Saudi Arabia: Moulding Alliances Amid Melting Oil Income
One year after the enthronization of King Salman, Saudi Arabia has enhanced its role as a center stage player not only on the global oil market but also throughout the Middle East. The modulations of Saudi’s regional foreign policy are monitored and scrutinized with more zeal and apprehension than the behavior of other main players, including the US, Russia, Iran, Israel, and even the increasingly unpredictable Turkey.
That is due to a number of overlapping factors, not fully positive for Riyadh. Saudi Arabia kick started a chain of crucial events in Libya, Yemen, Syria, etc. which did not evolve in the desired direction.
The Kingdom looks with a growing suspicion at the gradual strengthening of Iran, especially after the ayatollahs managed to patch up their quarrel with the international community over their controversial nuclear program. Saudi Arabia is currently trying to detach its foreign policy from the commitment to coordinate all the substantial moves with the US Administration and, eventually, assume more geopolitical autonomy.
Saudi Arabia is currently trying to detach its foreign policy from the commitment to coordinate all the substantial moves with the US Administration and, eventually, assume more geopolitical autonomy.
This is no easy task. To a certain extent, the Saudis are perceived by Western allies, especially after the terrorist attacks in Paris in November, as aggressive promoters of Wahhabism, the ultraconservative strain in Islam, while abstaining from putting up a fight against Islamic radicals and terrorists.
The tarnished image is exacerbated by the accumulation of economic worries linked to the falling oil prices, leading to additional constraints. The Kingdom’s budget deficit for 2015 amounts to $98 billion. It is less than projected by the IMF ($130 billion) but it is no longer a sad one-off phenomenon but a trend supported for the second year in a row, although in 2014 the deficit was modest, $17.5 billion. Consequently, domestic petrol prices will go up by 40%; in the
next 5 years subsidies for electricity and water would decrease; taxes will be raised on tobacco and some other commodity goods. The Kingdom is gradually lowering its dependence on oil export revenues: today, they fill in the
budget by 73% compared to 89% in 2014. For 2016, the goal is to achieve the 70% threshold.
Simultaneously, Saudi currency reserves have melted down in 2015, shrinking from $732 billion to $644 billion. With no fast track to diversification of sources of revenues and given the current spending commitments, the reserves
would disappear in 5 years, warns the IMF.
At the very end of December 2015, the King addressed the Majlis al-Shura (Advisory Council) and highlighted the need of economic reforms in order to be able to diversify the economy, overdependent on oil revenues. That was perceived as the beginning of the end of a time-honored bonanza for the Saudi population, who got used to subsidized prices and other financial concessions.
So far, the Government has no intention to limit oil production for the sake of pushing up prices. Riyadh might not act until international sanctions are lifted from Iran and Iranian oil comes en masse to the global markets. What would be the impact on prices is unknown, with many energy analysts downplaying this factor and claiming it has been already accommodated in the current low price environment after the nuclear deal was reached last summer.
Anyway, it is not clear for how long Saudi Arabia could sustain low oil prices. Diversification of the national economy cannot be achieved overnight. Right now, as a consequence of the multiplying challenges, Saudi Arabia seems to be eager to find a solution for regional crises, and the Syrian quagmire comes on the top of the list.
According to the Vienna deal on Syria (see aslo: ”Will Iran Contribute To Regional Stability?”, EIRA, Volume 3, Issue 8/9 August/September 2015) Saudi Arabia organized a meeting of the heterogeneous Syrian opposition in order to formulate a common platform for future political negotiations with the al-Assad regime.
The strongest, from the military standpoint, organizations (not only IS, but also Jabhat al- Nusra and Ahrar al-Sham) were not invited, because they are considered almost unanimously to be terrorists. Kurdish groupings were also absent. At the end of the day, the Saudisponsored gathering did not elaborate a genuine approach/roadmap and produced nothing more than routine invectives against the regime in Damascus, with whom, as a matter of paradox,
they were supposed to negotiate a comprehensive political settlement.
In mid-December another exceptional event happened in Riyadh. The strongman of the regime, the deputy Crown Prince and Minister of Defense, Mohammed bin Salman, informed the press of the creation of a Sunnite coalition to
fight terrorism, presumably the IS, but without naming it as the key target.
On paper at least, the new alliance looks powerful: 34 countries, from Sahel to Turkey (Pakistan and Malaysia were also announced to be part of the coalition but later they denied it) committed themselves to fighting terrorists. The
formidable union can showcase some mightiest armed forces in the MENA region, and even beyond.
However, most of the experts believe that there will no dramatic changes on the ground. The US-led anti-IS coalition comprised of 65 nations already exists, and Saudi Arabia is part of it. Yet, only half a dozen of the coalition participants sent military aircraft to the conflict zone and occasionally bombarded the terrorists’ targets. The US is acting basically alone. The Saudi airplanes executed few missions in Syria at the beginning of the US-led operations, and then were grounded. In Iraq, no Saudi military aircraft was ever spotted. So far Riyadh seems to be completely absorbed with the war in Yemen, and does not have the possibility (or the desire) to commit its military to combat IS in full and in earnest.
Other participants of the Saudi-led coalition seem to be even less committed to the goal of fighting IS. If so, is there any sense in the Riyadh’s initiative?
Obviously, there is.
First, it is aimed to showcase to Western partners some activity on the anti-terrorists’ front, especially in the context of the suspicions that Saudi money and ideology is fuelling the jihadist movement. From a formal approach and a Western perspective, the move could be correct: only the Sunnite nations’ military would be not perceived by the local population as hostile, with no colonial legacy and no Christian roots as in the case of peacekeeping missions in the region. After a year of existence of the US anti-IS coalition, the Americans were not very vigorous in bombing Caliphate’s depots and trenches, partly because they did not want to be perceived as a pro-Shiite, anti-Sunnite power.
Second, Saudi Arabia is acting as an aggregator of the Sunnite nations; its new coalition excludes the Shiite countries, Iran and Iraq, and a couple of Sunnite countries considered unreliable, defying the Saudi Arabia’s primacy, namely the
multi-confessional Lebanon, Oman, and Qatar. It proves the assumption that Riyadh wishes to assert itself as an indisputable leader of the Sunnite world, probably in view of a potential gearing up of the religious war in the Islamic
Third, the move may be the first step in creating real Sunnite armed forces for hard-core operations on different battlefields. It may start with a hypothetical peacekeeping operation in Libya to prop up the new unified government, while Western powers would commit their air forces, and continued by “boots on the ground” operations in Syria, presumably with collaboration from Bahrain, Qatar, and the UAE.
The decision-making mechanism is supposed to be collective, but Saudi Arabia would certainly position itself as the sole leader without asking for clearance or permit from the US. It is noteworthy that Washington was taken by
surprise by the Saudi announcement of the formation of a new coalition.
Fourth, the more realistic scenario seems to be the sharing of intelligence and coordination of some activities on the ground. For that purpose a joint command would be set up in Riyadh, similar to a coordination center operated in
Bagdad by Iran, Iraq, Russia and Syria. Remarkable enough is the claim of the Saudi-led coalition to counter IS and other jihadists “ideologically”, whatever that means.
In sum, the Kingdom tries to position itself in a more appealing format, hoping to find a new and comfortable place for the day when the time will be ripe to end the wars and determine the shape of peace (see also: “Saudi-Iranian war of words: prelude to Islam’s Reformation?”, EIRA, Volume 4, Issue 1, January 2016).
Yet, the gradual exhaustion of financial resources could derail this ambition and force Riyadh to limit demands and accept compromises, which, as of now, are considered out of the question being incompatible with the grand stature of the number one OPEC oil purveyor to the world.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of ESCP Europe Business School.