The Saudi Purge Isn’t Just a Power Grab

By Peter Waldman and Glen Carey
November 9, 2017

It’s a go-for-broke upheaval. The question now, for hopeful investors, is whether the crown prince follows his corruption crackdown by opening up an economy dominated by plutocrats and royal cronies.

It makes sense to be cynical about Crown Prince Mohammed bin Salman’s ostensible crackdown on corruption in Saudi Arabia.

Among the 11 princes, 4 ministers, and dozens of well-known businessmen arrested were some of the 32-year-old’s last potential rivals to the Saudi throne.

The move also smacks of an asset snatch. Police nabbed 3 of the Arab world’s 10 richest men, including investor Prince Alwaleed bin Talal, the billionaire best known for rescuing Citicorp in 1991 and making big bets on Apple Inc. and 21st Century Fox Inc.

But was it only a Machiavellian power play? Or is this the start of a dramatic, go-for-broke attempt to transform a country that’s resisted change for decades?

Prince Mohammed seems to be playing the equally ruthless roles of autocrat and reformer.

The millennial has been outspoken about his bold plans to modernize Saudi society and wean the kingdom from fossil fuel. Now, Prince Mohammed has locked up globe-trotting tycoons and other dynastic rivals, sending shock waves across the desert and around the world.

Since Saudi Arabia’s founding in 1932 by his grandfather, Abdulaziz Al Saud, successive kings have sought consensus among the family’s thousands of princes, balancing religious, princely, and tribal factions to maintain stability in the world’s largest oil supplier. Decisions were made at a glacial pace, often capped with generous payouts for anyone left unhappy. Prince Mohammed has smashed that conservative status quo in an act, he no doubt believes, of creative destruction.

This is a man of dead-certain belief in himself, who told this magazine in a long, autobiographical interview in April 2016 that his childhood experiences among princes and potentates were more valuable and formative than Steve Jobs’s, Mark Zuckerberg’s, and Bill Gates’s. So, he wondered aloud, “if I work according to their methods, what will I create?” Now we know his disruptive potential.

The prince’s unprecedented arrest of a who’s who of Saudi society is a first stab at fulfilling his vow to hold the corrupt accountable. “I confirm to you, no one will survive in a corruption case—whoever he is, even if he’s a prince or a minister,” Prince Mohammed said in a televised interview in May. The vow has now become a Twitter sensation among Saudis under the age of 30, who make up 70 percent of the population, the demographic bulge the prince has made his base. They’re still plenty skeptical of Prince Mohammed and his father the king, who recently visited Moscow with 1,500 retainers, his own carpets, and a golden escalator for his Boeing 747.

No one imagined the crown prince would go so far. The takedown, set up by his father, King Salman, through a new anticorruption commission that Prince Mohammed chairs, rounded up his most visible potential adversary, Prince Miteb bin Abdullah. A favored son of the late King Abdullah, who died in 2015, Miteb, 65, commanded the Saudi National Guard, which, until his arrest, had been the last military branch not under Prince Mohammed’s control.

Other detainees included princes and ministers who have been linked to questionable, if not corrupt, transactions. Prince Turki bin Nasser, for example, is infamous for his involvement in the so-called Al Yamamah arms deal between Britain and Saudi Arabia, a massive sale that led to corruption probes in the U.K. and the U.S. Adel Fakeih, a top economic policymaker before his Nov. 4 arrest, was mayor of Jeddah during a flood in 2009 during which scores of people died because of the failure of infrastructure, apparently shoddily made. Dozens of people were convicted of criminal charges including bribery, but not Fakeih, who was never charged and went on to serve as a minister in Riyadh for an additional half-dozen years.

Ever since the floods, Abdullah Jaber, a popular Saudi cartoonist, has drawn caricatures of Fakeih, without naming him, to symbolize the toll of corruption on Saudi Arabia. He couldn’t believe his eyes when he read Fakeih had been arrested and that the Jeddah flood case had been reopened. “I still can’t absorb the greatness of what has happened,” Jaber said in a Twitter post.

In total, the government froze bank accounts of the more than three dozen men detained, putting about $33 billion of personal wealth at risk. Three of the detainees, Alwaleed among them, own three of the largest privately held television networks in the country. Saudi authorities also moved to freeze the private accounts of hundreds more suspected of corruption but not yet arrested. The crackdown is Prince Mohammed’s strongest blow yet at the rentier state, the system of gatekeepers, sinecures, and handouts that’s sapped the incentive in Saudi Arabia for entrepreneurship to flourish, the prince has said.

The question now, for hopeful Saudi and foreign investors, is whether the prince builds on the anticorruption momentum with new rules to open up an economy until now dominated by princes and their cronies as well as wealthy families. Ayham Kamel, a director with Eurasia Group, says the crackdown will help. “Mohammed bin Salman is in effect taking steps to separate the Al Saud family from the state,” Kamel wrote in a note on Nov. 6. “The process of destroying old elite networks that monopolized access to profitable contracts bodes well for the business environment.”

Robert Jordan, the former corporate lawyer who served as George W. Bush’s ambassador in Riyadh, said if Prince Mohammed’s anticorruption campaign is real, “it will add credibility to the Saudi business posture, to its operations, and to the potential IPO of Aramco,” the Saudi national oil company. “If it turns out to simply be a power grab,” he told Bloomberg Television, “then I think it will hurt the Saudis in the long run and certainly hurt this crown prince.”

One downside, of course, is more repression, wielded by a headstrong prince cocksure he knows what’s best for society. He told Bloomberg last month that a $500 billion city he wants to build on the Red Sea “represents a civilizational leap for humanity,” with a bayside community to become “like the Hamptons in New York.” While the prince has reined in the religious police and taken the once-unthinkable step of allowing women to drive, he’s shown little interest in participatory governance. The government has promised a transparent judicial process for the detainees but still hasn’t disclosed specific charges against any of them.

“The one positive thing is that maybe things will get more equitable, more meritocratic,” says a young Saudi management consultant who, tellingly, declines to be named. “It’s also scary. There’s no due process, and people can disappear.”

Some Saudis are nervous that Prince Mohammed’s bellicose campaign against Iran will lead to war. Nerves frayed on Nov. 4 when a missile fired by Houthi rebels in Yemen was shot down on its way to Riyadh, the farthest encroachment yet into Saudi territory by a Houthi-fired missile. The Saudis blamed Iran for supplying the missile and said they reserved the right to respond. Iran rejected the allegation and accused Saudi Arabia of threatening an attack. The kingdom has also intensified its anti-Iran rhetoric over proxy conflicts in Iraq, Syria, and Lebanon.

“Confrontations will widen with Iran’s unchecked expansion,” Abdulrahman Al Rashid, a prominent columnist for the newspaper Asharq Al-Awsat, wrote on Nov. 7. “Strengthening local militias in unstable countries remains the only path forward.”

The prince is racing the clock. When he and his father came to power in 2015, oil prices had recently plummeted, leaving the country in imminent danger of a budget meltdown. They slashed spending and reduced subsidies for energy and water, grounding the economy to a halt. With little prospect that oil prices will rise much higher, the country has only about four more years at its current rate of deficit spending until its currency reserves are depleted. “Four years is not a long time; time is running out,” says Ziad Daoud, an economist with Bloomberg Intelligence.

Recent history doesn’t bode well for anticorruption reformers, Daoud says. Chinese President Xi Jinping instituted a similar purge for a few years, only to backtrack on economic reforms after some of his rivals had been vanquished, the economist says. And each time the prince has assumed more power, such as in June when he usurped his older cousin as crown prince, he’s given generous handouts to the public.

“This time could be different. You never know,” Daoud says. “Now that Prince Mohammed has unrivaled and unprecedented power, he may forge ahead with his reform agenda. It’s highly uncertain.” —With Vivian Nereim and Alaa Shahine

  1. #1 by good coolie on Thursday, 9 November 2017 - 10:03 pm

    The bright, modern side of this episode is that there is no blood- shed involved among the brothers of the Al Saud family. Along with the slow modernisation of Saudi society, this is a good sign, indicating that Saudi Arabia is ready to truly join the international community in moderate politics. This progressiveness is in contrast to the policies of the Iranian government which is secretive and repressive, and undermines the stability of the Gulf region.

  2. #2 by SuperStringhg on Friday, 10 November 2017 - 10:50 pm

    When a mountain is in front of you, you should not blow up the mountain but bore through, tunnel by tunnel. The USSR tried to make change overnight, see where are they now…still the same dictator except different name. See how china change by taking one step at a time, see where are they now…Second world economic power and you see power changes hand…Chinese style.

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