Assessing Saudi Arabia's Future

Assessing Saudi Arabia's Future

Stringer

More on:

Saudi Arabia

Politics and Government

Princeton University's Bernard Haykel and Karen Elliott House, author of On Saudi Arabia: Its People, Past, Religion, Fault Lines - And Future, join Douglas Jehl, foreign editor of the Washington Post, to discuss Saudi Arabia's escalating tensions with Iran, as well as its relations with its regional neighbors and the United States. The conversation assesses the kingdom's economic challenges and its approach to managing global oil prices. Haykel and House consider King Salman bin Abdulaziz al Saud's leadership style and the role of the deputy crown prince, Mohammad bin Salman, in the country's politics. Over the course of the discussion, the panelists discuss Saudi Arabia's approach to regional crises in the Middle East and its increasing geopolitical rivalry with Iran.

JEHL: Ladies and gentlemen, welcome. I think we can get started now, as long as everyone can hear me and hear all of us. I’m Douglas Jehl. I’m the foreign editor of The Washington Post. And welcome to today’s Council on Foreign Relations meeting. Just a couple reminders: This meeting is on the record, and please turn off cellphones so we’re not disrupted during this really interesting session.

We’re quite fortunate to have a fascinating topic and distinguished guests here with us today. We’re talking about Saudi Arabia and rising tensions and strained relations. And with us is Karen Elliott House—journalist, news executive, author, most recently of “On Saudi Arabia: It’s People, Past, Religion, Fault Lines—and Future.” And Professor Bernard Haykel, professor of Near Eastern studies at Princeton University, who is editor, among other things, of Saudi Arabia in Transition. I’ll spare you the longer bio so we can move quickly into discussion here.

We have an hour. We’ll take the first half an hour to talk among ourselves, and then turn it over to questions from the audience. But Karen, Bernard, I wonder, as we think about this moment and these rising tensions and strained relations, we might start off by thinking about the constellation of threats and challenges that Saudi Arabia might see on its horizon, and on its borders. And I wonder, as you think about Iran and the Islamic State and oil prices, which of those do you see as the biggest challenge to Saudi Arabia at this time? Can I start with you, Karen?

HOUSE: Well, having just spent the month of January there, I think they feel all of those are challenges. But I’m of the view that their internal challenges are greater than their external challenges. They’re far from broke, but if oil prices do remain at this level, or lower, for another two or three years, I think it will become very difficult for them. And there is a new report out by the gentleman who wrote the 2012 report at the Belfer Center, forecasting that there would be this kind of oil price decline in 2015, saying it will last for a significant time. So I just think they have—in a country where the social contract is loyalty for prosperity, when you can’t deliver the prosperity at the level people want it, that it is a real difficulty for them. And they’re now talking about all kinds of ways to grow non-oil revenue. But that’s something that’s been talked about many times in the past without enough success. So we’ll see.

JEHL: Bernard, does that make—do you agree? Is oil the challenge now?

HAYKEL: Well, in terms of the three items that you listed, I would say that certainly domestic issues are very important. Basically diversifying the economy away from oil is a major challenge. And it’s a structural one. It would involve an overhaul of the society in many ways that are profoundly—would be profoundly painful to its members. And that’s a difficult thing to do. A long, sustained, low price of oil will force them to do this.

But the Iranian challenge I think, in their minds, is extremely important. And it’s very high—it’s probably much more significant than that of the Islamic State, because Iran is using non-state actors and projecting influence in an arc, or actually more like a noose, all around Saudi Arabia, from Iraq, to Syria, to Lebanon, into the Palestinian territories, and then south in Yemen, and potentially in Bahrain, and even among the Shiites who live in the Eastern Province of the—of the kingdom. So I think they see Iran as engaged in really a zero-sum competition for regional and geopolitical dominance of the entire Middle East.

HOUSE: I was struck at just how much people talk about Iran, and do not seem to see ISIS as a big—not nearly the level of threat that we ascribe to it. I mean, most people seem to take the view that we can handle it. And Muhammad bin Nayef has been handling it. It was just striking to me the focus on Iran, which the government clearly, I think, wants people to focus on. They’re using the—what frustrations people have internally are being turned not against Saudi Arabia, but against Iran. And right now, I would say it’s very successful. People are willing to give a pass on their frustrations to say: We’re happy our country is standing up to Iran. We’re no longer hunkering behind an indecisive U.S. We have pride. Our country’s acting. And the more we act against Iran, the less the danger of our young people joining ISIS. We can wage jihad on Iran.

JEHL: What is it that’s changed in the Saudi-Iranian relationship that accounts for this growing sense of threat? Is it the growing influence in Iraq and across Syria? Is it the nuclear agreement? What’s changed things?

HAYKEL: Yeah, I think the question of Iran for the Saudis is not a recent development. You know, the late foreign minister of Saudi Arabia had warned the United States, the Bush administration then, that if you invade you’re going to hand Iraq on a silver platter to the Iranians. And that’s effectively what’s happened. So the Iranians being in control of Iraq is a—is a major structural development in the region. And I think that the move more recently of the Obama administration towards trying to strike a deal with the Iranians in the hope that the Iranians would become a reliable and responsible state actor and not a revolutionary power, all of this has, I think, unnerved the Saudi leadership very considerably. And they feel that the U.S. is no longer the sole, dependable ally that would always come to the aid of the Saudis in the region. And I think, you know, the Saudis, to be fair to them, have good reason to be worried in that regard.

JEHL: I didn’t mention Yemen, but that should have been on the list as well. Karen, you just spent a month in Saudi Arabia. How much did you hear about Yemen? And is that really seen as a proxy for a Saudi-Iran conflict?

HOUSE: Yes, but I think most of the Saudis I talked to, normal people and government people, see Iran as a bigger, long-term issue. And obviously Yemen is—it’s Iran in Yemen that they’re worried about, and worried about the fact that if they can’t keep a government that would invite Iran in from being established, that once that happens, once some government—as Assad has—invites them in or invites the Russians in, the rest of the world accepts that. And they do not want to have that happen in Yemen. But there are also Saudis who understand and take the view that Yemen, for them, is like Afghanistan for us. They’re never going to fix it. And the sooner they figure out how to declare victory and get out, the better off they will be.

Other people, including academics who focus on that, say, no, you really need to fix it. And they compare, actually, this time to the period when King Faisal had a problem in Yemen, and also not enough—too much government spending for the money the country had. That the problems are similar although at a much higher level on the spending issue now, and that, you know, he sort of got out. And one needs to find a way to get out of Yemen, because it’s a lose-lose proposition. Once you’re finished, you still have to reconstruct the country which will be expensive or at least constructive enough that the poverty doesn’t become an even—an opportunity for more mischief-making.

JEHL: Are the Saudis looking for a way out, do you think?

HAYKEL: I think so. I mean, I think that the adventure that the Saudis have gotten into in Yemen is a break with their history and their tradition. They’ve always used clients in Yemen to project their influence. And they’ve had many clients to work with on the Yemeni political scene. The fact that they’re involved militarily, directly, is not just expensive, it’s costing them about—I’ve heard a billion and a half dollars a month.

HOUSE: And people are dying.

HAYKEL: Yeah. And their people are dying on the—

HOUSE: Border.

HAYKEL: On the border. They haven’t sent that many troops in. They have some special forces there. It’s mainly the Emirates, the UAE troops, that are dying. But they want a way out. But it’s very hard for them to find a way out, partly because the man that they’re backing, President Hadi, has no popularity in Yemen whatsoever. And the groups that the Saudis are backing are divided internally amongst themselves. So it’s a real mess. Very difficult to find an elegant solution to Yemen. And it’s partly, actually Saudi Arabia’s fault, because it had more or less abandoned Yemen for several years before this war started. So they had lost their connections to the different clients that they had been managing for many decades.

JEHL: And what do you think accounts for this—for this break, for them having found themselves enmeshed in Yemen? Were they blinded by the Iranian threat?

HAYKEL: Partly. I mean, the Iranians, through Hezbollah in Lebanon, have been working on the Houthis for some years. But I think the reason that the Saudis have not been more engaged with Yemen is partly to do with internal Saudi government dynamics. The people who are running the Yemen file had kind of lost their engagement in it, in part because the prince who was managing it fell it, he was ill for a number of years. So, I mean, sort of petty bureaucratic and administrative reasons I think let them not be as engaged with it.

And then overreliance on Ali Abdullah Saleh, the former president of Yemen, who really is a thug, and someone who has always deliberately kept Yemen unstable in order to remain in power. The Saudis found a way for him to give up power. And he was in Saudi Arabia actually convalescing from a very bad injury. And I’m amazed that the Saudis allowed him to leave, because much of what we see now in Yemen is largely because he managed to flee Saudi Arabia and go back to Yemen and start up his old games.

JEHL: I want to circle back to some of those internal fissures later, because, well, some may be petty, they’re all fascinating. And some are quite serious. But to stick with the foreign affairs and Saudi’s relations with its neighbors first, the United States, of course, has tried very hard to reassure Saudi Arabia in recent months, since the nuclear deal and in the context of Syria. Do you feel, Karen, as if they’re making headway with those efforts to reassure?

HOUSE: I would say they’re making no headway. I mean, the question I got asked most, actually, by—in January by Saudis—government, academic, normal people, business people—was a form of: Is Obama an eight-year aberration, or does he represent American policy? Or, as some would put it: Will Trump or Hillary be different? (Laughter.) And it’s a good question. Someone else said, you know, we have to—the biggest challenge facing Saudi Arabia is to prepare for the post-American Middle East. I mean, I think they really don’t see us—they keep hoping. And Adel al-Jubeir keeps saying—he said again in an interview I read in Der Spiegel yesterday, it’s not—you know, it’s not that the U.S. has abandoned Saudi Arabia. They’re just focused more on the Far East. But he’s the only one I have heard—you know, most people believe that the U.S. is not pursuing its own interests in the Middle East, and certainly not those of the kingdom, that we’re not reliable.

JEHL: And so, Karen, in the context of Syria, which is the theater right now where the U.S. and Saudi Arabia are trying to get along, to make common cause, how is that mistrust playing out?

HOUSE: Well, not much is happening. You know, I mean, I think the Saudi offer to put troops in was a way to emulate Obama and lead from behind, that they will be behind us and if we go in they’ll go in. But they know we’re not going in, so they won’t have to go in. That’s—

JEHL: Bernard?

HAYKEL: Yeah, if I can just say one thing about Syria. I think the way in which the difference comes out fairly strikingly is that the Saudis feel that the Obama administration is willing to compromise on the—on President Assad remaining in power, whereas for the Saudis, this is really a red line. This is unacceptable, that he has to leave, because he is responsible for, you know, the killing of so many hundreds of thousands, largely Sunni Syrians. And the Syrian War really plays domestically within Saudi Arabia very powerfully. I mean, the Saudi population really feels that Assad and the regime he represents, and the backing of Iran for that regime, that that regime has to go, and he has to go.

And so, you know, the Saudi leadership is responsive to that sentiment, whereas I think they feel—the Saudi leadership feels that Obama’s willing to compromise on this point. And so that’s one area where I think you see a significant difference. Also, from the Saudi perspective, the Obama administration’s flirtation with Iran is a major slap in the face, I think for two reasons. The Saudis feel that on the one hand they were responsible stewards of their oil reserves. They’ve never used oil as a weapon, except that one famous time in 1973. And that therefore they’re responsible actors in the international global economy.

And on the other hand, the Saudis also feel that they have for decades been responsible actors in that they were for the order and stability of the region and for the American—you know, American (piece/peace ?) of this region, whereas Iran has always been for the toppling of the American order. And so America is rewarding a country that has been nothing but an enemy to the United States in every respect—whether to do with oil production or regional stability. Whereas, the Saudis have been the opposite. And what do they get for it? And you have to remember that this comes on the heels of an Iraqi invasion that has given Iraq over to the Iranians, right? So from a Saudi perspective, there’s almost a continuation from Bush to Obama, all in favor of Iran, whether it’s—whether that’s American intention or not is another matter.

JEHL: And so, Karen, on Syria, in your discussions most recently you’d said there wasn’t much attention to Islamic State. More attention on Assad? More attention to Iran’s role in Syria as the threat to Saudi Arabia at this juncture?

HOUSE: I mean, my impression is that they are—they don’t have high expectations in Syria, for a number of the reasons Bernard mentioned. But you know, they don’t see us doing anything to help them get rid of Assad. They see as, frankly, in the Donald Trump way, being willing to sort of let the Russians fix it, prop up Assad, and somehow make everybody behave, and it’s OK if Russia, they believe, owns Syria, which is not OK with them, wo long as the Russians back Assad. That Yemen seemed to be a more immediate preoccupation, or trying to both accomplish more and, indeed, find a way to get out.

So my impression was Yemen concerns them a lot because of the proximity. Syria, at least, is a little further away. Iraq, obviously, concerns them a lot. And they’ve sent their ambassador back now after a, what, nearly 25-year hiatus? And, you know, people would say what we’re learning in Yemen will help us when we have to confront Iraq, so leaving the impression that they didn’t think that diplomacy in Iraq was going to be sufficient to keep the Iranians from, in their minds, stirring up more trouble against them. They clearly want Syria resolved, but I think they don’t think it’s going to happen.

JEHL: Bernard, do you have a view of how the Saudis see Islamic State?

HAYKEL: Well, I mean, I’ll tell you the official line on the Islamic State. So the official line on the Islamic State is that this is a group that has misinterpreted Islam, that it’s in error, they are extremists. They call them Kharijites, which is a pejorative terms in the Islamic tradition. The Islamic State, of course, sees the Saudi rulers as apostates, that they’re illegitimate and not Muslims and should be topples. In fact, the Islamic State has created three new provinces out of Saudi Arabia and has governors over these provinces. I mean, these are, you know, people who are underground. And the Islamic State claims that it is the successor of the first Saudi State, which is the 18th century Islamic reformist state of the Saudi royals. And so there’s a real ideological battle over, you know, what does Wahhabism mean, what does Salafism mean, between the Islamic State and the Saudi government and the Saudi royal family.

I think, though, that the Saudi government sees these people as—firstly, that they’re only, you know, 40(,000), 50,000 of them. You know, so one shouldn’t sort of, you know, get bent out of shape. And that if they were ever to try to come across the desert from Anbar into Saudi Arabia as a convoy, presumably we could—we would help them take them out. You know, so there’s no immediate sort of military threat from them. There are cells and there’s terrorism, but the past experience that the Saudis had with al-Qaida, whose—al-Qaida has started a terrorist campaign in 2003 in Saudi Arabia. It lasted till about 2007. That actually played very well for the Saudi government and Saudi royals, because terrorism domestically in Saudi Arabia makes the population generally rally to the government. And so I don’t think they think of them as an—the Islamic State as an existential threat. In fact, it might be an opportunity, whereas Iran is really a threat.

JEHL: Karen, we started out by talking about internal concerns in Saudi Arabia. And you spoke about oil prices and the pressure on the economy. Was that what you meant? Or when you think of internal threats and challenges, are you speaking about something more?

HOUSE: As I said, I think right now they have—by focusing on the external threat people, you know, will say again, in so many words, at least we’re not killing each other here. So they—and they don’t want the kind of chaos you see in every other part of the Middle East. They look at the competition between Crown Prince Muhammad bin Nayef, who is the keeper of internal security and who people obviously believe has done a good job at that, and Mohammad bin Salman, the kind’s 30-year old son who’s deputy crown prince. They look at that competition, and it makes people nervous. But most people, at least that I talk to, would say: We don’t have a dog in that fight. Whether it’s MbS or MbN, you know, doesn’t matter, so long as the family itself resolves—doesn’t have a fight over which one it is.

I mean, there are people who have the view that—I would ask people at the end of conversations: So if you had a vote in Saudi Arabia on MbS or MbN, who do you think would win? And then, who do you want to win? Most people, I think because they do see which way the wind is blowing, say MbS would win. And then some of them will say, but that’s not good, that he’s too unpredictable, he’s too prone to do things halfway and flit from one issue to another. So Yemen, Iran, the national transformation plan 2020 to privatize the economy and make government a regulator not an employer of last resort, all of that. So I think the issue of royal family politics is one that if the king decides to remove the crown prince and make his son crown prince and king in waiting, it would—it could certainly have some repercussions among the royal family.

I mean, I assume they wouldn’t fight each other, but I think the bigger issue is can any of them solve the problem of all of these young people—70 percent of the population is 30-years or younger, so MbS’s age or younger. And you know, he—I think that he has much—he doesn’t have the same respect for the U.S. that the older ones do, because he was five- or six-years old when we, you know, went into Kuwait and removed Saddam. So it’s not a—it’s like—you know, I ask one of my kids who was born in 1973: Do you know what Watergate is? And he said, of course, it’s that stuff you put in salad. (Laughter.) So you know, young people like that don’t remember things that they were only five or six to live through. So I still think the focus has to be on how do they create jobs for people whom the government can’t any longer afford to pass out money?

JEHL: Bernard, last question to you before we open it up to questions. What should we make of Mohammad bin Salman, and how significant is this rivalry?

HAYKEL: Look, the Saudi royal family is an extremely opaque institution. And the decision making within the royal family today is confined to a handful of people. So what happens between them is very difficult to discern. And you know, there are new—there are old rules that are being broken with this new prince and his father. I think that, you know, from the perspective of the United States, there are certain core strategic interests that matter to us in this region. Certainly, you know, a reliable and steady supply of oil from that region, from the kingdom, is important. That those oil fields not fall into the hands of the Islamic State, or Iran, or proxies of Iran is important. Maritime navigation is important—the freedom of shipping. I think those should be our concerns.

And what happens within the Saudi royal family is really something that we can do very little about. And they don’t have a history of—as Karen said—they don’t have a history of bloodletting. They learned the lesson from the 19th century when that happened, and I don’t think they’ll repeat it. So as long as our core interests, those of the United States, that is, are preserved, I don’t think it really matters who is in power.

JEHL: But do you see the more aggressive stance toward Iran and the involvement in Yemen as reflecting the mark of Mohammad bin Salman?

HAYKEL: I think the stance towards Iran is not his. I mean, I met with the king, who was then still governor of Riyadh, in 2007, I believe. And his views on Iran were very muscular and robust, and I think are well-reflected by the present policy. So I don’t think that’s to do with Mohammad bin Salman. Yemen, maybe, yes, is something to do with Mohammad bin Salman. It’s an aggressive move that I don’t see the elders of the family having made, especially given that they—given that they will have internalized what war in Yemen means. The last time they engaged in that war—in a war directly in Yemen was 1934. And they chose not to repeat it in the 1960s, when there was a civil war in Yemen. So I think that is a whole new way of thinking about force and power.

HOUSE: And they stepped their toe in it in 2009 and got—

HAYKEL: Briefly.

HOUSE: Yeah.

HAYKEL: And they—

HOUSE: They got it shot off.

HAYKEL: Yes.

JEHL: Well, let’s open up the discussion to a larger group for questions. Please wait for the microphone and stand and state your name and affiliation and, of course, keep your questions and comments concise to allow as many members as possible.

Judith Kipper?

Q: Thank you. Judith Kipper. A quick comment and then a—and then a question.

Karen touched on it: domestic threat is the greatest one. And I want to emphasize the demographic challenge. Yes, as Karen said, 60 percent under 30, 40 percent of that 60 percent are under 13. Their population doubles every 20 years. We in the U.S. have not changed our view of Saudi Arabia since the good old days of the 1980s, after we made up after the oil embargo, and things were great, and their population was half of what it was, and they were throwing money around left and right. Saudi Arabia is so obsessed with Iran that they can’t really focus or think about any other foreign policy issue, and there’s almost nothing they can do about Iran because Iran is a big, huge, old country, et cetera, et cetera.

So, with the changing relationship with the United States, which needs to be examined, I wonder how our speakers would see what needs to be changed in that relationship to make it more workable. After all, we’ve had a strategic relationship with Saudi Arabia for close to a century. We’re ready to use force to protect them and Israel, two of our best babies in the region. Both are doing everything they can against our interests. Nevertheless, we have to stay in good relations with both of them. But how should our approach to Saudi change, from a point of view of managing what is going to continue to be an exceedingly difficult and unsatisfying experience?

JEHL: So how can Clinton or Trump fix this relationship, Karen? (Laughter.)

HOUSE: I think we simply have to be—when we say we’re going to do something, we have to do it, or not say it. I mean, I think Adel’s—the foreign minister’s—quote, which he is repeating again everywhere, but we’re damned if we do and damned if we don’t. You want us to take care of ourselves, you say, and look after your interests; and when we do, you don’t like it. So do you want us to play a supporting role or a lead role? If you want us to support, who’s going to lead?

And I think we do have to lead. And it isn’t this administration’s plan to do that. So if a new administration comes along and would be more consistent, more consultative, and more committed to what it says, I think that would be useful.

Just a fast—there is a very good article, I think in Foreign Affairs actually, by Kenneth Pollack, arguing that the next president must either get in or get out, and analyzing the costs of both. But that the kind of waddle and muddle along is the worst thing for everybody involved. So I would vote for get in and figure out what our strategy is, and then be consistent with it.

HAYKEL: All right, so I—you know, with all due respect, I don’t accept your or agree with your characterization of Iran. I don’t care how old Iran is or, you know, how important it is as a country. We can just judge it by the way it’s behaved since 1979, and it’s behaved—

Q: No, I don’t think I characterized Iran.

HAYKEL: OK.

Q: I just said I didn’t think Saudi Arabia could do much about Iran.

HAYKEL: I think—well, maybe. I think what the United States ought to do about the Saudi-Iranian problem is to try to get them to agree on small steps, on small things, and build on that.

Now, the United States actually did try to do this recently. They tried to get the Iranians and the Saudis to agree on a new president in Lebanon and a new prime minister in Lebanon. The Saudis were on board with the choice of president and who—the president was to be a pro-Iranian, pro-Assad man, and the prime minister was to be a pro-Saudi. And the Iranians refused to do this agreement. So, you know, based on this one little effort by the Obama administration, it’s the Iranians who have been—you know, who have not been playing, you know, ball, and the Saudis have been.

Now, as far as the United States in the region, I mean, we are a—we are a local actor. We have a(n) aircraft carrier battle group there in the region all the time. We have a major naval base, a major air force base. You know, the force projection of the United States is massive. So it’s—we’re in. There’s no question that we’re not in. I think that actually the Obama administration has done a fairly good job, you know, in terms of trying to contain the Islamic State, not sending boots on the ground.

So as—but going back to the Iranian-Saudi business, the Americans ought to try to get them to agree on small things, and then build on that. I don’t—I don’t see any other way for the U.S. to play—to play a role in that region.

JEHL: Next question. Here in the front, please.

Q: Thank you. I’m Will Imbrie from DynCorp International.

Even with the Saudis’ formidable foreign exchange reserves, if oil prices remain low for a long time, they’re going to have to tighten their belt. I’m not sure what they consider discretionary and non-discretionary. Where are—where are they going to cut first?

JEHL: You were part of the discussions in January about this, Karen, or?

HOUSE: Well, they—as I’m sure you know, they raised gasoline prices and they—yeah, from 50 cents to a dollar—and they have cut subsidies for electricity, that kind of thing. Their focus is not so much on cutting as on growing non-oil revenue. So a VAT, supposedly, next year; charging people more to—not for the Hajj, but for Umrah, to collect more revenue from visitors; to restructure Saudi Telecom and other companies to get more money; to develop gold, uranium, I mean, various—I don’t think they have a plan yet that allows people to see how you’re going to get from 70 percent of your revenue being from oil to 30 percent, so that it’s a sustainable country. I think if they do that, you know, people won’t have any problems with the fact that they’re not there. But they have to see the plan, or I think there will be growing economic consequences—foreign investment and other things—from the fact that—it’s like watching the hourglass. You know, the sand is running through, that $500 billion, and there’s nothing going in. And the oil price hourglass is already down to $20 and nothing—not much going in. So they’re focused on raising revenue, not on cutting expenses, because that obviously hurts people. They’ve cut the Abdullah Scholarships. They’ve cut the stipend to students. You know, in a country that has that much waste, they can save a good bit of money through that, but it won’t fix the—it won’t fix the problem without causing too much pain.

Q: Defense, foreign assistance?

HOUSE: Pardon?

Q: Defense or foreign assistance?

HOUSE: No, the defense bill’s going up because of Yemen and all the turmoil around. They still have Egypt to fund because they need Egypt to be stable. The king is going there in April, and almost certainly will have to take money with him. So, you know, the—when your foreign policy is fundamentally an insurance policy of paying people, you need a lot of money. And they have less and less of it.

JEHL: Bernard, do you see a vision for living with $30 oil for the long term?

HAYKEL: Well, I mean, just going back to the question, you know, they cut capital expenditures right away, infrastructure projects. The thing that they cannot touch are government salaries, so public-sector salaries. Two-thirds of the population works for the government, so that’s a no-go zone for them.

Actually, you know, their reserves are closer to 600 billion (dollars), and they can borrow domestically about 100 billion (dollars), and they can still borrow internationally. They have very little, you know, debt to—internationally. So, you know, they I don’t think will really face a serious financial crisis for at least five years, assuming that—three, maybe. (Laughter.) I think, you know, we can say three to five years. And the—and, you know, three to five years in the oil business is a long time. Things can turn around, you know, for them.

HOUSE: I think that’s what they hope. I mean, in the ’80s, when this happened, they keep hoping something will turn up. And it has in the past, and maybe it will this time, and maybe it won’t. But you don’t see, in my view, the kind of decisive steps that they say they’re going to take yet.

JEHL: Yes, please. Here.

Q: Rob Quartel with NTELX.

It’s not exactly a foreign policy question, but it will affect foreign policy if the government were to fall to social pressure. So, you know, outside of these kinds of conversations, a lot of people say, when is the House of Saud going to fall? What will push it over? Are they subject to the Spring? You know, these—all these kids, of whom some I know, are generally well-educated, but then you also have a split between those who are madrassa-educated. So spin that out a little bit on how they’re trying to deal with it.

HOUSE: You go ahead, Bernie.

HAYKEL: Yeah. I mean, my sense is that—you know, and Karen already alluded to this—you know, Saudis look around and they see Syria, they see Yemen, they see Egypt, they see, you know, Iraq. They don’t—they have a lot to lose, even those who don’t have much. You know, so—and there was an Arab Spring movement, or at least an attempt at an Arab Spring, in March of 2011, and nothing happened. I think one person turned up. And, you know, the government in Saudi Arabia, due to a combination of its financial power and its co-optational power, its ability to buy social peace through the entitlements that it gives its population, and its formidable coercive power—this is not a weak state—you know, makes mobilization—a popular mobilization against it most unlikely. And there’s a long history of people predicting the fall of the House of Saud. I mean, it’s as long as, you know, the kingdom has been around, since 1932.

So I—you know, I am very reticent to speculate that, you know, the end is nigh. I mean, it might be. But it’s unlikely, given, you know, what we know at the moment.

And they also have religion, by the way, and they know how to deploy religion to, you know, generate obedience. And people also, in Saudi Arabia, know that the alternative to this—to this government is chaos.

HOUSE: Saudis are, in my view, just extraordinarily passive because they have been like someone hooked up to an IV for their entire life. So the country—you can’t overstate what he just said, how dependent. When somebody goes astray—I mean, there is a government critic I talk to regularly. He’s still being paid by his university. He’s not allowed to teach, but he’s paid, so that everybody is—you know, got the IV in them. And some are allowed to get out of bed and go to work, and the rest are just told to lie there and keep the IV. So it just—it’s very, very hard for people to—I mean, I think it is possible at some point that there are more people who have something to lose, but that’s a long way—that’s more than three years off. That’s more than five years off, probably.

JEHL: Yes, sir.

Q: Dick McCormack, CSIS.

You know the oil industry. You’ve been following it for a long time, and you know the huge cycles that have taken place over this century, and you know the pain that all of the existing oil producers are undergoing right now. Why won’t this force them into a new agreement of one kind or another? And why won’t they let price rationing—like, namely, oil above ($)50 or $60 a barrel—take care of the excess production, as they see it, coming from the U.S.?

HOUSE: Why won’t the Saudis allow price—

Q: I mean, why won’t the people that will get together and form the new OPEC—why won’t they assume that oil as ($)50 or $60 a barrel will dim somewhat the rate of investment that kept the fracking business going so vigorously in the U.S.?

HOUSE: Partly, I think people’s assumptions about how quick the fracking industry would go—be in big trouble didn’t pan out. So everybody would like to see that happen, but the Saudis, again, do not want to take a cut while the Iranians and the Russians and the Venezuelans and the frackers make more money from them taking 2 (million) or 3 million barrels off. I mean, that would be a huge revenue loss for the Saudis. The Russians are desperate for money. Iran feels that, despite getting whatever it is—$100 billion—from us, they need to sell oil, they need more money, so they don’t seem to be eager. I mean, you would assume common sense would say at some point they would all. But I—you know, the Iraq—the Iranian-Syrian tension and Iranian-Saudi tension that’s already been talked about complicates having that happen, certainly, between them. So I wouldn’t rule it out, but I think, you know, they have been—everybody of those producers has an interest in a higher price, but there is right now so much surplus oil—about 3 million barrels a day. So that is just far too much for anybody to quickly soak up, and they don’t trust each other.

Q: But of course, that’s all as a result of pre-existing investment. (To sustain ?) that rate of oil production, there will have to be new investment going forward over the next two or three years.

HOUSE: Mmm hmm. Yeah, at some point, because investment isn’t being made, it will—or isn’t being made at the same level—it will go back up. You know, whether that’s two or three years, or five or six years, I’m not—I’ve covered it, up and down, for 40 years, but not participated in making it go up or down by investing. So I don’t know. (Laughter.)

JEHL: Odeh?

Q: Odeh Aburdene.

You know, there is one variable that none of you talked about Saudi Arabia that cements the stability of the royal family, and that’s tribalism. For the most part, when you look at Saudi Arabia, it’s basically a tribal society that is in coalition with Islam. And I don’t see tribal support for the family as declining. Secondly, the business community for the most part is aligned with the royal family. I don’t see the business community rebelling. So these two factors are not going to undermine the family, short term.

As far as oil, by 2(0)17, as many investments in oil production and drilling declines, that is bound to increase—decrease supply, and that will also bring the price of oil. So the people I talk to say to me by 2(0)17 the price could go up to 45, 50 (dollars). And at $50, they can adjust; at $30, they cannot adjust.

JEHL: Bernard?

HAYKEL: You know, their break-even price has gone up significantly. It’s probably closer to 90 (dolllars). So, you know, even at 50 (dollars) I think they would have a problem.

But, you know, they are waiting for all these other producers, the more expensive oil, to be, you know, driven out of the market, and then they would be sitting, you know, where they want to be. But I agree with Karen, again, that if they were now to cut their production, it would be soaked up, probably, by Iranian and Iraqi production, and why should they give that benefit to—or that market share to others?

The other thing about market share is that, if you lose it, it’s not easy to gain it back. So they’re very keen on maintaining market share, those clients, because those are relationships with specific clients. And if you lose those relationships, it’s not just—it’s not easy to rebuild them. And China is an important—is an important customer for them, in particular.

Q: But market share is a function of price. If I can buy oil at $10 less—

JEHL: Yes, sir. You, please. I’m sorry. Yes.

Q: Thank you. Mohammad Khaishgi from The Resource Group.

I had a question about, I guess, in the last few years there obviously has been sort of the critique that the form of Islam that originates from the Arabian Peninsula, from Saudi Arabia I particular, has led to sort of, you know, intolerant views across the broader Muslim world, which has had consequences, obviously, throughout the world. How much sensitivity to that criticism is there within Saudi Arabia? What is the form of pushback against that? And to what extent do you think that the fundamental kind of contract between the royal family—of, you know, I guess, a century or more back—and the religious order, to what extent will that sort of—you know, will that resist such forms of criticism? Thank you.

HAYKEL: Should I take it, or do you want—

HOUSE: Go ahead.

HAYKEL: All right. You know, the dominant argument in the West—and you can see this in The New York Times and other places—is that, you know, Saudi Arabia spent all this money—about 100 billion (dollars), actually—since the early 1960s on building mosques and madrassas and so on, and that this is what led to, you know, the jihadi terrorists that we see today.

That correlation has yet to be proven, by the way. Saudis, for instance, have been spending in India lots of money since 1963 on producing Salafis. None of them are actually jihadis. None of them have joined a terrorist group. So you can be intolerant and not be violent, you know. Just because you’re intolerant doesn’t necessarily mean that you’re violent. (Laughter.) We know this in our country. We don’t have to go to Saudi Arabia to figure that out. (Laughter.)

So the relationship between, you know, the form of Islam, Salafism, and violence has to be explained. And I think it has to be explained in a way that doesn’t just account for Saudi funding. There’s something else going on in the Islamic world. And you can see this, for instance, in Iraq and Syria, and in Libya. The Saudis have not spent a dime in promoting their form of Islam in either Iraq or Syria or Libya, because those authoritarian regimes would not permit the Saudis in. And yet, this is where you see—and Tunisia, for instance, also is another example—this is where you see most of the jihadi Salafis are from.

So there’s something, I think, in the—in the nature of Salafism, especially when you want to politicize it, and especially in its relationship also with the Muslim Brotherhood, the more violent branches of the Muslim Brotherhood, that I think goes to explaining the violence that we see. It’s not just Saudi funding, in fact. And yet—and I still think, also, that Saudi funding has to be proven to have led to violence.

Now, the Saudis are aware of this because they have their own violent problem. They have their own people who are Salafis and who are Salafi jihadis. And the way they deal with them is a(n) interesting way. I mean, it involves, you know, force. It also involves education and rehabilitation. It involves also buying people off. And it also involves dividing up the religious field in Saudi Arabia between different actors, and playing them off against one another, and so on. So it’s a very complicated game that the Saudis play, and they’ve been fairly successful at it. They were able to crush and defeat al-Qaida.

That said, the only—and this goes back to an earlier question—the only group in Saudi Arabia that could ever mobilize against the regime, as far as I’m concerned—against the government—are the Islamists. They’re the only ones who actually have the underground networks. They’re the only ones who can be mobilized and deploy people on the street. And the—and the government is well aware of that.

HOUSE: Just to comment on the other part of your question, I mean, they’re very—the regime is extremely sensitive to this accusation, which has gotten louder and louder in this country, so they do go to lengths—Adel, MbS, MbN, the religious—to say this is not accurate; that Wahhabism is more than 270 years old, why is terrorism only now, if it’s really derived from Wahhabism; that there’s no such thing as Wahhabism, we’re all just Salafis; and, you know, various word games. But they’re very sensitive to it, and it is true that, you know, the Iranians behead or execute as many people—more people a year than the Saudis, and we don’t seem to mind. And that’s because we put a higher burden on our allies than we do on our opponents, although now that we’re trying to make Iran an ally, you know, one might like to think that they would be held to some higher standard, too. But they’re very sensitive to that, and they clearly try to correct it with their own view, at least, of saying there’s no association every chance they get.

JEHL: Yes, please, in the front row.

Q: I’m—(off mic)—from the State Department. Thank you very much. Just a very quick question.

Could you talk about how Saudi is dealing with its neighbors in the GCC, especially Qatar, and the relationship between GCC countries and Saudi Arabia? That would be very helpful nowadays.

HOUSE: I think Dr. Haykel spends more time in the Gulf. He should—you’re just back from Qatar, right?

HAYKEL: Yeah. You know, my feeling is that—and you can see this from when the diplomatic relations were broken off with the Iranians, that the GCC countries, with the exception of Oman I think, you know, followed suit in some form—not maybe breaking off diplomatic relations, but recalling ambassadors. The relationship between the deputy crown prince, Mohammad bin Salman, and Abu Dhabi is a very strong relationship, with the crown prince of Abu Dhabi. That’s probably the closest relationship. Also, the relationship with Kuwait is very close.

With Qatar, there have been some differences, and apparently they have to do with history. I mean, Qatar feels that Saudi Arabia is big brother and has interfered often. Also, Qatar has its own independent policy when it comes to—has had, when it comes to Egypt and the Muslim Brotherhood. And they’ve had their differences. My sense is that they’ve more or less patched things up lately. They are coordinating on Syria, for instance, and backing the same groups in Syria.

So, you know, the sense is that the worst days are probably behind them rather than ahead, with maybe the exception of Oman. Oman has its own kind of idiosyncratic role, especially as it tries to be an arbiter between Iran and the West. Also has been playing a role in Yemen that the Saudis don’t entirely approve of.

JEHL: So I think we have time for just one more question, and before we take it I wanted to remind everyone that this discussion has been on the record.

Yes, sir. In back.

Q: Amit Taityoun (ph) at GW.

I want to ask you a 30,000-feet, big-picture question. We tend to talk about the—like we have two camps, the Sunni, the Shia; Saudi, Iran; Russian, Americans. Are there any equal camps by any measure? I mean, if you compare the military capacity of Iran to the Saudi military force, which is largely good for parades; if you compare the allies of Iran, in Hezbollah and the Shia militias, to whatever weak forces allied themselves with the Sunnis; even in Kuwait—I can go on and on by any other measurement—doesn’t predict us where it’s going to come out. And what will our allies in the Far East say when they see that?

JEHL: So, Professor Haykel, is Iran winning the Saudi-Shia—or, sorry, the Sunni-Shia split?

HAYKEL: Yeah, so I think the way to think about sectarianism is that it’s often a language that is a cover for something else going on. So you have geopolitical differences that often get put in religious terms, or sometimes in the case of Iran in ethnic and national terms as well. And certainly pushing an anti-Iran and an anti-Shia line helps support the Saudi government domestically.

But in terms of your question and the balance of forces in terms of actual military power, I don’t think it will ever come to a war between Iran and Saudi Arabia in that way. If Iran were to mobilize a military force, it’ll probably be through non-state actors—you know, militias, probably Iraqi Shia militias or militias among the Shia populations of Saudi Arabia and Bahrain. I don’t think the Iranians would ever frontally attack Saudi Arabia militarily because the United States would get involved and would, you know—you know, defeat the Iranians in very short order, I think.

JEHL: Is there a red line, Karen, for Saudi Arabia as they see Iran growing in influence? You mentioned the discussion of the confrontation in Iraq—

HOUSE: That’s precisely what they worry about. I mean, a nice frontal assault and we would be there to protect the oil, if not the royal family. Probably can’t protect one without the other, so we’d be doing both.

But, you know, what they worry about is troublemaking where the U.S. is going to say, what can we do, you know? We can’t get into Syria. We can’t get into the eastern province. We can’t get into Yemen. And so the fact that the Iranians do have much better—the Hezbollah, the Iraqi Shia militias, they have better military—non-state military forces is exactly what unnerves the Saudis, because they don’t see us being able to confront that.

JEHL: Well, this has been a fascinating hour, and thank you for both for taking the time.

HAYKEL: Thank you. (Applause.)

(END)

Up

Top Stories on CFR

Saudi Arabia

The United States should draw a distinction between Saudi Arabia and the Crown Prince.

Venezuela

Bankrolling the region’s biggest humanitarian disaster won’t win Beijing many friends.

Italy

Italy’s populist government has relished defying the European Union, and its latest showdown with Brussels could threaten the continent’s fragile recovery—and the global economy.