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Saudi Arabia Is Falling Apart
NEWS 10/06/2039 5:21 AM ET
Saudi Arabia Is Falling Apart

Sal Benitez
Foreign Affairs Deputy Editor, Huntington Courier

CC BY-SA 4.0 - image changes released under same license العربية: غارة جوية في مخازن الصواريخ والأسلحة في جبل نقم بصنعاء by Ibrahem Qasim | Writer image: CC BY 4.0 beautiful faces by tommerton2010 | Images were cropped. Images used for illustration purposes only.
A bomb explodes in Dammam two weeks ago.
Widespread chaos has gripped Saudi Arabia, fuelled by a budgetary emergency and a jihadist insurgency the government seems powerless to confront.

The past three weeks have seen a string of attacks on key Saudi population centers with bombs exploding in Riyadh, Medina, Jeddah and Dammam killing more than six thousand people.

Intelligence agencies have linked the bombings to a large scale effort by jihadists to infiltrate and potentially subvert the failing nation.

With the former ISIS suffering collapse on both its eastern and western flanks, it is believed that jihadist formations are finding their way through Iraq to Saudi Arabia's Northern Borders region, and infiltrating other terrorist networks throughout the country.

United States, British and French naval vessels remain positioned in the Persian Gulf and the Mediterranean sea, ready to evacuate foreign personnel if necessary. Israel and Iran have offered to assist in that effort.

For their part, government officials are downplaying the seriousness of the situation.

"No situation exists which the authorities of the Kingdom, cannot adequately handle", Prince Fahd bin Muqrin said yesterday, at a press conference for foreign media outlets.

Ordinary Saudi people are suffering, not only through terrorist attacks, but also in an economy which has stagnated after decades of wealth. The Riyal has plummeted and inflation is at 20%. Basic supplies are becoming difficult to purchase and infrastructure is not being maintained by an increasingly insecure central government.

Water is sometimes not available in some cities. Other cities lose electricity for hours at a time. It is rumored that state employees are removing parts of some state installations to sell for scrap.

The government has tried to entice foreign business and tourism in order to boost its budget, but internationals have had little appetite for the growing unrest in the Kingdom.

The despair on the ground is apparent. Louise Rainey of the BBC spoke earlier this year to ordinary Saudis in Riyadh, many of whom said that they feel let down by the governing royal family.

It is not only an inability to prevent terrorist attacks. Fuel and water subsidies have been gradually cut, leading to a harder life not only for citizens but also for the businesses they run. Unemployment has remained between 35%-45% for the past five years.

In an explosive development last month a mob comprised of young men stormed Aja Palace in the north-western city of Ha'il, prompting the evacuation of Prince Saud Bin Abdul Mohsen Bin Abdul Aziz, the provincial governor. One week later soldiers fought off the last of the rioters, finding the building laid bare.

Other members of the royal family are departing for foreign destinations with no estimated return date. I spoke to an ambassador a week ago, who mentioned his contacts among the Saudi bureaucracy are becoming increasingly concerned at the royal departures. He fears that the perception among ordinary Saudis is of billionaire rulers who have stripped the country of its wealth and sent it overseas.

The ambassador says that if a trickle to Zurich, London and New York turns into a flood, the country will collapse wholesale.

As it is, the nation is being undermined from the inside. Jihadi fighters are increasingly finding a population willing to listen to their message. They may also be finding a welcome home with a Saudi Wahhabist clerical network, which has become increasingly disillusioned with the Saudi government's intent to liberalize in recent decades.

The current crisis has its roots in policies enacted twenty years ago. Saudi Arabia, alarmed at the increase of US shale oil production, tried to flood the market with cheaper oil in an attempt to drive American shale producers out of business. Not only did the strategy fail, it set in motion a decline in pricing which has continued to this day.

Saudi Arabia has needed a price of $90 per barrel in order to break even, but the signal failure of OPEC to reach any kind of lasting agreement on supply has helped prevent this.

Iran and Venezuela have been particularly intransigent regarding any compromise; the former because it was under sanctions for so long and has been trying to make up for lost time (and money) and the latter because it is hopelessly corrupt and needs the money.

Oil prices have settled at $40 per barrel. Saudi production sat at 11.5 mbpd (million barrels per day) in 2033, giving them totals of roughly $168bn in oil revenue.

Compare this with net oil exports in 2005 worth approximately $270bn today, and it's easy to see a drastic decline in The Kingdom's chief economic pillar. The budget shortfall for the last five years has averaged $125bn.

This has necessitated dipping into Saudia Arabia's sovereign wealth fund (SAMA Foreign Holdings) in order to forestall more dire budget emergencies. Analysts have been referring to SAMA as "the piggy bank" as a result of how often it is raided by a myopic administration.

The government tried selling shares in Saudi Aramco, but faced popular disapproval with profits heading offshore. It retains 70% after managing to buy back 10% in recent years.

That same disapproval has been levied against the rise of income taxes, from 0% in 2015 to a peak of 20% for the highest non-royal earners. But with an unemployment rate so high, it has not had the impact the government has expected.

In 2026 SauSol was incorporated, in an attempt to leverage Saudi Araba's vast solar energy potential. A $50bn project was begun in Eastern Province, near the gulf coast, in a bid to improve relations with restive Shias. However, the installation was repeatedly attacked by what were suspected to be Iran-backed militants, and the project was abandoned two years later at a cost of $10bn.

It seems the Saudi royal family has tried everything it can think of to rescue its country. With a rising jihadi presence, and an economy on the verge of total implosion, it remains to be seen whether it has any further tricks up its sleeve or whether a complete national meltdown is simply unavoidable.
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