"Saudi Arabia, Where Even Milk Depends on Oil, Struggles to Remake Its Economy," by Nicholas Kulish (Friday), and the even longer "Rise of Saudi Prince Shatters Decades of Royal Tradition," by Mark Mazzetti and Ben Hubbard (Sunday), paint a picture of woe for the absolute monarchy of 30 million subjects.
Kulish captures this woe in a few paragraphs (and without even mentioning the war in Yemen):
Saudi Arabia’s about-face last month at a meeting of the Organization of the Petroleum Exporting Countries in Algeria, agreeing to cut production to raise the price of crude, showed the urgency policy makers here are feeling. Prince Mohammed announced plans this year to sell off a small piece of the country’s economic crown jewel, Saudi Aramco, to free up money for investment.
The budget deficit was nearly $100 billion last year. The country’s foreign reserves have dropped by a quarter since oil prices started falling in 2014. The government has taken loans from foreign banks and will try to borrow more from the global bond market.
Hedge funds are wagering that the Saudi central bank will be forced to revalue its currency, the riyal. Zach Schreiber, the head of PointState Capital, which made $1 billion betting that oil would fall, told investors in May that the Saudi riyal was “massively overvalued” and that the country had only “two to three years of runway before it hits a wall.”
The government has abruptly cut construction projects, forcing contractors to lay off workers. This year, foreign laborers set fire to buses in protests demanding months of back pay. The sudden jump in water bills this spring led to such an outcry on social media that the minister for water and electricity was fired after telling customers to dig their own wells if they were unhappy with prices.
“If you’re a Saudi, you’ve grown up with that expectation of the financial largess that’s dished out,” said Adel Hamaizia, the vice chairman of the Oxford Gulf and Arabian Peninsula Studies Forum. “Things are likely to get more difficult for the government in terms of managing frustration from the everyday people.”
Adding to the pressure, the kingdom’s population has nearly doubled since 1990. With half of all Saudis younger than 25, the private sector does not offer enough good opportunities for the estimated 300,000 young people entering the work force each year, especially women. Fewer of the public sinecures that have sustained earlier generations are available, with plans for deeper cuts.The Mazzetti and Hubbard story describes the coming battle for ascension to the throne between boy Prince bin Salman and Crown Prince bin Nayef. Prince Salman's father, King Salman, is fast on his way to dementia and has already ceded much of the management of the Kingdom to his favorite son. Vision 2030, the neoliberal reboot of the House of Saud, is Prince bin Salman's baby.
All of this is an enormous problem for the United States. The Kingdom of Saudi Arabia is a U.S. creation. The USG will do everything in its power to insure its survival (such as a presidential veto of a universally popular bill to allow families of 9/11 victims to pursue civil claims against al-Saud, as well as knocking out Yemeni radar sites).
The Kingdom is singularly unpopular among U.S. voters. It is going to be a tough pull for any U.S. Government to save the Kingdom's bacon. And what does the U.S. do if there is a civil war among Saudi royals?