SIM Report: MIDDLE EAST AND CENTRAL ASIA ISSUE 2, MARCH 2020

SIM Report: MIDDLE EAST AND CENTRAL ASIA ISSUE 2, MARCH 2020

SAUDI ARABIA: MBS POWER CONSOLIDATION SUGGESTS PREPARATIONS FOR SUCCESSION, LONG-TERM ECONOMIC CHALLENGES TO PERSIST

On 6 March 2020, Crown Prince Mohammed bin Salman (MbS) arrested three senior members of the royal family, including King Salman’s nephew, Prince Mohammed bin Nayef, and his only remaining full brother, Prince Ahmed bin Abdulaziz al-Saud. In the following days, sweeping arrests were made against senior royals and officials from the army and interior ministry. They have been charged with treason over an alleged coup attempt.

The arrests mark the most significant set of detainments since 2017 when around 500 royal, government and business elites were apprehended over the course of several weeks and charged by an anti-corruption committee led by MbS. This apparent power consolidation in 2017 resulted in the elimination of a faction connected to the late King Abdullah, who ruled from 2005 until his death in 2015, that opposed MbS’ control and his legitimacy as a successor to the throne.

The crown prince’s efforts towards establishing a monopolised personal power base has been ongoing for the past two years. MbS is likely to continue efforts to eradicate any remaining dissenters and enforce total compliance across the regime before he succeeds King Salman, an inevitability that is highly likely to occur in the coming 12-month period. It is probable that MbS aims to take the throne in time for the 2020 G20 Riyadh summit in November where he will be able to officially seal his authority on the international stage. With most potential opposers now arrested, significant dissent is unlikely: any remaining opponents are without a power base from which to launch a viable challenge against MbS in the short- to medium-term outlook.

However, economic challenges persist that may serve as spoilers to a smooth reign in the longer term. Despite efforts at combatting the rising cost of living including announcing in December 2019 that the government would continue to pay a cost of living allowance to citizens, MbS has failed to address the growing economic slowdown in the country.  An oil output dispute between OPEC and its allies will lead to further economic pressure. The Kingdom is effectively battling for market share against Russia, who rejected OPEC’s proposed oil cuts and elevated levels of production, subsequently initiating an oil price war with the Saudis. On 13 March, national oil company Saudi Aramco stated that production levels would be increased to 13 million barrels per day, a move that will contribute to an increased budget deficit. The company later announced on 15 March that a capital-spending cut of USD5 billion would be implemented, raising the likelihood of the government stepping in to allocate these funds  A higher deficit will raise the chances of delays or suspensions of contracts or infrastructural projects in the short-medium term, something that will lead to mounting economic insecurity in the longer term. 

Meanwhile, the crown prince has placed too much reliance on the success of Saudi Vision 2030, a scheme launched in 2016 to diversify the economy as a means of loosening the country’s oil dependency. The oil sector has become increasingly inefficient due to slowing global growth. Oil dependency is reflected by Saudi’s GDP, of which revenue from oil makes up around 45 per cent. Reforms and projects launched under the scheme have resulted in marginal growth increases in the non-oil sector. However, the growth is not enough to circumvent what will likely become a USD50 billion budget deficit in 2020, with revenues and spending likely to fall by at least 10 percent and 15 percent, respectively. If unaddressed, there is a realistic probability that significant economic insecurity will develop into growing discontent with the status quo and MbS a grassroots level.

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