Saudi Arabia faces many threats, and Iran isn’t at the top of the list

As Iran and major world powers race toward a June 30 deadline to reach a final agreement on limiting Tehran’s nuclear capability, Saudi Arabia is so furious that it is threatening to develop its own nuclear program. The Saudis are hinting that, along with other Arab states, they would match whatever nuclear enrichment capability Iran is allowed to preserve.

“Whatever the Iranians have, we will have, too,” Prince Turki al-Faisal, the former Saudi intelligence chief, warned at a conference in South Korea last month. Under the emerging deal, instead of ending Iran’s nuclear program outright, Tehran might be allowed to keep up to 5,000 centrifuges to produce nuclear fuel for energy and medical purposes.

Saudi Arabia’s leaders are fixated on containing Iranian power throughout the Middle East, whether real or perceived. The Saudis worry that, once economic sanctions are lifted under a nuclear deal, Iran would gain access to tens of billions of dollars in frozen funds and new oil revenue, which Tehran could use to expand its influence in Iraq, Syria, Lebanon and elsewhere.

“Underlying all of this is how do we confront Iran’s interference in the affairs of the countries of the region,” the Saudi foreign minister, Adel al-Jubeir, said before leaders of the Gulf Cooperation Council met with President Barack Obama at Camp David this month. “We see Iran’s hand in Lebanon, in Syria, in Iraq. We see Iran’s hand in Yemen. We see Iran facilitating terrorist organizations, so the challenge is how do we collectively coordinate our efforts.”

But Saudi Arabia and the other Sunni Arab states should not be so singularly obsessed with the danger posed by Shi’ite-led Iran. These states have other internal problems and economic worries to deal with, especially bulging youth populations and the lack of avenues for political expression. The House of Saud is facing a challenge from the militant group Islamic State, which carried out a suicide bombing last week that killed at least 21 worshippers at a Shi’ite mosque in the kingdom’s Eastern Province. The Saudi regime must also cope with the long-term consequences of declining revenue due to lower oil prices.

In an interview with the New York Times in early April, Obama warned that U.S. allies like Saudi Arabia should be more worried about internal threats. These states have “populations that, in some cases, are alienated, youth that are underemployed, an ideology that is destructive and nihilistic, and in some cases, just a belief that there are no legitimate political outlets for grievances,” Obama said, adding: “I think the biggest threats that they face may not be coming from Iran invading. It’s going to be from dissatisfaction inside their own countries.”

Obama’s comments angered the Arab monarchs, including the leaders of Saudi Arabia, the United Arab Emirates and Bahrain, who decided to send lower-level officials to the Camp David summit. But Obama was trying to initiate a difficult conversation with U.S. allies — a discussion that got drowned out by a focus on who did and didn’t make it to the summit.

Saudi Arabia must deal with its “youth bulge”: more than half of the country’s population of 29 million is under the age of 25. Two-thirds of the population is under 30. Most troubling, the estimated unemployment rate for Saudis aged 15 to 24 is about 30 percent.

While Saudi officials insist that their substantial foreign reserves allow them to withstand a long period of low oil prices — and potential regional turmoil — the reserves dropped by $36 billion in March and April alone. (Saudi reserves peaked at around $800 billion in mid 2014; some economists forecast that they could drop to $500 billion in the next two years.) When King Salman ascended to the throne after his brother’s death in January, he granted salary bonuses to all public employees and members of the military. Those bonuses most likely came out of the foreign reserves, since the kingdom was already projecting a 2015 budget deficit of $40 billion — the first in seven years. The Saudi-led war against Houthi rebels in Yemen is also draining the kingdom’s coffers, and the war will become more costly as it drags on.

Yemen is but the latest arena in the Saudi-Iranian proxy war. The conflict with Iran has defined Saudi foreign policy over the past decade, and it intensified since the Arab uprisings of 2011, when the House of Saud tried to choke off revolutionary momentum in the region. Saudi leaders tended to view all Shi’ite politicians and factions in the Muslim world as agents of Iran — and they attached an Iranian connection, whether real or imagined, to virtually any regional security issue.

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For the Saudi regime, internal and external pressures converged during the Arab uprisings of 2011. After the wave of popular protests forced out longtime dictators in Tunisia, Egypt, Libya, and eventually Yemen, the Sauds were worried about the revolt spreading to the kingdom.

The House of Saud quickly resorted to one of its time-honored methods of shoring up internal support: generous handouts. Shortly after the leaders of Tunisia and Egypt were toppled, then-King Abdullah set aside $130 billion to buy domestic peace. He awarded two extra months of salary to all government employees, who make up a majority of the national workforce, and created more public-sector jobs.

Abdullah also budgeted $70 billion to build a half-million housing units for low-income Saudis over five years. And he granted about $200 million to organizations controlled by the Wahhabi religious establishment, including the dreaded morality police. In turn, the kingdom’s highest religious council issued a fatwa proclaiming that Islam forbids street protests. The ruling family also played the Shi’ite card, declaring that the uprisings across the region were targeting Sunnis and being instigated by Iran.

The Saudi regime became more nervous when the revolutions spread to Yemen, on its southern border, and Bahrain, a Shi’ite-majority country ruled by a Sunni monarchy only 16 miles from Saudi Arabia’s Eastern Province, where most of the kingdom’s oil reserves lie and where a large segment of the population is Shi’ite. The Sauds accused Iran of supporting the Bahrain uprising, and sent troops across the causeway to help crush the pro-democracy movement. The Gulf Cooperation Council, of which the Saudis are the leading power, began discussions on offering membership to Jordan and Morocco — two non-Gulf, non-oil-producing Sunni monarchies — in a bid to build a stronger bulwark against Iran.

Aside from dealing with Iran and coping with worsening conflict in its two neighbors, Iraq and Yemen, the kingdom also had to absorb the economic shock of plummeting oil prices. In early January, Brent crude, the international benchmark, fell below $50 a barrel for the first time since May 2009 — a drop caused in part by Saudi Arabia’s refusal to cut high production levels. At the last OPEC meeting in November, the Saudis led the charge to prevent the cartel from cutting production, which would have driven prices up. Instead, the kingdom has tried to retain its market share and to drive out U.S. shale oil, which requires higher prices to remain competitive.

There are signs that the kingdom has used oil as a weapon to punish Iran, and Russia, for their support of Bashar al-Assad’s brutal regime in Syria. Since the Syrian uprising began in 2011, regional and world powers have played out a series of proxy battles there. As Saudi Arabia and Qatar armed many of the Syrian rebels, the Iranian regime — and to a lesser extent, Russia — have provided the weapons and funding to keep Assad in power. Facing Western sanctions and economic isolation, both Iran and Russia are dependent on oil prices remaining above $100 a barrel to meet their budget commitments. While Saudi can better withstand lower prices, oil revenues still account for nearly 90 percent of government income.

So far, Saudi leaders have been able to endure the economic shock by increasing oil production to make up for falling prices, and by accessing the kingdom’s foreign reserves. But these are not long-term solutions to Saudi Arabia’s internal challenges: a growing youth population that is underemployed, the lack of political outlets, and high dependence on oil revenues. The House of Saud cannot solve these problems by fixating on the Iranian threat.

http://blogs.reuters.com/great-debate/2015/05/28/why-the-biggest-threat-to-saudi-arabia-isnt-iran/