Transcript Saudi briefx

Update: Succession in Saudi Arabia
September, 2015
Objective of Study
Assessing political risk of King
Salman’s succession & challenges
facing the Kingdom
Structure of Presentation
1.
2.
3.
4.
5.
6.
7.
8.
History and context of succession
Political risk resulting from succession
Impact of Mohamed bin Salman’s ascendance
The security challenge
The economy challenge
Salman’s foreign policy
Future of ties with the United States
Way forward
1. History and context of succession
• Absolute monarchy but succession prioritizes competency and
consensus over primogeniture or right of the son
• Ruling Saudi relies on a ‘balance of tension’ both among tribes and
inside Al Saud
• King Saud deposed in 1964, incompetent, tried to appoint son
• Tradition is King appoints sons and favorites to top posts, not heirs
• Basic Law in 1992; Allegiance Council 2006 to formalize process
• Sudairi power: King Fahad, Sultan, Nayef, King Salman
2.
Political risk resulting from succession
• At time of regional crises, state collapse, internal
challenges succession moves spell unnecessary risk
• Abdullah tapped Muqrin as possible placeholder for son
Miteb, but Salman upset that
• Salman addressed challenge of grandson generation, but
made moves too quickly, selected wrong person
• Salman broke with tradition in appointing son as DPC, CP
also Sudairi solidifying Sudairi control
• MbS called by critics as “Little General,” critics allege he
is corrupt and chatter abounds of resentment of 30 year old
Kingmaker—dangerous letters circulate urging sedition
3.
Impact of Mohamed bin Salman’s ascendance
• MbS is DPC, Defense Minister, Chief of Royal Court, President
of Council for Economy and Development, President of Supreme
Aramco Council
• MbS holds Defense, MbN holds Interior, Miteb holds National
Guard uneasy balance of tension (Abdullah vs. Sultan)
• Possibility of MbS vs. MbN rivalry; State Minister Saad al-Jabri
dismissed who was MbN “go to man” acc. to Embassy Riyadh
• Great centralization of economic decision-making in the
kingdom; good to be in, bad consequences if shunned out
• Centralization means more streamlined processes, but also
focuses attention on royals responsibility for economy
• Critical for any businessman to have an in with the Council since
it approves any project over $27 million
Mohamed bin Nayef
Ministry of Interior
Mohamed bin Salman
Ministry of Defense
Miteb bin Abdullah
National Guard
A rising star?
• Khaled Al Faleh seen as King Salman’s go to ‘crisis’ man to
clean up Saudi health ministry and tackle MERS-CoV plague
• Still chairman of Aramco, was CEO
• Was on September 2015 visit as key Saudi figure—even
overshadowed Al Jubeir
3. The security challenge
Islamic State in Hijaz and Najd
• Two major suicide attacks trying to instigate sectarian strife
• 1677 individuals arrested on charges of belonging to ISIS,
1375 are Saudis
• Numerous cells disrupted even in Riyadh, shootings
• Yemen campaign will make or break MbS
• Six months later Houthis still have Sanaa, 3 Scud missile
launches, still projecting force on Saudi border
• Near 5,000 civilians died, more than 60 Saudi soldiers, more
than dozen Saudi civilians
4. The economic challenge
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Oil prices have dropped by 50%--~$47 break-even $106
GDP growth set to slow to 2.8% | Deficit 19.5 %| Debt 1.6% of
GDP
Energy subsidies make up 8.3 % of GDP (at least $62 b
officially)
Non-oil revenues only 7% of non-oil GDP
Solutions? Review capital expenditures as first resort (wish to
cut 10%); sell bonds. Scare scenario FR depletion by 2017
unlikely.
Saudi banks can absorb $75 to $100 billion of securities (S&P),
already issued $5.33 b want $27 b by end of year
Real GDP % growth
10
5.4
4.8
2.7
2010
2011
2012
2013
3.5
2014
2.8
2015
DEFICIT % OF GDP
15
10
5
0
2010
2011
2012
2013
2014
2015
-5
-10
-15
-20
-19.5
-25
5. Salman’s foreign policy
• More assertive but still no indication of broad coherent
strategy
• Bad return on investment/experience reaching out to
Russia on Syria
• Inability to utilize great wealth & power to play
kingmaker role in Syrian opposition, paralyzed in terms
of policy
• Still views Iran as major threat but may feign interest in
negotiating, unclear if Saudi is capable to go back to preIraq war posture with Iran
• Chilled relations with Sisi’s Egypt, seems to be
branching out more to Muslim Brother branches, but MB
still designated as terrorist organization: intentionally
ambiguous
6. Future of ties with the United States
• Despite media sensationalism ties remain strong even though there are
disagreements
• Saudi foreign policy activism presents risks & challenges to US (endless Yemen
campaign), but fundamentals of transactional relationship in place
• $90 billion in arms sales since October 2010, IMET program, embedded US
advisers in internal security infrastructure; Saudi biggest trade partner for US in
MENA ($65.7 b volume)
• US still involved with Saudi even in Yemen campaign by offering intelligence
and targeting information
• September 2015 trip highlighted by MbS a new “strategic partnership for 21st
century” by offering to open up Saudi for American investments in the tune of an
absurd $2 trillion over coming years
• Saudi wants to keep US in Saudi and that means opening up markets, economy, to
look beyond oil
Way Forward
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Continue secondary research and exhaustive weekly clips, and to
interview experts and analysts
Prepare for travel to Saudi to canvass crop of Saudi writers,
analysts, current and former government officials, and
businessmen
Targeting potential interview subjects and soliciting suggestions
for individuals to interview in Saudi
Use trip to better understand leadership dynamics on the ground
and establish a stronger network in country