, sweeping aside his younger brother Muqrin and replacing him with his nephew, Interior Minister Muhammad bin Nayef. King Salman’s son, Mohammed bin Salman, was made deputy crown prince.

Former Crown Prince Muhammad bin Nayef speaks with current Crown Prince Mohammed bin Salman
In an unprecedented shake-up in the line of succession, Muhammad bin Nayef (R) was ousted as heir to the Saudi throne in 2017, and replaced by the king’s son, Mohammed bin Salman (L) (source: dpa)

Even then, however, it was clear that MbS would wield significant power. He was made defense minister and president of the Council of Economic Development Affairs. In 2017, Muhammad bin Nayef was ousted as heir, and replaced by the 32-year-old MbS, who became crown prince without a deputy. This officially made him the second-most powerful man in the country.

But King Salman and his son have so far failed to thwart Tehran’s quest to become the dominant regional power. On the domestic front, they have been forced to implement modernization initiatives, but these have been met with great resistance from the religious establishment. Whether MbS can take on the role of Islamic reformer “has fundamental implications for the country’s political stability,” since Wahhabi clerics have buttressed the Saud dynasty’s rule, wrote Dr. Steinbach.

Domestic instability

MbS’s reforms are so disruptive that in his 2018 Global Outlook for the Middle East, Mr. Siman named “domestic instability” in Saudi Arabia as one of the four biggest dangers in the region.

The reforms initiated by Saudi Crown Prince Mohammed bin Salman have targeted the three pillars of traditional Saudi stability: the religious establishment, the merchant class and the cohesion of the royal family. To attack one would be perceived as destabilizing; to attack all three will have potentially incalculable consequences, many unintended. Besides generational displacement, the inevitable social, economic and political disruptions will bring long-lasting uncertainty.

Mr. Siman pointed out that the changes on the domestic scene have been “accompanied by equally risky foreign forays,” such as the aforementioned war in Yemen and the blockade of Qatar.

“Saudi Arabia has broken decisively from its traditional role as an anchor of regional calm and stability,” he wrote, while its finances are under more pressure than they have been in years.

“Psychologically, the Saudi leadership is prone to fears of strategic encirclement (to the north and west in Iraq and Syria, to the south and east in Yemen) that could lead to sudden policy lurches and increasingly transactional geopolitical relationships, such as the one Riyadh is developing with Moscow,” he concluded.

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