Michael Stephens for CMEC: What next for the House of Saud?
Analysis 18 Oct 2018

Michael Stephens for CMEC: What next for the House of Saud?

Michael Stephens

The disappearance, and death of well-known Saudi Journalist Jamal Khashoggi has sent shock waves around the world and is arguably the biggest crisis for the Kingdom of Saudi Arabia since 9/11. Khashoggi’s death is also undoubtedly the toughest challenge that Crown Prince Mohammed bin Salman has faced since his rapid ascent to power began in January 2015.

Firstly, it needs to be said that Saudi Arabia will survive this crisis. Global politics are as they are, and the world will not stop buying Saudi oil, nor will Western nations abandon their decades old defence relationships with the Kingdom. Riyadh will not be any less secure as a result of the crisis, and with oil approaching $100 a barrel Saudi coffers will not be too adversely hit.

However, the appearance of doubling down on traditional policies from the 1970s is the polar opposite of everything Mohammed bin Salman has set out to achieve over the past two years. The Crown Prince’s Vision 2030 set out a future for Saudi Arabia in which it was more technologically advanced, more self sufficient in defence and, crucially, weaned off its dependence on oil exports into a variated private sector. 

The plans laid out V2030 may have been vertiginously ambitious, but few could fault the sincerity with which MbS approached the task, and even fewer disagreed with the structural malaises in Saudi Arabia that he identified. But MbS’ insistence that he alone take ownership of the plan meant his success was tied intimately to the Vision’s success so that it is unlikely that one can survive without the other.

Whether Saudis want to admit it or not, the allegations of an horrific death of a journalist in a Saudi Consulate have resulted in the Crown Prince’s reputation taking a battering. Private sector companies have fled from the Davos in Desert conference scheduled to take place in late October. Ministers from foreign governments may still turn up, the cost of losing Saudi Arabia is too high. But the Ubers and JP Morgans of the world have calculated that the cost of being currently associated with brand MbS is higher than the cost of losing out on taking a slice of Saudi Arabia’s economy.

Like all brands, brand MbS might be able to resurrect itself, but it will take time. The Saudis will have to accept that the year ahead is likely to be very quiet indeed. But this is time that MbS and Saudi Arabia cannot afford to lose. Demographic changes in the Kingdom, and the impending death of the petrol engine mean that Vision 2030 can probably only work if it is put in place now. High oil prices defer some of the pain in the short term, as does the sense of nationalism which has rallied many Saudis behind their leadership. But these are not solutions for Saudi Arabia in the medium term. 

So, what can the House of Saud do? Firstly, it is likely that the elderly King will have to step up and take more control of the Kingdom. The Khashoggi affair marks the third occasion this year (the other two being the issue of Palestine, and the IPO for Saudi ARAMCO) that the King has had to take the lead. King Salman might have hoped for a more leisurely semi-retirement, but he seems left with little choice at this juncture than to reset the Kingdom’s global image as a rising power that seeks stability and prosperity. 

Doing this will not be easy, the severity of the blow to Saudi pride, and prestige is great. The Saudis are fully aware that their regional rivals are circling, looking to take advantage of Riyadh’s perceived weakness, and so rather than back down from their current regional posture, it is logical to assume the Riyadh will double down on its assertive stance in the Middle East region. 

This does not bode well for those hoping for an end to the dispute with Qatar, a lessening of regional tensions with Iran, and most seriously of all, an end to the war in Yemen, which is now grimly dragging on toward the end of its fourth year. All three issues are bogged down in stalemate, and a wounded Kingdom cannot afford to lose face in any of these problems. 

Regional states (with the notable exceptions of Qatar, Iran, Iraq and Turkey) have rallied around Saudi Arabia, no doubt worried that a lack of overt support will damage their relations with the regional hegemon. But with the exception of UAE, whose relationship with Riyadh has become a close alliance, these are countries who rely on Riyadh’s goodwill to prosper. However, these countries support will not be sufficient to enable them to ride out the storm.

The Kingdom will look toward China and Russia as potential allies in the months and years ahead. Neither Moscow nor Beijing seem to have much of a problem with their own citizens disappearing, and of course will seize the opportunity to pounce on the Saudi market while Western states vent their outrage. This could lead to a new set of political alignments for Riyadh in which its pre-existing drift Eastwards is accelerated, and the Kingdom will no doubt make concerted efforts to outreach to both nations in the coming year, particularly with large investments driven by its sovereign wealth fund, the PIF.

This can ameliorate the pain of Western companies distancing themselves, but it cannot replace them. The Chinese don’t have Snapchat, Instagram or Google, the Russians don’t have reliable defence platforms the Saudis know and trust, and the major banking players are still Western dominated.

This all points to a Kingdom having to tread far more carefully in the coming year. Simply put, Western states are in no mood to tolerate another excessive abuse of power, nor can the private sector be associated with a country that continues its current reaction to the Khashoggi affair. The King has a lot to do to get the country’s foreign policy back on track, and many will say that he may need teach his son a few lessons in statecraft while he does it.