Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Tag: Saudi Arabia

Saudi Arabian Crown Consolidates Control as War Looms

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On November 5, 2017

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Right, so there is a purge in Saudi Arabia, with princes arrested for “corruption” (they’re surely corrupt, but in Saudi Arabia that’s like saying they drink water), but more importantly, the National Guard commander was arrested and replaced with the Crown Prince, and the navy commander was also replaced.

A new anti-corruption committee led by the Crown Prince will continue the purge.

This has shades of what’s been going on in China, where Xi Jinping is called the “Chairman of Everything,” because he’s in charge of every important committee. In Saudi Arabia, his counterpart is the Crown Prince.

Power is being consolidated. It is true that Saudi Arabia has unavoidable problems and larger challenges coming down the pike. The most important should be the price of oil, which can be expected to continue its relative decline over the next couple decades as electric cars and so on come online.

But they’ve also chosen many of their problems: The war in Yemen is a self-inflicted wound, as is the (related) confrontation with Iran.

The latter confrontation is barrelling ahead, and it is likely to be the next significant war, not North Korea. The resignation of Lebanese PM Saad Hariri (who lives part time in Saudi Arabia) is part of the clearing of decks for the next phase, which will be another attempt to take out Hezbollah.

We can expect the US to impose significant sanctions on Lebanon as part of this, justified by Lebanon supposedly being insufficiently democratic (it was Hariri’s job to make this plausible).

Lebanon not being Venezuela, this will likely not be sufficient and military action will be required.

Note that, in this effort, Israel, the US, and Saudi Arabia can be expected to act in cooperation.

This can and may well easily escalate into an actual war with Iran. As in Iraq before, the Saudis will want the US to do the actual dirty work, and Trump is eager to do it.

Iran is increasingly a Russian ally, and, as for Hezbollah, they appear to expect Syria to support them in any war with Israel, which is not unreasonable: Without Hezbollah support, Syria would have lost its war. Additionally, the usual reason for not fighting Israel doesn’t particularly apply any more: Syria is a smoking ruin already, though I’m sure Israel will try to demolish the capital. However, one suspects it will be heavily defended by Russian air defenses, however.

The entire mess is a clusterfuck waiting to happen. Absolute stupidity: Israel would be better off leaving Hezbollah alone (they have a lot more missiles than last time and are even more battle hardened); Iran is not an existential threat to Saudi Arabia, and; the US would have to be crazy to start another major war in the Middle East or even become involved in another one as it has done in Yemen (which should be none of the US’s business).

A lot of countries are acting directly against their own self interest. The only thing Saudi Arabia should be concerned with right now is handling the end of oil, and the prestige they might gain from defeating Iran will not be sufficient to save them from the consequences of a complete economic meltdown.

So this entire mess is, again, worth keeping an eye on.

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Saudi Arabian Collapse Continues

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On September 6, 2017

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The Course of Empire by Thomas Cole

The Course of Empire by Thomas Cole

Saudi Arabia is engaging in, in the words of the Guardian, a privatization so comprehensive it dwarfs Thatcher or even the great post-Communist Russian fire sale.

That’s…large.

It is also a consequence of the price of oil. Saudi Arabia isn’t making enough money from oil to support its government expenses.

They could directly tax or charge their population for the difference, of course, but privatization allows them to sluff off the blame. Sell assets that can charge more and cost more than they make right now, let private actors do the charging.

This kicks the problem down the line a bit, and distances the Saudi Royal family from some of the blame, but it doesn’t make much difference in the long run.

Saudi Arabia needs much more from the outside world than Saudi Arabia now produces. That’s what has to be changed, and the situation is only going to get worse. (When electric cars become the norm, Saudi is cooked, as I have noted before).

The assets the Saudis are selling are also that which make them legitimate to their population. The House of Saud bought a lot of peace from their subjects by spending a lot of money on their subjects.

When they aren’t able to do any more, their legitimacy will take a huge hit. If they aren’t doing anything for people, why keep them around?

I stand by my prediction of revolution in Saudi Arabia. Timing is always hard to predict, but 10 to 20 years seems likely.

This is exacerbated by incompetence at the top. The war in Yemen was supposed to be over in months, and isn’t; it’s a fiasco. The blockade of Qatar was supposed to bring them to heel, and hasn’t, but has pushed them into the orbit of Iran and Turkey.

The current generation of Saudi rulers are spectacularly incompetent. This isn’t surprising, it happens to all wealthy or powerful families in time when their scions are protected from the real world, which the Sauds always have been.

Buying Saudia assets located in Saudi Arabia may work out very well for some people. But it will be a political and possibly military game as much as a financial game. As such, it is only for sharks. A lot of people got hurt trying to make money after the USSR fell, and while some won big, they were a minority.

The prelude to the Age of War and Revolution chugs on.

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The Death of Saudi Arabia

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On July 16, 2017

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The Course of Empire by Thomas Cole

The Course of Empire by Thomas Cole

Saudi Arabia, Egypt, United Arab Emirates, and Bahrain recently cut off diplomatic relations with Qatar and launched an embargo, stating that they wanted the media outlet Al Jazeera shut down, and support for the Muslim Brotherhood ended.

Or, more colloquially, and good for a belly laugh, for these entities to “stop supporting terrorists,” which coming from any of those countries–and especially Saudi Arabia–is so flamingly hypocritical it puts the sun in shadow.

Oh my God.

Unfortunately for Saudi Arabia and its allies, Qatar has yet to give in, and it has been backed up by Turkey (who sent troops), and Iran (who is sending food).

Then we have the war against Yemen. Saudi Arabia invaded Yemen, with a huge coalition, and US support, and, well, what have they accomplished? I suspect the main accomplishment will be crippling Yemen’s next generation by starving them when they were young.

And, some time back, Saudi Arabia decided to lower oil prices to push out Western producers and…Oh, look! Oil prices are too low to support Saudi Arabia.

The joke in Saudi Arabia, I understand is, “My grandfather rode a camel, I drive a car, my grandson will ride a camel.”

Saudi Arabia is doomed. The current king is an incompetent, thrashing around trying to solve problems and making them worse.  He, as with his forbears, sees foes everywhere; unlike his predecessors, he isn’t willing to simply sit and let sores fester. He wants to do something about them, and so far, what he’s done has made them worse.

This is fairly standard: All dynasties go bad eventually because the kings-to-be grow up in wealth and power and think their privilege is the natural state of things. They believe they are brilliant and deserve it all, when it was handed them on a platter. Perhaps they are good at palace intrigue and think that extends beyond the palace.

It doesn’t.

But this is worse than that; Saudi Arabia is just an undeveloped country sitting on oil. It’s that simple. Their particular ideology did not allow them to control their population, and the source of their power, oil, was always going to be replaced as the world’s most important energy source at some point. That “some point” is now close.

Electric cars are coming. It is that simple. And when they do, oil will never recover.

As with all such windfalls, the only correct way to deal with resource windfalls is to siphon them off from the regular economy and develop the new economy. That is almost never done, and the story is always the same. Sometimes it takes decades, sometimes centuries, but the resource is always either replaced or depleted and the country or area, never having developed an actual economy, goes into terminal decline.

I live near one such place: the Canadian Maritime provinces. Once, this was the main supplier of ships’ masts in the British Empire. As the entire empire ran on sailing ships, this made it important. When steam took over, there were no ship masts left, and the Maritimes have never recovered.

Alberta, Canada’s oil patch, will likely experience the same story, with the added problem of having destroyed much of its soil, so that it cannot even go back to its full, agricultural roots.

Saudi Arabia is DONE. Like other rich and powerful countries, and Saudi Arabia has been a great power (though not a super power), its death throes will be terrible. Yemen is collateral damage; part of the early collapse. Likewise, Qatar. From the long point of view, this all just has to play out; for those on the ground, it will be ugly.

There are good Saudis, even as there are good Americans, and they have my sympathy, but I have little hope to offer them. Saudi Arabia is a classic example of over-development, on top of resource sickness: The land cannot support the population, and relatively soon, in historical terms, it will not be able to afford the necessary imports.

Civil war and implosion, famine and catastrophe are all next to certain. If you live in Saudi, it is probably time to get out. What is to come is unlikely to be avoided; it would take vast amounts of luck. Luck Saudi Arabia, in making so many enemies, has made unlikely to occur.

And a lot of people, close or far from Saudi, will suffer as it destructs.

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Saudi Arabian Debt Will Not Be Among Safest in World

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On November 4, 2016

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Saudi Arabia is issuing 5, 10 and 30 year bonds.

The debt will be among the most secure in the world given the country’s strong balance sheet, net foreign assets, and ~$13 trillion worth of proven oil reserves.

…

On Wednesday, Saudi Arabia is set to issue its first wave of sovereign debt to foreign investors. The measure, first announced last November, is being offered in response to a historically severe compression and enduring slump in oil prices that has squeezed the nation’s fiscal budget. Accessing the debt markets can help mitigate short-term fiscal pressure and provide financing during a necessary bridge period to a more diversified economy.

Well, the five and ten years are safe enough.

Saudi Arabia’s problems are both inevitable, and caused by the new generation of leadership’s stupidity. Remember, Saudi Arabia, seeking to destroy the US fracking industry, is the one who broke the back of oil prices in the first place.

That said, the prices had nowhere to go but down anyway. The world is in a wave of austerity and options which avoid the use of oil are coming online. Somewhere in the early 2020s, electrical cars will be as cheap as gasoline cars.

Game over.

As for the bonds, Saudi Arabia isn’t going to “bridge to a more diversified economy.” Not going to happen. They simply import too much, and do not have enough domestic producers capable of replacing imports and creating new work. Nor are those conditions easy for them to create when their currency value is almost entirely based on vast volumes of resources, which means it isn’t providing the necessary feedback (low, low) to make production in the country viable.

Saudi Arabians have a joke: “My grandfather rode a camel, I drive a Mercedes. My grandson will ride a camel.”

Correct, in essence.

On the bright side, once they’re broke, the money flooding out to promote their particular take on Islam will subside to a dribble.

I expect economic collapse and civil war in Saudi Arabia. Within 20 years.

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Saudi Arabia & Turkey to Invade Syria?

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On February 15, 2016

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It’s hard for me to credit anyone for being so careless, but the Independent reports that:

Saudi Arabia is sending troops and fighter jets to Turkey’s Incirlik military base ahead of a possible ground invasion of Syria.

…

“At every coalition meeting we have always emphasised the need for an extensive result-oriented strategy in the fight against the Daesh terrorist group.

“If we have such a strategy, then Turkey and Saudi Arabia may launch an operation from the land.”

So… they will claim that they are fighting ISIS, which is, by this point, I suppose, traditional. Turkey is already shelling Kurdish positions in northern Syria.

Of course, Saudi Arabia is not credible on this (at least with regards to a large commitment), with their involvement in Yemen, especially as they are also considering invading that country.  But Turkey is. I hope this is just bluster, intended to sway negotiations.

If it isn’t, this is a fiasco, a catastrophe, waiting to happen. Unlike the other foreign forces with boots on the ground (Iraq, Iran, Hezbollah, Russia), these forces would obviously not be invited by the Syrian government.

Syrian forces, backed by Russian airpower, are now fighting quite close to the Turkish border. Their aim has been to close that border so that various rebels (including ISIS) can’t receive supplies from Turkey.

It should be pointed out that if Daesh/ISIS has a government ally in the world, it is Turkey. As for Saudi Arabia, well, Daesh’s theology is a very close descendant of their branch of Islam.

Perhaps more to the point, all those armies tromping around in a rather small country risks war between Russia/Syria/Hezbollah and Saudi Arabia/Turkey.

Russian supply lines to Syria are not the best, to put it mildly. Turkey can close the direct sea route from Sevastopol, and alternative routes require going through some dangerous territory.

I wonder what Russia would do in such a situation. The Turkish military is very large and right on the border. A Turkish attack on Syria can’t be considered an existential threat to Russia, so Russian nuclear doctrine doesn’t call for use of battlefield nukes, but… I get twitchy when a NATO member goes up against Russia, and Turkey is a member of NATO.

Russia created “facts on the ground,” which have led to a realization that Assad will probably survive and that the rebels are doomed.

It seems those who wanted Assad gone the most now want to create their own “counter-facts” on the ground. Either they get rid of Assad in peace deals (assuming they avoid outright conflict), or they divide up Syria, with Turkey getting a good chunk of it.

That’s the plan. If they do invade, I find myself almost hoping the plan “works,” because if it doesn’t “work” that will most likely be because of general war between the powers.

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This is an absolute catastrophe waiting to happen. I find it unlikely this could be done without the US’s approval, and, given Obama’s recent statement about how Russia should stop hitting “moderate” opposition targets in Syria, I can only assume he’s greenlighted this.

Were I in the White House, I’d be telling Saudi Arabia and Turkey not to. If they insisted on doing it anyway, I’d go public with a warning not to, and a UN Security Council motion with the US voting against Turkey and Saudi Arabia.

And let’s be perfectly, brutally frank here: If they want to do this, I’d tell Turkey that NATO’s “an attack on one is an attack on all” principle will not apply here. You do this, we’re not getting into a nuclear war for you. This is not self-defense.

As for Saudi Arabia, I’d have a pointed conversation about the price of oil and their budget. However, as much as they think the price of oil will increase if there is a war in Syria, their economy is still in bad shape, and the US could total it tomorrow if they chose to–simply through Treasury sanctions. Likewise, an end to parts and ammunition for their military would curtail them.

These are stern, even radical steps. Avoiding a war with Russia justifies them. There is nothing in Syria worth the risk of having all these armies stomping around, especially after Turkey has already shot down one Russian plane.

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