The recent visit in the United Kingdom and the USA of Saudi Arabian Crown Prince Mohammed bin Salman brought to the attention the complex recent evolution of Saudi Arabia, especially the economic and social reforms that are bound to influence not only the country itself, but also the region and the world.
Mohammed bin Salman bin Abdulaziz Al Saud, also known as MbS, born 31 August 1985, is also First Deputy Prime Minister, President of the Council for Economic and Development Affairs and Minister of Defense. He has been described as the power behind the throne of his father, King Salman, who appointed him Crown Prince in June 2017.
The crown prince’s visit to the United States comes to mark 75 years of the U.S. – Saudi relationship, as well as 80 years since the first discovery of oil in the Arab peninsula.
Besides the meeting at the White House and with the political leadership, the three-week, seven-city trip to the U.S., in which Prince Mohammed travelled with an entourage of officials and business leaders, included meetings with senior leaders of corporations such as Google, Apple, General Electric and Uber, as well as Hollywood producers. Besides Washington, the cities of Boston, New York, Seattle, San Francisco, Los Angeles were included in the program, as well as Houston where the Saudi prince hopes to lure more of the U.S. oil sector to Saudi Arabia,
A day after the White House visit, the State Department has approved three arms sales to Saudi Arabia, worth more than $1 billion dollars. The deals include 6,000 Raytheon TOW-2 anti-tank missiles worth $670 million, $106 million in helicopter support and $300 million worth of vehicle parts. The sale is not yet final, and the deals also must be approved by Congress.
According to senior U.S. officials, the Washington administration would be lobbying for $35bn in deals for US companies.
While supported by a strong and costly PR campaign, the U.S. visit – as well as the preceding visit of the crown prince to the United Kingdom – also marked the effects generated in the West and among the business circles by the economic and social reforms included in the “Saudi Vision 2030”[1], the strategy coordinated by Mohammed bin Salman.
“Saudi Vision 2030”: a long road away from oil
“Vision 2030”, Saudi Arabia’s plan to diversify its economy away from its dependence on oil, is one of the cornerstones of crown prince Mohammed bin Salman bin Abdulaziz Al Saud’s political agenda. Its first details were announced on 25 April 2016. “Vision 2030” envisages increasing the private sector’s share of economic output to 65%, developing alternative sources of government revenue, and reducing dependence on public spending.
Based on a report by the consulting firm McKinsey, the vision has three main pillars:  the status of the country as the “heart of the Arab and Islamic worlds”; the determination to become a global investment powerhouse; and finally to transform the country’s location into a hub connecting the 3 continents (Asia, Europe, Africa).
The main targets of the “Vision” are the following:

  • Move from being the 19th largest economy in the world into the top 15.
  • Increase the private sector’s contribution from 40 per cent to 65 per cent of GDP.
  • Increase foreign direct investment from 3.8 per cent to the international level of 5.7 per cent of GDP.
  • Raise the share of non-oil exports in non-oil GDP from 16 per cent to 50 per cent.
  • Increase non-oil government revenue from SAR 163 billion to SAR 1 trillion.
  • Increase the number of pilgrimage visitors from 8 million to 30 million annually.
  • Localize over 50 per cent of military equipment spending by 2030.
  • Increase Saudization in the oil and gas sectors from 40 per cent to 75 per cent.
  • Increase the Public Investment Fund’s assets from SAR 600 billion to more than SAR 7 trillion.The vision’s policy implementation mechanisms take shape in 13 programs: Government Restructuring, Strategic Directions, Fiscal Balance, Project Management, Regulations Review, Performance Measurement, Saudi Aramco Strategic Transformation, Public Investment Fund Restructuring, Human Capital, National Transformation, Strengthening Public Sector Governance, Privatization, and Strategic Partnerships. Several of these projects are quite broad, while others focus on specific topics. The subcomponent programs will commence in a phased approach over the next decade. The first and most significant initiative so far is the National Transformation Program (NTP), which gained attention as the umbrella project for many of the other items listed previously. The NTP essentially replaced the 10th five-year development plan. The program outlines 178 objectives and 340 targets related to public finance, investment policy, jobs, privatization, exports, the business environment, the role of women, energy, mining and health care.A new vision of the old plans?The name is also familiar in the region: Qatar has a National Vision 2020, and Bahrain, Kuwait and Abu Dhabi each have a Vision 2030. Oman has a Vision 2020, and is working on its Vision 2040.While diversification has been an economic policy priority since the 1970s, the implementation of successive initiatives has usually fallen short of the targets. Government spending, almost exclusively underwritten by oil revenues, remains the engine of economic growth. Twice as many Saudis are employed in the public sector as in the private sector. However, there have been some diversification successes: developing infrastructure and non-oil sectors (albeit largely energy-based industries such as petrochemicals and plastics); establishing new industrial cities at Jubail and Yanbu (centered around petrochemical production facilities); moving oil production further up the value chain from crude to refined; and increasing the number of Saudi nationals – especially women, albeit from a low base – working in the private sector. As part of the reform plan, Saudi Arabia is also stepping up plans to develop a civilian nuclear energy capability. Saudi Energy Minister Khalid Al-Falih said in October 2017 that the nuclear program would start by building two reactors, each producing between 1.2 and 1.6 gigawatts of electricity.As the Saudis pursue the technology needed to undertake the ambitious project, they are expected to play potential rivals against one another, reminding their American counterparts that China, Russia and France are also capable of filling their needs (the U.S., South Korea, Russia, France and China are bidding on a multibillion-dollar tender to build the country’s first two nuclear reactors). However, according to sources close to the Saudi government, it would be virtually impossible for the Saudi government to accept terms that are less than what ex-president Obama offered the Iranians, namely the possibility of future enrichment.The “crown jewel”: the Aramco IPOThe kingdom was considering listing about 5 percent of Aramco in 2018 in a deal that could raise $100bn, if the company is valued at about $2 trillion as hoped. The crown prince relies on the IPO to transform the Saudi Public Investment Fund (PIF) into a $2trn sovereign wealth fund, one of the most important changes of the “Vision 2030” reform process.Executives of the New York Stock Exchange (NYSE) were working hard to convince Saudi officials to trade oil giant Saudi Aramco on Wall Street, rather than rival bourses in London, Hong Kong and elsewhere.Foreign interestsIndustry sources said that Chinese state-owned oil companies PetroChina and Sinopec (part of a state-run consortium including China’s sovereign wealth fund) have written to Saudi Aramco to express an interest in a direct deal, willing to take the whole 5 percent, or even more, alone. Saudi Aramco was also evaluating a private placement of shares to a Chinese investor as a precursor to an international IPO, which could be delayed beyond 2018. But allowing China to buy 5 percent would effectively mean cancelling the IPO altogether, which is an unlikely outcome.Saudi oil exports could also receive a boost through a separate supply pact with the state-run China National Offshore Oil Corp, which is starting a new 200,000bpd plant in southern China.Sovereign wealth funds from South Korea and Japan, which are major buyers of Saudi oil, were also interested in acquiring a stake in Aramco. Also, Russia’s sovereign wealth fund RDIF was keen to invest in the Aramco IPO.Risks of delayOn the other hand, the plan created public misgivings that Riyadh is relinquishing its “crown jewels” to foreigners cheaply at a time of low oil prices. Some Aramco employees would like the whole idea to be shelved. Internal disagreements between what some advisers recommend and what the crown prince wants have delayed several key decisions about the IPO.Another option includes selling some stock immediately to so-called cornerstone investors, such as China, and then selling shares on the local bourse as well as an international stock exchange, with New York, London and Hong Kong in the running.Positive reactions from international financeAl-Khudairy will take over in April as the non-executive chairman for Goldman in the country, subject to regulatory approval, and become regional adviser for the Middle East and North African markets. The banker will help to further bolster Goldman’s presence in the kingdom and make principal investments in the country.Among other deals in Saudi Arabia, Goldman Sachs Inc. was among the companies chosen to help arrange the sale of a dollar-denominated bond, as the country prepares to borrow the equivalent of $31 billion this year to bridge an expected budget deficit and fund growth plans after its economy shrank last year. Goldman Sachs also advised Kingdom Holding on its Saudi Fransi stake purchase and is also advising Saudi British Bank on its merger talks with Alawwal Bank.Other global investment banks are also bolstering their operations in Saudi Arabia to take advantage of business opportunities arising from the state’s plan for privatizations and investments in non-oil related sectors. Deutsche Bank AG has said it’s expanding in the kingdom as the outlook for bond and stock sales improves, while Citigroup Inc. recently won its first local advisory mandate since returning to Saudi Arabia after a 13-year absence.Structural disadvantages of the country such as weak institutions, inefficient bureaucracy and significant gaps between the labor force required by the labor market and the current educational system are seen by many experts as hindering some of the growth prospects of the country and as risk factors for the successful implementation of the “Vision 2030.”The proposed Saudi economic expansion also necessitates building the infrastructure for a new industrial economy that will consume much of the proposed investment fund without assurances that it can generate sustainable revenues. Judging by the expansion of the Saudi development infrastructure over the past five decades, the need for expatriate personnel, including highly paid executives and skilled specialists, will increase exponentially. Privatization will also increase dependence on foreign skilled labor, despite the unattractiveness of the Saudi work environment, because Saudis lack the necessary skills and motivation to do manual or strenuous work.Previous reform programs have repeatedly lagged behind targets also because of the necessary fiscal and labor-market policies. Policies intended to cut the structural fiscal burden and reduce reliance on government spending, could be seen as undermining the implicit social contract, understood in Saudi Arabia as a series of informal pacts between the government and key constituencies including the wider royal family, business elites, influential clerics and the general pu
    blic. Economic drawbacksThe scope of privatization efforts is increasing, but the flow of deals and bids has almost completely halted. MbS and his team seem to have lost focus on the economic future of the country, choosing instead to continue the embargo against Qatar and an anti-corruption campaign that undermines the unity of the Saud family.Oil discovered in 1938 fuelled state-led development that shaped the rentier state where the government, clergy, and population agree to coexist under a symbiotic social contract.In this system, the people render political acquiescence to the monarchy in exchange for a subsidized life, while the clerics support the House of Saud for the price of religious semi-autonomy. Traditionally, oil revenues funded public sector jobs, provided free education, reduced the cost of living, etc. Despite repeated attempts to modify this dynamic, the country’s economic and social models remain much the same today as they did four decades ago. Yet changes in global energy markets and expansion of the Saudi population indicate that this way of life may soon end. The new vision is essentially a way to modify the social contract while preserving royal power.Patronage is a crucial impediment for the Saudi state to overcome in implementing Vision 2030 successfully. Patronage plays a central role in shaping the Saudi political system and economy and in creating opposition to political change. The implications are more far reaching than simply creating rent seeking attitudes. Patronage shapes the structure of the government, influences education and employment choices, defines the relationship between the people and the state, and limits the monarchy’s autonomy.Political and social complications
  • Another main risk factor for the “Vision 2030”, as the kingdom prepares to shift from a “rentier” to a production-based economy (and eventually a knowledge-based one), is the fact that a more inclusive and participatory political system necessary for economic development is still missing. One without the other will not be possible, yet political reform does not seem to be factored into the grand vision.
  • The uncertainty over the sale of 5 percent of Saudi Aramco, more than two years after Mohammed bin Salman announced the plan, is just one example of how his ambitions on the economic front remain unfulfilled. The “National Transformation Program 2020”, which is intended to run alongside “Vision 2030”, has already had to be substantially changed to make it more focused. Attempts to implement politically sensitive reforms, such as scaling back benefits and subsidies, have been delayed and reversed in the face of public disquiet, suggesting the crown prince has not yet built up enough political capital to push them through.
  • The shift is further complicated by most of the citizens’ continued expectations of state patronage. Citizens have become used to viewing the state (by extension, the monarchy) as providers. The state had in the past reinforced that by providing expansive social programs and direct cash transfers of the oil wealth to keep locals quiet. MbS’ willingness to put an end to Saudi Arabia’s rentier political economy as a regime survival strategy will likely be one of the risks arising from “Vision 2030.”
  • One of the major risks associated with “Vision 2030” is that it could break the social contract in place between the government and the population, which historically relies on heavily subsidized public utilities, state employment, and free education and healthcare. For decades, Saudi Arabia has functioned as a so-called “rentier state”, depending on oil revenues to ensure its paternal-distributional model toward its constituencies. Often described as a series of informal pacts between the Al Saud and the society, including the wider royal family, business elites and the influential clerics, the social contract is at the core of political equilibrium within Saudi Arabia. The “Vision 2030” economic diversification plan could potentially undermine the social contract as an incentive to political behavior, which might provoke some discontent among the wider population.
  • Saudi Arabia’s privatization program will take longer than expected, delaying the kingdom’s grand plan to be diversified out of the oil business by 2030. Among the issues that may affect this process there is the frustrating bureaucracy, a lack of legal framework that mollifies investors, and an unorganized implementation of “Vision 2030” altogether.
  • The fear of upsetting this balance means such efforts are often diluted or deferred, or reversed when oil prices rise. The most dramatic example in recent years was seen in the Saudi response to the Arab uprisings of early 2011, when the government increased its spending by 25 per cent over the previous year, including around $130 billion of announced social spending, higher pay and bonuses for public-sector workers.
  • “Vision 2030” also implies a degree of social liberalization to enable the growth of the entertainment and tourism industries, as well as extensive reforms to the education system, traditionally a stronghold of Saudi Arabia’s religious clerics. If followed through, this would transform relations between the state and its citizens, politically and socially as well as economically, and also the government’s partnership with the clergy.
  • On the economic side, Riyadh cannot realistically compete in labor-intensive manufacturing industries, as low wages do not appeal to Saudis accustomed to high-paying public sector jobs. The petrochemical sector is already well developed and has little room to absorb more workers. The same thing goes for mining, which also does not require a large workforce. Even if Saudi Arabia further develops its health care sector, it would be virtually impossible for it to become a medical hub because other facilities elsewhere in the region, such as in Lebanon and Jordan, are already far more advanced and readily accessible. Likewise, banking and finance require specialized training, and it is doubtful that the kingdom can carve a niche in this very competitive regional sector.
  • Economic and political risk factors
  • Among other deals, Saudi Arabian hospital operator Al Hammadi Co. for Development & Investment is close to hiring Goldman to advise on merger talks with National Medical Care Co. Jabal Omar Development Co. also hired Goldman Sachs to advise on a potential merger with Umm Al Qura Development.
  • Goldman is also among the major banks likely to be appointed to manage the Saudi Aramco IPO.
  • Some of the first positive reactions for the “Vision 2030” came from international finance, with Goldman Sachs Group Inc. planning to deploy its own money in the kingdom for the first time. According to Wassim Younan, Goldman’s chief executive for the Middle East and North Africa, in order to identify such opportunities, the bank is hiring veteran banker Ammar Al-Khudairy, who previously oversaw Morgan Stanley’s operations in the country.
  • According to Saudi Aramco, a range of options, for the public listing continue to be held “under active review”, but no decision has been made and the IPO process remains on track.
  • Industry sources also pointed out to disagreements between senior government officials, with some pushing only to list Aramco locally or to delay the IPO beyond 2018 when they hope oil prices will stabilize at $55 to $60 a barrel.
  • The proposed timetable for the Saudi Aramco IPO, which had been scheduled for 2018, seems to be slipping, since the very benefits that would flow from an international listing (more transparency, more accountability for management, the discipline imposed by independent shareholders) are precisely the issues that present some of the biggest challenges.

  • The Chinese option would also help the kingdom access the One Belt, One Road (OBOR) market for its future non-oil production. This option could be very valuable, given that OBOR may well become the largest free-trade area in the world.
  • Any alliance between Saudi Arabia and China could go beyond the purchase of a stake in Aramco and also include a reciprocal move by the Saudi company to invest in the Chinese refining industry. Saudi Energy Minister Khalid al-Falih said in August 2017 that he expected to finalize a deal with PetroChina early 2018 to invest in the Yunnan oil refinery in China’s southwest.
  • After the announcement, China was reportedly offering to buy up to 5 percent of Saudi Aramco directly, a move that would give Saudi Arabia the flexibility to consider various options for its plan to float the world’s biggest oil producer on the stock market.
  • Alex Ibrahim, NYSE’s head of international capital markets, addressed Riyadh’s concerns about US regulators and exposure to costly lawsuits over everything from climate change to the 9/11 attacks, saying that Wall Street is the only venue capable of delivering “very large complex transactions” like Aramco’s looming IPO.
  • Aramco was created in the 1970s by nationalizing four U.S. oil companies that had previously operated in the kingdom, and for decades ‘resource nationalism’ has been a powerful sentiment in the Arab world, which has meant there has been resistance to opening oil and gas sectors up to foreign private investment (notably in Kuwait, where the parliament has repeatedly quashed such plans).
  • The flagship project for the “Vision 2030” is the international initial public offering (IPO) of 5 percent of the national oil company Saudi Aramco. It already is subject of intense interest, since it could be the largest such sale in history.
  • Moreover, in an interview to CBS before his March visit in the U.S., crown prince Mohammed bin Salman said that Saudi Arabia will develop nuclear weapons if Iran does so. “Saudi Arabia does not want to acquire any nuclear bomb, but without a doubt, if Iran developed a nuclear bomb, we will follow suit as soon as possible,” said the crown prince.
  • Saudi Arabia has repeatedly said it wants nuclear technology only for peaceful uses. Riyadh also approved a national policy for its atomic energy program, including restricting all nuclear activities to peaceful purposes, within the limits defined by international treaties.
  • Riyadh also wants to greatly accelerate the pace of its civilian nuclear energy program. The goal is to build 16 reactors over the next 20 years, at a cost of some 80 billion Euros ($98 billion), according to officials and analysts.
  • Nuclear power… indirectly aiming at Iran
  • The previous Saudi strategies have had some successes in generating non-oil growth and encouraging some Saudis to work in the private sector, but implementation has repeatedly fallen short of the ambitious targets that have been set, with the result that the Saudi economy remains overwhelmingly dependent on oil-fuelled government spending.
  • There is very little in “Vision 2030” that previous Saudi development plans did not target. Building infrastructure, developing human resources, empowering the private sector to drive and diversify economic growth have been recurring themes from the second through the eighth 5-year development plans (1975-2009). In fact, “Vision 2030” looks like a continuation of the ninth development plan (2010-15), with its emphasis on promoting sustainable development and raising the competence of the Saudi workforce while creating a knowledge economy in an environment of progressive structural development.
  • “Vision 2030” essentially continues, in amplified and expanded form, policies that the country has had in place for some decades. In 1970, under the leadership of King Faisal bin Abd Al-Aziz, the country’s first economic development plan already emphasized on the necessity of economic diversification for the time when oil reserves would become depleted.
  • The Fiscal Balance Program (FBP) is the second major initiative that the government made public. Like the NTP, the target date is 2020.
  • The plan is supervised by a group of people employed under the National Center for Performance Measurement, the Delivery Unit, and the Project Management Office of the Council of Economic and Development Affairs. The National Transformation Program was designed and launched in 2016 across 24 government bodies to enhance the economic and development center.
  • About 80 major projects are expected to be developed in Saudi Arabia by the year 2030. Most of these projects are financed by the Public Investment Fund of Saudi Arabia.

“Vision 2030” is presented not just as a program of economic development and investment promotion, but as a broader national modernization project. But there is no explicit reference to politics, whether in terms of political reform, security or foreign policy. In the run-up to the release of “Vision 2030”, Prince Mohammed was asked in a high-profile, five-hour interview with The Economist what impact he thought “Vision 2030” would have on the social contract. He responded that the two matters were unrelated: since the Saudi government already represented its people, it was not an issue to be considered.
However, analysts agree that Riyadh no longer has the luxury of ignoring the relationship between economic and political development. The transformation into a production state is bound to create a knowledge economy and break the kingdom’s tribal-based system.
Since one of the main divides in Saudi Arabia is between the highly educated and the less educated, better-educated and entrepreneurial Saudis would find new social openings and economic opportunities, but those more dependent on the state sector will face new challenges, and the latter category is by far the majority in the Kingdom. Moreover, for those who are likely to be losers from the restructuring of the economy, an entertainment economy will be largely an expensive luxury, and “Vision 2030” will be seen as a Westernization project for a privileged few. There is a risk of a backlash against the economic and social changes, a Saudi version of populism with a strong anti-Western element.
A future backlash against economic reform may draw on anti-Western identity narratives, as the planned reforms are, for many, associated with Western consultants (who have been advising the Saudi leadership) and Western-educated Saudi elites. Most historical political opposition in Saudi Arabia has come from groups claiming to represent authentic Islamic values. Analysts are already considering the possibility that economic reforms may offer the context for radical militant groups such as Daesh and al-Qaeda to appear as offering the only political alternative, especially given the absence of other forms of political opposition.
In order to manage potential opposition and avoid delegitimization, the ruling family is drawing on alternative, non-economic pillars of ‘legitimacy’. One of them is a growing emphasis on nationalism in official discourse and in the media, and on the state’s role as a provider of security against perceived regional and transnational threats. Other planned steps, to provide more entertainment and ease social restrictions, suggest the current leadership has identified a growing youth constituency with an appetite for greater social freedoms.
The country’s rulers will also seek to present themselves as an example of good governance without democracy – for instance, through the long-standing narrative around shura, or consultation, and the growing discourse about transparency. Vision 2030 and the National Transformation Program (NTP) contain a number of pledges to hold ministries more accountable through ‘key performance indicators’ (or KPIs).
The authors of “Vision 2030” are aware that for the plan to succeed, Saudi society must adopt the values of moderation, tolerance, discipline, equity, and transparency. However, they claim that the authorities “shall have zero tolerance for all levels of corruption, whether administrative or financial,” overlooking the fact that in a society where family, tribal, and regional ties are stronger than the nebulous conception of state identity.
Consequently, the plan avoids references to government measures to win the cooperation of the Saudi public that, in addition to its strong primordial ties, grew dependent on state largesse that included fuel subsidies, loans, free land, and public sector jobs.
Transforming the House of Saud
The personal rise to power of crown prince Mohammed bin Salman (MbS) and the speed at which he is consolidating his authority also present a risk to the success of “Vision 2030”, as the plan is closely associated with the crown prince. The unprecedented purge of top princes and businessmen in the November 2017 anti-corruption sweep[2] showed his disregard for winning support from the elderly members of the Al Saud house.
Since 2015, Mohammed bin Salman has concentrated power to a degree unprecedented in modern Saudi history. While the crown prince has heralded his effort to transform the Saudi economy, his changes to the kingdom’s balance of power are transforming the nature of the Saudi state.
The crown prince already mentioned in his recent CBS 60 Minutes interview that “only death” would stop his ascent.
The change of the succession line of the Saud house had been predicted in December 2015 in an unusually blunt and public memo published by BND, the German Federal Intelligence Service[3], which also portrayed Mohammed bin Salman as a political gambler who is destabilizing the Arab world through proxy wars in Yemen and Syria. After the Saudi government reportedly complained about the BND’s assessment, German officials reacted to the BND’s memo, saying the published statement “is not the position of the federal government.”
The BND 1-1/2 page report, entitled “Saudi Arabia – Sunni regional power torn between foreign policy paradigm change and domestic policy consolidation”, pointed to risks stemming from the concentration of power in Prince Mohammad, who it said could get carried away with efforts to secure the royal family succession in his favor.
The BND also said there was a risk he would irritate other royal family members and the Saudi people with reforms, while undermining relations with friendly, allied states in the region.
The November 2017 anti-corruption campaign, when MbS rounded up dozens of royals, ministers and tenured officials was seen by outsiders as a bid to consolidate power as his ascension to the throne nears.
One of the results of the round-up was that crown prince Mohammed appears to have established control over all three Saudi security services – the military, internal security services and national guard. For decades they had been distributed among branches of the House of Saud clan to preserve a balance of power in Saudi Arabia. MbS has achieved a degree of dominance that no ruler has attained for generations.
Last year, MbS used his position of defense minister to curtail the powers of the National Guard, whose functions are protection of the royal house and the oil fields, and merge it with the regular army. Its budgets have been slashed and its autonomy for making arms purchases annulled.
According to local observers, Mohammed bin Salman is attempting to change the kingdom that his grandfather, King Abdulaziz, created in 1932 and has been ruled by his sons, ending with King Salman. He is demolishing the order that was created upon Abdulaziz’s death in 1953, when political authority was spread across several power brokers, in an informal system of checks and balances. While formal institutions had barely existed during Abdulaziz’s long reign, his sons created the modern mechanics of government after his death and moved into positions of seniority that they proceeded to occupy for decades. Power solidified across a set of “princely fiefdoms” that ossified over time as the sons of Abdulaziz grew older.
The key figures in the Saudi political establishment have died over the past decade, leaving the current king as the last man standing of his generation of post-1953 state builders. Crown Prince Sultan died in 2011 after 48 years as defense minister, and his successor as crown prince, Nayef, died a year later after 37 years as interior minister. Both King Abdullah, who headed the National Guard for 48 years, and Prince Saud al-Faisal, who served as foreign minister for 40 years, died in 2015. These four men had between them 173 years in office.
The Saudi government has never been a one-man show, but decisions taken by Mohammed bin Salman since he replaced his cousin, Mohammed bin Nayef, as crown prince in June 2017 appear to be moving the kingdom in that direction.
At the age of 32, he has become the most powerful man in Saudi Arabia since King Abdel-Aziz bin Saud, who founded the state. All this may be the precursor to profound reforms that the country needs. The danger is that it will just lead to another failed one-man Arab dictatorship.
As MbS sidelines potential rivals and dismantles alliances built with other branches of the royal family, some senior members of the Al Saud are likely to oppose his rise to power, which could consequently spell trouble for “Vision 2030.”
As he meets resistance and his base narrows, the crown prince may rely increasingly on the security apparatus to silence critics. That would only repeat the mistakes of republican Arab strongmen: socially quite liberal, but repressive and ultimately a failure.
War-generated risks
The Saudi-led intervention in Yemen may also have negative implications for MbS’ standing. The Saudi government originally thought that the intervention would only last a few weeks. However, the conflict has become stalemated and is increasingly unpopular in Saudi Arabia. The Yemen war is closely associated with the Crown Prince (MbS was appointed defense minister just before the military campaign began) and is taking a toll on his reputation. While estimates of the cost of the war vary, it was estimated at tens of billions of dollars in direct expenditure on munitions and military operations. As Saudi Arabia’s exit strategy remains unclear, the campaign could lead to considerable economic losses in the long term, which would in turn negatively impact “Vision 2030.”
The Yemen war, which, instead of the “Decisive Storm” that MbS promised in March 2015, became a stalemate. Since the war is seen as the crown prince’s signature policy initiative, failure in Yemen is a fundamental black mark on his credibility. He is determined to double down on the blockade, the air bombardment, and trying to rally the Houthis’ enemies against them.
According to military analysts, the war multiplied on the ground. There is the Houthi war with the government of President Abdrabbuh Mansour Hadi and its Saudi allies. Then there is the war against al-Qaida in the Arabian Peninsula and against Daesh. Recently, a new conflict appeared between Hadi and southern secessionists in Aden backed by Abu Dhabi.
Iran appears so far as being the main winner, and according to a recent testimony before the U.S. Congress by U.S. Central Command (CENTCOM) chief General Joseph Votel, Iran has accomplished more in Yemen in the last five years than it did in building up Hezbollah in Lebanon in 20 years, and has every reason to perpetuate a conflict that costs Saudi Arabia some $5 billion per month.
With no victory in sight, and as the war pushes the country towards famine, Saudi officials, including crown prince Mohammed bin Salman, have expressed a desire to end the conflict. According to diplomats and Yemeni political sources quoted by Reuters[4], Saudi Arabia and its adversaries in Yemen’s armed Houthi movement are holding secret talks to try to end a three-year-old war that has unleashed the world’s worst humanitarian crisis. The Houthi spokesman Mohammed Abdul-Salam had been in direct communication with Saudi officials in Oman on a comprehensive solution to the conflict, without a representative of the internationally recognized Yemeni government. The contacts were officially denied by both Saudi Arabia and the internationally recognized Yemeni government.
The sources said the Saudi-Houthi dialogue had been going on for about two months and appeared aimed at providing a framework for a resolution to coincide with the arrival of a new UN envoy to Yemen, former British diplomat Martin Griffiths.
The hoped-for accord would begin with a truce to pause fighting on nationwide battlefronts and culminate in the signing of a peace deal addressing the political interests of the warring parties.
Changes of the top brass
Last February, in a shake-up apparently aimed at overhauling its Defense Ministry during the stalemated war in Yemen, Saudi Arabia replaced its military chief of staff and other defense officials, including the naming of new commanders for the land and air forces.
No details were given about the military overhaul but crown prince Mohammed bin Salman has in the past openly talked about the need to improve the performance of the armed forces to match the expensive hardware purchased by the kingdom. Some analysts saw them as part of the reform process which would include improving training and recruitment of troops, allocating better resources and changing a military’s leadership to one willing to hear new ideas and make changes.
While some military analysts said that the shake-up was meant to enable crown prince Mohammed to convince western allies that he is trying to improve conditions in Yemen, others pointed out that they may be part of the young royal’s efforts to consolidate power, by removing a layer of officialdom that does not have his trust and replacing them with officials and bureaucrats who exhibit more loyalty.
Prominent among the personnel changes was the firing of military chief of staff Gen. Abdulrahman bin Saleh al-Bunyan, who was said to become a consultant to the royal court (other sources mentioned that he was forced into retirement), as well as the heads of the ground and air defense forces.
Al-Bunyan was replaced by Gen. Fayyadh bin Hamid al-Rwaili, a former commander of the Royal Saudi Air Force. Also appointed as an assistant defense minister was Khaled bin Hussain al-Biyari, the CEO of the publicly traded mobile phone and internet service provider Saudi Telecom Co.
Also noticeable was an effort to include a balancing of appointments of others in the Al Saud royal family in Mohammed bin Salman’s attempt to put in place a new generation of leadership in tune with his vision to transform the structure of Saudi decision making.
Prince Turki bin Talal Al Saud was appointed as deputy governor of the Asir region. The prince’s brother is billionaire Prince Alwaleed bin Talal, who recently was detained for months at the Ritz-Carlton in Riyadh as part of what the government described as an anti-corruption campaign.
“Vision 2030” and the Wahhabi factor
Another threat concerns the growing antagonism between the Saudi clerics and the reformers, which could generate a conservative backlash.
Clerics have been seen as partners in governing Saudi Arabia since the pact between the founder of the first Saudi kingdom, Mohammed bin Saud and the conservative Islamic scholar Muhammad ibn Abd al-Wahhab (1703-1792), after whom ‘Wahhabism’ is named.
Muhammad ibn Abd al-Wahhab came from the Nejd region of the Arabian Peninsula, an avid traveler and the author of The Book of Unity, which was rejected by most of his contemporaries in Mecca and Medina. Abd al-Wahhab preached returning to the Koran and the Hadith, rejected religious innovation (bidaa) and advocated eliminating practices that are not grounded in the Koran, such as Sufi rites and veneration of saints. He even accused other Muslims of being infidels for following practices that were, in his opinion, un-Islamic and called for strict adherence to traditional Islamic law (sharia). Abd al-Wahhab’s teachings constituted a revival of the Hanbali doctrine in the most ultraconservative form.
In 1744, fleeing from Medina, Abd Al-Wahhab arrived in al-Diriya (today on the outskirts of Riyadh), and sought protection from the local ruler, Muhammad ibn Saud. The two formed an alliance dividing power and responsibilities: ibn Saud ruling over the military and political matters and Abd al-Wahab over the religious ones. Armed with religious legitimacy, ibn Saud expanded his rule beyond al-Diriya, establishing the first Saudi state.
The death of Abd al-Wahhab did not impact the power-sharing arrangement that had been solidified during his lifetime. The descendants of Abd al-Wahhab (the Al Sheikh family) remained in charge of religious affairs under Saudi rule. To this day, they legitimize the political power of the House of Saud by approving succession and endorsing the king’s decisions. In exchange, the Sheikh family enjoys a privileged position in the state structures and plays a key role in the Committee for the Promotion of Virtue and the Prevention of Vice (the so-called “religious police”), the Ministry of Education and the Ministry of Islamic Affairs.
Traditionally the clerics’ influence has been concentrated in the judiciary and education system, and on social and family issues. Security, foreign affairs and most aspects of the economy are under the control of the Al Saud. Saudi Arabia’s traditional clerical elite includes the state-sponsored grand mufti and a council of senior ulama (scholars), appointed by the king, while the Al Sheikh family, descending from Muhammad ibn Abd al-Wahhab, have held a particularly privileged position in the education system.
Saudi clerics have tended to preach political quiescence and obedience, arguing that religion should keep itself purer than the more worldly area of politics, and that obedience to the rulers is paramount to avoid the risks of chaos, conflict and social division. This has of course been politically useful, helping to legitimize the monarchy and delegitimize political opposition. During the Arab uprisings, for instance, key clerics reiterated the view that protests were un-Islamic.
The speed of social and economic change is likely to exacerbate existing fears about preserving Islamic norms within the society, especially since the Kingdom unveiled plans for an entertainment city on the edge of Riyadh, which will be fifty times the size of Gibraltar once complete. This Las Vegas-style entertainment park project might deepen tensions with the ulama, the clerical leadership that remains a significant political force. Although clerics have not expressed any criticism toward MbS’ ambitious reforms plan (as it could be seen as an insult to the king), they constitute a central pillar of the regime’s authority. Losing their support could prove dangerous.
Bound to clash
The clerical establishment and reformers are bound to clash, since the implications of the reforms’ social changes would be a major blow to the religious establishment’s authority.Reforms threaten the compact between the houses of Saud and Wahhab, which is used to establish royal legitimacy and to promote puritanical theology.
The conservative Hanbali leaders who dominate the country’s religious landscape cannot directly oppose the liberalizing forces that “Vision 2030” is trying to impose on society; however, the clerical establishment plays a complex role in the country’s political dynamics and possesses the capacity to hamper key portions of the current reform efforts.
The clerics have traditionally dominated the management of the education system’s curriculum.Any attempts to create a knowledge based economy will require broad educational modernization. “Vision 2030” is a threat to the ulama’s legitimacy. Under privatization, the business community will encroach on the cleric’s market share of importance in the national psyche. Wahhabism’s puritanical dogma is a roadblock to some, although not all, foreign investors.The education system will need to prioritize secular curricula over religious teaching. Western, liberal ideals will coexist with increased global integration.
In order to avoid such risks, in the past few years, the Saudi authorities have been gradually and cautiously limiting the extent of the Sheikh family’s power. In August 2010, for example, the late King Abdullah issued a decree that only state-vetted scholars were allowed to issue fatwas.
Under King Salman and his son, more drastic measures have been taken. In April 2016, the Committee for the Promotion of Virtue and the Prevention of Vice was stripped of arresting powers which curbed its policing functions. In December 2016, the king appointed more moderate clerics to the Council of Senior Scholars, the highest religious body in the country. And in 2017, music concerts were allowed, mixed public events for both genders were held, and cinemas were scheduled to reopen after 35 years.
Also, MbS and the reformists are supported by the Saudi-backed Muslim World League, led since 2016 by Sheikh Mohammad al-Issa.
The Muslim World League is one of Riyadh’s most important instruments of soft power, funding faith-related charity and education work and spreading the Wahhabi religious ideology throughout the Muslim world and beyond.
Issa recently endorsed a series of recent moves by the crown prince that he said are backed by his colleagues among the ulama, or senior religious leadership, including the symbolic issue of women driving cars (which will be allowed beginning in June), about which he claimed that it was never a religious issue, but extremists wanted to connect it to religion. He also said the religious scholars backed MbS’s move to curtail power of the religious police, which “took authority that did not belong to them.” He explained that his colleagues among the ulama accept that “these reforms will assist in better understanding and in developing the society in general.”
While the Saudi religious establishment has been publicly supportive of the crown prince, his policies in favor of modernization could provoke some to call it corruption and an embrace of Western influence. It is also likely that the policies MbS is introducing would force a lot of dissenters among the clerics underground. Discontent could simmer for years before surfacing in some form or another.
In order to rationalize the Saudi economy, bring women fully into the workforce, shift the economy’s emphasis from the public to the private sector, and diversify away from a 90 percent reliance on oil revenues, the reformers will have to get free from the social restrictions imposed by Wahhabism. Restructuring the economy inevitably will involve renegotiation of the Al Saud’s bargain with the Wahhabis and the kingdom’s social contract in which the population surrendered political rights for cradle-to-grave economic benefits.
They would also have to take into account the fact that the country’s legal system operates within Islamic law, which is the ultimate source of legislation in Saudi Arabia. Strictly abiding by traditional interpretations of Islamic law is a crucial element of the worldview Abd al-Wahhab introduced. Breaking the Saudi-Wahhabi pact would mean breaking up with this traditional interpretation and potentially codifying law rather than relying on judges to interpret it.
The greatest challenge the Al Saud face is to find an alternative to Wahhabism that will legitimize their continued absolute rule. No immediate alternative presents itself. There are a minority of scholars in the wider Saudi establishment that want to re-integrate Saudi religious thought into a more normative Sunni mainstream, but that would mean essentially disregarding Abd al-Wahhab’s teachings and that of his successors. However, a change of philosophical levels where the Saudi religious establishment is no longer Wahhabi would be a monumental shift.
While it is impossible to say what percentage of the reform program will materialize, the amount of change that “Vision 2030” achieves will directly impact the region and the rest of the world.
The main question is how much of “Vision 2030” will actually be implemented, given a track record of non-delivery in the past. Policymakers and economists alike are already trying to manage expectations by saying in interviews and conversations that if Saudi Arabia meets 70 per cent, or even 50 per cent, of “Vision 2030”’s goals, this will be excellent progress.
In any event, “Vision 2030” would significantly alter the various elements of the social contract(s) in Saudi Arabia. If implemented as planned, it would change economic relations between citizen and state, disrupt some traditional patronage structures and probably also ultimately lead to expanded social freedoms. Privatizing the economy and an influx of foreign investors and technicians are bound to strain the conservative rules of Saudi society.
The authorities may hope that the political system can remain largely unchanged, at least in terms of the dominant role of the monarchy. But their economic reform plans imply major changes in the economic basis of the relationship with citizens, and potentially also to the traditional partnership between ruling family and clerics.
The Saudi leadership has traditionally shown remarkable resilience. The question is whether crown prince Mohammed bin Salman is truly capable of dissenting from the eternal policy charted by the kingdom’s founding monarch Abdulaziz ibn Saud.
King Faisal bin-Abdulaziz, who ruled Saudi Arabia from 1964 to 1975, put in place policies of modernization and reforms, including a formal abolition of slavery, some religious inclusiveness, and the introduction of television broadcast. The efforts by Faisal to reform Saudi Arabia ended with his assassination by his own nephew, on behalf of the ultra-conservative Wahhabists.
Forty-two years later, some of those forces remain at play. MbS’ recent consolidation of power within the dynasty has created serious animosity within the House of Saud. King Faisal’s fate should be a cautionary tale for the young crown prince who has disturbed the traditional balance of power within the dynasty itself.
In the world arena, the Saudi Arabia that emerges throughout and after “Vision 2030” will shape the kingdom’s political and economic relationships with other key countries. Saudi Arabia and Iran dominate the Persian Gulf and are central figures in the larger Middle East. Their competition for regional hegemony is long running and continuously evolving, and a Saudi internal shakeup will impact the kingdom’s ability to fight the proxy wars where these states face off. Changes to Saudi energy policy will impact Saudi Arabia’s customers and competitors, specifically China’s efforts to shift its economy from an export to consumer driven model. Reduced Saudi crude production that seeks to raise prices is already presenting opportunities for other producers to fill the void. Saudi diversification away from oil will reshape the international energy market.
According to most assessments of the “Vision 2030” process, Saudi Arabia will not experience serious political instability or regime collapse in the next year or two. There are, however, reasons to worry about what will happen later. The success of planned domestic economic reforms is by no means ensured, and the coincidence of several plausible developments – a potentially divisive succession process, a worsening external environment, and growing unrest at home, including an upsurge of terrorist attacks from Saudi jihadis returning from foreign battlefields – could present a challenge that the ruling regime may not be able to manage.
While many have predicted the fall of the House of Saud, they all proved to be wrong. The most likely alternative to its rule is not democracy but chaos. The country would fragment and, in the scramble for its riches, Iran would extend its power, jihadists would gain a new lease of life and foreign powers would feel compelled to intervene.
However, if MbS succeeds in his modernization efforts, Saudis will benefit from new opportunities and freedoms, and the world will benefit from curtailing the Wahhabi radicalization agenda. A decade from now, the kingdom could look more like the United Arab Emirates, its prosperous and relatively forward-looking neighbor.
[1] Kingdom of Saudi Arabia, Council of Economic and Development Affairs of Saudi Arabia (2016), ‘Saudi Vision 2030’, April 2016, see
[2] Details are presented in the Annex
[3] BND warnt vor Saudi-Arabien, 02.12.2015, DPA, retrieved from, Germany scolds BND spy agency over Saudi criticism, 03.12.2015, BBC, see
[4]Yemen’s Houthis and Saudi Arabia in secret talks to end war, 18.03.2018, Reuters, retrieved from
The Ritz-Carlton “anti-corruption campaign”
In November 2017, the Saudi government locked up hundreds of influential businessmen, many of them members of the royal family in the Riyadh Ritz-Carlton hotel, in what it called an anti-corruption campaign[1].
The Saudi-owned satellite network Al Arabiya reported only that a large number of arrests, including 11 princes, had been ordered by an “anticorruption committee” that just hours earlier had been formed under the direction of Crown Prince Mohammed. A royal decree granted the committee powers to detain individuals or seize assets without any trial, process or disclosure.
During several months of captivity, many were subject to coercion and physical abuse, according to witnesses. In the early days of the crackdown, at least 17 detainees were hospitalized for physical abuse and one later died in custody. The government denied accusations of physical abuse as “absolutely untrue.”
To leave the Ritz, many of the detainees not only surrendered huge sums of money, but also signed over to the government control of valuable real estate and shares of their companies, all outside any clear legal process. The government has yet to actually seize many of the assets, leaving the former detainees and their families in limbo.
While the Saudi officials have denied any allegations of abuse and portrayed the Ritz episode as an orderly legal process, interviews with Saudi officials, members of the royal family, and relatives, advisers and associates of the detainees revealed a coercive operation which transferred billions of dollars in private wealth to the crown prince’s control.
The government, citing privacy laws, has refused to specify the charges against individuals and, even after they were released, to clarify who was found guilty or innocent, making it impossible to know how much the process was driven by personal score settling.
Among the more than 200 detainees was Prince Alwaleed bin Talal, the kingdom’s most famous investor and one of the world’s richest men, as well as some of the kingdom’s wealthiest and most powerful men. They included Fawaz Alhokair, who owned the kingdom’s franchises of Zara, the Gap and dozens of other stores; Salah Kamel, an elderly businessman from the Red Sea port city of Jidda; and many other princes, businessmen and former government officials.
1) Part of the campaign appears to be driven by a family feud, as Crown Prince Mohammed presses the children of King Abdullah, the monarch who died in 2015, to give back billions of dollars that they consider their inheritance. They were seen as potential rivals for the Saudi throne and since Salman became king in 2015, he and the crown prince have moved to sideline them.
One of Abdullah’s sons, Prince Turki, was removed from his post as the governor of Riyadh in 2015, while another, Prince Mutaib, was dismissed as the head of the National Guard in November. Both men, and a number of their brothers, were detained in the Ritz. Prince Mutaib bin Abdullah, a favored son of the late King Abdullah and head of one of the country’s three main security services, was considered the most potent remaining rival to the crown prince’s power.
King Abdullah left tens of billions of dollars in the Abdullah Foundation, which was meant to finance projects in the king’s name while also serving as a piggy bank for his heirs. After he died in 2015, the foundation paid out billions of dollars to his more than 30 children, about $340 million to each son and $200 million to each daughter.
The crown prince is seeking to recover that money, which he believes was taken illegally from the charity, according to people familiar with the negotiations. King Abdullah’s children, however, consider it their inheritance. The foundation’s administrator is Prince Turki, who is still detained and most of his siblings and their families are banned from travelling outside the kingdom.
2) A significant case is that of the Arab world’s largest private media company, MBC, which crown prince Mohammed expressed interest in buying in 2015. While MBC is not considered highly profitable, the company is very popular and has considerable power to influence Arab public opinion.
A team from the international accounting firm PWC arrived to vet the company’s books in October, and the company’s owners and most of its board were arrested and detained on Nov. 4. Four days later, PWC’s accountants visited the company’s headquarters in Dubai to finish their report, and a second foreign firm, the British law firm Clifford Chance, drew up the paperwork to transfer the company’s ownership. Neither firm publicly raised any concerns that the sellers had been detained by the buyer.
Waleed al-Ibrahim, MBC’s chairman, was released from the Ritz in late January, but has yet to return to Dubai, despite promises to his staff. In recent weeks, MBC representatives have met with Clifford Chance lawyers to finalize an agreement that will leave Mr. Ibrahim with 40 percent of the company, likely paving the way for his ouster as director. The company’s programming has already changed and six popular Turkish drama series were cancelled, costing the company about $25 million. The order came from a senior Saudi official close to Crown Prince Mohammed. The Saudi government is at odds with Turkey over its ties with Qatar, which Saudi Arabia and its allies are boycotting.
3) Among the Ritz-Carlton detainees was Sheikh Mohammed Hussein Al Amoudi, the 71-year-old son of a Yemeni businessman and his Ethiopian wife, who once was considered by Forbes the world’s richest black person, also known as “Sheikh Mo”. He controls businesses that employ more than 70000 people, from Ethiopia, where he is the largest private employer and the most prominent backer of the authoritarian government, to Sweden, where he owns a large fuel company, to London, which he has used as a base to set up a number of companies.
The late King Abdullah was a supporter of Sheikh Amoudi’s Saudi Star Agricultural Development, a farming venture in Ethiopia established to supply rice to Saudi Arabia. Such ventures are seen as strategic assets in a desert kingdom keenly aware of its agricultural limitations. While Saudi Star has had a tough time getting going, it is said to be a particular focus of the new government’s interest.
4) During the operation, the government has also taken management control of Saudi Binladen Group, the construction giant founded by Osama bin Laden’s father that for decades has served as the royal family’s go-to contractor. Its chairman, Bakr Binladen, remains detained, and his relatives have lost much of their private wealth. Large sums and pieces of land have been taken from Mohammed al-Tobaishi, the former head of protocol of the royal court; Fawaz Alhokair, a retail tycoon; Khalid al-Tuwaijery, a former chief of the royal court; Adel Fakieh, a former government minister who helped Prince Mohammed develop his reform plans; and Amr Dabbagh, the former head of the government body that oversees foreign investment.
Following the campaign, the kingdom’s public prosecutor said in January that the government had reached settlements worth $106 billion, and other officials have said they expect the process to yield $13 billion in cash by the end of 2018. However, little cash was seized, and most of the seized assets were domestic real estate and shares of companies, which the government is expected to liquidate over time, a process that could take years.
[1] The main aspects were presented in two articles from The New York Times: Danny Hakim, Ben Hubbard: He Owns Much of Ethiopia. The Saudis Won’t Say Where They’re Hiding Him, 16.03.2018, and Ben Hubbard, David D. Kirkpatrick, Kate Kelly, Mark Mazetti: Saudis Said to Use Coercion and Abuse to Seize Billions, 11.03.2018
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