Kingdom of Saudi Arabia’s junior princes are in crisis mode. Prominent members of the royal family have sent letters to the family calling for Saudi King Salman’s removal in an effort to refuel the Kingdom’s ailing economy. Meanwhile lurking in the shadows are terrorist insurgent groups, like ISIS, who are willing to exploit any weakness demonstrated by the oil-rich country.
“The King is not in a stable condition and in reality the son of the king [Mohammed bin Salman] is ruling the kingdom,” one unnamed prince said.
“So four or possibly five of my uncles will meet soon to discuss the letters. They are making a plan with a lot of nephews and that will open the door (to regime change). A lot of the second generation is very anxious,” according to a letter, published by the Guardian. “The public are [sic] also pushing this very hard, all kinds of people, tribal leaders. They say you have to do this or the country will go to disaster.”
Similarly, another dissident prince claims that 80 percent of the monarchy backs his call for a palace overthrow against King Salman and his designated successors to the throne. “There are two people in Saudi who have to be punished and thrown out,” he told the Times. “It is best for the country for King Salman to step down as well. We cannot take sick people in top leadership.”
The downturn in the economy started last year when KSA decided to take on the US oil industry. They forced oil prices down by not reducing crude production that has cost the Middle East’s largest oil producer hundreds of billions. The calculated effort forced the US/Canadian oil industry to consolidate smaller firms, but has the House of Saud destroyed its own economy in the process?
For the past 14 years the Middle East allowed OPEC to keep barrels of crude oil artificially high, but the lingering slump in oil prices has sent Saudi Arabia into the bond market.
The recent bonds were sold to keep KSA’s social programs fully funded; oil must be traded in the $50-60 per barrel range. Today it’s traded closer to the $45-50/price per barrel that has forced the Saudi’s into the capital markets to pay its bills.
Saudi Arabia is facing a budget deficit for the first time since 2009. With 80 percent of the country’s revenues tied to oil, the recent plunge in crude prices has hit the Kingdom particularly hard. The government has cut spending, sold bonds and tapped foreign reserves to compensate for the self-imposed low oil prices.
“They have a lot of cash, but a lot less than they had this time last year. It’s interesting, the architect of this has decided to hold on to global market share when it comes to oil, to drive down oil prices lower and begin to plug the holes of their finances. The $5 billion sold in the domestic market today in Riyadh could add up to $27 billion by the end of the year,” John Defterios, emerging markets expert in Abu Dhabi told CNN.
A confluence of recent events like sinking oil prices to foreign-policy missteps with Yemen and Iran, pose serious challenges for the year-old Saudi regime. “If not properly managed, these events could eventually coalesce into a perfect storm that significantly increases the risk of instability within the kingdom, with untold consequences for global oil markets and security in the Middle East,” Defterios said.
As a result Saudi Arabia hasn’t paid companies working on infrastructure projects for six months and has resorted to selling bonds to cover its shortfall. Now the Kingdom faces its biggest challenge in years in the form of war, plummeting oil prices and the Mecca tragedy.
The threat from ISIS within and without the Kingdom is becoming increasingly destabilizing as well which is exacerbated by the war in Yemen. The war remains relatively unpopular by most Saudis who view the conflict as the Arab world’s richest country beating up the region’s poorest nation. The mounting civilian causalities are splashed across the Kingdom’s news services, offering more questions than answers.
Saudi’s assign blame to Prince Mohammed bin Salman, the Kingdom’s defense minister and even labeled him “reckless.” Like the US’s war efforts in the Middle East, Prince Mohammed bin Salman has hastily sent Saudi’s soldiers into a proxy war in Yemen without a clear strategy or exit plan. The result of the lingering war has drawn international criticism for the humanitarian crisis.
To survive the monarchy’s social welfare apparatuses require a great deal of money, and challenges the self-styled protectors of strict Islam by sinking them deeper into chaos. They increased social spending by $6,000 for every poor person in the country that totals $37 billion per year. Saudi Arabia also spends about $48.5 billion on defense, according to NATO, and plans to increase the total to $63 billion by 2020.
“Saudi Arabia’s clerical establishment is one of the most important stabilizing mechanisms in the kingdom. Salafist Wahhabi ideology requires obedience to the confirmed ruler, which in Saudi Arabia’s case, is the king, but only so long as he enforces Islam,” IHS-Janes analyst Meda al Rowas said in July. “In November 2014 ISIS chief Abu Bakr al-Baghdadi called on Muslims to rebel against the Saudi monarchy. ISIS staged suicide bombings against the country’s Shia minority earlier this year to assert its authority against the government-allied clerical.”
On the home front, KSA offered extravagant social welfare programs to stave off a 2011-style regime change like Libya, Egypt, Tunisia, Syria and Iraq. The Kingdom offers generous energy subsidies that cost close to 20 percent of Saudi’s annual GDP. The Kingdom also subsides food, housing, water, as well as other consumer goods to buy compliance.
Over the weekend Department of State Secretary John Kerry met with KSA’s ailing King Salman. The US reassured the Saudis that Syria remains a regional focus; “Both sides noted the importance of mobilizing the international community to support this goal and reiterated the need for a transition away from Assad. They pledged to continue and intensify support to the moderate Syrian opposition while the political track is being pursued.”
In a show of good faith, the US government just approved an $11 billion deal to sell Saudi Arabia four advanced warships, amid a renewed arms race in the Middle East.
But with the deteriorating conditions in the Middle East, Saudi Arabia is increasingly looking like the next stop on the regime change train.