Saudi Arabia – Next Generation Poised to Lead

The death of King Abdullah on January 23 came at a time when the risk of political instability in the Saudi kingdom had already been heightened by a combination of plummeting global oil prices and the security threats posed by Sunni Islamic militants and an Iranian-backed Shia insurgency in neighboring Yemen. The new monarch, King Salman, acted quickly to provide assurances of a smooth transition, formally naming his younger half-brother, Muqrin bin Abdulaziz Al-Saud, as crown prince, and appointing his nephew, Mohammed bin Nayef, to the post of deputy crown prince, a position created only last year with the aim of bringing greater clarity to long-term succession plans.
The latter appointment marked the official first step in an inevitable generational transfer of power that will be accompanied by a heightened risk of infighting within the royal family. Muqrin was an especially poor choice to oversee that process, as the fact that he has no full brothers means that he lacks an extensive kin-based network of support on which he could count to protect his hold on the crown from the threat of palace intrigue.
Under the circumstances, the king’s rearrangement of the succession order in early May is not all that surprising. In late April, King Salman issued decrees promoting Mohammed bin Nayef to the positions of crown prince and first deputy prime minister, and placing his own son, Defense Minister Mohammed bin Salman bin Abdulaziz Al-Saud, second in line for the throne.
Given their relative youth, the advancement of the two princes to first and second in line to throne arguably brings certainty to the identity of the kingdom’s rulers for the next 50 years. Moreover, as scions of the royal family’s powerful Sudairi line, whose historical dominance within the ruling structure was interrupted by Abdullah’s reign, both can presumably count on a strong base of support within the House of Saud when it comes time for them to take the throne.
The latest personnel changes were part of a broader restructuring that places significant political authority in the hands of the king and his two heirs. Indeed, with the exception of the Ministry of National Guard, which is headed by Abdullah’s son, Prince Miteb, all of the most important ministries are headed by either Salman’s chosen heirs or non-members of the royal family who serve purely at the pleasure of the king.
On the one hand, the concentration of authority in the hands of just a few princes implies a reduced need to achieve consensus among numerous members of the royal family, creating the potential for more rapid shifts in policy, such as the evident adoption of a much more assertive foreign policy strategy since Salman took the throne. On the other hand, it creates a risk of unpredictable changes of policy course, as well as a danger of festering resentment among princes now closed out of the decision-making process.
The government’s oil policy prioritizes the retention of market share over production cuts that might help to boost global prices, but even producing at full capacity, Saudi Arabia has not been able to prevent a significant decline in oil income since prices began their descent in mid-2014. Government spending will remain a key driver of growth this year, and the 2015 budget’s projected deficit of $38.6 billion has already been rendered invalid by the salary bonuses decreed by King Salman in recent months, as well as other unplanned expenditures.
Finance officials have indicated that they will explore ways to cut spending, but with the risks associated with external conflict rising and the initiation of the generational transfer of power possibly imminent, the priority granted to ensuring stable domestic conditions suggests that additional spending is much more likely than any significant cuts, and it is quite probable that the fiscal deficit will hit double digits as a share of GDP this year. Even a massive shortfall can be financed from savings as a short-term necessity, but a prolonged bout of weak oil prices would spell trouble for the kingdom’s finances, especially if political considerations preclude significant spending cuts.