structural realities means that Saudi Arabia is indeed on the brink
of protracted state-failure, a process likely to take-off in the next
Tuesday 22 September, Middle East Eye broke the
story of a senior member of the Saudi royal family calling for a
“change” in leadership to fend off the kingdom’s collapse.
a letter circulated among Saudi princes, its author, a grandson of
the late King Abdulaziz Ibn Saud, blamed incumbent King Salman for
creating unprecedented problems that endangered the monarchy’s
will not be able to stop the draining of money, the political
adolescence, and the military risks unless we change the methods of
decision making, even if that implied changing the king himself,”
warned the letter.
or not an internal royal coup is round the corner – and informed
observers think such a prospect “fanciful” – the letter’s
analysis of Saudi Arabia’s dire predicament is startlingly
many countries in the region before it, Saudi Arabia is on the brink
of a perfect storm of interconnected challenges that, if history is
anything to judge by, will be the monarchy’s undoing well within
the next decade.
biggest elephant in the room is oil. Saudi Arabia’s primary source
of revenues, of course, is oil exports. For the last few years, the
kingdom has pumped at record levels to sustain production, keeping
oil prices low, undermining competing oil producers around the world
who cannot afford to stay in business at such tiny profit margins,
and paving the way for Saudi petro-dominance.
Saudi Arabia’s spare capacity to pump like crazy can only last so
long. A new peer-reviewed study in
the Journal of Petroleum Science and Engineering anticipates that
Saudi Arabia will experience a peak in its oil production, followed
by inexorable decline, in 2028 – that’s just 13 years away.
could well underestimate the extent of the problem. According to the
Export Land Model (ELM) created by Texas petroleum geologist Jeffrey
J Brown and Dr Sam Foucher, the key issue is not oil production
alone, but the capacity to translate production into exports against
rising rates of domestic consumption.
and Foucher showed that the inflection point to watch out for is when
an oil producer can no longer increase the quantity of oil sales
abroad because of the need to meet rising domestic energy demand.
2008, they found that
Saudi net oil exports had already begun declining as of 2006. They
forecast that this trend would continue.
were right. From 2005 to 2015, Saudi net exports have experienced an
annual decline rate of 1.4 percent, within the range predicted by
Brown and Foucher. A report by Citigroup recently predicted that net
exports would plummet
to zero in
the next 15 years.
riches to rags
means that Saudi state revenues, 80 percent of which come from oil
sales, are heading downwards, terminally.
Arabia is the region’s biggest energy consumer, domestic demand
having increased by 7.5 percent over the last five years – driven
largely by population growth.
total Saudi population is estimated to grow from 29 million people
today to 37 million by 2030. As demographic expansion absorbs Saudi
Arabia’s energy production, the next decade is therefore likely to
see the country’s oil exporting capacity ever more constrained.
energy is one avenue which Saudi Arabia has tried to invest in to
wean domestic demand off oil dependence, hoping to free up capacity
for oil sales abroad, thus maintaining revenues.
earlier this year, the strain on the kingdom’s finances began to
show when it announced an eight-year delay to
its $109 billion solar programme, which was supposed to produce a
third of the nation’s electricity by 2032.
revenues also have been hit through blowback from the kingdom’s own
short-sighted strategy to undermine competing oil producers. As I
Saudi Arabia has maintained high production levels precisely to keep
global oil prices low, making new ventures unprofitable for rivals
such as the US shale gas industry and other OPEC producers.
Saudi treasury has not escaped the fall-out from the resulting oil
profit squeeze – but the idea was that the kingdom’s significant
financial reserves would allow it to weather the storm until its
rivals are forced out of the market, unable to cope with the chronic
lack of profitability.
hasn’t quite happened yet. In the meantime, Saudi Arabia’s
considerable reserves are being depleted at unprecedented levels,
dropping from their August 2014 peak of $737 billion to $672bn in May
– falling by about $12bn a month.
this rate, by late 2018, the kingdom’s reserves could deplete as
low as $200bn, an eventuality that would likely be anticipated by
markets much earlier, triggering capital flight.
make up for this prospect, King Salman’s approach has been to
What happens when over the next few years reserves deplete, debt
increases, while oil revenues remain strained?
with autocratic regimes like Egypt, Syria and Yemen – all of which
are facing various degrees of domestic unrest – one of the first
expenditures to slash in hard times will be lavish domestic
subsidies. In the former countries, successive subsidy reductions
responding to the impacts of rocketing food and oil prices fed
directly into the grievances that generated the “Arab Spring”
Arabia’s oil wealth, and its unique ability to maintain generous
subsidies for oil, housing, food and other consumer items, plays a
major role in fending off that risk of civil unrest. Energy subsidies
alone make up about a
Saudi’s gross domestic product.
revenues are increasingly strained, the kingdom’s capacity to keep
a lid on rising domestic dissent will falter, as has already happened
in countries across the region.
a quarter of the Saudi population lives in poverty. Unemployment is
at about 12 percent, and affects mostly young people – 30 percent
of whom are unemployed.
change is pitched to heighten the country’s economic problems,
especially in relation to food and water.
many countries in the region, Saudi Arabia is already experiencing
the effects of climate change in the form of stronger warming
temperatures in the interior, and vast areas of rainfall deficits in
the north. By 2040, average temperatures are expected to be higher
than the global average, and could increase by as
much as 4
degrees Celsius, while rain reductions could worsen.
would be accompanied by more extreme weather events, like the 2010
Jeddah flooding caused by a year’s worth of rain occurring within
the course of just four hours. The combination could dramatically
impact agricultural productivity, which is already facing challenges
from overgrazing and unsustainable industrial agricultural practices
leading to accelerated desertification.
any case, 80 percent of Saudi Arabia’s food requirements
are purchased through
heavily subsidised imports, meaning that without the protection of
those subsidies, the country would be heavily impacted by
fluctuations in global food prices.
Arabia is particularly vulnerable to climate change as most of its
ecosystems are sensitive, its renewable water resources are limited
and its economy remains highly dependent on fossil fuel exports,
while significant demographic pressures continue to affect the
government’s ability to provide for the needs of its
population,” concluded a
UN Food & Agricultural Organisation (FAO) report in 2010.
kingdom is one of the most water scarce in the world, at 98 cubic
metres per inhabitant per year. Most water withdrawal is from
groundwater, 57 percent of which is non-renewable, and 88 percent of
which goes to agriculture. In addition, desalination plants meet
about 70 percent of the kingdom’s domestic water supplies.
desalination is very energy intensive, accounting for more than half
of domestic oil consumption. As oil exports run down, along with
state revenues, while domestic consumption increases, the kingdom’s
ability to use desalination to meet its water needs will decrease.
of the road
Iraq, Syria, Yemen and Egypt, civil unrest and all-out war can be
traced back to the devastating impact of declining state power in the
context of climate-induced droughts, agricultural decline, and rapid
the Saudi government has decided that rather than learning lessons
from the hubris of its neighbours, it won’t wait for war to come
home – but will readily export war in the region in a madcap bid to
extend its geopolitical hegemony and prolong its petro-dominance.
these actions are symptomatic of the fundamental delusion that has
prevented all these regimes from responding rationally to the Crisis
of Civilization that
is unravelling the ground from beneath their feet. That delusion
consists of an unwavering, fundamentalist faith: that more
business-as-usual will solve the problems created by
many of its neighbours, such deep-rooted structural realities mean
that Saudi Arabia is indeed on the brink of protracted state failure,
a process likely to take-off in the next few years, becoming truly
obvious well within a decade.
those few members of the royal family who think they can save their
kingdom from its inevitable demise by a bit of experimental
regime-rotation are no less deluded than those they seek to remove.
is an investigative journalist, international security scholar
and bestselling author who tracks what he calls the 'crisis of
civilization.' He is a winner of the Project Censored Award for
Outstanding Investigative Journalism for his Guardian reporting on
the intersection of global ecological, energy and economic crises
with regional geopolitics and conflicts. He has also written for The
Independent, Sydney Morning Herald, The Age, The Scotsman,
Foreign Policy, The Atlantic, Quartz, Prospect, New Statesman, Le
Monde diplomatique, New Internationalist. His work on the root
causes and covert operations linked to international terrorism
contributed to the 9/11 Commission and the 7/7 Coroner’s Inquest.