The Caravan

Saudi Arabia’s Reforms And The United States

Tuesday, June 19, 2018

The reign of King Salman of Saudi Arabia (since January 2015) represents a significant watershed in the history of the kingdom’s system of governance as well as in its domestic and foreign policies. These changes reflect the priorities of the king, who is an absolute monarch. The first, and most important, of these is the handing over of de facto rule to a prince of the younger generation: the king’s 32-year-old son and Crown Prince Muhammad bin Salman (known in the West by his acronym MBS), who will become the reigning monarch upon his father’s passing. MBS has consolidated power, and in so doing sidelined virtually every senior prince of the House of Saud. Power today is centralized at the very top and is no longer shared with high-ranking members of the royal family, as was the case from the 1960s until the death of King Abdullah in 2015. In practical terms, this means the end of policy-making by consensus and interminable deliberation. Instead, speedy reform and significant social and economic change is the order of the day.  Second, MBS has subdued and restrained the official religious establishment as well as more autonomous Islamist activists, such as those inspired by the Muslim Brotherhood and its radical offshoots. He has done this through a series of measures that include cooptation, intimidation and coercion. Because of this, all organized forms of opposition to MBS’s authoritarian rule have been tamed, and popular political mobilization in the streets is difficult to imagine in the near future, but it is not inconceivable.  Moreover, the regime is signaling that the promotion of Islam, and in particular the intolerant Wahhabi version of the faith, is no longer a principal source for its legitimacy. Instead, nationalism, populism, and the state’s provision of order and economic opportunity will become its foundations.  Third, beginning in November 2017, MBS has detained several hundred of the country’s business and administrative and royal elite, claiming they were involved in widespread corruption. He has reached financial settlements with most of these detainees after which they were released. This is intended, according to MBS, to stanch the culture of corruption, which pervaded the system and cost the country around 20 percent of its annual budget, and to recover over $100 billion for the public treasury. In short, King Salman and his crown prince have shaken the system to the core, changed the rules of power so that it is unrecognizable from what it had been until early 2015.

According to MBS, these moves represent more than an exclusive power grab. Rather, they are about national reform, modernization and empowerment—a Saudi version of the Japanese Meiji Restoration albeit with profound differences between the two countries. The Crown Prince argues these steps are necessary to enable the kingdom to transition to a new and necessary stage in its history and development, one in which it must accomplish two imperative and intertwined goals to guarantee its survival into the future. These are: 1) the diversification of its economy away from the state’s overwhelming dependence on oil revenues for its fiscal obligations. In short, the building of a non-oil economy. And 2) the transformation of the kingdom into a regional political and military power, able to project influence and defend itself from external aggression, and especially to stand up to its nemesis Iran. The latter goal should also be understood as a desire to diminish Riyadh’s dependence on U.S. military protection, but not to end the strategic alliance that has bound the two nations since 1945.

The government’s desire to diversify the Saudi economy dates back to the 1960s when the country’s rulers and leading technocrats realized that economic dependence on a single commodity, and the vicissitudes of the global oil market, is dangerous and unsustainable in the long term. Yet, successive kings have failed to accomplish this because, frankly, it is an exceedingly difficult task. Oil wealth, especially when it accrues to the state and is then distributed to the population in the form of wages for public sector employees and entitlements of various kinds to the citizenry (e.g., free health care and education, cheap energy), has pernicious effects on the economy. This is called the “Dutch disease” or the “resource curse” which invariably entails high domestic wages and prevents the non-oil sectors of the economy from flourishing, such as manufacturing. To compound matters, the oil industry, in both its upstream and its downstream and other energy-intensive sectors (e.g., petrochemicals, refining, aluminum smelting), generates relatively few jobs, and certainly not enough to absorb the hundreds of thousands of young Saudis looking for work.  For example, Saudi-Aramco, the world’s largest oil company, employs only around sixty thousand workers.  This is the main reason the government has over time created a bloated public sector, which now employs around 70 percent of the working population and whose wages constitute the largest share of the fiscal budget.

Saudi Arabia is in effect a nanny state with a system of cradle-to-grave entitlements for its population that ensures obedience to the state but which it can no longer afford.  Moreover, it has to create three hundred thousand new jobs annually for at least five years to absorb the young population (70 percent are under 30 years of age) that is coming on to the market, and which is a result of the country’s large demographic youth bulge.  Because the situation is fiscally unsustainable, MBS must find ways to help create more employment in the private sector and stop employing people in the government. The future stability of the Saudi regime depends on the success of this effort, especially as oil is replaced by alternative sources of energy and potentially loses its market value over the longer term.

As noted earlier, the second goal King Salman has set for MBS is to transform the kingdom into a military power in the Middle East. This desire is rooted in recent history, and in particular the country’s fraught relationship with the United States after the 9-11 attacks. Since 1945, when Saudi Arabia struck an agreement with the United States whereby it would become a reliable supplier of oil in return for U.S. military support and protection, the kingdom’s rulers deliberately kept their own military weak—a parade-ground army as opposed to a real one that can defend the homeland. This was in order to prevent military officers from fomenting a coup against the rulers as had become the norm in country after country of the Arab world throughout the 1950s and 1960s.  This arrangement worked well for over four decades: the regime remained coup-proof and the U.S. led a military coalition force which defended Saudi Arabia from an invasion in 1990 after Iraq occupied Kuwait.

The attacks of 9-11 and their aftermath, however, altered considerably the nature of the relationship between the two countries. First, a serious questioning arose in the U.S. about the benefit of the strategic relationship with the kingdom because 15 out of the 19 hijackers were Saudi nationals, and because the kingdom is widely perceived to have spread the virulently anti-American ideology of jihadism across the world and which Al-Qaeda advocates. Second, the Saudis were adamantly against the U.S. invasion of Iraq in 2003, seeing, quite correctly as it turned out, that this would hand the country over to Iran and its Shiite allies. The Saudis nonetheless reluctantly supported the invasion, offering their territory and bases to the U.S. military as well as logistical help. Third, and to make matters worse, the Obama administration seriously undermined Saudi Arabia’s trust in America’s support for Riyadh.  From Riyadh’s perspective, President Obama’s sins were multiple and included his abandonment of President Hosni Mubarak of Egypt, a longstanding ally, in January 2011 during the Arab Spring revolt in Cairo. Another error was President Obama’s favoring of the rule of the Muslim Brotherhood, an Islamist group that Riyadh sees as posing a serious challenge to its own system of rule. And then President Obama spoke of a pivot in America’s priorities to the Far East, which implied the U.S. abandoning the Middle East. Last, though certainly not least, was President Obama’s desperate push for a nuclear agreement with Iran—the JCPOA--and his favorable mention of Iran, such as when he stated that the Arabs had to learn to “share” the region with Tehran.

All these American moves were perceived by King Salman as amounting to a downsizing by the U.S. of its relationship with the kingdom, perhaps even signaling its eventual abandonment of the strategic alliance. And he certainly did not appreciate what he saw as Obama’s policy of appeasement toward his mortal enemy, Iran. The lesson that was drawn from this was that the kingdom had to build its own military capacity, a real army that would be able to defend the country. In the words of the perceptive scholar Gregory Gause, Saudi Arabia was now militarily going “to carry its own water.” It is well understood by MBS that this effort will take time to accomplish, and will involve a change in the culture of the military, just as the economic diversification will require a change in the work habits of the population at large. The model army he seems to have in mind is something akin to the U.A.E.’s military--highly professional special forces units that can perform well and in cooperation with a first-rate air force.

How should the U.S. view and respond to these developments in Saudi Arabia? As the kingdom’s principal long-standing and strategic ally, the U.S. should welcome these efforts at reform in the kingdom and also realize that its plays an inordinately important role in influencing events. If successful, these changes in Saudi Arabia will strength the kingdom and make it less dependent on the U.S. for military protection and less economically vulnerable in terms of dependence on the rents that accrue from oil. Yet, the road to success is fraught with difficulties and pitfalls, and the kingdom needs all the advice and support it can get from America.  And since these efforts are being driven from the very top, and by a single individual, that is MBS, access to him and his team of advisors is important. In particular, several points need to be stressed. Among these are: the importance of building institutions that deliver good and accountable governance and services; the management of expectations of ordinary Saudis since the economic transformation is likely to be painful; the concentration of the reform efforts on a few areas rather than taking on every task all at once; and, finally, giving thought to, and then implementing, processes that allow for broader political participation.  These are just a few areas and suggestions in which the U.S. can play an important role as a guide and friend to the kingdom. The ultimate goal should be to see a prosperous and powerful Saudi Arabia, which can continue to be a partner to the U.S. and help secure stability and order in this turbulent region of the world.

About the Author

More from Foreign Affairs & National Security