Economic crisis in Saudi Arabia looms over Middle East

By Adi Ramachandran || Contributing Writer

“Unfortunately,” said Iranian Foreign Minister Javad Zarif on Friday, “the Saudis have had the illusion that backed by their Western allies, they could push Iran out of the equation in the region.” Although Saudi Arabia has never vocally objected to the global deal that restricted Iran’s nuclear program whilst shaking off the yoke of Western sanctions, it is hard to fathom that its royal authorities would have accepted the subsequent consequences without protest. It is evident that Zarif’s administration has grasped this nuance; as the Minister went on to decry the Saudis for “panicking over the potential for reduced tensions between Tehran and the West.”

The Saudi Arabian stock market fell seven percent as of the week of the Jan. 17; a cascade that saw billions of dollars wiped from its markets. The gradual reintegration of the Islamic Republic into international oil markets heralded a critical shift in the fate of the Tadawul; dealing a hefty blow to the Saudis at a time when the record low price of oil is already taking a heavy toll on the Kingdom’s economic fortunes.

Saudi’s fiscal deficit has given rise to sociopolitical strains such as growing inequity as well as enhanced tensions between the Kingdom’s local Saudi Population and its 10 million member expatriate labor force. Quite naturally, a clumsy slew of announced reforms were to ensue under the Kingdom’s new Deputy Crown, heralded by many observers as the power behind the Saudi Arabian throne. Among the more notable policy shifts include one toward austerity, from a state known for lavishing generosities upon its citizenry– be it money, utilities or status through kafeel, a Persian Gulf social contract.

Although these economic woes are already a significant existential threat to Saudi Arabia, a country which Nassim Nicholas Taleb labeled as the “most fragile (in the world) for a lot of reasons (notably demographic, political and existential),” there also exists a fear that the Islamic Republic will be emboldened to expand its influence in an already turbulent and violent region, and thereby enhancing a dangerous geopolitical vacuum. In the words of Saudi Foreign Minister Adel Al Jubair, “Iran is the single-most-belligerent-actor in the region, and its actions display both a commitment to regional hegemony and a deeply-held view that conciliatory gestures signal weakness either on Iran’s part or on the part of its adversaries.” 

The hostility has deep roots. Rivalry between the sovereign states is intertwined with dual animosities, between Arabs and Persians, as well as between the Sunni and Shia sects of Islam. This is especially concerning for the Gulf nation in context of the current state of its bilateral relationship with Iran, one which has fallen to a historic political and diplomatic low following Saudi’s execution of Nimr al Nimr, a Saudi Arabian Shia ayatollah in its majority Shia Eastern Province. The execution sparked a well-documented spark of national outrage in Iran, culminating in Persian protesters storming the Saudi Embassy against a backdrop of the Ayatollah announcing that “divine revenge” was on its way to Saudi Arabia’s doorstep. In response, the Saudis severed diplomatic relations, an action echoed later on by Arabian Ottomans of the Kingdom, such as neighboring Bahrain and Sudan.

Saudi Arabia does have good reason to fear a resurgent Iran pursuing its expansionist policies across the Peninsula unhindered, threatening the established post World War Two regional order, but a patch in the quilt of American hegemony. It is on this basis that the trajectory of this growing crisis should assume a higher pedestal in our collective global imaginations, for it has the potential to permanently transform the world we live in domestically, regionally, and internationally.

Senior Adi Ramachandran is a contributing writer. His email is aramacha@fandm.

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