Saudi Arabia in Transition from Defense to Offense, but How to Score?
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v BELFER CENTER PAPER Saudi Arabia in Transition From Defense to Offense, But How to Score? Karen Elliott House SENIOR FELLOW PAPER JULY 2017 Belfer Center for Science and International Affairs Harvard Kennedy School 79 JFK Street Cambridge, MA 02138 www.belfercenter.org Statements and views expressed in this report are solely those of the author and do not imply endorsement by Harvard University, Harvard Kennedy School, or the Belfer Center for Science and International Affairs. Design & Layout by Andrew Facini Cover photo and opposite page 1: Deputy Crown Prince Mohammed bin Salman arrives at the Hangzhou Exhibition Center to participate in G20 Summit, Sunday, Sept. 4, 2016 in Hangzhou, China. (Etienne Oliveau/Pool Photo via AP) Copyright 2017, President and Fellows of Harvard College Printed in the United States of America BELFER CENTER PAPER Saudi Arabia in Transition From Defense to Offense, But How to Score? Karen Elliott House SENIOR FELLOW PAPER JUNE 2017 About the Author Karen Elliott House is a senior fellow at the Belfer Center and author of “On Saudi Arabia: Its People, Past, Religion, Fault Lines—and Future,” published by Knopf in 2012. During a 32 year career at The Wall Street Journal she served as diplomatic correspondent, foreign editor and finally as Publisher of the paper. She won a Pulitzer Prize for International Reporting in 1984 for her coverage of the Middle East. She is chairman of the RAND Corporation. Her April 2016 report on Saudi Arabia, “Uneasy Lies the Head that Wears a Crown,” can be found at the Belfer Center’s website: http://www.belfercenter.org/publication/uneasy-lies-head-wears-crown The author, above, in rural Jizan Province in April 2009 with an elderly farmer and some of his 35 children (from three wives) and 30 grandchildren. Table of Contents Introduction ................................................................................................................1 Two Big Unknowns ....................................................................................................3 Reform Is Possible, If Only Because Necessity Makes it Inescapable .................8 Year One: Shock, But Not Yet Awe ......................................................................... 10 Year Two: Social Change Leads the Way ............................................................... 13 Economic Reform is Lagging .................................................................................. 19 Aramco: The Privatization of the Century? ..........................................................24 Nasty Neighborhood, but the U.S. is Back ............................................................ 27 Royals Resigned ......................................................................................................32 Conclusion ...............................................................................................................36 Introduction Saudi Arabia is like an obese man disfigured from decades of gluttony and idleness. Dieting is painful given his body’s cravings. Even the small exertion of walking is more unpleasant. And the inability to imagine that his sacrifice and suffering eventually will lead to good health makes it easy to revert to old habits. If, however, he will just push through the pain, good health and a better life are attainable. This metaphor, offered by a senior Saudi minister, is the best way to understand the titanic struggle Saudi Arabia confronts as it seeks to wean itself off decades of dependence on oil wealth. It’s not the first time the Kingdom has tried to diet. Promises to transform the Saudi economy from oil are almost as old as its half century of dependence. So, not surprisingly, the Saudi people continue to assume something will turn up to extend their idle but ample lives. And, thus far it always has. But almost surely not this time. So, this latest government transformation plan known as Vision 2030 calls for nothing short of a societal revolution. Out with government dependence; in with self-reliance. Out with conservative anti-modern- ist Wahhabi dogma and in with moderation. “Our vision is a strong, thriving and stable Saudi Arabia…with Islam as its constitution and moderation as its method,” is how the plan was described in April 2016 when unveiled by its architect, Mohammed bin Salman, the 31-year- old son of the Saudi King. If, as promised, the economy is to be privatized, Saudi companies and citizens will need to become much more nimble and efficient to compete globally and survive. That suggests the elimination of conser- vative religious constraints like forced closing of shops multiple times a day for 45 minutes to observe prayers which require no more than 10 minutes, and the end to rigid segregation of men and women in the Belfer Center for Science and International Affairs | Harvard Kennedy School 1 workplace. The risk that conservative Saudis balk and then simply refuse to change, precipitating social instability in the Gulf’s most strategic nation, is definitely there. But the regime launched Vision 2030 precisely because it fears a prolonged fall in oil revenues that began in 2014 will lead soon to precipitous declines in the livelihoods of Saudis who then, with nothing left to lose, may destabilize this nearly three century-old monarchy. Pick your poison. So far, Saudis only have been forced to consume a little less—to diet. The more difficult and painful phase of actually resculpting the national body to build muscle and shed fat—to make citizens self-reliant rather than dependent on government largesse—is still to come. Yet even a modest amount of imposed dieting—reduced government subsidies for water, elec- tricity and energy—has provoked citizen complaints. A tougher measure to reduce salaries and benefits of government employees (60% of working Saudis are employed by government) was reversed within six months after persistent citizen protests on social media. As the transformation plan enters its second year, much undeniably is changing. But almost all the change is social, not economic—and surely not political. The government has sought to distract Saudis from the pain of change by opening up a wide variety of heretofore banned entertainment events like music concerts, wrestling matches and a Comic Con where young Saudis dress as their favorite cartoon characters, something heretofore regarded as frivolous and forbidden. A royal decree also has banned the religious police, who long roamed streets enforcing Wahhabi restrictions on veiling and separation of the sexes, from arresting citizens for such indiscretions. But the hard work of privatizing the economy—and, equally hard, per- suading citizens that privatization isn’t just a way to make the rich richer and purloin the patrimony of the people—remains to be done. The existing private sector in Saudi Arabia relies on cheap foreign labor: 90% of workers are foreigners. Retooling to employ more expensive and often untrained Saudi labor will require wrenching changes for both business and Saudi citizens not accustomed to performing or losing their jobs. 2 Saudi Arabia in Transition: From Defense to Offense, But How to Score? Relative to any of its neighbors or indeed to any other Arab country in the Middle East, Saudi Arabia maintains a high degree of stability and, even in reduced circumstances of lower oil prices, prosperity. The greatest advantage the regime has going for it as it subjects citizens to the pain of economic change is precisely that comparison. Saudis can merely look at neighboring Yemen, Syria, or Iraq, all engulfed in bloodshed and chaos, to count their relative blessings. Still, like citizens of any other society, Saudis rue the change in their pocketbooks more than they appreciate their relative good fortune vis a vis neighbors. Thus, seeing benefits reduced and being asked to work harder constitutes real pain for citizens who for generations have lived off govern- ment dole and worked very little. Even worse for Saudis is the anxiety of anticipating still further, as yet undefined, changes. Two Big Unknowns As the first anniversary of Vision 2030 passes, two big unknowns have dominated discussion in the Kingdom: Will the government have the courage to stick to its reform plans when the going gets tougher? After all, a social media threat of a street protest in Riyadh quickly brought a royal decree in April restoring those salary and benefit cuts imposed on govern- ment workers last October. For some Saudis, this was a sign that reform plans were poorly thought through and thus should be shelved; for others, it was a sign that government listens to people—and thus can be pushed further in the future. Either interpretation only deepens the Kingdom’s inertia. The second and even larger unknown was this: Would Prince Mohammed bin Salman, the undisputed architect and chief cheerleader of Vision 2030, retain power and thus the ability to push his reform plans once his 81-year- old father, King Salman, died? That uncertainty has been removed by his elevation in June to Crown Prince. Indeed, it is possible that the Crown Prince soon will persuade his elderly father to step aside and install him as King to assure the ascension takes place. Belfer Center for Science and International Affairs | Harvard Kennedy School 3 After all, the last two designated crown princes have been removed. And once King Salman dies, his power over the fractious family dies too. Although 31 of the 34 senior princes on the Allegiance Council, which represents each of the direct