January 8, 2016

WINNING THE WOT:

Fear and loathing in Saudi Arabia (Kenneth M. Pollack | January 8, 2016, Brookings)

At the broadest level, when the Saudis in Riyadh look at the Middle East around them, they see a region spiraling out of control. Since 2011, they have witnessed a massive increase in general instability across the region, with "the people" increasingly willing to protest or even overthrow their rulers. The complacency and popular "inertness" that categorized the Arab populations for decades is gone. That clearly worries the Sauds, the kingdom's ruling royal family, who have always preferred a docile populace.

Civil wars are raging in Syria, Iraq, Yemen, and Libya, spilling refugees, terrorists, armed militants, and powerful, radical ideas over onto their neighbors. Already, spillover from these civil wars has created nascent civil wars in Egypt and Turkey. It is eroding the stability of Lebanon, Jordan, Algeria, Tunisia, and even Kuwait. It has also created vast new opportunities for Iran to destabilize and rearrange the region to suit its own interests.

Indeed, both the civil wars and the spillover they generate have also produced a general mobilization of the Middle East's Shiites, instigated and led by Iran. And that includes the Shiites in the Saudi kingdom. Officials in private and press reports occasionally note that hundreds of Saudi security service personnel have been killed and wounded in operations in the Eastern Province, the home to the vast majority of the kingdom's Shiites. Americans tend not to pay attention to these operations because we see them as proof that the Saudis have things well in hand; but another way to look at it is that the Saudis are fighting pitched battles with someone in the cities of the Eastern Province. In other words, there seems to be a much higher degree of mobilization and violent confrontation among the Saudi Shiites than most realize.

Then there are Saudi fears about the oil market. Everyone seems to believe that the Saudis are purposely not cutting back production to kill off North American shale producers. But that is absolutely not what the Saudis are saying, either in private or public. Instead, they are saying that they can no longer control the oil market because there are too many other sources and all of the OPEC countries cheat like crazy whenever Riyadh tries to orchestrate a production cut. This has happened to them repeatedly over the past 20 to 30 years. They try to cut production to prevent oil prices from dropping, and the rest of OPEC takes advantage of it to pump as much as they can, contrary to what they promised and agreed to. The result is that there is no overall supply curtailment and the Saudis lose market share. This time around, they have stated that they cannot realistically control the OPEC oil supply, so they are not going to try to do so. Instead, they are going to fight for market share. But doing so means having to win a race to the bottom, with the result that their oil revenues are plummeting.

So that is another element of fear for them: They can no longer control the oil market the way they once did, and the low price of oil is obviously killing them. It has become so bad that they are now talking about real economic austerity, including repealing subsidies on gasoline and other fuel that average Saudis now see as part of their rights as citizens. Repealing subsidies and other austerity measures is always a very unpopular move and can easily cause widespread popular unrest -- one need only remember events in Greece last year. The fact that the Saudi government now feels forced to take this route speaks to how desperate its financial situation is--and, given how it conjures the threat of popular mobilization that makes it so uneasy, it can only make the Saudis that much more apprehensive.

Meanwhile, the region's civil wars have the Saudis so frightened that they have intervened in unprecedented ways. They have poured tens, if not hundreds, of billions of dollars into Syria and Yemen and to a lesser extent Iraq and Libya. They are pouring tens of billions more into Egypt, Jordan, Morocco, Algeria, and Bahrain to shore up their governments, prevent state collapse under the strain of the spillover from neighboring civil wars, and thus prevent more civil wars on their own borders. But these increased foreign-policy costs coupled with reduced oil revenues have forced the Saudis to draw from their sovereign wealth fund at a rate of $12 to 14 billion per month--a pace that will wipe out those reserves in less than three years, but is likely to cause severe domestic political problems (including dissension within the royal family) long before.

And there sits Iran, at the intersection of all of these problems, from the Saudi perspective. The Saudis think the Iranians are to blame for the civil wars in Syria, Yemen, and (to a lesser extent) Iraq by mobilizing Shiites to destabilize the kingdom and its Sunni Arab allies. (They also blame the United States for the Iraqi civil war, appropriately, I might add.)

Our credit is not parenthetical, and primary, rather than subsidiary to Iran's.

Posted by at January 8, 2016 6:20 PM

  

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