They say a week is a long time in politics; it certainly must have felt that way in Riyadh, capital of Saudi Arabia this week. it has truly been one of the most turbulent weeks in recent Saudi political and economical history.
In an unprecedented and unexpected move, an anti-corruption crackdown, authorised by the King, Salman, and carried out by his son, the Crown Prince Mohammed bin Salman, the head of a recently formed anti-corruption unit, saw many of Saudi Arabia’s most powerful and richest people held at the Ritz Carlton hotel in Riyadh.
Whilst there are worse places to be incarcerated, news of the purge has sent shockwaves around the world, with many Saudi billionaires scrambling to sell their assets and move their money abroad, and markets across the gulf region into turmoil.
Many members of Saudi Arabia’s rich elite were desperately trying to offload their assets in the gulf region and move them into more liquid holdings – the selloff reduced the value of stocks across the GCC by an estimated $17.6bn on Wednesday, and Gulf investors sold $92.5m of Dubai based stocks in a single day on Tuesday, the most since February.
As shocking as the actions of the 81-year old King Salman and his son, the Crown Prince, whom many believe is being prepared to take over the reins of power from his father, are, the events of last Saturday are really just the tip of the iceberg.
Understanding what is currently taking place in Saudi Arabia, and what it means for the rest of the Middle East, and the world, is complex, but necessary, if you want to understand this week’s financial fallout. So we have broken things down into 5 areas for our readers, to help explain. There is much more to it than we are able to go into below, but we hope this serves as a useful primer.
The anti-corruption purge
The purge seems to have come as a surprise to almost everybody, not just in Saudi but all over the world. Whilst it is true that rumours of corruption abound in the country, which is home to some of the world’s richest tycoons, it is unlikely that anybody expected the Crown Prince to make such an aggressive move.
Amongst those who have allegedly been arrested are the billionaire owner of the Savoy Hotel in London, and the Kingdom Tower in Riyadh, Prince Al-Waleed bin Talal, Arab satellite network MBC owner Waleed al-Ibrahim, and construction tycoon Bakr Bin Laden.
Altogether, more than 200 people have been detained, it is alleged, all of whom have had their assets frozen. The authorities, led by the Saudi Attorney General say they suspect that at least $100 billion has been misused in “systematic corruption and embezzlement over several decades.” Other reports suggest that officials plan to seize as much as $800 billion of funds from the detained, amongst whom there are 11 princes, and more than 35 former government ministers.
The Crown Prince’s clean-up act
The generally accepted explanation for the purge was an anti-corruption drive, but it is also rumoured that the Crown Prince may be cementing his position of power as part of a succession plan that will see him come to power as the heir apparent of the current king.
The Crown Prince is just 32, but that hasn’t stopped him targeting the wealthy Saudi elite. It seems the Prince is trying to send a clear message that the regime’s old ways will no longer be tolerated. Bin Salman, or MBS as he often referred to, has also overseen the removal of another Prince, Prince Miteb bin Abdullah, from his prestigious position as the head of the National Guard.
If he does assume power, MBS will face a situation unlike any other Saudi leader – as he must plan for a future in which Saudi Arabia must try to find a way to become self-sustaining, without the vast oil reserves his predecessors enjoyed, which is close to running out.
The Saudi 2030 Vision
The Crown Prince is also behind a comprehensive plan, known as Saudi Vision 2030, to reduce Saudi Arabia’s dependence on its oil reserves. The plan intends to focus on developing other sectors, including health, education, infrastructure, and tourism.
To finance the project, it is planned to use the Saudi Public Investment Fund, currently valued at over $2 trillion, making it the world’s largest sovereign fund. The Saudi 2030 Vision has been criticised for being too wide-ranging and ambitious – anticipating that the Saudi economy will be able to ween itself off oil by 2020, and announcing plans to build a “city of the future”, called Neom, in the North East of the country, from scratch.
Either way, the Crown Prince knows that he has to do something as Saudi is expected to run out of foreign reserves within the next five years – a situation that threatens to imperil the country.
The Crown Prince is behind recent reforms such as permitting Saudi women to drive for the first time, and his stated ambition is to introduce sweeping reforms to the country, to bring it’s values and culture more in line with the rest of the world.
MBS also wants to list Saudi Aramco, the world’s largest company and an employer of large numbers of Saudi citizens, on the stock exchange to raise further funds. Donald Trump recently sent a tweet encouraging the Prince to list the company in New York, whilst the UK has also said it is prepared to change its listing laws in order to accommodate the listing on the London Stock Exchange.
There’s no doubt that Salman has made a strong start, and has support from key allies, but for how much longer will the Saudi elite continue to tolerate his actions?
The resignation of the Lebanese Prime Minister
It wasn’t just the anti-corruption drive that was shaking up Saudi Arabia last Saturday. In a move that again shocked the world, the Lebanese Prime Minister, Saad al-Hariri, resigned.
The Prime Minister announced his decision in a televised broadcast whilst he was staying in the Saudi capital, Riyadh. Hariri said that he feared for his life, pointing to problems within the Lebanese government, such as the presence of members of the Hezbollah group, allegedly backed by Iran.
A pro-Saudi Sunni politician, Hariri believes that Iran is trying to destabilize the middle east, and that a face-off between Saudi Arabia and Iran in the region is inevitable. Lebanon has a complex political structure that ensures Christians, Sunnis and Shiite and Muslim can co-exist peacefully, but the presence of the militant group Hezbollah had clearly unsettled Hariri, who turned to the Saudis, and MBS for help, before deciding to quit and avoid the fate of his father, also Prime Minister of Lebanon, who was assassinated in 2005.
As the conflicts in Syria and Iraq fizzle out, disputes are breaking out in other regions in the Gulf region, and it seems that Iran and Saudi Arabia, arguably the two most powerful states in the Middle East, are on a collision course.
The conflict with Yemen
Yet another incident occurred last Saturday when Riyadh’s international airport was targeted by a missile fired from somewhere in the North of Yemen, an area controlled by a rebel faction known as the Houthis.
Saudi is being targeted by the rebels as the country is behind a controversial coalition that returned ex-Yemeni president Abed Rabbo Mansour Hadi to power after the rebels forced him to flee the country in 2015. This has made Saudi a regular target for the rebel’s missiles.
So far, the Saudi government have fought a losing war with the Houthi rebels, unable to dislodge them, whilst Hadi is currently under house arrest in Riyadh.
The latest missile attack – from more than 700 miles away – suggests that Iran is supplying the rebels with advanced military technology, as only a few years ago it was Mecca, just 350km away, that was under threat – suggesting the rebels did not have the necessary range to target Riyadh.
It is suspected that Iranian forces are regularly crossing the border into Yemen and supplying military knowhow and weaponry to the Yemeni rebels.
Saudi reacted with fury to the attack, announcing that it would close all land, sea and air borders with Yemen, and posting a list of wanted Houthi rebels, offering rewards of up to $30 million for information leading to their capture.
It seems a bitter power struggle with Iran, and continuing efforts to prop up the Yemeni leadership and expel the Houthi rebels can be added to the Crown Prince’s to do list.
The Power Struggle with Iran
Iran has historically, and continues to represent a huge problem for Saudi and the reforming Crown Prince. Saudi is backed the US, but Iran exerts a powerful influence across the Middle East and has very different ambitions for the future of the region than Saudi and its ally.
MBS would apparently like to take a more aggressive stance towards Iran, long seen as an enemy of the state. But Iran is arguably just as powerful and influential as Saudi Arabia.
Saudi’s religion is Sunni-Muslim, whereas Iran’s is Shia, and the two powers regularly take different sides in disputes in the Middle-East, for example in Syria, where Iran is pro-Assad, and Saudi would like to see the “dictator” removed from power.
Saudi and Iran have been engaged in a cold war of sorts ever since 1979, when the Imperial State of Iran became an Islamic republic. There is even a rumoured nuclear arms race taking place between the two most powerful nations in the Middle East.
There are currently few signs that Iran and Saudi agree on any aspect of the how the future of the Middle East as a region should be shaped, but both are determined more influence than the other – and this has been going on for decades, whilst the religious differences go back centuries.
The tension with Iran could be the biggest problem of them all for the Crown Prince, MBS, if and when he does assume full power.
As week’s go, they don’t come much tougher than the past seven days in the world of Saudi Arabia’s heir apparent. Detaining 11 Princes, dodging missiles, dealing with the resignation of a neighbouring country’s sympathetic Prime Minister, and battling with one of the world’s richest and most powerful nations.
And you thought you’d had it tough this week.
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