From our 15 March LDESP Middle East News Update.
Though news from inside Saudi Arabia does not usually get much traction in Western media, in mid-March the subject of the country’s practice of execution by beheading came to the fore. From CNN, “Saudi Arabia Beheads Men for Stealing”:
“The deaths came a day after the United Nations called for the kingdom not to carry out the punishment, in part because the men had allegedly not been given fair trials. The U.N. said the men were reportedly accused of organizing a criminal group, armed robbery, raiding and breaking into jewelry stores in 2005. The U.N. special rapporteur on torture, Juan E. Mendez, said there are also grave concerns that the men were tortured during detention and forced to sign confessions. “This is not the only in breach of Saudi Arabia’s international obligations under international law, which imposes an outright prohibition on torture, it is also in breach of the government’s international obligation under the Convention against Torture that explicitly forbids the use of all forms of torture for the purpose of extracting confessions or acquiring information,” he said. SPA, the official Saudi News agency, issued a statement on behalf of the Ministry of Interior that starts with a Quranic verse from the chapter “The Table Spread.” “The punishment of those who wage war against God and His Messenger, and strive with might and main for mischief through the land is: execution, or crucifixion, or the cutting off of hands and feet from opposite sides, or exile from the land: that is their disgrace in this world, and a heavy punishment is theirs in the Hereafter.” (CNN)
Coincidentally, around the same time, there were also reports that Saudi Arabia might be ending punitive beheadings due to a dearth in trained executioners. Sorcha Pollak of Time writes of the practice and a particularly controversial execution of a Sri Lankan nanny in “A Lack of Swordsmen May Lead Saudis to Abolish Beheadings”:
“Is this what progress looks like in Saudi Arabia? The kingdom is considering ending execution by beheading in favor of firing squads, reports the Egyptian English-language news website Ahram Online. A committee consisting of representatives from the Ministries of Interior, Justice and Health says there are shortages in government swordsmen and argue that a change to execution by firing squad would not violate Islamic law, the Saudi daily newspaper al-Youm writes. According to an official statement from the committee, “This solution seems practical, especially in light of shortages in official swordsmen or their belated arrival to execution yards in some incidents.”
Execution by beheading in Saudi Arabia has continually been condemned by human-rights groups. According to Human Rights Watch (HRW), at least 69 people were executed by beheading in 2012, while Amnesty International says 79 were killed under the death penalty in the same period. In 2012 HRW wrote, “Saudi Arabia has no penal code, so prosecutors and judges largely define criminal offenses at their discretion.” Rape, murder, armed robbery, drug trafficking and even suspected “sorcery” are punishable by death under Saudi Arabia’s Islamic law.
The Saudi death penalty recently made headlines following the execution of Rizana Nafeek, a young Sri Lankan woman who was beheaded for the murder of her employers’ 4-month-old son. Nafeek arrived in Saudi Arabia in 2005 at age 17 but spent the next seven years in Saudi jails after the baby died under her care, writes CNN. The family of the boy believed he had been strangled by Nafeek, while she claimed he had choked on his milk. The young Sri Lankan immigrant had no access to a lawyer during her pretrial interrogation during which she said she was forced to sign a confession, notes CNN. The execution of this young woman revealed how “woefully out of step they [the Saudi justice system] are with their international obligations regarding the use of the death penalty,” said Philip Luther from Amnesty International. It highlighted how Saudi law tends to treat children as adults in criminal cases even though international law prohibits the death penalty for crimes committed before the age of 18, writes HRW.” (Time)
Reports from Saudi Arabia’s domestic politics seem to oscillate between slow progress and Islamic fundamentalism. Senior Fellow at the Council on Foreign Relations Isobel Coleman explains this dichotomy in The Atlantic. From “Saudi Arabia’s Timid Flirtation with Women’s Rights”:
“On 11 January 2013, Saudi Arabia’s King Abdullah made history when he named 30 women to the kingdom’s Shura Council, an appointed advisory body that cannot enact legislation but is still the closest institution to a parliament in that country. He also amended the Shura Council’s law to ensure that women would make up no less than 20 percent of the 150-person council going forward.
The 11 January announcement did not occur in a vacuum. Before now, some women served in an advisory capacity, but not as full members, on the committee. In 2011, King Abdullah, known for relatively moderate views on women’s roles in society, announced that women would be appointed to the Shura Council and that women would be able to run and vote in the country’s 2015 municipal elections.
Nevertheless, the 11 January follow-through is a sign of King Abdullah’s seriousness about incrementally increasing women’s participation. In a 2011 speech, King Abdullah introduced the decision as a vital step for keeping up with the times, saying, “Balanced modernization in line with our Islamic values, which preserve rights, is an important requirement in an era with no room for the weak and undecided people.” He also explained that the decision to appoint women to the Shura Council and to allow them to vote and run in elections was made after consulting with religious scholars.
Much as when women from conservative Muslim countries including Qatar and Saudi Arabia competed in the Olympics for the first time this past summer, a considerable amount of attention is being paid to the logistics of women’s participation in the Shura Council. The amendments allowing women to join the council specifically prescribe gender-segregating measures, ranging from separate office spaces to council chamber entrances to seating areas. As journalist and Saudi Arabia expert Thomas Lippman explains, “Even when [King Abdullah] moves boldly, he moves cautiously, in increments that the conservatives can be persuaded or forced to accept.” Indeed, this gender segregation is an absolute prerequisite to women’s participation in Saudi Arabia. (…)
Despite the limitations of the Shura Council, the appointed women have their work cut out for them. As my friend, women’s rights advocate and new Shura Council member Thuraya Arrayed said to Al Arabiya News, “I expect this decision to open doors for qualified women to take part in all fields and not just in politics but in all areas.” Fellow new Shura Council member Thuraya Obaid, whose impressive career includes time as executive director of the UN Population Fund, told the newspaper Asharq Alawsat, “…as for those who do not accept this, this is a huge challenge for women to prove that their presence is an addition to, not lessening of, Saudi society.” With female council members like these, this mixed-gender Shura Council may well pave the way to greater opportunities for Saudi women, however incrementally.” (The Atlantic)
In spite of the fundamentalist foundation, with globalization and the impact of the Arab Spring, the shift towards progress seems inevitable. Recently Specialist in Middle Eastern Affairs Christopher M. Blanchard contextualized the country’s progress within the U.S.’s foreign policy in an excellent report on “Saudi Arabia: Background and U.S. Relations” for the Congressional Research Service. Summary of the report:
“The kingdom of Saudi Arabia, ruled by the Al Saud family since its founding in 1932, wields significant global political and economic influence as the birthplace of the Islamic faith and by virtue of its large oil reserves. Close U.S.-Saudi official relations have survived a series of challenges since the 1940s, and, in recent years, shared concerns over Al Qaeda-inspired terrorism and Iranian regional ambitions have provided a renewed logic for continued strategic cooperation. The ongoing political upheaval in the Middle East and North Africa is changing the dynamics of long-running reform debates in the kingdom. The full effect of these events on the kingdom and on U.S.-Saudi relations has yet to be determined. Official U.S. concerns about human rights and religious freedom in the kingdom persist, and some Members of Congress have expressed skepticism about Saudi leaders’ commitment to combating religious extremism and sharing U.S. policy priorities in the Middle East and South Asia. However, Bush and Obama Administration officials have referred to the Saudi government as an important regional partner in recent years, and U.S. arms sales and related training programs have continued with congressional oversight. In October 2010, Congress was notified of proposed sales to Saudi Arabia of dozens of F-15 fighter aircraft, helicopters, and related equipment and services, with a potential value of $60 billion. Contracts to implement those sales are now being signed.
At home, Saudi leaders are weighing a litany of economic and political reform demands from competing, energized groups of citizen activists. The prevailing atmosphere of regional unrest and increased international scrutiny of domestic political developments further complicates matters. Groups representing liberal, moderate, and conservative trends have submitted advisory petitions to King Abdullah bin Abdelaziz, and many recent reform statements refer to and echo past requests submitted to the king and his predecessor, the late King Fahd. Initiatives to organize nationwide protests have been met with some popular criticism and official rejection, while local protests over discrete issues occur sporadically. Some observers fear that public confrontations with unpredictable consequences may result from the apparent incompatibility of a ban on all demonstrations and the enthusiasm of different activist groups, including Shiite citizens of the Eastern Province, government employees, students, and relatives of prisoners and terrorism suspects. The Obama Administration has endorsed Saudi citizens’ rights to free assembly and free expression. Saudi leaders reject foreign intervention in the country’s internal affairs.
Since taking power in 2005, King Abdullah has created greater public space for domestic social reform debates and has promoted the concept of a strong national identity among Saudis in the face of a determined domestic terrorism campaign. Succession arrangements have attracted particular attention in recent years, as senior leaders in the royal family, including the king, have faced health crises, and the deaths of two crown princes has raised questions about the transition to the next generation of the Al Saud family. Robust oil export revenues have strengthened the kingdom’s economic position and provide Saudi leaders with significant financial resources to meet domestic investment needs and provide social benefits. Current U.S. policy seeks to coordinate with Saudi leaders on regional issues and help them respond to domestic economic and security challenges. It remains to be seen whether U.S. initiatives and, more importantly, Saudi leaders’ efforts will ensure stability. Shared challenges have long defined U.S.-Saudi relations, but questions about political, economic, and social reform may become more pressing in light of the calls for political change that are now swirling around the kingdom.” (Congressional Research Service)
It is impossible to discuss Saudi Arabia without looking to energy policy. In a recent report, Hisham Akhonbay, a visiting fellow with the Energy and National Security Program at the Center for Strategic and International Studies took a closer look at “Saudi Arabia’s Energy Policy: A Disciplined Approach to Forward-Looking Policymaking”:
The oil market has long been dominated by the Kingdom of Saudi Arabia (KSA) because of its ability to produce and export large quantities of crude oil, a valuable globally traded commodity. Saudi Arabia’s role is further enhanced by its ability to maintain a surplus capacity that can act as a strategic cushion during times of market tightness, allowing production to be expanded in relatively short order. For that reason the kingdom has been crucial to the stability of the oil markets. This pivotal role was highlighted in the previous decade as future expectations of demand growth had been increasing while supply growth expectations were cut. Lately, however, the importance of being the supplier of last resort seems to have come into question, as both the International Energy Agency (IEA) and the Energy Information Administration (EIA) have cut their demand forecasts while increasing their projections of supply growth. Other factors that may be contributing to this notion are slower economic growth due to the 2008 financial crisis, better energy efficiency measures in the transportation and industrial sectors, and burgeoning supply prospects in Canada, the United States, and abroad with the advent of new technologies.
To Saudi Arabia, energy is the source of life. The country derives 80 percent of its national budget revenue from the sale of crude oil and natural gas liquids (NGLs) in the international market. The government views its resources as both economic and strategic. So it comes as no surprise that the country has invested much in ensuring that it is able to maximize the utilization of those riches.
At the same time, given the slower economic growth and the prospects of new unconventional oil supplies, Saudi Arabia now finds itself in the precarious position of being the largest exporter in a market that is potentially facing an oversupply situation. It has not escaped policymakers that the role of oil has been largely confined to the transportation sector. They are also monitoring the progress of urban planning in emerging economies like China and India and the advancement in alternative transportation vehicles.
The shift in the oil market in particular and the energy market in general generates questions about the implications for Saudi Arabia’s role as the market stabilizer. A close look at the country’s evolving energy policy reveals that the kingdom is a dynamic player. KSA has put in place factors that will help it adapt to changes and, to a certain extent, help shape those changes. (…)
Saudi Arabia recognizes the importance of having a stable oil market by ensuring adequate, dependable supplies and combating higher than necessary oil prices. The kingdom also recognizes that the global energy market is shifting and dynamic. Events such as the disaster in Fukishima, Japan, the development of tight oil in North America, and the global economic downturn of the past few years indicate the level of uncertainty about the future. That is why the evolution of Saudi Arabia’s domestic energy policy to continue to ensure the robustness of its hydrocarbon production and consumption, as well as to introduce alternative energy options to enable it to maintain its export capability, is important to the global market as it embodies the country’s commitments to the international community. (CSIS)
Party in the KSA
Fifty men and women were arrested on New Year’s Eve in a coffee shop in the Saudi city of Jeddah, according to local news site Sabq. Their crime: They were together. The arrest, unfortunately, is business as usual in Saudi Arabia. The kingdom is an absolute monarchy that practices a strict interpretation of Islam where the mixing of unrelated men and women is forbidden. Members of the Commission for Promotion of Virtue and Prevention of Vice, sometimes known as the religious police, patrol the streets of the country to ensure that gender segregation is observed. Women must wear a black cloak, called an abaya, when they are in public, and they are not allowed to drive. Selling and consumption of alcohol is illegal. But there are places in Saudi Arabia where the conservative country’s rules don’t seem to apply. It’s one of Saudi Arabia’s many paradoxes: The government builds gated, liberal communities and promotes them as an attempt to change the culture of a conservative society. But at the same time, it punishes those who attempt to replicate these communities’ values outside their walls. It’s a prime example of the kingdom’s scattershot, and usually ineffective, approach to reform. Take, for example, the Aramco camp in the Eastern Province, where the state-owned oil giant provides housing for some of its 52,000 employees, who hail from 65 different countries. With its wide streets, lush green fields, and neatly trimmed trees, the Aramco camp looks more like American suburbia than a Saudi town. Men and women work side by side at the company’s offices during the day and then later pass the evening by going to one of the parks, watching a baseball game, or playing golf. They can even watch the latest Hollywood films at the movie theater — a pleasure denied to most Saudis, as theaters are banned in Saudi Arabia. In early December, a foreign geophysicist who lives there invited dozens of friends to a party at his house. Men and women in their 20s started to arrive around 10 p.m. Dance music was blasting from the speakers, and alcohol, some locally made and some smuggled from abroad, was available on the kitchen counter for those who wanted a drink. The party crowd was mixed: Americans, Irish, Arabs, and Saudis. Most of them work for Aramco, but there were some outsiders too. They talked, drank, smoked shisha, and danced the night away. It was the weekend, so no one was in a particular hurry to leave — except those who wanted to catch other parties going on in the camp. The party continued throughout the night: The last guest left around 6 a.m. Parties like this are not limited to the Aramco camp in Dhahran. If you know the right people, you can find such gatherings in Riyadh’s Diplomatic Quarter and the campus of King Abdullah University of Science and Technology (KAUST), as well as in dozens of private residential compounds around the country. These areas, or “liberal enclaves” as former Reuters correspondent in Saudi Arabia Andrew Hammond calls them in his new book, remain outside the control of the conservatives who dominate most aspects of social life in the country. Such areas exist in a legal gray zone — there are no official edicts that exclude them from the kingdom’s laws, but the religious police are reportedly ordered to avoid them. (Foreign Policy)
A Growing Divide in Saudi Arabia Between Rulers, Ruled
Karen Elliott House, a former publisher of the Wall Street Journal, is most recently the author of “On Saudi Arabia: Its People, Past, Religion, Fault Lines — and Future.”
The 10-year prison sentences a Saudi court handed down in mid-March are more significant than the sad fate of two moderate political activists who persisted in calling for a constitutional monarchy and respect for human rights. The saga is a microcosm of the political dilemma facing the House of Saud and, by extension, a challenge to U.S. policy, which from one administration to the next supports the regime while remaining silent about Saudi Arabia’s human rights abuses. The two dissidents, Mohammad Fahad al-Qahtani and Abdullah al-Hamid, were accused of, among other things, sedition, providing inaccurate information to the foreign media and founding an unlicensed human rights organization, the Saudi Civil and Political Rights Association (known as ACPRA). Saudi Arabia permits no civil society or political organizations. But Qahtani, a chubby, cherub-faced man in his mid-40s, determined long ago that he would seek to change the kingdom. In 2009 he told me that he would “challenge and change the system legally,” so that his young children would live in a freer society. (…)Because most Saudis depend on government jobs, or outright largess, open defiance is rare. The regime may toy with and torment citizens, like a cat with a timid mouse, but it tries to avoid arousing ire. After the Arab Spring took hold, however, even in docile Saudi Arabia some citizens have become more assertive. Qahtani and ACPRA finally crossed a red line in January 2012 by asking the king to remove his heir, Crown Prince Nayef, who during four decades overseeing internal security was responsible for imprisoning any number of Saudi citizens without charges or trials. This request defied an explicit ban (established after the Arab Spring began) on criticizing the royal family, or its compliant religious establishment. Nayef died soon after but his son quickly replaced him, and small-scale Saudi protests multiplied. (Washington Post)
Lockheed Martin Receives $253M Contract from Saudi Arabia
Lockheed Martin Corp. announced in mid-March it received a $253 million contract to work on F-15SA pilot and maintenance training systems for the Royal Saudi Air Force. The work on the training systems will take place at Lockheed Martin’s facility in Orlando, as well as at a facility in Akron, Ohio, and the training systems will be delivered by 2020. (Orlando Business Journal)
Clashes in Bahrain as Protesters Mark Anniversary
Thousands of anti-government protesters threw firebombs and stones at riot police and burned tires in Bahrain on the second anniversary of the intervention by a Saudi-led force in the Gulf island’s crisis. The clashes were the worst in several weeks and served a reminder that there are elements of the opposition that have yet to buy into slow-moving talks with government officials. Police fired stun grenades at the demonstrators during the clashes in the mainly Shiite neighborhoods surrounding the capital, Manama. Starting early in the morning, the mostly young demonstrators blocked roads leading into scores of Shiite villages to prevent security forces from entering. Bahrain’s Shiite majority is seeking a greater political voice in the strategic Sunni-ruled kingdom, which is home to the U.S. Navy’s 5th Fleet. The main Shiite opposition group, Al Wefaq, said 35 protesters were wounded in the clashes, including three critically, in what it called a “systematic policy carried out under high, official orders to use violence against peaceful pro-democracy protesters.” It also accused police of using live ammunition and bird shot against some protesters. “This is unforgettable day,” said Maki Ali, an 18-year-old demonstrator from Bilad Al Qadeem, west of the capital. “I remember well how the Saudis with United Arab Emirates intervened in my country’s internal affairs. They supported the government killing.” Saudi and other Gulf troops were deployed in Bahrain to help the Western-backed Sunni monarchy quell a wave of anti-government protests demanding a greater role for the country’s Shiite majority. Ameena Mohamed Hussain, a 21-year-old from the village of Diah, said she still carried a lot of anger from that day two years ago. More than 60 people were killed in more than two years of unrest inspired by the Arab Spring. (Yahoo News, Associated Press)
With Official Wink and Nod, Young Saudis Join Syria’s Rebels
Following a circuitous route from Saudi Arabia up through Turkey or Jordan and then crossing a lawless border, hundreds of young Saudis are secretly making their way into Syria to join groups fighting against the government of Syrian President Bashar Assad, GlobalPost has learned. With the tacit approval from the House of Saud and financial support from wealthy Saudi elites, the young men take up arms in what Saudi clerics have called a “jihad,” or “holy war,” against the Assad regime. (…) Based on a month of reporting in the region and in Washington, more than a dozen sources have confirmed that wealthy Saudis, as well as the government, are arming some Syrian rebel groups. Saudi and Syrian sources confirm that hundreds of Saudis are joining the rebels, but the government denies any sponsoring role. The Saudis are part of an inflow of Sunni fighters from Libya, Tunisia and Jordan, according to Aaron Zelin, a senior fellow at the Washington Institute for Near East Policy. “Most of the foreigners are fighting with al-Nusra or Ahrar al-Sham,” both extremist groups, Zelin said. Sunni extremist fighters are now part of a vicious civil war that has killed an estimated 70,000 people and created more than a million refugees. The Saudis hope to weaken their regional competitor Iran, a Shiite theocracy that is backing Assad. Saudi officials also hope to divert simmering political unrest at home by encouraging young protesters to instead fight in Syria, according to Saudi government critics. The government seeks to “diffuse domestic pressure by recruiting young kids to join in another proxy war in the region,” said Mohammad Fahad al-Qahtani, a human rights activist and economics professor at the Institute of Diplomatic Studies in Riyadh. They are joining ultraconservative groups who “definitely are against democracy and human rights. The ramifications could be quite serious in the whole region.” (…) In one documented case, a Saudi judge encouraged young anti-government protesters to fight in Syria rather than face punishment at home. Mohammed al-Talq, 22, was arrested and found guilty of participating in a demonstration in the north-central Saudi city of Buraidah. After giving 19 young men suspended sentences, the judge called the defendants into his private chambers and gave them a long lecture about the need to fight Shiite Muslims in Syria, according to Mohammed’s father, Abdurrahman al-Talq. “You should save all your energy and fight against the real enemy, the Shia, and not fight inside Saudi Arabia,” said the father, quoting the judge. “The judge gave them a reason to go to Syria.” (NPR)
US, Saudi present united front on Syria, Iran
The United States and Saudi Arabia on March 4 presented a united front to Iran and Syria. They warned Syrian President Bashar Assad that they will boost support to rebels fighting to oust him unless he steps down and put Iran’s leadership on notice that time is running out for a diplomatic resolution to concerns about its nuclear program. After a series of meetings in the Riyadh, U.S. Secretary of State John Kerry and Saudi Foreign Minister Prince Saud al-Faisal told reporters at a joint news conference that Assad must understand that recent scud missile attacks on regime foes in the city of Aleppo would not be tolerated by the international community and that he had lost all claim to be Syria’s legitimate leader. Saud, whose country along with other Gulf states is widely believed to be supplying weapons to the Syrian rebels, said Saudi Arabia could not ignore the brutality Assad is inflicting on his people, even after two years of escalating violence that has claimed 70,000 lives. He said that history had never seen a government use strategic missiles against its own people. “This cannot go on,” he said. “He has lost all authority.” In his discussions with Kerry, Saud said he had “stressed the importance of enabling the Syrian people to exercise its legitimate right to defend itself against the regime’s killing machine.” Saud also decried the fact that the Assad continued to get weapons from “third parties,” a veiled reference to Russia and Iran, which have backed the regime through the conflict. (…) But Kerry sidestepped a question about whether the arms reportedly being supplied to the rebels by Saudi Arabia and others were a concern. Instead, he criticized Iran, Hezbollah and Russia by name for giving weaponry to the Assad regime. (…) Saud, whose country shares concerns with other Gulf Arab states about increasing Iranian aggressiveness in the region, agreed. “We hope that the negotiations will result in putting an end to this problem rather than containing it,” he said, “taking into account that the clock is ticking and negotiations cannot go on forever.” In addition to Saud and the Saudi crown prince, Kerry met in Riyadh with the foreign ministers of Kuwait, Bahrain and Oman, all of whom are equally wary of Iranian intentions. (The State, Associated Press)
Syria’s future: Israel favors fragmentation while Saudis want reliable counter to Iran
The Syrian rebellion is bringing new security concerns to many countries, especially Israel. (…) A democratic unified Syria might be in Israel’s interests as democracies are thought to be reasonably peaceful. However, a democratic Syria might be prejudged unreliable in commitment to peaceful relations. It might also be deemed unviable. Syria’s social composition and authoritarian past present formidable challenges to democracy. The Muslim Brotherhood – no friend of Israel – will be a force in post-Assad Syria and its kindred group in Egypt has not inspired outsiders or even its own people with its commitment to popular will and the rule of law.While a frail democracy will receive some international support, Saudi Arabia will seek to strangle Syrian democracy and, through subsidies and Salafi networks, turn the country into a reliable vassal state. A weak, divided, perhaps even deeply fragmented Syria will be more attractive to Israel’s national security bureaus. Geography and sociology favor such an outcome, and Israeli policies can aid them. The boundaries of Syria, after all, were the product of foreign intrigue, not indigenous will or long history. (…) There would be strong opposition to a Shia-Alawi region as well. The Sunni principalities, Saudi Arabia foremost among them, want to expel Iranian influence from the region altogether, and reduce the Shia apostates to a subjugated minority. Syrian rebel groups, though exhibiting little unity beside opposition to Assad, will also oppose a Shia-Alawi region. The enclave might become a redoubt, from which the Alawis can play upon Sunni disunity and someday reassert control over the country. Israel will likely share this opposition to the enclave as it would be a bastion of Iranian influence and an ally of Hizbullah – another Shia power which Saudi Arabia and Israel may turn their attention to once Assad is out. (…) This new Syria, then, will be a patchwork of fiefs and strongholds, of warlords and tribal leaders, at best loosely integrated into a national framework, tied to and manipulated by several outside powers. The political system will be deeply fragmented, antagonistic to the point of intermittent fighting, and incapable of decisive national action – especially in military matters. Israel’s goal of a fragmented Syria differs greatly from the Saudi goal of a strong Syria which will be its partner in rolling back Shia-Iranian influence from Lebanon to Iraq. In this respect, Syria will one day be a source of conflict between Jerusalem and Riyadh, as each power pursues its national interests beyond the transient one of ousting Assad. (The World Tribune)
The Saudi Oil War on Iran
When Prince Turki al-Faisal suggested last year that the House of Saud would join in the U.S.-led sanctions against Iranian oil, by seeking to displace Tehran’s oil exports from the global economy, he was not referring to a novel idea. Indeed, Saudi Arabia has led two prior oil wars against Iran. (…) An appreciation of the limits and potential consequences of the third Saudi oil war are critical—the former having to do with Saudi Arabia’s current vulnerabilities, while the latter concern Iran’s possible reactions. Though the Saudis, as OPEC’s swing producer, can impact immediate supply fluctuations, their ability to fundamentally reshape market dynamics is now being hampered by new pressures. The toxic mixture of rapidly growing domestic consumption (driven by population increase) and ill-conceived subsidies that encourage it is now being aggravated by the possibility of depleting reserves of conventional hydrocarbons. The resource shortage was alluded to in Wikileaks revelations of U.S. exchanges with Sadad al-Husseini, Aramco’s former head of exploration and production. The cables reveal that Saudi oil reserves are possibly exaggerated by up to 40 percent. Complicating this natural trend of a rentier state undergoing demographic changes are the Arab Revolutions, which recently forced the Kingdom to spend roughly $7,000 per citizen to placate economic, and, by extension, political discontent at home. These interrelated dilemmas will eventually challenge the conventional wisdom behind Riyadh’s purported capacity to be a price stabilizer, a faculty that already is beginning to be doubted. Another significant factor is the possibility of Iranian retaliation against Saudi Arabia. In this oil war, unlike the prior two instances, the Saudis are overt about their involvement. In the past, Iran’s inability to counter Saudi actions was rooted in its incapacity to hurt Saudi Arabia in any meaningful way. Both monarchial Iran, distracted by revolutionary upheaval, and the nascent Islamic Republic, bogged down in brutal conflict, simply did not have the ability to push back against Saudi actions with credible threats of retribution. But the twenty-first century Islamic Republic is much different. (The National Interest)
Saudi Emerging as Regional Auto Hub
With more and more trucking firms including Jaguar/Land Rover and Isuzu of Japan entering Saudi Arabia in a big way due to its low energy costs, a pro-business environment, and availability of raw material, the country is fast becoming the region’s automobile hub, said an expert. The Saudi Government too has taken a number of steps to build an automotive cluster in the country, said a statement from the US-Saudi Arabian Business Council (USSABC) which is hosting a major conference in Michigan on June 26. The conference, titled “Saudi Arabia: New Auto Market Hub for the Middle East, Africa,and South Asia,” will bring together senior Saudi Government officials, major Saudi industrialists, and leading OEMs to highlight the advantages of doing business in the Middle East’s largest car market. (…)The powerhouse market of South Asia – approximately one-fifth of the world’s consumers – is within easy reach by air and sea, they added. Low energy costs, a pro-business environment, and the availability of raw material inputs for vehicle “lightweighting” are drawing the attention of OEMs and automotive component suppliers worldwide. Besides, the rising auto sales in Saudi Arabia and other emerging markets in the region has also put the country on the map for OEMs looking to tap into new growth opportunities, the experts added. (Trade Arabia)
Saudi Stock Market to Open to Foreigners in 2014, Predicts HSBC
Saudi Arabia’s stock market is set to open to foreign investors as early as 2014, according to predictions by market analysts and HSBC. Foreign investors are currently prohibited from investing directly in Saudi-listed shares, but an expected liberalization of the rules could see tens of billions of dollars of outside money pumped into the local market. The banking giant HSBC expects Saudi Arabia’s equity market to open to foreigners as early as next year. “There’s tremendous appetite,” Simon Cooper, chief executive of HSBC’s Middle East business, told Bloomberg. “I’d say 12 to 18 months. Steps are being taken at the appropriate places to open the market up… I think there’s a strong desire to see it happen from both sides – buyer and seller.” Foreigners based outside the GCC are currently only allowed to invest in the local market through equity swaps and exchange-traded funds. Saudi Arabia last year signaled it would open the market on a gradual basis, according to media reports. Market analysts told Al Arabiya that they too expect Saudi Arabia’s stock exchange to open its doors to foreigners, with one predicting such a step could be taken as early as next year. (Al Arabiya)
Saudi Arabia’s IT Spending to Reach $4.2 Billion in 2013
Saudi Arabia’s IT spending is expected to reach $4.2 billion in 2013, up 3 percent in US dollar terms year-on year, with BMI downwardly revising its forecast after the PC market slowed in H112. However, there were major IT projects by organizations including telecoms company Mobily and the justice department of the government. Saudi Arabia has the biggest IT market in the Gulf region and the Kingdom will continue to be a lucrative market for technology products and services over the forecast period as it invests to upgrade its IT and communications infrastructure. The country’s relative political stability for the region will also attract vendors, Fast Market Research said in its study. Computer hardware sales in the Kingdom that posted $2.1 billion in 2012 will hit $2.2 billion in 2013, a 2 percent rise in US dollar terms. Forecast in US dollar terms downwardly revised owing to lower than expected PC sales growth in H112. Software sales is forecast to increase 5 percent in US dollar terms to $807 million in 2013 from $771 million in 2012. Software-as-a-service business models are expected to provide a growing opportunity for vendors. IT services sales is forecast to increase 4 percen to $1.3 billion in 2013 from $1.2 billion in 2012, with increased spending on ICT infrastructure translating into long-term growth in IT services investment. Youthful demographics and a growing population should drive demand as BMI predicts that the per capita IT spend will reach $197 by 2017, with PC penetration rising to around 35 percent. (Saudi Gazette)