An insight into King Salman’s Asia

Extreme caution has long been the watchword of Saudi monarchs: caution in foreign policy, and especially when it comes to internal change. Of course, there are good reasons to be cautious. Saudis often cite the assassination of King Faisal in 1975 as a warning, linking it to his attempts at reforms and especially his introduction of television, which many at the time regarded as an encouraging sin.

The more civil society opens up, the more difficult it becomes to sustain an autocracy. King Salman knows that the key factor here is the continued suppression of civil society activity. The more civil society are established, the more difficult it becomes to sustain an autocracy, in particular, to the extent that people are allowed to express their views at all, this is treated as a privilege rather than a right – a privilege that the government arbitrarily grants and can arbitrarily take away. Seemingly non-political activity by charities or professional foreign organisations also tends to be unwelcome because the government gets nervous and worried, as a recent research paper from Chatham House noted:.” This nervousness isn’t new since every major geo-strategic potential fear they have quietly harboured for years has started to materialise – virtually simultaneously such as: the street revolutions of 2011 that overthrew several Arab leaders, the rise of Muslim Brotherhood parties; the current turmoil in Libya, Iraq, Syria and Yemen; the growing influence of Iran; and concerns that the US is trying to disengage itself from the Middle East. Each of these is dangerous for Gulf rulers, but together they “take on the dimensions of a tsunami” Khouri, CEO of Olayan Saudi Arabia, said.

While the Saudis have time to deal with external challenges, they do not enjoy that same luxury in their domestic affairs. The Saudis have been largely successful in containing the threat from al Qaeda, but they have had to engage in radical reforms, which are extremely uncomfortable from the religious establishment’s point of view. That is why the key pillars upon which the monarchy rests — its unity and leadership, its relationship with the religious establishment and the legitimacy — will all be called into question in the coming decades when the third generation of sons of the founder of Saudi Arabia will rule the kingdom.

King Abdulaziz, the founder of the kingdom, had 17 known wives and at least 36 sons while nowadays there are 12,000 to 15,000 princes and about as many princesses. At some point, the family could grow too large to support and soon there has to be some decision about lopping off some of the royal family members.

Revenues from the national oil company, Saudi Aramco, have long been the lifeblood of government spending and the fortune of the clan which has always been the main secret of the country. The money is divided and spread across several continents, making a precise accounting difficult due to opaque funding mechanisms. Even people who closely follow the Saudi royal family said they could not estimate its total assets. An official memorandum, released with other documents by WikiLeaks five years ago, says that the allowances, which included payments to other prominent families around the kingdom, accounted for roughly $2 billion of the government’s total $40 billion budget. The largest share, went to tribal and provincial leaders, not royals, in order to maintain their legitimacy. Instead revenue from one million barrels of oil per day went into off-budget programs under the control of the king and several top princes.” The line between family and state assets is very blurry while sustained low oil prices have strained the economy and forced questions about whether the family — with thousands of members and still growing — can simultaneously maintain its lavish lifestyle and its unchallenged grip on the country. Therefore, as long as the royal family views the country as ‘Al Saud Inc.,’ ever increasing numbers of princes and princesses will see it as their right to receive dividend payments. On the other hand, as the size of the general population have grown, some observers say, the balance of rewards has become harder to maintain. “At the top level, they know that they have to leave something for the rest of the country; otherwise it will be over,” Jean-François Seznec, senior fellow at the Atlantic Council. Even though the pockets of the kingdom are still very deep, they are certainly not bottomless. But getting into the habit of throwing money at problems has other negative effects. It has made the kingdom far less inclined to explore and adopt non-monetary solutions even though it can’t continue like this indefinitely.

King Salman’s Asia

There was no mistaking about the arrival of King Salman in Malaysia in February since his entourage included 25 Saudi princes, 10 ministers and around 700 people as a business delegation plus over 500 tonnes of baggage carried in 26 aircraft. It is only rarely in the past that Saudi’s rulers have ventured outside their kingdom on this kind of scale, that is why King’s first trip to South East Asia is something rare and significant in many ways. On a practical level, the Asian tour is about trade. In Kuala Lumpur, Malaysia’s Petronas signed a deal for Saudi Aramco to invest $7 billion into an oil and petrochemical refinery in the southern state of Johor while other agreements will be announced soon. Indonesia’s president Joko Widodo made a similar claim since an agreement for $25 billion worth of Saudi investment in his country is almost settled. The king’s visit and the huge amount of new trade being generated around it are also very public votes of confidence in the economic reform programmes in the two South East Asian nations. At a time when the United States has been sending mixed – and sometimes unfriendly – signals to many countries, including allies, the Saudi King’s tour also suggests that links in Asia need to be strengthened. Moreover, the connection between Malaysian politics and Saudi Arabia came as recently as last year, when Malaysia’s Prime Minister Najib Razak said that the $681m found in his personal bank account was a gift from the royal family. However, critics say the Saudi Arabian excuse is just a convenient cover – and several international investigations into the matter continue.

King Salman arriving in Malaysia in February.

Then King Salman headed to Indonesia, Japan, Brunei and China as part of his tour of the region shows the kingdom’s desire to extend its influence in the region and attract Asian investors to Saudi Arabia. Four reasons why Saudi Arabia is investing in Asia, according to The National:

  1. Scratching backs: Saudi Arabia is looking for ways to diversify its economy and reduce its dependence on oil. Riyadh has already invested in a $45bn technology fund with Japanese firm Softbank, and, according to analysts, the Saudis are looking for investments in logistics, infrastructure and technology from Tokyo and Beijing.
  2. Keeping customers: It’s not just about bringing investment into Saudi Arabia – it’s also about maintaining business in Asia. The big prize is China – which has overtaken the US as the world’s biggest importer of oil. Data from 2014 shows that it sources most of its energy needs from the Arab kingdom, but Russia and Iran are fast gaining ground, and China has been investing in oil fields in both nations.
  3. Potential investors: Saudi Aramco, the Arab kingdom’s state-run oil firm, is heading for a public share sale in 2018, which would be the world’s biggest share flotation and the main purpose of the trip is drumming up interest from Asian investors.
  4. Relations with Washington: The US has traditionally been Saudi Arabia’s most powerful ally, both in terms of trade and politics. But Donald Trump’s recent anti-trade stance may have unnerved some in the kingdom. Reaching out to Muslim majority nations such as Indonesia and Malaysia makes sense for the Saudis as it won’t just be conversations about investment in physical infrastructure – but also about investing in religious pilgrimages.

The choice of destinations reveals Saudi Arabia’s aims and priorities. Malaysia, Indonesia and Brunei – as Asia’s most important majority-Muslim countries – are important Sunni allies in the ongoing battle with Iranian-led Shiites, as well as long-standing trade and investment partners. China and Japan are among Saudi’s most important oil and natural gas export markets (but we must take into account the recently declared trim in oil export that will take place from November). Moreover, diplomatically speaking, China has in the recent past played a carefully balanced hand between Iran and Saudi Arabia. As sanctions have been lifted on Iran, China has been a willing purchaser of Iranian oil and gas. At the same time, it has been increasingly nervous about the emergence of Islamic radicalism among its Hui Muslim and Uygur minorities in the western provinces bordering Kazakhstan. Friendly links with Saudi can be helpful as Beijing anxiously seeks support to stabilise the Central Asian Islamic countries – which are a central crossroad to its “One Belt, One Road” strategy. A decade ago, the tour would probably have been to Europe and the US, but now Asia is a more sensible destination reflecting how the world’s balance of economic power is being altered.

 

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