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Cyril Widdershoven

Cyril Widdershoven

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently, he holds several advisory positions with international think tanks in the Middle…

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Saudi Power Struggle Could Destabilize The Entire Middle East

Political instability in Saudi Arabia is growing as King Salman bin Abdulaziz begins to overhaul the Saudi government, putting a long list of family members into positions of influence while increasing the power of his son, Deputy Crown Prince Mohammad bin Salman. These actions have the potential to lead to a direct conflict with Crown Prince Mohammed bin Nayef. The expected internal power collision, predicted by many analysts, finally seems to be heating up. The real surprise, however, is that it is taking place while King Salman is still alive rather than during the succession period. King Salman’s royal decrees, in which he has appointed two of his other sons, Prince Abdulaziz and Prince Khaled as Minister of State for Energy Affairs and Ambassador to the United States respectively, has opened up Pandora’s box.

At the same time, King Salman has decided to re-establish all allowances and benefits which were canceled last September during the oil price bust. Additionally, the King has stated that two months of salary will be paid as an allowance to the military and security personnel fighting in Yemen. The latter is a complete reversal on economic measures taken in 2016 when Saudi Arabia was hard hit by the global slump in oil prices.

The power struggle in the coming months could emerge inside of King Salman’s palaces as the current government overhaul is a direct move to increase the influence of the Salman branch of the Al Saud family tree. During this time, media sources in Saudi Arabia and the GCC have indicated that King Salman’s decrees have moved several allies of his son, Mohammed bin Salman, into key positions. King Salman has also shown a keen interest, likely supported or instigated by Mohammed bin Salman, in strengthening relations with the United States. The appointment of Price Khaled as ambassador to Washington is convincing evidence of this suggestion.

The appointment of Prince Abdulaziz bin Salman, half-brother of Deputy Crown Prince Mohammed bin Salman, as Minister of State for Energy Affairs is seen as very significant, as well. He will ease the overall burden on the Ministry of Energy, Industry, and Mineral Resources, Khalid Al Falih. Prince Abdulaziz will also be at the center of the Kingdom’s critical energy portfolio, including upstream oil and gas, renewables, and power generation. Related: Kuwait Sees $80 Oil By 2020

The appointment of Prince Khalid, the full brother of Mohammed bin Salman, some suggest, is a move to push Crown Prince Mohammed bin Nayef further to the sideline. And while Nayef maintains strong high-level connections to the power brokers in Washington and the Trump Administration, it could also be seen as a move by King Salman to bring counterterrorism operations and political relationships back into the hands of the Salman Branch.

Mohammed bin Nayef remains the current Crown Prince. And though Mohammed bin Salman has never openly challenged Nayef’s claims to the throne, it is clear that there is a potential for an all-out power struggle, especially given the high-profile media coverage of Salman in the Kingdom. As the main power behind the Coalition War in Yemen, the plan to wean the Kingdom from its oil dependency via Saudi Vision 2030, and as the chair of Saudi Aramco, it is clear that Deputy Crown Prince Mohammed bin Salman is highly ambitious.

King Salman has also created a new National Security Centre. The role of the national security advisor will be filled by Mohammed bin Salih Alghfaili who Saudi insiders have already linked to Mohammed bin Salman’s inner circle. At the same time, another Salman loyalist, Major General Ahmed Assiri, was appointed as deputy chief of the General Intelligence Presidency. The NSC is in direct competition with the already existing security body, the Political and Security Council, headed by Mohammed bin Nayef, as the Minister of Interior leaving Nayef in a precarious position.

The direct impact of Salman’s reshuffle is obvious to most. Saudi Crown Prince Mohammed bin Nayef’s main power position has been hit hard. Nayef’s power structure is partly built on his links to the security establishment in the Kingdom. One of his main accomplishments before becoming Crown Prince were his very successful operations against Al Qaeda and other Islamic militants.

The increased internal power struggle, in which Mohammed bin Salman and his allies have the upper-hand, doesn’t bode well for the months to come. Stability on political and security levels are only possible if opposition elsewhere is countered. To quell political (or royal) discord, King Salman’s government must continue to push for higher oil prices and revenues. This will present the Kingdom with a major challenge. As prices are still floundering around $50 per barrel, Saudi Arabia will have to use all of its power and international influence to get a grip on volatile oil markets. Riyadh will need a continuous influx of cash to support higher government expenses, subsidies, and salaries while also investing in the ongoing economic diversification projects. An OPEC production cut extension is the only option.

Higher revenues are already expected by Riyadh, as optimistic statements by government officials are following each other quickly. Officially, the government’s financial position has improved, but the Kingdom is still set to run up a deficit of around $50-53 billion over 2017. The latter will be partly mitigated by the high success rate of its bond issues, but still a strict fiscal policy should be held. In general, a move to reverse the financial cutbacks is not a positive one. Financially, it should have been blocked, but internal political and societal issues have forced the hand of Salman. Related: Trump Flirting With The Idea Of A Federal Gasoline Tax Increase

Though opposition in Saudi Arabia is extremely quiet at present, the current situation could be the silence before the storm. King Salman’s unexpected reshuffle of the government, transferring all power into the hand of the Salman Branch, while also handing out additional money to the public and army, is still a sign that there is a high level of opposition to the dreams of the Deputy Crown Prince Mohammed Bin Salman’s coterie.

Global oil and energy markets should not take these internal Saudi developments lightly. The threat of a royal conflict in Saudi Arabia or increased unrest in the streets will destabilize OPEC’s de facto leader. Reports already show that there have been nationwide calls for protests. Wire reports have also stated that security forces lined the streets of central Riyadh, but no demonstrations or clashes have yet been disclosed. Opposition has become increasingly vocal, especially the so-called “April 21 Movement”, which has been using the Twitter hashtag to demand the reinstatement of benefits and has called for an end to the Aramco IPO plans. Some have even demanded the end of the constitutional monarchy.

In this light, Salman’s benefit reversal and government overhaul is a rational one. Stability is the primary goal for Saudi royals. If the people of Riyadh were to unravel, combined with ongoing issues in the Shi’a Eastern Province, things could quickly go from bad to worse. Additionally, a destabilized Saudi Arabia would be a god-send for Iran. Taking out Tehran’s main adversary would not only give Iran total freedom in Iraq, Syria and Yemen, but it could also threaten Bahrain - even Kuwait. Underestimating the still simmering conflicts in the region, especially between Iran and Saudi Arabia, is unwise. Internal unrest in Riyadh, in combination with the Iranian presidential elections (19 May), could start a bushfire which would be difficult to extinguish.

By Cyril Widdershoven for Oilprice.com

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Leave a comment
  • Terry Saxton on May 04 2017 said:
    The Middle East is already unstable lol, it's time for the Saudis to pay for their interference,complicity in terrorism, and human rights violations,hope the whole family loses.
  • S. Mayo on May 07 2017 said:
    MbS is not the Chair of Saudi Aramco...that would be Khalid Al-Falih.

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