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The Kingdom and the Arab Uprisings

The Kingdom and the Arab Uprisings

In a report earlier this year, veteran Middle East scholar Gregory Gause addressed the question of how, given the level of unrest in the region, Gulf Monarchies have survived the Arab Uprisings. While Saudi Arabia shares some of the preconditions which led to unrest elsewhere in the Middle Eastincluding high levels of state corruption and youth unemploymentthe Saudi regime has remained firmly in control of the situation to date. In this light Gause rightly asks, is the Saudi monarch truly a King for all seasons?

The regime has relied on two strategies in particular to maintain its grip on power. The first involves the time honoured approach of carrot and stick:  extensive state repression coupled with large subsidies and cash handouts to the population, totalling around $130 billion. A second, more subtle strategy involves increased state reliance on the religious establishment to foster a climate of obedience among Saudi citizens. With increased backing from the state and its media outlets, Saudi clerics have played on both domestic and regional sectarian tensions, “casting a chill over cooperation and coordination between Sunni and Shia activists in the Kingdom —to the benefit of the monarchy.” In the process, the Saudi state has carefully cultivated its image as an island of stability amid the civil disorder and political upheaval that has spread throughout much of the Middle East since early 2011.

The Kingdom has thus managed to emerge from the storm relatively unscathed, so far. At a glance, it would appear that social, political and economic stability will remain the norm in Saudi Arabia, in the medium term at least. Much of the media commentary since 2011 has echoed this view; as one academic argued in the Washington Post shortly after the fall of Mubarak,

Satisfaction with the leadership, economic strength and nascent nationalism mark a unity in Saudi Arabia that is of a different fabric than those that are tearing across the Arab world. While other regimes reap the bitter harvest of irresponsible fiscal policies, social disunion and unpopular leadership, the Saudi monarchy is likely to remain a bulwark of regional stability and security.

This view ignores many important realities, however. There is little doubt that the strategies deployed by the Saudi regime are likely to experience diminishing returns over time, for they leave the root causes of popular disenchantment with the regime unaddressed -high levels of youth unemployment, inflation, rising inequality and corruption. Meanwhile, welfare costs are ballooning, leaving the fiscal position of the Saudi state vulnerable to downward fluctuations in oil prices. Finally, by fuelling sectarian strife, the Saudi authorities are opening themselves up to a possible backlash as an increasingly marginalized Shia minority seeks to make itself heard.

The Saudi Economy: growth drivers and tail winds

By most conventional measures, the Saudi economy is doing well. Over the last decade GDP growth has been robust, averaging around 4.4 percent. 2012 GDP was $711 billion (making it the world’s 19th largest economy), and in the same year, oil accounted for 87 percent of exports, 75 percent of government revenues, and 46 percent of GDP. And yet the fruits of growth have not been felt by all. The Shia minority in the Eastern province of Saudi Arabia has been systematically marginalised and excluded from economic opportunities, while youth unemployment has remained persistently high at around 28 percent. The distributional implications of the Saudi political structure go a long way in explaining this.

Saudi Arabia is an oil economy par excellence. Wealth generated by oil has played a definitive role in shaping the Saudi political economy. The social, economic and political relations that govern Saudi society are part of a system that rewards the royal family with vast wealth, as revenues from oil are used to “buy off” society (politically de-mobilizing the population) while maintaining a closed political system. State patronage and the provision of a comprehensive social safety net are the cornerstones of the domestic political economy. Wealth derived from oil trickles down to Saudi society through a variety of welfare programmes including employment support, free education, healthcare, subsidized fuel and even, as the historian Toby Jones points out, “the provision of copious amounts of water.”

The upshot? Saudi arabia is what economists and political scientists describe as a “rentier state”. The Saudi government’s control over oil revenues allows it to refrain from extracting any significant taxes from its citizens, while providing them with extensive benefits. The system, as Chatham House’s Jane Kinnimont puts it, “means that while the state is absolved from the usual need to obtain income from its citizens, they in turn have less of a stake in demanding transparency, accountability and so on, or so the argument goes.” No representation without taxation, in other words.

How long can this last? According to recent estimates, Saudi Arabia can continue pumping oil out at current rates for the next 63 years. However, the cost of Saudi’s welfare programmes and subsidies to the population are growing rapidly, and all require massive spending on the part of the state. This spending, in turn, is contingent on the continuation of high oil prices – if the state is to balance its books.

There is of course massive wealth from which to draw to placate domestic dissent and with which to spread the Saudi counter-revolutionary agenda throughout the middle East. The latter has been most visible in Bahrain, and more recently in Egypt, where the Saudi monarchy stood firmly behind the Egyptian military’s brutal crackdown on the Brotherhood.

Nevertheless, should oil prices fall below $100 per barrel for an extended period of time, the Saudi state will inevitably find it harder to meet its obligations without reform. As one expert on the Kingdom observes, “Since the late twentieth century, Saudi politics has been based on outmaneuvering calls for political transformation, on preserving a system of political economic privilege, on high returns on the sale of oil, and on unleashing the forces of radicalism and sectarianism to insure the survival of the kingdom’s ruling clique.” Preserving the status quo is the name of the game, and in the face of regional turmoil, this is likely to become increasingly difficult for the Saudi ruling elites to achieve.

Domestic Oil Consumption

Another important issue for Saudi society more generally is that of rising domestic oil consumption. Of the 11.1 million barrels of oil produced in Saudi Arabia in 2011, over one quarter were consumed domestically – making The Kingdom the fifth largest oil consumer in the world. Saudi now consumes more oil than Germany, while having less than one third of Germany’s population. The doubling of the population since the mid 1980s is one part of a story or surging demand. The primary factor however is a reliance on oil-fired power generation, which has risen in tandem with economic prosperity.

Saudi Arabia has a remarkably undiversified approach to addressing its energy needs, which are almost entirely met by oil and gas. According to a 2011 Chatham House report, rising domestic consumption could turn The Kingdom into a net importer of oil within the next three decades. The report goes on to note that,

Saudi Arabia’s place in the world oil market is threatened by unrestrained domestic fuel consumption. In an economy dominated by fossil fuels and dependent on the export of oil, current patterns of energy demand are not only wasting valuable resources and causing excessive pollution, but also rendering the country vulnerable to economic and social crises. Similar to other Gulf countries, Saudi Arabia has responded to the Arab Spring with generous public sector pay increases, highlighting how the country relies on oil revenues to deter political unrest. But diminishing oil revenues in the future could hinder Saudi Arabia’s ability to use its elaborate public sector and welfare system to combat political turmoil.

The Problems are Widespread

In his recent book Sectarian Gulf, Toby Matthiesen demonstrates how the legitimacy of Gulf rulers has been profoundly challenged as a result of the Arab Uprisings. This has gone unnoticed by many in part because Western politicians as well as the western media establishment have been reluctant to discuss protests and demands for political reform in the Gulf. This is mainly for strategic reasons: the Gulf is home to almost half of global oil reserves, hosts U.S. military bases, purchases large amounts of US military equipment, in addition investing large sums in Western economies.

But beneath a veneer of calm, unrest is brewing. The Arab Uprisings have drawn attention to “a number of grievances [which] have arisen that are shared by disparate sectors of Saudi society: low wages, unemployment, infrastructural neglect at the municipal and provincial level, and—perhaps most importantly—protests over the incarceration of political dissidents. On top of this, the previous tools of social control—familial and clerical authority—may be showing the strains of overuse.”

Matthiesen echoes this when stating that popular unrest across the Middle East since 2011 “has fundamentally altered the equation and given hope to Saudi citizens; the old tactics of repression, defamation, and media blackout have not worked anywhere else in the Arab world and are unlikely to work indefinitely in Saudi Arabia.”

Is the Kingdom on the Wrong Side of History?

In sum, carrots and sticks have sufficed to enable the Saudi regime to maintain a firm grip on power so far. The monarchy has effectively neutralized dissenting voicesin the short term at leastby handing out further subsidies to parts of the population, while at the same time undertaking a ruthless crackdown on those who engage in public activism. Added to this was Riyadh’s use of sectarianism to prevent Shias and Sunnis from rallying around a common cause. As a result, relations between the Shia and the Saudi state are currently at their lowest ebb in decades.

Saudi economic dynamism may also suffer as a consequence of the regime’s approach to dealing with potential domestic unrest. It is widely recognized that Saudi Arabia would benefit greatly from the emergence of a genuine private sector – and yet as one analyst rightly points out, “the adopted responses to the uprisings of 2011 have only reinforced the culture of state-dependency and the general impression that GCC citizens are better off in the public sector. This will make it more difficult for private companies to entice and retain talented citizens as employees when government jobs offer more attractive incentives: shorter working hours, job security (GCC citizens are rarely laid off), and, of course, increasing wages.” Steffen Hertog, an authority on the Saudi political economy, echoes this reality eloquently:

In the long run, Saudi Arabia will have to undergo a painful shift away from both public sector over-employment and dependence on migrant labor. Such a shift means short-term pain for both citizens and business. Times are probably too good to impose such pain right now. Once the state reaches its fiscal limits, however, the forced shift away from state dependence would be all the more sudden and violent. This does not guarantee revolution, but it would mean potential for serious instability for the first time in decades.

The current picture of stability that dominates the airwaves may therefore be more tenuous than many would have us think.

Further Reading:

Is Saudi Arabia Stable? Sada Discussion – Carnegie Endowment for International Peace

Jane Kinnimont – Gulf States Under Pressure – Chatham House

Toby C. Jones – Saudi Arabia Versus The Arab Spring – Ritarian Quarterly

Toby Matthiesen – The Sectarian Gulf Vs. The Arab Spring – Foreign Policy

F. Gregory Gause, III – Kings For All Seasons: How the Middle East’s Monarchies Survived the Arab Spring – Brookings Doha

Hugh Eakin – Will Saudi Arabia Ever Change – NYRB

Glada Lahn and Paul Stevens – Burning Oil to Keep Cool: The Hidden Energy Crisis in Saudi Arabia – Chatham House

(Wikimedia Commons image courtesy of Brian0918)

About the Author:

William Oliver is Nabateans’ editor for international economics and Middle East current affairs. He obtained his degree in History from the School of Oriental and African Studies in London. While his studies focused on the Middle East in the 18th and 19th centuries, William has a long-standing interest in international finance and the political economy of development. William’s work is aimed at understanding how the Middle East integrates with the global economy, and into the wider geopolitical landscape.

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