Eight of the 12 surviving sons of Saudi Arabia’s founding monarch are supporting a move to oust King Salman, 79, the country’s ailing ruler, and replace him with his 73-year-old brother, according to a dissident prince.
The prince also claims that a clear majority of the country’s powerful Islamic clerics, known as the Ulama, would back a palace coup to oust the current King and install Prince Ahmed bin Abdulaziz, a former Interior Minister, in his place. “The Ulama and religious people prefer Prince Ahmed – not all of them, but 75 per cent,” said the prince, himself a grandson of King Ibn Saud, who founded the ruling dynasty in 1932.
Support from the clerics would be vital for any change of monarch, since in the Saudi system only they have the power to confer religious and therefore political legitimacy on the leadership.
There have been rumblings about this for several weeks, with the SNAFU blog noting it towards the end of September. (See this Guardian article).* * *Unhappiness at King Salman’s own diminishing faculties – he is reported to be suffering from Alzheimer’s disease – has been compounded by his controversial appointments, the continuing and costly war in Yemen and the recent Hajj disaster. Earlier this week the International Monetary Fund warned that Saudi Arabia may run out of financial assets within five years unless the government sharply curbs its spending, because of a combination of low oil prices and the economic impact of regional wars.
The issue of declining oil revenue is paramount: currently, 30% of Saudis under the age 30 are unemployed, according to The Daily Times, and dependent on Saudi welfare programs. But the Saudi strategy to lower oil prices may have backfired. The Middle East Eye explains:
... Saudi Arabia’s primary source of revenues, of course, is oil exports. For the last few years, the kingdom has pumped at record levels to sustain production, keeping oil prices low, undermining competing oil producers around the world who cannot afford to stay in business at such tiny profit margins, and paving the way for Saudi petro-dominance.The lower oil prices have required Saudi Arabia to dip into its financial reserves at the tune of $12 billion per month, which the King has attempted to make up through borrowing. However, the long term prospects indicate that unless something happens in the next few years, Saudi Arabia may be required to cut its lavish domestic subsidies, which will likely spark a great deal of social unrest.
But Saudi Arabia’s spare capacity to pump like crazy can only last so long. A new peer-reviewed study in the Journal of Petroleum Science and Engineering anticipates that Saudi Arabia will experience a peak in its oil production, followed by inexorable decline, in 2028 – that’s just 13 years away.
This could well underestimate the extent of the problem. According to the Export Land Model (ELM) created by Texas petroleum geologist Jeffrey J Brown and Dr Sam Foucher, the key issue is not oil production alone, but the capacity to translate production into exports against rising rates of domestic consumption.
Brown and Foucher showed that the inflection point to watch out for is when an oil producer can no longer increase the quantity of oil sales abroad because of the need to meet rising domestic energy demand.
In 2008, they found that Saudi net oil exports had already begun declining as of 2006. They forecast that this trend would continue.
They were right. From 2005 to 2015, Saudi net exports have experienced an annual decline rate of 1.4 percent, within the range predicted by Brown and Foucher. A report by Citigroup recently predicted that net exports would plummet to zero in the next 15 years.
This means that Saudi state revenues, 80 percent of which come from oil sales, are heading downwards, terminally.
(I would note the article at Foreign Policy, "The Reports of Saudi Arabia’s Death Have Been Greatly Exaggerated," which argues that Saudi Arabia is in great financial shape: "Saudi Arabia will not incur a fiscal or currency crisis of any sorts for the next few years. Its balance sheet has recently made tremendous improvements.... During the years of plenty, Saudi Arabia amassed a significant war chest that will help it survive the current low oil prices." Ironically, the story mentions something that may also underlie the unrest among the other royals: the Saudi king instituted government reforms to streamline the government and make it more efficient--i.e., reforms that would reduce the opportunities for graft).
Besides the drain of its welfare and subsidies programs, Saudi Arabia is involved in what is an increasingly unpopular war in Yemen, and threatening to double-down on the conflict in Syria, indicating that nothing less than the removal of Assad will be acceptable. Zero Hedge notes that the Gulf states have a strong incentive to do so:
... Assad's ouster would have removed a key Iranian ally and cut off Tehran from Hezbollah. Not only would that outcome pave the way for deals like the Qatar-Turkey natural gas line, it would also cement Sunni control over the region on the way to dissuading Tehran at a time when the lifting of crippling economic sanctions is set to allow the Iranians to shed the pariah state label and return to the international stage not only in terms of energy exports, but in terms of diplomacy as well. Just about the last thing Riyadh wants to see ahead of Iran's resurgence, is a powergrab on the doorstep of the Arabian Peninsula.If Saudi Arabia can't get the U.S. to foot the bill, it will have to spend its own money on the conflict, which will further draw down its reserves. So, I don't think things are as "peachy keen" in Riyadh as the Foreign Policy article suggests.