Abstract
Saudi Arabia faces a host of challenges over the coming year or so, with the
economic downturn likely to
increase dissatisfaction and inter-communal
tensions. The violent clashes between protesting Shi' a
Muslims and the
security forces in February and March illustrated the resentment that
continues to
simmer below the surface. For Saudis to protest in this
manner, given the reputation of the security
services and jails, suggests
that dissatisfaction is running deep.
With an al-Qaeda threat already
looming over the country, the question of the spill-over of violence from
Iraq is a real source of anxiety for the authorities. This was seen in the
recent declaration by the interior
ministry that ' Iraq has become a major
centre for Islamic militancy in the region' . Subsequently, when
announcing
the US$12bn security wall project, the powerful Interior Minister Prince Nayef
added that ' a
border fence separating us from Iraq has become essential to
protect security' – both to stem the tide of
Saudis travelling to
Iraq to join the insurgency and to stop such fighters coming back to continue
their
jihad within the Kingdom. Al-Qaeda has a stated goal of toppling the
House of Saud, which it deems an
infidel regime.
The succession
question in Saudi Arabia now looks of imminent relevance. The 83-year-old
Crown
Prince Sultan is apparently very ill, and the decision of who will
take his place remains undecided. It is
possible that some instability
could result, although this is not our core scenario. Prince Nayef, 75,
looks
likely to be appointed crown prince, signalling a potentially more
conservative and hawkish direction
over the coming years. This may be
positive for stability, which is highly prized by Saudi Arabia' s allies
and trading partners. Although Nayef is seen as particularly conservative, and
could even reverse some of
the (tentative) reforms implemented by Abdullah
over the last few years, the appointment of the younger
rival Bandar bin
Sultan, 60, would not necessarily be a bad thing in terms of stability.
Ultimately, we
believe that whoever is the next crown prince will maintain
the status quo, with security remaining a
priority and electoral,
political and economic reforms kept to a minimum.
Considering the size and
wealth of the country, Saudi Arabia’s defence industry is small and
underdeveloped. Despite previous efforts to create a degree of
self-sufficiency in its defence production,
the country still relies
heavily on arms imports. Saudi Arabia has traditionally relied heavily on
foreign
sources of arms, and looks set to continue to do so in the medium
term. The country’s geo-strategic
position and pro-Western outlook
have allowed it to receive high-technology weapons systems from the
major
supplier countries. The majority of arms have been sourced from the US, the UK
and France.
The most significant development to affect the country’s
defence industry has been the sharp
deterioration of personal security for
overseas workers. The attacks in Khobar and the impossibility of
guaranteeing security (a raid on ExxonMobil’s Yanbu complex was
undertaken by employees with
security passes) have led to a greater fear
among expatriates and pressure to leave the country.
We see Saudi Arabia
managing to grow by 0.5% in 2009, with the rate bouncing back to 2.7% in
2010
and then continuing to recover gradually after that, although 4%
rates of growth are not expected to return
within our ten-year time
horizon. The oil price of US$49/bbl may be a welcome rise now, but would
have
seemed horrifyingly low to Saudi policymakers this time last year. In
the longer term, we see a gradual
rise in oil prices, with the OPEC Basket
averaging US$48.50/bbl in 2010, US$56.50/bbl in 2011,
US$71.50/bbl in 2012
and US$81.50/bbl in 2013. This will see total exports grow from 2009' s trough
of
US$169bn to US$303bn in 2013.
This quarter, we have introduced a
significant new aspect to BMI' s Defence Reports, which is the City
Terrorism Rating (CTR). This assesses the risk of a terrorist attack. The CTR
takes into account the
overall BMI Terrorism Rating for the country in
question. It also incorporates the ' prevalence' of
terrorism, which
recognises the frequency of attacks, and whether the city is a target for
terrorists. The
CTR also recognises the ' threat' of terrorism in terms of
the likely numbers of victims and the ability of
groups to launch
sustained campaigns. In Saudi Arabia we assess the CTR for Riyadh at 80.0, the
seventh
best of the 23 rated cities in the Middle East and Northern Africa
region.
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