Saudi Arabia Reassuring Investors, Really!!!

What is one to make out of chaos and conflicting messages coming out of Saudi Arabia following Crown Prince Muhammad Bin Salman’s (MbS) recent campaign of detention and torture of royal members and former government officials at the Ritz-Carlton in Riyadh.

While the inexperienced and impulsive de-facto leader, MbS realizes how his misadventure in Yemen, for instance, is turning out to be a political disaster for Saudi Arabia, foreign investors are already questioning MbS’s ability to fathom global economic dynamics. Further, they wonder whether it makes economic sense to invest in the Desert Kingdom given the private conversations in the West about Saudi Arabia’s future stability and survival. The ill-conceived policies the Desert Kingdom is pursuing toward Yemen, Qatar, Iran, and Syria, among others is a reminder of how risky it is to invest in Saudi Arabia. And if I may add, the latter may soon may find itself dealing with demonstrations and angry population (mainly youth) following the price increase of commodities and imposition of sales tax. Of note: Saudis have never paid taxes before, thanks to oil revenues.
The turmoil in Saudi Arabia highlights lack of vision, waning leadership, concerns over domestic uprising, and fear of Iran’s expansion of influence. One does not have to look far to realize the chaos taking place on the Kingdom’s southern borders. What has not been reported widely is that the Houthis have recently killed Saudi soldiers on its southern borders. Further, surface-to-surface missile fired by the Yemeni Army has hit Riyadh.

On a another front, Saudi youth are taking to Twitter to express their frustration about the government policies vis-à-vis the cutting of subsidies.

Against this backdrop, MbS is trying to soften and improve his image. The recent detention of royal family members has damaged his credibility and highlighted his dictatorial style of governance. I doubt investors, who have recently met with MbS behind closed doors, trust him when he said he does not intend to carry out other mass detention campaigns in the future. If I were to advise investors, I’ll certainly caution them about investing in Saudi Arabia because there are no guarantees they’ll get their return on investment if and when the Desert Kingdom descends into chaos. Alas, instability had become a normal matter.
Of note: Recent Saudi government’s statements suggest that the sum of the financial settlements it had reached with the released detainees had exceeded 100 billion dollars. I doubt it! The details of these financial settlements were shrouded in secrecy, which already undermine transparency undertakings. A good enough reason for investors to be very wary!

I wonder what will become of Saudi Arabia when King Salman, eighty-three years old at the time of this writing, passes away, should his impulsive, inexperienced son, MbS ascend to the throne. The concern among global affairs analysts, business leaders and Saudi watchers is that the death of the king will set off power struggles within the royal family. Will the rest of the royal family accept MbS and allow him to rule? Or, to the contrary, will the al-Saud family still see division within its ranks after the current king’s demise? Given the present familial tumult and the inevitable shift in the Middle East’s political landscape, the risk to the kingdom’s stability is the greatest that it has been since that dark day in 1975 when King Faisal was assassinated.
As I argue in my forthcoming book, Beneath the Veil: Fall of the House of Saud, when considering the drop in oil prices, record shale-oil output from the U.S which is on track to surpass both Saudi Arabia and Russia, an ever-tenser rivalry with Iran, unjust blockade of Qatar, and a quagmire in Yemen, among others, investors should pose and reconsider their options!!!

Post Submitted by David Oualaalou