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Can Saudi Arabia’s Aid Policy Pay Off? – Analysis

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By Sumaya Almajdoub*

In November 2015, Saudi Arabia pledged over USD 2 billion of aid to Sudan for its support to Operation Decisive Storm in Yemen and, more recently, the kingdom suspended over USD 3 billion of military aid to Lebanon’s army. These two actions illustrate Saudi Arabia’s attempt to utilize its economic power to shape regional political outcomes across the Arab world. But what are Riyadh’s objectives in Yemen and Lebanon? How does the kingdom use aid as a foreign policy tool?

Providing aid has enabled Saudi Arabia to accumulate soft power and to assert its image as a benevolent leader in the Arab and Muslim World. But ‘Riyal Politik’ alone may not help officials in Riyadh achieve their regional goals.

A Fragmented Aid System

Saudi Arabia is a generous international donor. According to one study conducted by the Global Public Policy Institute, the country donated over USD 90 billion or 3.7 percent of its gross domestic product (GDP) between 1975 and 2005. The same study found, however, that the Saudis lack an articulated and coherent aid policy.

Saudi foreign assistance comes in many forms. The first is humanitarian aid, which aims to provide immediate relief for crises. During the 2010 Pakistan floods, private and public Saudi donations exceeded USD 240 million. The second form is development aid, which invests in funding long-term poverty alleviation projects, including services and infrastructure. This includes projects to build roads, provide water and electricity in rural areas, and build medical and educational facilities. Although altruistic motives can drive both humanitarian and development aid, this foreign assistance undoubtedly factors into the soft-power aspects of Riyadh’s foreign policy.

The third category is military aid in the form of arms deals, which can help achieve two goals. It aims to strengthen the internal security apparatus and military forces of the kingdom’s allies such as Egypt and Pakistan. Furthermore, military aid packages often include long-term contracts with arms manufacturing companies such as the French ODAS. These companies become responsible for periodical maintenance, upgrading of systems, and training of their clients’ forces. Consequently, this commitment helps solidify Saudi Arabia’s economic and security ties with these companies and their countries of origin, whether it is France, the United Kingdom, or the United States.

Finally, Saudi Arabia grants loans, investments, and oil assistance to various countries to help stabilize their economies and shore up their currency reserves. Egypt’s economy has relied on the GCC’s assistance particularly since the July 2013 coup led by General Abdel Fattah El-Sisi. In December 2015, the Saudis announced their latest USD 8 billion aid package to Egypt, scheduled to be delivered over the next five years.

Despite these massive inflows of aid, the lack of coordination between various decision makers and multiple agencies has fragmented the Saudi aid system. Decision makers — the Royal Court, the Ministry of External Affairs, the Ministry of the Interior, and the Ministry of Finance — decide where to allocate aid and how much, but they do not deliver the aid themselves. Institutions such as the Saudi Red Crescent, various royal foundations, the International Islamic Relief Organization, and the Saudi Fund for Development are responsible for managing aid delivery. The lack of a central organization or mechanism to coordinate between these different institutions has led to limited synergy and a duplication of efforts. Finally, the shortage of extensive data on aid stems from the lack of systematic reporting and evaluation of aid programs in both Saudi Arabia as a donor country and in countries receiving the kingdom’s aid.

Aid as a Foreign Policy Tool: Merits and Limits

How has Saudi Arabia been using these different forms of aid as a foreign policy tool? And what are the merits and limits of this tool?

In a post-2011 regional order, Saudi Arabia has been increasingly reliant on distributing aid in order to solidify Riyadh’s sphere of geopolitical influence. In the current crisis of low oil prices, however, and the projected USD 87 billion budget deficit, the kingdom will need to reassess where and how it dispenses aid packages. It is interesting that even when the Saudis had the confidence of high oil revenue, they did not necessarily have a long-term strategy to utilize the full potential of economic and military aid.

Yemen

Saudi Arabia’s billions of dollars of aid and economic investments to the government of Yemen did not prevent mass political protests in 2011, nor did the GCC-sponsored transition plan help to bring long-term stability. Between 1990 and 2004, Yemen received over USD 1 billion in aid from the Saudi Fund, the Islamic Development Bank, the OPEC Fund, and the Arab Fund. After President Hadi took power in 2012, Saudi Arabia pledged an additional USD 3.25 billion of aid. The high level of corruption, however, in the governments of both Saleh and Hadi as well as the lack of institutional capacity resulted in a mismanagement of funds. Saudi Arabia’s military intervention in Yemen signifies a strategic failure to invest in the country’s long-term political and economic stability. As Farea Al-Muslimi, Yemeni writer, advocate, and consultant, has aptly commented, “The richest country in the Arab World has had to bomb the poorest one to change its political dynamics.”

Furthermore, Saudi Arabia’s policy of containment, or keeping Yemen “weak but stable”, is likely to fail under the current military intervention. This is because the system that protected some semblance of stability over the past three decades collapsed in the aftermath of the 2011 uprising. Ali Abdullah Saleh was able to maintain control through a delicate governing system that leveraged Yemen’s tribal system and patronage links. This tenuous arrangement prevented a fragile Yemen from becoming a full-fledged failed state. It is hard to imagine that this balance could be easily restored given the current domestic and regional contest for power. Some Saudi government officials have alluded to the possibility of ending the war in the near future. If and when that occurs, the challenge of restoring stability and security in Yemen will not be solved simply by the most recent Saudi aid pledge of USD 274 million.

Money alone cannot bolster Yemen. The structural weaknesses and the legitimacy crisis of Hadi’s government may well be beyond the control of Saudi Arabia as a donor country.

Lebanon

On February 19, 2016, Saudi Arabia halted USD 3 billion of aid to Lebanon’s military and USD 1 billion to Lebanon’s internal security apparatus. The immediate impetus behind the aid suspension was Lebanon’s refusal to join other Arab League members in condemning the attack against Saudi Arabia’s diplomatic presence in Iran.

The suspension reflects Riyadh’s frustration with the dominance of the Iran-backed Hezbollah in Lebanon, and the failure of its Lebanese allies to confront the influence of Hezbollah and, by extension, Iran. Saudi Arabia’s main political allies include the March 14th movement, currently led by Saad Hariri, whose family has long-standing ties with the Kingdom. But what are the implications of the aid suspension? Could this decision backfire on the Saudis by leaving a vacuum for Iran to exploit? Or will the aid suspension somehow help contain Hezbollah’s influence and its Iranian backer in the Lebanese political landscape?

Hussein Ibish, a senior resident scholar at the Arab Gulf States Institute in Washington, argues that if the Saudis do not follow this punitive measure by an active effort to strengthen their political allies in Beirut, Hezbollah may attempt to further consolidate its control by accepting increased Iranian support. Lebanese Minister of Defense Samir Moqbel has already stated that he will urge the Lebanese government to consider accepting Tehran’s past offers of military aid. Whether Saudi Arabia’s suspension of aid in Lebanon will achieve Riyadh’s goal, or backfire by enhancing the Islamic Republic’s influence in the small Mediterranean nation, remains to be seen.

Pakistan

Saudi aid has successfully persuaded countries like Sudan and Senegal to join the intervention in Yemen, and Pakistan to join the “Islamic Military Alliance to Fight Terrorism” announced in late 2015 by Prince Mohammad bin Salman Al Saud. Since its establishment in 1947, Pakistan has maintained a strong alliance with Saudi Arabia, which hosts over 1.5 million Pakistani residents and workers. The two countries have strong military, political and economic ties, commonly understood as a “special relationship”. In 2014, Saudi Arabia helped bail out the Pakistani economy from collapse by granting a USD 1.5 billion loan.

Nonetheless, there are limits to the influence which money can buy. In March 2015, Pakistan refused to join Operation Decisive Storm in Yemen. The Pakistani parliament passed a resolution stating that the government would maintain a neutral stance, and that any Pakistani involvement would be in order to facilitate peace. Notwithstanding the GCC’s economic leverage over Pakistan, officials in Islamabad also had to consider other national interests. These included not marginalizing the nation’s Shi’ite minority by direct military involvement in a Middle Eastern civil war with strong sectarian undertones; maintaining its military focus on India and the Afghan border without opening up a third front on the southwestern Arabian Peninsula; and avoiding actions that could antagonize the Islamic Republic at a time when Islamabad and Tehran seek to improve Pakistani-Iranian relations.

Conclusion

Saudi Arabia has employed aid as an important foreign policy tool. It has not been able to develop its full potential, however, due to lack of a long-term allocation strategy. Furthermore, the influence of aid is necessarily limited by strong political alliances, as is the case of Lebanon, and by a country’s domestic calculations, as is the case of Pakistan and its refusal to participate in Operation Decisive Storm. Finally, without a coherent and well-articulated plan to restore security in Yemen, maintain stability in Lebanon and stabilize the region as a whole, any amount of aid alone will be insufficient to shape political outcomes in the region.

*Sumaya Almajdoub is a Middle East analyst based in Washington, DC.

Source: Gulf State Analytics (@GulfStateAnalyt) originally published this article

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Gulf State Analytics

Gulf State Analytics (GSA) assesses risks and opportunities among Gulf Cooperation Council (GCC) states for lenders, traders, investors and policymakers.

One thought on “Can Saudi Arabia’s Aid Policy Pay Off? – Analysis

  • April 14, 2016 at 7:10 am
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    9/11 never forget.

    Reply

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