As the extreme ‘Arab Spring cleaning’ continues, economic and social tensions that flourished for decades face, not surprisingly, concrete challenges. Tunisia and Egypt, but also Yemen, Libya and Syria confronted clear socio-political trials, with serious economic consequences for the rest of the Arab world.
Urgent investments were necessary and, while Qatar and the UAE deployed forces on European bases to participate in Nato-led operations for Libya, Saudi Arabia was one of the few countries that “invested” in key states, both to buttress regional stability and assert its “will to power”.
In fact, Riyadh provided Cairo with at least $4 billion (Dh14.68 billion) since the beginning of 2011, and donated $400 million to Amman as both Egypt and Jordan wrestled with serious economic woes. Jordan’s King Abdullah Bin Hussain sought additional pledges for a much larger aid package, which he was likely to receive, especially if Jordan joined the Gulf Cooperation Council (GCC).
In the event, Saudi Arabia’s critics highlighted that such assistance was tantamount to bribery, though similar conclusions almost always highlighted peripheral understandings of what motivated Saudi leaders. Undeniably, it was natural for a monarchical regime to assist a fellow sovereign, which was the case in Bahrain.
Still, Riyadh’s involvement in Yemen, a complicated republican-cum-tribal government, proved that Saudi leaders could spearhead diplomatic negotiations in other polities too. Its diplomacy showed teeth in Syria and Lebanon as well, where an unabashed tug-of-war was under way among truly confused parties. Riyadh — along with several Arab governments — withdrew its ambassador from Damascus, and refused to receive Lebanese Prime Minister Najeeb Mikati during the latter’s Umrah visit to Makkah.
Like the American stock brokerage firm E.F. Hutton, whose famous commercial claimed: ‘When E.F. Hutton talks, people listen’, world leaders were increasingly listening to Saudi King Abdullah Bin Abdul Aziz. Although part of the reason for this attention was the kingdom’s growing influence, an increasingly important motivation was Riyadh’s long-term prospects, which literally guaranteed its influence.
According to a recent Bank of America/Merrill Lynch report on long-term growth outlook for the European, Middle Eastern and African regions, South Africa, Turkey and Saudi Arabia were the three key markets with the most promising 10-year growth outlook. “Based on an analysis of growth determinants from demographics to leverage,” the report expected Ankara, Pretoria and Riyadh to sharply improve their growth performances.
Indeed, at a time when oil production in Saudi Arabia increased to 9.8 million barrels per day (bpd) in June 2011, up almost 1 million bpd from the previous month, Riyadh filled its coffers and even increased its foreign holdings. Data from the Saudi Arabian Monetary Agency confirmed that the country’s foreign exchange reserves topped $590 billion, although overall holdings were probably higher.
The nearly $600 billion figure included $358.9 billion in foreign securities, $100 billion in foreign deposits, and $42.5 billion in foreign currencies. An additional $85 billion were held in securities and cash deposits by various government pension agencies.
Foreign exchange reserves
It may be useful to place the $590 billion figure in perspective, by comparing it with other countries holding large foreign exchange reserves, to better ascertain the kingdom’s enviable position and its capabilities to institute change.
In effect, Saudi Arabia ranked third among countries with large reserves in mid-2011, right behind China ($3.2 trillion) and Japan ($1.15 trillion), but ahead of Norway ($579.8 billion), Russia ($540.2 billion), Singapore ($434.3 billion), UAE ($415 billion),Taiwan ($400.7 billion), Brazil ($352.4 billion), and Kuwait ($350 billion).
When measured on a per capita basis, or as a percentage of gross domestic product, the kingdom’s foreign asset holdings were substantially higher than those controlled by China, given the huge population gap between the two countries (30 million versus 1.2 billion).
With significant commitments to Arab and Muslim states, which were likely to continue since foreign aid programs remained a pillar of Saudi foreign policy, Riyadh was not about to retrench. Rather, it embarked on massive domestic spending projects, while expanding its regional and international roles.
Notwithstanding allegations that Riyadh squandered its resources, was seldom accountable, or suffered from rampant corruption, in reality, the data above dispelled false perceptions. On the contrary, the gravest problem that required attention was education, as millions of young people joined the workforce. Their expectations were critical as the government’s development plans required solid socio-political and economic anchors, precisely to preserve and protect the country from the spillover effects of the Arab Spring.
In his detailed recent report titled Stability in a Time of Change, Anthony H. Cordesman, an analyst at the Centre for Strategic and International Studies, concluded that Saudi Arabia was “scarcely immune to protest and dissent, and long struggled with the challenges of reform.” Cordesman was surprised that no major challenges emerged and while no one could “guarantee Saudi Arabia’s future stability in a time of turmoil,” he acknowledged that the so-called “day of rage” demonstrations on March 11, 2011 came to naught.
Time and again, the Al Saud regime has demonstrated a unique “will to power” that safeguarded the ruling family, and fostered steady growth. By investing in their own society, mobilising some of their vast resources to help Arab countries that faced domestic upheaval, and shepherding foreign assets to secure safe returns, the Saudis have earned a spot on international ledgers. Not just within the GCC or G20 organisations, but with Bank of America/Merrill Lynch and similar powerbrokers that, in effect, ‘listened’.
Dr Joseph A. Kechichian is a commentator and author of several books on Gulf affairs.