Saudi Arabia is facing a systemic overhaul. Deputy Crown Prince Muhammad bin Salman recently indicated as much during an interview with The Economist, by answering “most certainly” to a question about whether or not Saudi Arabia is facing “a Thatcher revolution.” The freshly anointed King Salman seems poised to respond to populist uprisings, declining oil prices, and the Obama Administration’s nuclear deal with Iran, with an ambitious program of religiously-inflected privatisation. It can be termed as “Thatcherite Wahhabism.”
First, the reasons for it. 90% of government income is currently based on oil production, with a deficit that is 15% of total GDP. Saudi Arabia currently produces ten million barrels of oil per day, with a possible reserve of 260 billion (the figure is a state secret). This is obviously unsustainable given that oil has plummeted nearly 70% since mid-2014, and there is reason to believe that we are entering an extended period of low prices.
Prices have sunk because of overproduction. Since November 2014, Riyadh has been trying to pump oil above the agreed OPEC production ceiling, in order to kill American hydraulic fracking, and harm Iranian and Russian energy interests. The result has been that the United States is now a net exporter of oil, at the expense of its own environmental concerns, and Tehran has also been overproducing, with severe consequences for Saudi Arabian finances.
Riyadh needs to agree to new production ceilings at an OPEC meeting, however, this is almost impossible now that it is rallying its allies in a diplomatic war with Tehran. The International Monetary Fund has already warned that Riyadh may run out of financial assets by 2020. As a result, it must drastically reduce government spending to stay afloat, reexamining its large public sector, generous subsidies, and the fact that it has few taxes on necessities and luxury goods. Hence the perceived need for the Royal Family to embrace Thatcherism, particularly given the growing costs of the war in Yemen (already $60 billion).
Analysts have spent the last week speculating about what “a Thatcher revolution” would mean in Saudi Arabia. Gas prices have already been doubled to $0.21/litre, alongside reductions in subsidies for water, electricity, and other services. Sales taxes are being introduced if they haven’t already, and “sin taxes” for products like tobacco will increase. Prince Salman also told The Economist about privatisation in health, education, and “some military sectors.”
It seems clear that Riyadh will look to mining, tourism, and banking activities to sustain it through the apparent end of its oil boom. Prince Salman speaks ominously of “expanding religious tourism,” on four million square meters of “unutilised state-owned land” in Mecca. He also touches on developing Saudi Arabia’s uranium reserves, which are 6% of the global total, and investing Saudi capital across the region. Basically, the plan appears to be for the country to transition to a competitive market economy. 70% of Saudi Arabians are currently below the age of thirty, and they will be the first generation to experience these forces.
Naturally, he leaves out the immense social conflict that will be generated by this shift, and how the Royal Family plans on staying ahead of it. For instance, Riyadh already faces immense criticism for valuing pilgrimage revenues over Mecca’s deep cultural heritage. Private sector employment would require a greater program of ‘Saudisation,’ and a reliance on domestic over foreign labour, which has already been causing turbulence since 2013. The answer appears to be Sunni nationalism: the execution of Nimr al-Nimr was an indication of the future. State repression, sectarianism, and privatisation will occur in tandem. That is what makes it Thatcherite Wahhabism.
Tellingly, much of the debate has focused on the section of the interview in which he floated the idea of selling the state-owned oil company Aramco. Granted, full privatisation would be enormously significant, and not just because Aramco is valued in the trillions of dollars. Aramco is also the lever to Saudi Arabian geopolitical and strategic power, but that is exactly why only up to 5% of it is officially being considered for sale. Even then, the official line is about selling “shares […] and/or some downstream assets,” vague enough to make actual changes minimal. The fact that Prince Salman mentioned it at all could mean wider privatisation, but it is more likely that the Royal Family is simply holding the option of reconstituting itself as a post-monarchical oligarchy.
Annoyingly, the rest of the interview has been ignored. Prince Salman describes a figurative Saudi woman as needing “more time to accustom herself to the idea of work.” The war in Yemen is justified by the loaded rhetorical question, “is there any country in the world who would accept the fact that a militia with this kind of armament should be on their border?” Despite its unwillingness to tolerate pluralism and substantive democracy, the Royal Family is described as being “part of a national process; we are part of the local tribes of the country; we are part of the regions in the country; we have been working together for the past three hundred years.”
Prince Salman is adamant about retrofitting a theocratic monarchy with the characteristics of a “modern economy.” However, at the core, these measures are reactionary, and meant to preserve the Royal Family’s power in the country. It is an open question whether or not this will work, given the state of the oil market, and political crises in the region more generally. Yet Prince Salman is correct to mention to his interviewer that “Churchill said that opportunities come during crises. And I recall Churchill’s statement whenever I see the obstacles or the crises in the region. So this is how I view the challenges or the crises in the region.”
Thatcher isn’t just being cited here because of how she changed her country’s economy. She is also being praised for crushing the possibility of radical change in the United Kingdom, and instead directing those energies towards a very different future. Thatcher saw a crisis, and turned it into an opportunity to implement neoclassical economics. Riyadh is currently under the control of people who want to do the same thing, with Prince Salman’s rhetoric leading the charge into a post-oil future. The issue is that Thatcherism has not exactly led to stability, and there is no reason to believe that this will be the case in Saudi Arabia.