Saudi Arabia: The Cost of Empire

Saudi Arabia’s state expenditures for this year are an impressive 41% over the original budget. The Saudis have been spending money as only the Saudis (and Americans) can–buying weapons, giving mass foreign aid grants, and shoveling money into their population. Despite this, the state will run a surplus of nearly $100 billion dollars. It’s all a paradoxical consequence of the Arab Spring. The Saudis had been very pessimistically budgeting for $60 a barrel oil (a price unseen for regional index Dubai Crude since mid-2009), even though it was at $90 a barrel at the beginning of the year. Then the uprisings happened, investors got nervous, Libya stopped producing and the market tightened up. Oil hit $120 at the end of April. The Saudis are suddenly flush with money and more able than ever to push counterrevolution and stabilization wherever they please. That’s the paradox: the more unstable the Middle East becomes, the more regimes there are able to fight instability.

Saudi troops in Yemen in 2010. (Image via CSM/AP)

Had oil prices not spiked during the Arab Spring, the al Saud would be unable to influence events in their favor. $4 billion to stabilize Egypt? Millions of barrels of oil to help Jordan deal with its energy crisis? Military action in Bahrain and on the Yemeni border? In order to pull everything off, the Saudis would have to run up their national debt–which would have already been growing by $40 billion this year. Despite the religious divides, radicalism, and complex social forces that perpetually challenge Riyadh, the most serious political instability in Saudi Arabia, the decade-long power struggle between Saud, Faisal, and Tallal that followed the death of ibn Saud, was largely a result of the government’s significant debt. (Defying the conventions of Arab politics in which the military is the most important source of political power, Faisal undermined Saud from the Finance Ministry.)

Debt is probably still a threat to the third Saudi state. An indebted Riyadh would have trouble giving the princes their allowances, creating instability at the top of the political system. An indebted Riyadh would also be unable to quiet its people with financial gifts, education grants, and development projects, creating instability at the bottom of the political system. An indebted Riyadh would also have incentives to align more with the hawkish factions in OPEC to increase oil prices, which would be a threefold disaster. First, they’d anger crucial allies like the US; second, they’d create incentives for alternative energy that could make oil less important; third, high oil prices underwrite stability and expansionism in regional rival Iran. Given the strength of the Saudi repressive apparatus–it very effectively forestalled protests in Shia areas in March–runaway debt might actually be the biggest long-term danger to the Saudi political system.

It will be interesting to see whether the Saudis can continue to play their current big role in the region’s politics if oil prices drop again–say, in a double-dip recession. They’re currently living life as an empire–ruling a diverse set of subjects at home, gaining regional influence through the GCC framework, playing kingmaker in Yemen, basing troops overseas (or at least over causeways), and buying influence. However, just like the US is learning, empires based on power and not economics are extremely expensive. The Saudis are having a year in the sun, but oil will have to stay high for them to avoid a return to the shade.



Filed under Saudi Arabia

2 responses to “Saudi Arabia: The Cost of Empire

  1. Pingback: Prince Nayef Strikes Back: Palace Politics and the New Dissent Law | John Allen Gay's Middle East Blog

  2. Pingback: Government In The Lab | Government In The Lab

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