Saudi Arabia: The Kingdom in a Post

“Arab-Spring” Environment

Nawaf Obaid Senior Fellow

King Faisal Center for Research & Islamic Studies

Riyadh February, 2012

Basis of Saudi Arabia's Diplomacy: 1

•  Largest petroleum producer and exporter. •  Largest oil reserves and most spare capacity. •  Preeminent financial and economic power in Middle

East / North Africa (MENA) region. •  Largest stock market (50%+ of total regional market cap)

and largest foreign reserves (~$650 billion) in MENA. •  Strong strategic partnerships with the US, China, the EU,

and other countries.

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Basis of Saudi Arabia's Diplomacy: 2

•  Custodianship of Mecca and Medina, Islam's two holiest sites.

•  Sunni state. •  The leading country in the Arab world (Arabs comprise a

vast majority of the inhabitants of the MENA region). •  One of the largest foreign aid programs in the world --

and by far the largest in the MENA region -- at $10 to $15 billion per year.

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Gross Domestic Product ($Billions)

3 Source: IMF and internal estimates.

Total Proven Oil Reserves (Billion Barrels - 2011)

4 Source: EIA and internal estimates.

Oil & Refined Products Exports ('000 Barrels/Day – June, 2011)

5 Source: EIA and internal estimates.

Global Distribution of Sunni & Shia (85%-90% Sunni)

6 Source: University of Texas.

Instability Has Left No Viable Leadership Alternatives

•  Iraq: Internal chaos; massive economic problems. •  Egypt: Poor and facing enormous political and economic

challenges as well as spreading instability. •  Syria: Poor and marginal state, isolated from

international community, civil war unfolding. •  Iran: Major economic problems; non-Arab, Shia state;

growing international isolation.

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The New Gulf Union •  Saudi Arabia is leading the creation of a bloc of like-

minded states to ensure security, stability and prosperity. •  Members include current GCC states: Saudi Arabia,

Kuwait, Bahrain, the UAE, Oman, and Qatar; with the possibility of Jordan and Morocco joining at a later date.

•  Modeled on the EU, the “Gulf Confederation” will be a political, economic, and military alliance with its “capital” in Riyadh.

•  The union's decision-making body (modeled on the European Commission in Brussels) will replace the current GCC Secretariat.

•  A customs union came into effect on Jan 1st, 2012; other elements of union to be phased in over next five years.

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The Proposed “Gulf Confederation”

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Saudi Arabia’s Key Role in Regional & International Stabilization

•  As the world’s central banker of oil, Saudi Arabia has expanded production capacity to meet global demand and ensure the stability of energy markets.

•  Main Arab state actively working to curtail the disruptive policies of Iran and Syria.

•  The Kingdom is the regional leader of the �stabilization� camp versus those fomenting chaos in the MENA region.

•  Saudi Arabia’s regional foreign aid program is geared to stabilizing fragile Arab and Muslim states.

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Saudi Political Overview

•  King Abdullah’s reign continues to bring important social reforms and public sector improvements.

•  Recent transition to Crown Prince Nayef unfolded smoothly and as planned.

•  Despite much new and old media hype, no unrest seen in Saudi Arabia since start of so-called “Arab Spring.”

•  Growing national identity is superseding regional and tribal affiliations and sentiments.

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Saudi Economic Overview

•  With 2011 GDP of $577 billion, Saudi Arabia represents approximately 21% of total regional GDP and over 25% of the Arab world’s economic output.

•  With nearly $650 billion in foreign reserves, the Kingdom is the third largest holder after China and Japan.

•  Saudi Arabia continues to improve on international rankings of competitiveness.

•  The Kingdom is the only MENA and Arab member state in the G20.

12 Source: Saudi Arabian Monetary Agency (SAMA).

Saudi Energy Sector Overview •  Holds more than 20% of world’s proven oil reserves. •  Currently produces over 10 million barrels/day. •  The Kingdom has 90% of world's spare production

capacity at nearly 2.5 million barrels/day. •  The Kingdom is investing heavily in solar, nuclear and

natural gas to meet domestic demand and to curtail rising domestic oil consumption.

•  The Kingdom has created a 35,000 strong Facilities Security Force to protect oil fields and installations.

•  The Kingdom is the most influential member and de facto leader of OPEC.

13 Source: Saudi Aramco and internal research.

Top Foreign Exchange Reserves ($Billion)

14 Source: IMF and central banks of various countries.

Rank Country Foreign Reserves

1 China $3,181 2 Japan $1,295 3 Saudi Arabia $650 4 Norway $580 5 Russia $498 6 UAE $425 7 Singapore $404 8 Taiwan $385 9 Brazil $352 10 Switzerland $340 11 Kuwait $325 12 South Korea $311 13 India $308 14 Hong Kong $285 15 Germany $285

Saudi Arabia's Counter-Terrorism Successes

•  The Kingdom has been a global leader in the fight against terrorism (it was and remains al-Qaeda's primary target).

•  By decimating domestic al-Qaeda infrastructure (the cells were among the group’s most sophisticated), Saudi Arabia won a key battle in the global war against terrorism.

•  The Kingdom’s counter-terrorism forces now aid other states in the region and beyond in their fight against al-Qaeda.

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Saudi Foreign Assistance Program •  By far the largest and most comprehensive program in

the region at $10 - $15 billion / year in direct foreign aid. •  An additional $4 - $5 billion in soft loans is made by the

Saudi Development Fund (SDF) to specific projects in poor Muslim countries each year.

•  The Kingdom is the largest single donor to Egypt, Lebanon, Jordan, Pakistan, Palestine, and other Muslim countries.

•  It is among the top five foreign aid donors in the world (behind only the US, China, and Japan, and on par with leading EU countries).

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Key Saudi Initiatives in Region – Iran

•  Recent events show depth of Iranian meddling: assassination plot against the Saudi Ambassador to the US and Iranian-supported plan to bomb installations in Bahrain including the Saudi embassy and the King Fahd Causeway which connects Bahrain to Saudi Arabia.

•  The Kingdom is leading the regional effort to contain Iranian influence and counter its policies in Iraq, Lebanon, Syria, Bahrain and Palestine.

•  Saudi Arabia calls upon Iran to support a Weapons of Mass Destruction Free Zone in Middle East.

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Key Saudi Initiatives in Region – Bahrain

•  The Kingdom calls on Iran to discontinue meddling in internal Bahraini affairs through Shia proxy groups.

•  Recent action by Saudi Arabia in collaboration with GCC nations to support Bahraini government was requested and justified.

•  The Kingdom is working with the Bahraini government to secure the country.

•  Saudi Arabia led the $10 billion GCC economic stabilization plan for Bahrain. (Oman will similarly receive $10 billion from this plan.)

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Key Saudi Initiatives in Region – Yemen

•  The Kingdom is working to assure stability in Yemen to prevent civil unrest, cross-border incursions, and the proliferation of terror cells.

•  It led the GCC to broker a peaceful transition from President Saleh to a national unity government that will draw up a new constitution and work to end the conflict.

•  Economic, financial and energy support will continue for the good of the Yemeni people once situation stabilizes.

•  Strengthening borders and increasing counter-intelligence and counter-terrorism efforts to destroy Al-Qaeda in Yemen.

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Key Saudi Initiatives in Region - Palestine

•  The Kingdom calls on all nations to support a Palestinian state through the United Nations.

•  Best option remains the Arab Peace Initiative, launched by King Abdullah in 2002, calling on Israel to withdraw to its 1967 borders and the establishment of a viable and contiguous Palestinian state in return for Arab and Muslim recognition.

•  Saudi Arabia is the largest single financial contributor to the Palestinian Authority.

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Key Saudi Initiatives in Region – Iraq

•  Iraq is an important member of the Arab community, a founding member of the Arab League and OPEC, and the holder of vast natural resource wealth.

•  Unfortunately, Iranian meddling in Iraqi affairs continues to destabilize and weaken the country.

•  Saudi Arabia will continue to work with the people of Iraq to assure that their country becomes strong, stable and remains a significant pillar of the Arab world.

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Key Saudi Initiatives in Region – Egypt

•  Egypt is a critical anchor of the Arab world and key player in the MENA region.

•  Egypt is by far the most populous Arab country with long-standing and close ties to the Kingdom.

•  The Saudi leadership has authorized $4 billion in grants, loans, and deposits to Egypt's emerging post-revolutionary government.

•  The Kingdom regards the Egyptian military as the central institution of the state and will support it unconditionally during this transitional period to a stable democratically-elected civilian government.

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Key Saudi Initiatives in Region – Syria

•  Saudi Arabia has led the Arab League in establishing unprecedentedly strong sanctions against the Assad regime and its “killing machine,” including the expulsion of Syria from the League and isolating it within the Arab world.

•  The Kingdom urges the Syrian regime to end killings and pull tanks and armored vehicles out of major urban centers.

•  Saudi Arabia calls on Iran and its proxies to withdraw its support for the regime’s unconscionable actions.

•  The Kingdom demands that Assad implement a credible plan to stop the bloodshed and bring security and stability to the country.

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Key Saudi Initiatives in Region – Tunisia

•  The Kingdom gave asylum to ex-president Zine El Abidine Ben Ali after his removal from power.

•  As elsewhere, Saudi Arabia will continue to use diplomacy to support smooth transitions to stable governments.

•  The Saudi government has forbidden Ben Ali from engaging in any activities from within the Kingdom that could destabilize the transitional political process in Tunisia.

•  It will use financial pledges to offer incentives and development funds to Tunisia’s post revolutionary government. 24

Nawaf Obaid

Nawaf Obaid is a Senior Fellow at the King Faisal Center for Islamic Studies & Research. Formerly he served as a strategic affairs adviser to HRH Prince Turki Al Faisal.

He is the author of The Oil Kingdom at 100: Petroleum Policymaking in Saudi Arabia (Washington Institute for Near East Policy, 2000) and co-author, with Anthony Cordesman, of National Security in Saudi Arabia: Threats, Responses, and Challenges (Praeger/CSIS, 2005). He has been published extensively, including in The Washington Post, The New York Times, The Financial Times and Foreign Policy.

From 1999 - 2000 he was a (Non-Resident) Research Fellow at the Washington Institute for Near East Policy (WINEP) and from 2004 - 2007 he was a (Non-Resident) Adjunct Fellow with the Arleigh A. Burke Chair in Strategy at the Center for Strategic & International Studies (CSIS) in Washington, DC.

He holds a B.S.F.S. from Georgetown University's Walsh School of Foreign Service, an M.P.P from Harvard University's Kennedy School of Government, and has completed doctoral courses at MIT's Department of Political Science. He has received an M.Phil. (and will complete a D.Phil. in War Studies in 2012) from King’s College Department of War Studies.

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