Kowtowing to the Saudi king

Saudi Arabia is a vicious dictatorship, yet the death of the king recently led to warm words of tribute from Western leaders. Why? Matthew Partridge reports.


King Abdullah died last week, aged 90

Saudi Arabia is a vicious dictatorship, yet the death of the Saudi king recently led to warm words of tribute from Western leaders. Why? Matthew Partridge reports.

What happened to the Saudi king?

Last week, King Abdullah of Saudi Arabia died, aged 90. World leaders, including US president Barack Obama and UK prime minister David Cameron, flew to Riyadh to pay their respects, while the British flag was flown at half-mast in Westminster. This unquestioning support has proved controversial in light of Saudi Arabia's harsh domestic laws, dismal record on human rights (see below), and alleged support of terrorist groups. As Ross Douthat noted in The New York Times, the Western reaction shows that Britain and America "are handcuffed to Saudi Arabia with no immediate possibility of escape".

Why is the kingdom so important?

Western leaders court Saudi Arabia primarily because its large oil supplies an estimated 20% of global reserves give it vast power in the energy market. On top of that, it is also a major client for Western defence companies. The country's huge oil revenues allow the government to fund itself with little domestic taxation around 90% of revenue comes from oil. A significant proportion of this oil money is spent on Saudi Arabia's military, which has grown rapidly in recent years due to perceived internal and external threats.

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Despite having a population of only 30 million about half of the size of the UK Saudi Arabia spends $67bn a year on its armed forces. That makes it the fourth-biggest military spender in the world, ahead of both France and the UK. This spending is expected to continue growing by around 8% a year through to 2018 and the majority of the money goes on military equipment imported from the US, Britain and France. Last year British arms exports to Saudi Arabia alone totalled £1.6bn. With UK military spending set to decline, exports are seen as vital to protecting the jobs of as many as 350,000 people employed in the sector.

Is any of this likely to change?

The US shale oil and gas revolution is the most obvious immediate threat to Saudi's oil dominance America has overtaken the country as the world's biggest oil producer. Most believe that the recent slide in oil prices (to around $50 a barrel) has been exacerbated by Saudi refusing to sanction production cuts by oil cartel Opec and that this decision to keep pumping oil is a deliberate price war with the aim of making US shale oil uneconomical to produce.

A change of heart could see the oil price rebound. But for now, the new king King Salman, Abdullah's 79-year-old half-brother has reappointed Ali al-Naimi, the country's long-serving oil minister, and pledged to continue the same policy. A longer-term threat to Saudi's role in the energy market might be its own reserves.

Leaked diplomatic cables (published in 2011) note that a prominent Saudi expert warned in 2007 that the kingdom was exaggerating its oil reserves by around 40%. Some people even believe that its production will peak in the near future. Even if that doesn't happen, a recent report by Citigroup warned that Saudi energy consumption was growing so fast that the country was set to become a net oil importer by 2030.

Are there any other problems?

The main external problem for Saudi Arabia is its rivalry with Iran. While both regimes are socially and politically repressive, Saudi Arabia's government is based on Sunni Islam, while Iran follows Shia Islam. This has led Saudi Arabia to support armed opposition to the governments of Iraq and Syria, both of which are run by Shia governments (though Syria's population is majority Sunni).

Saudi Arabia's policy of supporting the most extreme elements, while ignoring the official Syrian opposition, has been blamed for the rise of the terrorist group Isis. Ironically, the Saudi regime is itself opposed by many terrorist groups including some that Riyadh has supported in the past who believe that the Saudi monarchy has made too many concessions to the West. Saudi Arabia also faces competition from fellow petro-power Qatar, which is also using its oil wealth to fund jihadists.

What about internal challenges?

Yes, the regime in Riyadh faces many internal challenges. More than half the population is under 25, and they are increasingly clamouring for political, economic and social reform. Meanwhile, thanks to polygamy, there are around 7,000 minor royals on the public payroll, although King Abdullah tried to cut down on the amount of money that they received. While the country is mostly Sunni, there is a substantial Shia minority in the east of the country who have been protesting their treatment.

The current policy is to deal with all this by a combination of repression, small political reforms and large amounts of public spending. However, this may not be sustainable if oil prices remain low, or if the wells run dry.

A dismal record on human rights

Saudi Arabia's laws are heavily influenced by the Wahhabischool of Sunni Islam. As a result, there are very strict rulesabout gender segregation, with women expected to beveiled in public (they are also banned from driving and maynot leave the country without a male relative's permission).

Despite the fact that there are a significant number of guestworkers from Christian countries, non-Islamic worship isessentially banned. These laws are enforced by the religiouspolice, with extremely harsh punishments for infractions orother crimes. As The Guardian's Julian Borger reports, morethan 80 people were executed in 2014, mostly by beheading,"a practice that has triggered global revulsion when used inrecent months by Islamic State extremists".

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri