Two weeks ago, Saudi Arabia’s powerful crown prince hosted some of the world’s leading investors at the palatial Ritz-Carlton hotel in Riyadh. Days later, he upended the country’s historical power structure by turning the property into a luxury prison for dozens of the kingdom’s most prominent princes and businessmen.
The detentions on grounds of corruption -- seen by some as a power grab by 32-year-old Crown Prince Mohammed bin Salman -- have ended a system by which kings maintained stability in the world’s largest oil supplier by parceling out powers to different branches of the family. The jettisoning of limitations on the king’s power may free his successor to enact much-needed social and economic changes, but it also creates fertile ground for discord and leaves Saudi Arabia’s ruler without a system of constraints.
“The king was certainly first among equals, but power was shared,” said Professor Gregory Gause, a Saudi specialist at Texas A&M University. “This system had the vices of committees -- slow, ponderous, sometimes missing opportunities, conservative, risk-averse. But it also had the virtue of committees -- cautious, avoiding major mistakes, checking impetuous decisions.
“When one person rules, the checks on decision-making disappear,” he said.
Anti-Corruption Campaign?
Authorities haven’t substantiated the corruption allegations, though graft is pervasive in the kingdom and some applauded the crackdown. Attorney General Saud Al Mojeb said Thursday that at least $100 billion had been misused “through systemic corruption and embezzlement” over several decades.
The weekend’s developments have made it easier for Prince Mohammed to pursue his plan to overhaul Saudi’s oil-reliant economy and step up a regional power struggle against Iran, which includes a military offensive in neighboring Yemen, a campaign to isolate Qatar and a warning Tuesday against travel to Lebanon, whose prime minister’s resignation over the weekend is seen by some as engineered by Riyadh. The broad nature of the shakeup has unnerved some investors at a time Saudi Arabia wants to attract foreign money.
“It isn’t that they arrested senior princes that concerns international investors,” Crispin Hawes, a managing director at Teneo Intelligence, a political risk consulting firm in London, said in a phone interview. “Until there is some clarity on charges or possible penalties, investors don’t know the risks of doing business with major Saudi partners.”
The purge, and the kingdom’s deepening feud with Iran, spurred a selloff of almost $18 billion across Gulf stock markets through Wednesday. The decline cut the combined market capitalization of bourses in the six-nation Gulf Cooperation Council to $900 billion, the lowest level in a year, according to data compiled by Bloomberg.
“The truth is corruption in Saudi is truly in the eye of the beholder, you’re only corrupt if a person more powerful than you decides that you are and does something about it,” Michael Stephens, a research fellow for Middle East studies at the Royal United Services Institute for Security and Defence Studies, said on Twitter. The arrests and freezing of bank accounts were not done “simply because of corruption,” he said.