Saudi Arabia: The Challenges Ahead

Since its foundation in 1932, Saudi Arabia has been an exemplary practitioner of what Kissinger would describe as statesmanship, realpolitik or raison d’etat. This entails the ability of governments and their leaders to unsentimentally analyse the geopolitical landscape in which they find themselves, effectively juggling competing priorities in a manner which mitigates conflict and enhances prosperity, while remaining anchored to a coherent worldview. Despite Saudi Arabia’s size, sparsely distributed population, vast natural resources and lack of easily defensible borders, it has mostly avoided conflict, acquired significant wealth and established healthy relations with all the major powers. In a region known for violent upheaval, Saudi Arabia has emerged unscathed.

Saudi Arabia now faces a crossroads, and a set of potentially historic challenges

It has achieved this through a combination of skilful diplomacy, and an astute understanding of its own population, successfully identifying when to reform, and when to repress. But Saudi Arabia now faces a crossroads, and a set of potentially historic challenges. Its current de facto leader, Crown Prince Mohammad Bin Salman, holds potential, both positive and negative. The revolutionary zeal with which he is imbued has may serve to both modernise and liberalise Saudi Arabia. But his evidently impetuous nature, betrayed by the sheer insanity of the apparent execution and dismemberment of a US-resident, albeit Saudi national – the journalist Khashoggi – also holds the potential to produce a more tyrannical, more capricious, more unstable government.

Internal

Saudi Arabia faces two particularly threatening long-term challenges, the first demographic. As much as 60% of the Saudi population is under the age of 21, and unofficial estimates place the unemployment rate at 35% among the young. Compounding this problem, large swathes of this age cohort are educated, often abroad, and thus have the expectation of well-paid employment. While they are unlikely to be found attending LGBT events in Brighton, San Francisco or Tel Aviv, this younger generation are certainly significantly more liberal than the prevailing religious orthodoxy in the country. Reforming the society and the economy, in the face of reactionary opposition from established elites, in a more liberal, more economically diversified direction will be a critical challenge for Saudi authorities. As the demographic make-up of Tahrir Square during the Arab Spring uprisings demonstrated, the combination of youth with boredom, dissatisfaction, poverty and repression can produce explosive results for the status quo.

The Saudi economy is dangerously dependent on oil

Adding to the severity of this problem, the Saudi economy is dangerously dependent on oil, its second long-term problem. It is the world’s leading oil exporter and has the second largest reserves after Venezuela. Easy access to vast oil reserves has mostly been a boon to the Saudi economy; in future this dependency may, however, be crippling. Around 87% of Saudi budget revenues, 90% of export earnings and a whopping 42% of the Kingdom’s GDP is reliant on oil, a commodity notorious for its price volatility.

In the immediate term the threat of this dependency is small. Oil prices have recovered from the lows of early-2016 when prices briefly dipped below $30 a barrel; they presently hover around $80 a barrel. Nevertheless, in the medium to long term, the world is gradually shifting away from reliance on energy sources derived from fossil fuels. Over a fifth of the world’s electrical power production now comes from renewable sources, with the International Energy Agency (IEA) predicting that this could rise to a quarter by 2020. Sure, oil will remain a profitable and in-demand commodity for some time; but for a country as dependent as Saudi Arabia, where 35% of its workforce is employed by the public sector and therefore vulnerable to decreases in government revenues, even a gradual decline could be catastrophic without substantial reforms, specifically diversification.

External

Bearing in mind its neighbourhood, Saudi Arabia has comported itself with skill and finesse since its founding in its external relations. But with the Middle East near the apogee of its historical turbulence, Saudi leaders will not be able to rest on their laurels.

Saudi Arabia’s greatest challenge is its political and religious archenemy, the Islamic Republic of Iran. This is an issue of profound danger to the Saudis, both internally and externally. Internally, Saudi Arabia possesses a large, and often restive Shi’ite minority, most of whom reside in its Eastern Province, the site of Saudi Arabia’s oilfields. With Iran a Shi’ite power, and basing much of its foreign policy and rhetoric on this mantle, the domestic threat is genuine.

But Riyadh also faces serious geopolitical threats from Iran. With Iranian, or Iranian-backed proxies fomenting violence and insurrection across Saudi Arabia’s northern border and south-western border, Saudi Arabia faces a land-encirclement by hostile Shi’ite forces. Whether it is the Houthi rebels in Yemen, Hezbollah and the Assad regime in Syria, or an Iraq with increasingly close ties to Tehran, Saudi Arabia faces a menacing geopolitical landscape. Although Saudi Arabia’s military equipment is highly sophisticated, its armed forces are not ready for conflict.

Saudi Arabia also faces growing calls amidst its traditional Western partners… to disassociate from the regime

Adding to this problem, Saudi Arabia also faces growing calls amidst its traditional Western partners – the United States, but also Britain – to disassociate from the regime, with these calls evolving into demands on the part of many following Saudi activities in Yemen, and the disappearance of Khashoggi. Although Riyadh can feel reasonably secure in its short-term relations at least with the United States, but most probably with a post-Brexit Britain as well, those waiting in the political wings in both Westminster and Washington DC are markedly less friendly. Although the Kingdom is forging closer relations with Russia and China, particularly over the latter’s `One Belt One Road` initiative, neither Moscow nor Beijing is likely to be able to satisfactorily replace the United States as a partner to Saudi Arabia.

Saudi Arabia: The Future

Saudi Arabia has faced crises before: whether internal succession struggles between King Saud and his Crown Prince, Faisal, or the seizure of the Grand Mosque in Mecca by insurgents in 1979, the Kingdom has successfully navigated difficult periods. Nevertheless, the serious long-term challenges on both the internal and external front, combined with the need to deal with the daily exigencies of being a state in the Middle East, is a unique and unprecedented challenge for the Kingdom. The Saudi state has disappeared twice before; whether this is third time lucky, only time will tell.