Monday, April 4, 2016

End Times Approaching for the Kingdom of Saudi Arabia

There were two interesting stories -- Ben Hubbard's "ISIS Turns Saudis Against the Kingdom, and Families Against Their Own" and "Saudis Moving to Reduce Dependence on Oil Money" by Hubbard and Stanley Reed -- at the end of last week that read as salvos in an information war that the Kingdom of Saudi Arabia is losing.

With 2015 on record as the hottest year by far, and a bombshell prediction appearing last week that West Antarctic ice sheet melt will lead to a six-foot sea level rise by the end of the century, a politics of finding ways to keep vast carbon reserves in the ground is gradually emerging.

The undeniable reality of catastrophic climate change, Brent crude trading below $40 barrel, and Wahhabism and neoliberalism at full stop add up to a paradigm shift.

The two Hubbard stories are meant to convince readers that the the bloodthirsty kleptomaniacs who rule al-Saud are paying attention to the shift underway and making the necessary changes to transition their atavistic society to a new, less profligate dispensation.

Hubbard's Friday story, the one about Islamic State's terror attacks inside the Kingdom, is meant to create the false impression that the Saudi royal family is a victim of ISIS aggression like the Yazidis who were forced into sexual slavery or the Syrian state that has been cracked apart. What the reader ends up getting is a description of a sloppy murder or two perpetrated by ne'er-do-wells glued to their laptops, not the well-funded and organized blitzkrieg that captured big cities like Mosul and Raqqa.

Hubbard's reporting is not completely Orwellian though. He does -- much like Beirut bureau chief Anne Barnard does when she toes the administration lie in Syria -- find the time to shine a light; in this case, the undeniable reality that the export of Sunni jihad is a Saudi product:
Saudi Arabia has a tangled history with Islamic militant groups. For a long time, it backed them as proxy forces to push its agenda in places like Bosnia, Chechnya and Afghanistan (where it worked with the United States). But that largely ended in 2003, when Al Qaeda turned its focus on the kingdom and staged a series of deadly attacks.
Now the Islamic State poses a new challenge, by turning aspects of Saudi Arabia’s conservative creed against it. Wahhabism has been molded over the years to serve the interests of the monarchy, emphasizing obedience to the rulers and condemning terrorist attacks, even against those seen as apostates. 
Still, among the Islamic State’s many enemies, Saudi Arabia is the only one that considers the Quran and other religious texts its constitution, criminalizes apostasy and bans all forms of unsanctioned public religion. 
The country was founded on an alliance between the Saud family, whose members became the monarchs, and a cleric named Sheikh Muhammad ibn Abdul-Wahhab, whose teachings were used to justify military conquest by labeling it jihad against those deemed to be infidels, most of whom were other Muslims.
Sheikh Abdul-Wahhab’s descendants still dominate the religious institutions of the Saudi state, which now play down the violence in the country’s history and emphasize aspects convenient to an all-powerful royal family, like the importance of obeying the leadership.
Saudi officials reject comparisons between their ideology and that of the Islamic State, noting that millions of non-Muslims live in the kingdom and that the government is closely allied with the United States and participates in the American campaign against the militant group.
They also say that Saudi Islam does not promote the caliphate, as does the Islamic State, and that senior clerics condemn the terrorist attacks and have branded the group “deviant.”
But critics argue that many Saudi clerics have never renounced the aspects of the Wahhabi tradition that the Islamic State has adopted, especially with regard to Shiites, who make up an estimated 10 percent of the kingdom’s 20 million citizens. Many Saudi clerics consider Shiites heretics and accuse them of loyalty to Saudi Arabia’s regional rival, Iran.
The jihadists have exploited this by repeatedly launching suicide attacks on Shiite mosques and then accusing Saudi clerics of hypocrisy for condemning the violence.
“It is clearly hard for Saudi clerics to condemn outright attacks on Shiites,” said Mr. Bunzel, the Princeton scholar. “And you get the feeling that they don’t care as much if the Shiites get attacked, since they’re not really Muslims in their view.”
But the more interesting story of the two is Saturday's. Hubbard and Reed recapitulate an interview with Deputy Crown Prince Mohammed bin Salman that Bloomberg published on Friday announcing the creation of a Saudi sovereign wealth fund that will be bankrolled by selling shares in Saudi Aramco to the public:
RIYADH, Saudi Arabia — A top Saudi prince has announced new elements of a plan to reduce the kingdom’s heavy dependence on oil, amid a drop in world prices that has sent shock waves through the Saudi economy. 
The plans include publicly selling shares of the state oil giant, Saudi Aramco, and routing much of its worth into a public investment fund, said the prince, Mohammed bin Salman, in an interview with Bloomberg published Friday.
The fund could become the world’s largest, he said, with more than $2 trillion in assets. 
“Undoubtedly, it will be the largest fund on earth,” said Prince Mohammed, who is second in line to the Saudi throne and has emerged as the country’s most powerful and dynamic official. “This will happen as soon as Aramco goes public.” 
Although less than 5 percent of Saudi Aramco would be sold, the prince said the national oil company would be transferred to a government fund, now relatively small, called the Public Investment Fund, giving it instant heft and potential financial firepower.
Saudi Aramco is the world’s leading oil producing company. It has about 10 million barrels per day of output, or about 10 percent of global production, and reserves of about 160 billion barrels. The company also has large refining and petrochemical interests inside Saudi Arabia and internationally, including in the United States.
At present, Norway’s fund, called the Government Pension Fund Global, is believed to be the world’s largest so-called sovereign wealth fund. It has about $850 billion in investments.
The announcements came as Saudi Arabia, the world’s largest oil exporter, struggles to reformat its economy.
A decade-long boom left the kingdom’s economy heavily dependent on oil, which provides most of the government’s income, and made the state far and away the country’s biggest employer. The drop in oil prices — to about $39 a barrel from more than $100 a barrel in June 2014 — undermined that model, leading to huge budget deficits and vast cuts in public spending.
Prince Mohammed, the apple of King Salman's eye, is the young man who is the architect of the failed, criminal war on Yemen.

The really shocking quote of the story appears in the next paragraph:
Rachel Ziemba, an analyst at Roubini Global Economics in New York, estimates that Saudi Arabia is burning up its financial reserves at the rate of $10 billion to $15 billion per month. She estimates that the kingdom has about $600 billion left. 
There are longer-term worries as well. A recent study by the consultants McKinsey warned that with more than half of Saudi Arabia’s population under 25, a surge of young people was likely to enter the work force in the coming years. This will require the creation of almost three times as many jobs for Saudis as the kingdom created during the 2003-13 oil boom.
Clearly this is a society headed fast for fracture. There have been thinkers like Christopher Davidson who have been sounding this alarm for years. But now with the Kingdom set to run out of cash in four to five years, the caliphate shrinking in Iraq and Syria, Iran gradually integrating into the global economy, and the supplicant Western neoliberal political parties completely discredited it seems a certainty.

Prince Mohammed's announcement smacks of a public relations ploy similar to a 60 Minutes report I saw years ago trumpeting the technological wizardry of Saudi Aramco, its engineering expertise and visionary investment in solar for a post-carbon world. All hokum as far as I can tell.

Why if Norway used its far-smaller oil reserves to build an $845 billion fund is the House of Saud's only worth $5 billion today?

The Kingdom is a kleptocracy. A big pile of money in a sovereign wealth fund will just be siphoned off by the royal family. Hubbard and Reed back this up in their story:
Western diplomats and analysts say it is hard to gauge the Saudi plans because much about the kingdom’s economy remains opaque and the deadlines for implementation remain unclear.
“The strategy makes sense,” Ms. Ziemba said, “but it is not a silver bullet.”
She said it would have been easier to try such reforms when oil prices were higher and Saudi Arabia’s assets were worth far more than they are now.
Some have questioned how many private investors will want to put their money in a company like Saudi Aramco that releases very little financial information and is seen by many as the piggy bank of the Saudi royal family.
Jean-Francois Seznec, a senior fellow in the Global Energy Institute at the Atlantic Council, said an initial public offering of less than 5 percent made sense because the amount of cash involved in a larger offering could flood the market.
The bigger challenge, he said, will be bringing transparency to a company that has long avoided it. “All of a sudden, everyone could see how much money is being taken off the top by the royal family, and everyone wants to avoid that,” he said.
When push comes to shove and the war really comes home to Riyadh, the royals will simply jet off to their European estates. Now at least such a moment appears to be visible on the horizon.

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