THE (OUT)HOUSE OF SAUD: THE COUP, THE OIL, AND THE MONEYNovember 11, 2017
Among the many articles I received this past week about the coup (and chaos) in Saudi Arabia, this one shared by Mr. V.T. is perhaps the one that gets down to the deep fissures that are beginning to show within the desert kingdom. Certainly the Saudis are not stupid: investments have allowed them to penetrate significant portions of the media, of technology and space, and so on, but the bottom line for the kingdom is oil, money, and a form of Islam that has remained extreme, though in the latter instance, we're seeing some (slow) signals of royally-approved change.
Here's the article:
The graphs, and increasing population, say it all:
One thing seems obvious: the House of Saud needs money. The cash flowing out to the princes is simply not available anymore. The oil price is a major factor in that. Miraculously, the weekend crackdown on dozens of princes et al, managed to do what all the OPEC meetings could not for the price of oil: push it up. But the shrinkage of foreign reserves shows a long term problem, not some momentary blip:
Another sign that money has become a real problem in Riyadh is the ever-postponed IPO of Saudi Aramco, the flagship oil company supposedly worth $2 trillion. Trump this week called on the Saudi’s to list it in New York, but despite the upsurge in oil prices you still have to wonder which part of that $2 trillion is real, and which is just fantasy.
But yeah, I know, there’s a million different stocks you can ask the same question about. Then again, seeing the wealth of some of the kingdom’s richest parties confiscated overnight can’t be a buy buy buy signal, can it? Looks like the IPO delay tells us something.
Hiding in between the lines here is the implication that a coup - with all the attendant exacerbation of tribal rivalries within the royal house - is tailor-made to drive up oil prices. Good news for the kingdom, but only in the short term. It doesn't, and won't, solve the long-term problems, and it's those long term problems that I suspect are forcing the "modernization" impulses. The reason? simply put, the money is drying up, and there's nothing to do:
And then you have the 15,000 princes and princesses who all live off of the Kingdom’s supposed riches (‘only 2,000’ profit directly). All of them live in -relative- wealth. Some more than others, but there’s no hunger in the royal family. Thing is, overall population growth outdoes even that in the royal family. Which means, since the country produces nothing except for oil, that there are 1000s upon 1000s of young people with nothing to do but spend money that’s no longer there. Cue mayhem.
In last Thursday's News and Views from the Nefarium, I pointed out that one member of the Bin Laden family, and a stakeholder in the massive Bin Laden Group - long an ally of the royal house - was part of the round-up of those arrested for "corruption." But that is just the tip of the iceberg of how extensive the arrests have really been:
The Saudi government is aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite, according to people familiar with the matter. Several prominent businessmen are among those who have been arrested in the days since Saudi authorities launched the crackdown on Saturday, by detaining more than 60 princes, officials and other prominent Saudis, according to those people and others. The country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.”
Attorney General?!?!? Needless to say, this caught my eye, and it suggested to me what I suggested in my News and Views last Thursday, that whatever is happening in the kingdom, it is not unconnected to goings on elsewhere, particularly in the USA. The article seems to confirm this view that, behind the scenes, one might have to look to Washington and its own internecine "factional infighting" to find further connections:
Going through all these numbers, you can imagine why the ruling family, or rather the rulers within that family, are getting nervous. And that’s where we get to an interesting piece by Ryan Grim at the Intercept, who says it’s not even 32-year-old crown prince Mohammed bin Salman, known as MBS, or King Salman, 81, who control the kingdom these days, it’s the United Arab Emirates (UAE) -and maybe Washington-. (Emphasis added)
The connections not only run all the way to potential implications in the Las Vegas shooting, as I averred in the News and Views last Thursday, but also to the Trump administration and Israel, which, according to the article, may be loosely tied to Prince Mohammed bin Salman's drive for "reforms":
The platitudes about reform were also challenged by recent mass arrests of religious figures and repression of anything that has remotely approached less than full support of MBS. The latest purge comes just days after White House adviser Jared Kushner, a close ally of Otaiba, visited Riyadh, and just hours after a bizarre-even-for-Trump tweet. Whatever legitimate debate there was about MBS ended Saturday — his drive to consolidate power is now too obvious to ignore. And that puts denizens of Washington’s think tank world in a difficult spot, as they have come to rely heavily on the Saudi and UAE end of the bargain.
As The Intercept reported earlier, one think tank alone, the Middle East Institute, got a massive $20 million commitment from the UAE. And make no mistake, MBS is a project of the UAE — an odd turn of events given the relative sizes of the two countries. “Our relationship with them is based on strategic depth, shared interests, and most importantly the hope that we could influence them. Not the other way around,” Otaiba has said privately.
Now add to this explosive mixture the internal rivalries within the (out)House of Saud itself, and its disastrous foreign policies in the past few years:
Power was shared between three main clans: King Salman (and his beloved son Prince Mohammed); the son of Prince Nayef (the other Prince Mohammed), and finally the son of the dead king (Prince Miteb, commander of the National Guard). In practice, Salman let MBS run the show. And, in practice, blunders also followed. The House of Saud lost its lethal regime-change drive in Syria and is bogged down in an unwinnable war on Yemen, which on top of it prevents MBS from exploiting the Empty Quarter – the desert straddling both nations. The Saudi Treasury was forced to borrow on the international markets. Austerity ruled …
[..] aversion to MBS never ceased to grow; “There are three major royal family groups aligning against the present rulers: the family of former King Abdullah, the family of former King Fahd, and the family of former Crown Prince Nayef.” Nayef – who replaced Bandar – is close to Washington and extremely popular in Langley due to his counter-terrorism activities. His arrest earlier this year angered the CIA and quite a few factions of the House of Saud – as it was interpreted as MBS forcing his hand in the power struggle. According to the source, “he might have gotten away with the arrest of CIA favorite Mohammed bin Nayef if he smoothed it over but MBS has now crossed the Rubicon though he is no Caesar. The CIA regards him as totally worthless.”
[..] The source, though, is adamant; “There will be regime change in the near future, and the only reason that it has not happened already is because the old King is liked among his family. It is possible that there may be a struggle emanating from the military as during the days of King Farouk, and we may have a ruler arise that is not friendly to the United States.”
And that, of course, would put a halt to Mohammed bin Salman's drives for reform, and push the Kingdom further into its well-known backwardness and barbarity.
So what's the high octane speculation? What I suspect may be going on is that the Saudi struggles are part of a much larger picture: it's an example of that factional infighting that I suspect is going on elsewhere as well, in Europe, with the battles between the Merkel-Juncker Axis on the one hand, and the rising discontent among various European nations themselves. (We'll get back to that in a future blog, for Germany is getting "nervous".) That infighting is certainly taking place within the USA as well, as anyone familiar with the news and constant battling between the Trump administration and his opponents from the last election cycle. If this "high octane speculation" be true, then it means one will, over time, be able to connect some very interesting dots between events, which, as I implied in last Thursday's News and Views, we've already seen with the case of Prince al-Waleed bin Talal's connection to Las Vegas, the Mandalay Bay Hotel, and potentially, the shooting itself, for al-Waleed was one of those arrested for "corruption." That's a threadbare connection, to be sure, but it is also interesting to note that among those purged in the coup, some have connections to both the Bush and the Clinton families, and that again argues for my speculation that this is not simply a "domestic crisis" in Saudi Arabia. It's a part of something much larger.
Time, of course, will tell...
See you on the flip side...