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Mohammed bin Salman had been lying low; not any more

The detention of senior prices and the decision to cut oil price show Crown Prince is back at the helm

First he ordered the detention of at least four senior members of his own royal family. The next day he plunged Saudi Arabia into a price war with Russia that sent energy and stock markets around the world into free fall.

For a while, Crown Prince Mohammed bin Salman of Saudi Arabia had appeared to be living down his reputation for dangerous aggression.

Perhaps chastened by the blowback over his connection with the killing of dissident journalist Jamal Khashoggi, the 34-year-old Crown Prince had kept a low profile for more than a year.

Now his power plays are back reviving debates in Western capitals about whether he is too rash to trust as a partner. His sudden, steep cut to the price of oil has rocked a global economy already at risk of falling into recession, threatened to burn through Saudi Arabia’s cash reserves and undermined his grandiose promises of new investments to lessen the kingdom’s dependence on oil.

Mutual destruction

“It is mutually assured destruction for any oil exporting economy, certainly including Saudi Arabia and Russia and probably the United States as well,” said Greg Brew, a scholar of the region and a fellow at Southern Methodist University.

“But this is typical MBS, right?” he added, referring to the Crown Prince by his initials. “He is a risk taker, and he is prone to impulsive decisions.”

The detention of the senior royals, which began to leak out on Friday, has not been acknowledged or explained by the Saudi officials.

Two of the detained princes — Prince Ahmed bin Abdulaziz, the younger brother of the Crown Prince’s ageing father, King Salman, and Prince Mohammed bin Nayef, the former Crown Prince and Interior Minister — had once been seen as possible rivals for power. Their arrests stirred anxious speculation among cowed members of the royal family that Crown Prince Mohammed might be sidelining opponents in preparation for taking the throne from his father, who is 84 and has sometimes appeared forgetful or disoriented.

People close to the royal court, though, insisted the Crown Prince had merely lashed out at his uncle and cousins for speaking critically about him. He wanted to teach the rest of the family a lesson. “It was quiet for a while and people were wondering if MBS had mellowed,” Steffen Hertog, a scholar at the London School of Economics, said. “But clearly his character is pretty persistent.”

Crown Prince Mohammed slashed the oil price to punish Russia, which he faulted for failing to cooperate in cutting production and propping up prices. The slowdown caused by the coronavirus was already reducing demand for oil.

“The Russians called their bluff, and now the Saudis are trying to demonstrate to the Russians what the cost is of a lack of cooperation,” Hertog said. But for Saudi Arabia, “it is a risky game of chicken.”

Saudi Arabia has much more to lose than Russia. Russia has more diverse sources of revenue and it has built up its reserves since the last oil price downturn.

Saudi Arabia, on the other hand, remains overwhelmingly dependent on oil. What’s more, its cash reserves have remained flat for about four years at around $500 billion, down from a peak of about $740 billion in the summer of 2014.

Analysts say that the kingdom needs a so-called break-even price of about $80 a barrel to meet its budget without either further drawing down those reserves or adopting painful austerity measures. But the price on Monday fell to about $35 a barrel, less than half the break-even price.

A downturn of as much as two years could cut into those reserves severely enough to put pressure on the Saudi exchange rate as well as the plans to diversify the economy, Hertog said.

The crown prince’s economic plan for the country centered on a public offering of shares in the Saudi state oil company, Aramco, to raise money to invest in other sectors. But plans for a debut on a major international market were pulled in favor of the more lax Saudi domestic exchange, and over the last two days the oil price cut has sent shares tumbling by 20%, shaving $320 billion off the value of the company.

The timing of the price war so soon after the roundup of his royal relatives on Friday has aroused speculation that the crown prince sought to contain potential opponents in anticipation of trouble. Perhaps he wanted to pre-empt any foes before economic pain from the downturn made him politically vulnerable, some analysts suggested.

“The threat to MBS is not coming from his royal rivals,” argued Kristin Smith Diwan, a scholar at the Gulf States Institute in Washington. “It is coming from the collapse in oil revenues and what that does to his ambitious economic plans.”

But other analysts, former diplomats and officials with experience in Saudi Arabia, and Saudis close to the royal court said that Crown Prince Mohammed had consolidated power so thoroughly that he had little left to fear.

With a level of ruthlessness unprecedented in modern Saudi history, the crown prince has seized more direct power over the kingdom than any monarch in decades, largely by intimidating into submission his own sprawling ruling family. Even in a severe downturn, the members of the royal family he detained had little hope of challenging him.

He had already put the same royals under tight surveillance, limiting their ability to plot against him, according to people close to the royal court.

A spokesman for the Saudi government did not respond to a request for comment on Monday.

The most senior figure detained, Prince Ahmed bin Abdulaziz, more than 70 years old, had once been recorded in London making comments distancing himself from the crown prince’s policies but had since appeared submissive, at least in public.

The other prominent royal detained, Prince Mohammed bin Nayef, had already been under house arrest since 2017, when he was removed from his posts as crown prince and interior minister by the current crown prince. — The New York Times News Service

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Printable version | May 28, 2020 6:54:19 PM | https://www.thehindu.com/news-service/mohammed-bin-salman-had-been-lying-low-not-any-more/article31033761.ece

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