By Iran Review
By Alireza Rezakhah*
Zachary Schreiber correctly predicted a drastic fall in global oil prices two years ago and is now issuing warnings over a financial catastrophe in Saudi Arabia. He has recently projected that Saudi Arabia will become bankrupt in terms of its financial structure because the country is facing two threats, that is, very high costs in the face of plummeting oil prices. Schreiber says that Saudi Arabia is undoubtedly suffering from high debts right now. According to his report, Saudi Arabia needs an oil price of over 100 dollars per barrel in order to make the ends meet. Schreiber has also noted that Saudi Arabia’s extravagant social programs are at loggerheads with reducing oil prices. The foreign exchange reserves of Saudi Arabia’s central bank previously stood at about USD 600 billion, but Saudis had totally squandered about USD 140 billion of those reserves between late 2014 and February this year. The International Monetary Fund has recently warned that Saudi Arabia will finally exhaust all its cash. The situation is so dire that even the Saudi royal court is now concerned.
It seems that recent changes among Saudi Arabian ministers are the outcome of wrong policies whose consequences are currently plaguing Riyadh. During past few years, Saudi Arabia has been consistently moving in line with the United States polices, which aimed to bring Iran to its knees and make Tehran give up its nuclear program. To do this, Saudi Arabia greatly increased its oil output, causing a drastic fall in global oil prices and now the country’s monoculture economy, which relies on petrodollars for 90 percent of its earning, is caught in the same trap that Riyadh had laid for Tehran. Under these conditions, Saudi officials are thinking about reforms. Of course, economic reforms in Saudi Arabia are, per se, positive and even necessary in view of the country’s young and burgeoning population. However, in view of serious obstacles that exist on the way of reforms in Saudi Arabia, hasty plans offered by Saudi officials cannot be expected to work miracle and prevent economic bankruptcy of the country. Analysts, therefore, have raised doubts about the true nature of these plans, among which the following instances are noteworthy:
Obstacles facing reforms in Saudi Arabia
First: The Saudi king is not in a situation to plan reforms, which would guarantee future prosperity of the country. Therefore, influence of American institutes must be seen behind all such plans which they have made on the future outlook of the country, and it is not still evident if the result of these plans will be exactly what Al Saud expects to see.
Second: Reforms proposed by the Saudi king and his scion are mostly of an economic nature while changes in political and social spheres are still considered a red line, though without changes in political and social spheres, any economic plan is less than likely to be viable.
Third: More than caring for reforms, the Saudi king means to show off the capabilities of his son, Muhammad, and this issue can be a sign of soaring power struggle in the country. It seems that King Salman is trying to change the country’s tradition from one in which the rule of the kingdom is handed down to sons of Abdulaziz, to a new one in which the power is handed down to the son of the king. However, it is certain that following the demise of the king, this issue will lead to flare-up of a more serious power struggle in the country.
Fourth: Muhammad bin Salman, the inexperienced son of King Salman, has already tried through direct intervention in the case of Syria and launching the war on Yemen to show that he is a qualified successor for his father. However, his failure in both cases can convey the message that he cannot be trusted with economic issues as well.
Fifth: Analyses about the changing attitude of the United States toward Saudi Arabia as a result of which Washington sees Riyadh as an ordinary friendly country rather than a strategic ally can be another factor that has caused Saudi Arabia to hastily come up with such plans in order to get out of the current dire straits.
Sixth: Muhammad bin Salman, who has been known as Saudi Arabia’s “economic tsar” and the official in charge of the country’s energy giant, Aramco, recently announced that he plans to sell part of Aramco’s stocks in order to set up a foreign exchange fund worth two trillion dollars for Saudi Arabia. On the other hand, certain cases against Al Saud are still open in the United States, including the case of Al Saud’s role in the 9/11 terror attacks. Therefore, as dissent and other unpredictable events may surface in Saudi Arabia, the United States is possible to block the country’s assets on the strength of such cases, especially the case of 9/11 terrorist attacks.
Seventh: The cultural structure and educational system of Saudi Arabia is affected by Wahhabi extremist teachings, which have given birth to such terrorist groups as al-Qaeda and Daesh. The point is that the Saudi ruling system keeps supporting such groups in order to maintain its legitimacy and this issue will not finally serve to guarantee the survival of this regime.
Eighth: Economic structure of Saudi Arabia is based on state-run posts, large-scale subsidies and employment of low-wage foreign workers and there is no doubt that economic reforms will lead to social protests. Let’s not forget that in April, Salman fired the kingdom’s water and electricity minister, Abdullah al-Husayen, because al-Husayen was under fire for introducing a high water tariff and enforcing new laws for drilling wells. He had also slashed subsidies that Saudi government gives its people on energy.
All told, the above facts clearly show that a Saudi Arabia without oil is tantamount to a Saudi Arabia without kingdom and monarchy.
*Alireza Rezakhah, Doctorate in Political Science; Political and International Analyst