December 7, 2017

MIDEAST: Saudi Arabia’s Earth-Shaking Coup.

How extraordinary to see a world-historical revolution unfolding before one’s eyes and not know how it will turn out: that’s what’s happening right now in Saudi Arabia. Mohammad bin Salman, a 32-year-old too young to be a partner in most law or finance firms, has managed, by intrigue not yet fully disclosed, to supplant his cousin Crown Prince Muhammad bin Nayef as heir to the throne and to carry out a purge of the royal family breathtaking in its sweep. Imagine: not only did bin Salman order the arrest of at least ten other princes and a score of former government ministers, now held in luxurious restraint in Riyadh’s Ritz Carlton; he also supposedly had Prince Al-Waleed bin Talal, one of the world’s richest men and a major shareholder of 21st Century Fox, Citigroup, Apple, Twitter, and a host of other giant Western corporations, hanged upside down and beaten in an “anti-corruption” investigation.

No matter that “wasta”—corruption, kickbacks, and cronyism—has long governed Saudi Arabian business dealings. Now, the kingdom’s economic crown jewel—Aramco, the Saudi state oil company—is headed for sale on the public stock markets, and the financial future of the kingdom and its oligarchs is on the line. Sadly for the Saudis, Aramco is no longer as valuable, economically and geopolitically, as it once was. Natural gas from fracking has displaced oil as the fuel of the Western economy, with the result that OPEC (and, less critically, Russian oil) can no longer hold anybody’s economy hostage. For the Saudi government, moreover, no longer can cartel-inflated oil revenues pay for the gigantic welfare state that supports so much of the population in non–working, gilded, state dependency. What can’t go on, won’t, said economist Herb Stein sagely; and MbS, as the new crown prince is called, saw this reality and stepped in to take precautionary measures before a rapidly collapsing economic order sparked social anarchy, with an outcome no government could foresee or control.

Read the whole thing.

Bin Salman faces serious headwinds — violent Wahhabi hardliners, frustrated members of his own ruling clan, and of course the ticking time bomb effect of low oil prices on his country’s finances.