Saudi Arabia Has Its Own Way of Draining the Swamp
(Bloomberg Gadfly) -- Saudi Arabia’s millennial-in-chief has reached the move-fast-and-break-things phase.
Prince Mohammed bin Salman’s Saturday night roundup of dozens of prominent royals and officials -- all under the auspices of the king he may succeed within months -- is actually a natural, if jarring, progression.The prince’s consolidation of power has been evident since June at least, when former Crown Prince Mohammed bin Nayef was taken out of the line of succession and replaced as interior minister.
While the arrest of Prince Alwaleed bin Talal generated many headlines, chiefly because he is so well known in the West, his detention wasn't the most momentous. That dubious honor belongs to Prince Miteb bin Abdullah, a son of the last king and, until this weekend, head of the country's National Guard. In Prince Mohammed's push to consolidate power and deter opponents, taking control of the ruling family's praetorian guard is a no-brainer.
It's also important to note how this crackdown was conducted. This wasn't a night of the long knives; it was done in the bright glare of a state TV broadcast. This suggests the prince was sending a signal to at least two broad constituencies.
The first was to the Saudi Arabian establishment. If anyone in the old guard wasn't aware that Prince Mohammed has effectively declared war on them, there should be no such illusions after this weekend.
The second constituency is more nebulous and intriguing.
Possibly taking a leaf from President Donald Trump, Prince Mohammed has adopted a notably populist approach in critical areas. That the weekend's wave of arrests happened under the auspices of a newly established anti-corruption committee -- headed by guess who -- is an obvious marker. Marry aristocracy with oil in any setting, and inequality and corruption will flourish. Given Saudi Arabia's persistently low scores on perceptions of corruption, addressing this is critical to any serious reform effort:
Politically, though, arresting wealthy, connected Saudi Arabians -- and doing so very publicly -- is straight from the drain-the-swamp playbook, or maybe drain-the-oasis in Riyadh's case.
But it follows other moves designed to appeal to ordinary citizens. Prince Mohammed stunned the audience at the country's recent "Davos in the desert" finance conference by telling them he would return Saudi Arabia to "moderate Islam."
In essence, he was telling the country's clerics that the deal the royal family struck with them after 1979's siege of the Grand Mosque in Mecca is being renegotiated. Prince Mohammed has launched a crackdown on dissent in general, including clerics critical of the government. The country's religious police haven't disappeared but are reportedly less fierce than they were previously. Notice, too, how part of the pitch for NEOM, the fantastical megalopolis project unveiled recently by the prince, centers on its future inhabitants enjoying much greater freedoms than Saudis do today.
September's royal decree lifting the ban on women driving fits with this, too. Notably, while the religious Council of Senior Scholars expressed some reservations, it backed the decree. Speaking on Sunday, Helima Croft, global head of commodity strategy at RBC Capital Markets, singled this out to me as having rallied well-educated Saudi Arabian women to the prince's cause. You could almost imagine tee-shirts emblazoned with "I'm With Him," she said.
These moves and messages, as well as youth rallies organized by the prince's own MiSK Foundation, suggest a strategy of building a "base" outside of the prevailing religious and political establishment. That base would appear to center on Saudi Arabia's young people -- half the population is under 30 -- including its women. Moves toward a more tolerant, open society have also garnered support from commercial elites, Croft noted.
From the perspective of outside investors and, of course, anyone with an interest in oil markets, this all constitutes a double-edged sword.
On the one hand, the prince has set out a sweeping reform plan that could strengthen Saudi Arabia over the long term and is consolidating the power he needs to make good on that. This weekend, on that optimistic reading, is a step forward.
Yet there's no denying that the world has also just witnessed a classic palace purge taken from a playbook as old as autocracy itself. I don't know if it was triggered by a perceived internal threat, but the suddenness of it certainly raises the question. It also shows how, for all the messaging of reform and openness, some old-school key-man risk lurks beneath this entire project.
It's worth noting that on the same day as the arrests, a missile lobbed from Yemen was intercepted near Riyadh. This should remind those banking on Prince Mohammed pulling off his audacious plan that, having launched Saudi Arabia into its war in Yemen, his headstrong approach can have negative consequences.
The prince's latest move may well have served to preempt a destabilizing backlash. Equally, it may yet set it off. Saudi Arabia is now well into uncharted territory.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.
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