Karim Alrawi discusses change in Saudi Arabia

Sept. 1, 2005
Karim Alrawi [[email protected]] is executive director of the US-Arab Economic Forum, which will convene in Houston Sept.

Karim Alrawi [[email protected]] is executive director of the US-Arab Economic Forum, which will convene in Houston Sept. 14-16. The biennial event is supported by the US Departments of State and Commerce, the Arab League, and the Gulf Co-operation Council. It is expected to attract more than 1,500 American and Arab business, political, and civic leaders. Alrawi provided these candid answers to questions submitted to him by OGFJ.

Oil & Gas Financial Journal: Do you anticipate there will be any major policy changes in Saudi Arabia under King Abdullah? Why or why not?

Karim Alrawi: Saudi Arabia is not a uniform homogenous society. There are a complex range of forces and competing interest groups. These include the rivalry between the al-Hijaz region, which has a long existing urban culture that is traditionally closer to that of Egypt and Syria, and say al-Najaf, which is the desert heartland of Saudi family power; the tension between the Wahabi establishment and the political establishment; the hostility between Wahabi theologians and preachers and the Shia in the oil rich eastern provinces; and the competing claims of the various power centers of Saudi princes, who number over 3,000 and who control almost every aspect of political and economic life in the country.

King Fahd’s predecessor, King Faisal, fell afoul of a faction of the princes and was assassinated. Faisal was a strong administrator and a shrewd politician who played hardball when he thought it was necessary. Fahd came to power with a mandate from the royal family to find a way of ensuring stability and social peace. This he did initially by maintaining a pro-American external policy while appeasing the hard-line religious establishment inside the country. He also spent liberally of the country’s wealth to buy off the princes and to support US foreign policy objectives during the Cold War against the Soviet Union. He largely payrolled the war against the Soviets in Afghanistan and contributed considerable funds to support US objectives in Central America. An estimated $80 billion were spent in this way and remain unaccounted for.

In the early 1990s [Fahd’s] health deteriorated, and the economic crisis caused by poor fiscal management led to Crown Prince Abdullah taking gradual control of the state. Abdullah is believed to be more in the Faisal mold than in the Fahd mold. Abdullah is known to be a good administrator, who works well behind the scenes. He has tried to put a stop to the rampant corruption and waste that existed during the early period of Fahd’s reign.

For 10 years he has increased his grip on the government and steered the country in a direction that is bringing about gradual change. He is mistrusted by the religious establishment and by the gaggle of princes that survive on the largess of the royal court.

It is Abdullah who has led the Saudi fight against terrorism and who has insisted on curbing the power of conservative religious leaders. He is a strong friend to America but not an uncritical one. He believes that the US and Saudi Arabia are partners and as such should listen to each other and work together. He does not believe that either country should dictate to the other. He has been known to object to the Bush administration’s unilateralism, especially over the war in Iraq.

OGFJ: To date, there has been more lip service than real movement towards privatization in Saudi Arabia. Is this likely to change in the near future? What are the major constraints preventing this from happening?

Alrawi: Now that Abdullah is king, the pace of privatization is likely to increase.

Abdullah will want to do this in a way that will not permit the conservative establishment to accuse him of selling the country to the highest bidder. There will be constraints on ownership and on partnership conditions. This may vary by sector. But these constraints are very likely to be considerably less than the current ones.

Abdullah is aware of the demographical reality that threatens Saudi Arabia.

Saudi Arabia, like many Middle Eastern countries, faces a looming crisis of an exploding number of young people under the age of 21, many of whom have little prospect of finding productive employment. He knows that both the stability of the country and the survival of the royal family are dependent on how this problem is addressed.

OGFJ: Can internal Saudi politics and the various power factions affect the global oil and gas industry?

Alrawi: The destabilizing factors in so far as the oil and gas industry is concerned are both social and political. If the price of oil collapses then it could also be economic.

Addressing the first two concerns: I would say that it is all in how reform is managed in Saudi Arabia. Antagonizing the conservative religious leaders would add fuel to the al-Qaeda fire and inflame their leaders and young followers to commit more acts of terrorism. But with a relaxation of autocratic control, and given that the Shia are in ascendancy in Iraq, the Shia in Saudi Arabia, who live largely in the oil-rich eastern provinces, may become emboldened to start demanding a share of the wealth and of opportunities that they have been denied. It is very likely that both scenarios may develop simultaneously. The pace of any reform being considered may be too much for the conservatives and not fast enough for the eastern Shia.

OGFJ: King Abdullah is 81. Who will ascend to the throne when he passes on?

Alrawi: Traditionally, brother has succeeded brother. Prince Sultan, formerly the minister of defense, is now the new crown prince. If all goes according to form, the crown prince will inherit the throne from the king.

Abdullah may be in favor of reform, but is unlikely to disrupt the succession by appointing somebody else to follow him.

OGFJ: Saudi Arabia is an absolute monarchy, although there has been some talk about it becoming a constitutional monarchy. Is this likely to happen?

Alrawi: It is difficult to see this transition happening in the short term. Abdullah is not the man to make that change. Though, it may be the only thing that will save the monarchy in the medium to long term.

OGFJ: How stable is Saudi Arabia and what is the likelihood of the country being taken over by individuals or groups sympathetic to al-Qaeda?

Alrawi: These are two separate questions: I doubt that al Qaeda will take over any country in the Arab world. They tried and failed and that is why they were in Afghanistan.

In terms of how stable Saudi Arabia is, that is another issue. I believe that it is stable in the short term. But change must and will happen. With change comes a risk of instability.

There is a lot happening within Saudi society. There is widespread discussion about the future and about the need or otherwise for reform. This is in itself a major step forward for a country where such debate was previously viewed as sedition. Abdullah’s first move as king was to release dissidents in Saudi jails. That is a clear sign that he endorses these kinds of popular discussions about the future and about reform.

That does not mean though that he endorses all forms of reform, nor does it mean that he wants rapid change. He is very much a man of his generation - a generation that was brought up with a strict and limited view of the world and one where the pace of change was very different than it is today.

OGFJ: What is the current and future role of Saudi Aramco in the whole picture?

Alrawi: This is an important question. Aramco is a Saudi bellwether. How and what King Abdullah decides to do with Aramco (for example: whether to privatize or not) will give us a sense of how he plans to tackle some of the issues facing the country.

Regardless, Aramco will continue to be a significant player in the Saudi economy. It is unlikely that any steps will be taken to dismantle or weaken the company, though it may be forced to compete in some areas with foreign joint ventures or American corporations.

Abdullah is cautious and it is unlikely that he will abandon his usual caution now that he is king regardless of how necessary he may believe it is to change or reform Saudi society and its economy. OGFJ