Author: Isabelle Schumacher, 2018.
“In November 2017, Saudi Arabia’s Crown Prince, Mohammed bin Salman, established an anti-corruption committee and arrested over 200 members of Saudi Arabia’s business and political elite, including members of the royal family…”
Photo from Cadiz, Adrian. Washington, DC, Flickr, 16 June 2016. Use of this image is not an endorsement.
In November 2017, Saudi Arabia’s Crown Prince, Mohammed bin Salman (bin Salman), established an anti-corruption committee and arrested over 200 members of Saudi Arabia’s business and political elite, including members of the royal family (Kalin and Paul, 2017). Among those arrested was billionaire Prince Alwaleed bin Talal, a cousin of the current prince and prominent businessman, who is an outspoken advocate for women’s rights, owns assets in foreign companies such as Twitter, Apple and Citigroup and is the chairman of the Saudi investment firm Kingdom Holdings (Kalin and Paul, 2017). The anti-corruption committee has also arrested Prince Mutaib bin Abdullah on charges of corruption. Prince Mutaib, who was the chief and minister of the Saudi Arabian National Guard (SANG) before his arrest, is accused of embezzlement and awarding state contracts worth billions of dollars to his own companies (Holodny, 2017). The former minister of finance, Ibrahim al-Assaf, and the former governor of Riyadh, Prince Turki bin Abdullah, were also detained and accused of corruption and embezzlement (Reuters, 2017).
Bin Salman and his supporters heralded this anti-corruption effort and claimed that this latest purge is part of the crown prince’s ambitious modernization agenda. Indeed, over the past two years, the soon-to-be King has implemented various reforms that seek to transform the Kingdom’s cultural fabric and its economic reliance on oil. The New York Times (NYT) columnist, Thomas L. Friedman, has even stated that Saudi Arabia is undergoing its own Arab Spring. Yet, commentators and skeptics within Saudi Arabia and around the world view this recent crackdown on corruption as a pretext for bin Salman’s consolidation of power and influence in the Kingdom. The following essay will seek to analyze and discuss the motivations behind bin Salman’s anti-corruption purge and determine whether the current crown prince is seeking to implement genuine reforms or whether he is simply seeking to consolidate his power and eliminate all opposition to his rule.
Is Mohammed bin Salman implementing genuine reforms by establishing an anti-corruption committee and arresting powerful figures on corruption charges?
First, according to bin Salman and his supporters, this recent crackdown on corruption is part of a set of progressive policies which seek to reform and tackle “persistent problem[s] that ha[ve] hindered development efforts in the Kingdom in recent decades” (Alkhalisi, 2017). Indeed, with these new reforms, bin Salman is seeking to replicate, in Saudi Arabia, the plan Mohammed bin Zayed envisioned for the United Arab Emirates: a socially liberal, economically open, but politically closed state (Financial Times, 2017). Thus, in the two years since rising to power, bin Salman has lifted the ban on women driving, has sought to distance himself from the Wahabist religious ideology that has long been associated with the Kingdom and has even pushed back against the religious police. He has vowed “to destroy extremist ideologies in a bid to return to a more moderate Islam” (McLaughlin, 2017). Bin Salman has also launched Vision 2030, a plan aimed at reforming the country’s economy and reducing its dependence on oil by promoting foreign investment and investing in the country’s tourism, education and health sectors.
Second, bin Salman’s anti-corruption purge has been lauded by many Saudis who have suffered from Saudi Arabia’s widespread and systematic corruption. Few disagree that corruption is endemic to Saudi Arabia and that “cleaning up business practices in the kingdom would benefit its people” (Hubbard and Kirkpatrick, 2017). Like many petro-reliant countries in the Middle East, Saudi Arabia has a long history of corruption (Hubbard and Kirkpatrick, 2017). A report by Verisk Maplecroft, which ranked 198 economies on the prevalence of bribery and the effectiveness of government efforts to combat it, found that corruption was most significant in oil-producing countries. The report identified corruption as “one of the greatest above ground risks for oil, gas and mining companies” and noted that Saudi Arabia falls into a “high” corruption risk category (Verisk Maplecroft, 2015).
Additionally, bin Salman’s anti-corruption purge has targeted members of Saudi Arabia’s elite who have, in fact, been involved in cases of corruption, embezzlement and money laundering. Indeed, bin Salman and his anti-corruption committee intend to investigate a 2009 case where the flooding of the city of Jeddah left over 100 people dead and 350 missing. Shortly following the incident, a supreme committee for investigation was formed but ultimately, judicial authorities acquitted 54 defendants and justice was never properly delivered. The incident exposed the level and magnitude of bureaucratic corruption in the Kingdom, with a prominent Saudi businessman “accused of absconding with millions of dollars allocated for a Jeddah sewage system and never installing any pipes” (NewsPaperNG, 2017). In 2004, Lawrence Wright stated in an article published in the New Yorker that Jeddah’s sewer project was only “really a series of manhole covers across the city with no actual pipes underneath” (Wright, 2004).
Prince Mutaib bin Abdullah, the former chief of the national guard, is also accused of corruption by diverting funds from the national guard for his own personal enrichment. He has been accused of “embezzlement, hiring ghost employees and awarding his own companies a $10 billion contract for walkie-talkies and bulletproof gear” (Sanchez, 2017). The former governor of Riyadh, Prince Turki bin Abdullah, has also been accused of embezzlement, and of awarding inflated contracts to his own companies for the construction of Riyadh’s subway system.
According to Saudi journalist, Jamal Khashoggi,
“Corruption in Saudi Arabia is quite different from corruption in most other countries, as it is not limited to a bribe in return for a contract […] Instead, in Saudi Arabia, senior officials and princes become billionaires as contracts are either enormously inflated or, at worst, a complete mirage” (Khashoggi, 2017).
Corruption is endemic to Saudi Arabia’s business practices and is a significant impediment to the economic development of the Kingdom. Saudi Arabia’s unemployment rate, 12.7 percent in the first quarter of 2017, would decrease if “the billions squandered on kickbacks and lavish personal enrichment schemes dressed up as public works projects were spent instead on the development of small to medium enterprises, vocational training and 21st century education reforms” (Khashoggi, 2017).
While bin Salman’s anti-corruption crackdown is an important step in the right direction for Saudi Arabia, Saudi citizens and the media should ensure that the crackdown on corruption and its subsequent investigations are impartial, transparent and do not target only bin Salman’s political and economic rivals.
Mohammed bin Salman has used the crackdown on corruption as a pretext for political and financial power consolidation in the following ways:
A. Targeted anti-corruption purge:
In a recent interview conducted by the news channel Al Arabiya, bin Salman stated that “no-one is above the law, whether it is a prince or a minister” (Al Arabiya, 2017). However, in a country where the lines between public and private resources are blurry and where kickbacks are common, bin Salman’s sudden crackdown on corruption is a reason for concern and skepticism. Saudi Arabia’s laws, which are issued either by royal decree or are based on Islamic law, do not apply to the royal family and its allies and do not govern relations between the ruling family and the state in any significant way.
In fact, bin Salman and his immediate family have complicated and undisclosed business ties, which have so far never been under the scrutiny of Saudi laws and judicial authorities. As a result, the royal family has never had to publicly disclose its sources of income, revealed how much money it has obtained from the country’s oil revenues or how much it has earned and benefited from state contracts (Kulish and Kirkpatrick, 2017). The royal family has never explained how it has been able to afford its lavish lifestyles, how King Salman obtained the financing to purchase $28 million worth of luxury homes in London, or how bin Salman was able to purchase a $500 million 440-foot yacht with two swimming pools and a helicopter. In fact, the Paradise Papers have “reveal[ed] how platoons of lawyers, bankers and accountants in Germany, Bermuda and the Isle of Man worked furiously to quickly transfer ownership [of the yacht] to Eight Investment Company,” a Saudi firm led by the head of bin Salman’s personal foundation and owned by members of the royal family.
Bin Salman is also the owner of a $300 million chateau near Versailles, France, which Forbes magazine has estimated as the world’s most expensive home. According to a report by the NYT, the ownership of the chateau is hidden through various shell companies in France and Luxembourg, all of which are owned by Eight Investment Company (Kulish and Forsythe, 2017). The NYT report has stated that “advisers to members of the royal family say the chateau ultimately belongs to the crown prince” (Kulish and Forsythe, 2017).
The Panama Papers and the Paradise Papers have also exposed the wealth accumulated by King Salman and other relatives of bin Salman. The papers exposed that Prince Sultan bin Salman, the brother of the current crown prince, purchased a luxury Boeing jet worth $100 million through an offshore shell company. King Salman’s compound in southern Spain is also “owned by two Panamanian companies, which are in turn controlled by a Luxembourg company belonging to the king and his children” (Kulish and Forsythe, 2017). Thus, the practice of corruption by which individuals obtain private profit at the public’s expense is so normalized within Saudi Arabia’s royal family that the current anti-corruption measures implemented by the soon-to-be King, who himself is engaged in corrupt practices, appear to be selective and targeted.
One of the most prominent figures arrested in bin Salman’s anti-corruption purge, Prince Alwaleed bin Talal, is not particularly corrupt and has been much more transparent about his sources of wealth and income than many other Saudi princes. In fact, bin Talal has been a long-time critic of Saudi Arabia’s widespread corruption and closed economy. According to a 1996 diplomatic memorandum released by Wikileaks, bin Talal had informed the American ambassador to Saudi Arabia that “a handful of senior princes enrich themselves by controlling several billion dollars in annual expenditures in off-budget programs, with no ministry of finance oversight or controls” (Wikileaks, 1996). Bin Talal added that “through these off-budget programs, five or six princes control the revenues from one million barrels per day of the kingdom’s eight million barrels per day of crude oil production” (Wikileaks, 1996).
The 1996 memorandum provides a detailed account of the different mechanisms through which money flows from state coffers to members of the Saudi royal family. It states that the most common way of redistributing the nation’s wealth to the royal family “is the formal, budgeted system of monthly stipends for all members of the Al Saud [family], managed by the Ministry of Finance’s Office of Decisions and Rules.” The stipends range from $270,000 to $800 per month and drain approximately $2 billion of the government’s $40 billion budget per year (Wikileaks, 1996).
Additionally, a second memorandum written in 2007 and released by Wikileaks stated that “land is the most important source of income for many princes. The government, specifically the Ministries of Finance and Municipal and Rural Affairs, often transfers public land to princes, who in turn sell it at huge profit to real estate developers” (Wikileaks, 2007). The memorandum explained that Prince Bandar bin Sultan, Saudi Arabia’s ambassador to the United States between 1983 and 2005, and Prince Abdulaziz bin Fahd, the son of late King Fahd, had both obtained millions of dollars when they sold land they had been given by the state to a Dubai-based real estate development company for the construction of a megacity north of Jeddah.
Weapons contracts have also been a significant source of wealth and income for members of the royal family. In fact, Prince Bandar bin Sultan Al Saud, son of former crown prince Abdulaziz al Saud, has been accused of receiving over $1 billion over the course of ten years from BAE Systems, a British military contracting firm. Adnan Khashoggi, the son of Saudi Arabia’s founding King Abdulaziz’s personal doctor, also became a multi-billionaire in the 1970s and 1980s by acting as a middlemen and arms dealer between members of Saudi Arabia’s royal family and weapons producers across the world (Kinzer, 2017).
B. The consolidation of political power:
Given the wide scale and endemic corruption that is present in Saudi Arabia and among bin Salman’s immediate family, the recent arrests on the grounds of corruption are targeted against bin Salman’s opponents and represent a further step in the soon-to-be king’s plan to consolidate power. Politically, these recent arrests seek to silence and disempower members of Saudi Arabia’s royal family and elite who are seen as rival centers of power and influence and oppose bin Salman’s rise to power. In fact, these arrests aim to disrupt the current balance of power, upend decades of consensus-based rule and fundamentally transform the structure of the Kingdom that has existed since the 1960s. Since the death of the Kingdom’s founder, King Abdulaziz, in 1953, Saudi Arabia has practiced a style of governing based on family consensus and collective leadership. While Saudi Arabia’s governance system was never democratic nor transparent, it was set up by the Kingdom’s founders to avoid the concentration of power in one branch of the royal family and allowed for different princes to control different elements of the state.
Particularly, the arrest of Prince Mutaib, the chief of the SANG, is likely to have significant internal political consequences. The Kingdom’s 1964 coup proved that when the SANG is involved in politics, it has the ability to tilt the balance of power according to its own interest and in favor of one individual over another. By siding with King Faisal in 1964, the SANG played a critical role in helping Faisal overthrow King Saud in a coup (Holodny, 2017).
Since rising to power in 2015, bin Salman has become the sole decision-maker for Saudi Arabia’s social, economic, foreign and military affairs. In addition to being the Kingdom’s defense minister, bin Salman is also the head of the Council of Political and Security Affairs, which oversees all internal security decision matters. By arresting Mutaib and deposing him as chief of the SANG, the crown prince now effectively controls the only branch of the country’s security apparatus that was not already under his direct control (Holodny, 2017).
Bin Salman is replicating what Fareed Zakaria, a CNN journalist, has called the “new standard operating procedure for strongmen around the world” (Zakaria, 2017). According to Zakaria, Vladimir Putin in Russia first used this power-consolidating formula when he came to power in the early 2000s. Indeed, in order to centralize power in the Kremlin, Putin targeted and arrested powerful oligarchs whom he considered rival centers of power and influence within Russian society. Most notably, Mikhail Khodorkovsky, one of the world’s richest men and head of the oil company Yukos, was arrested and jailed on charges of fraud and tax-evasion. Similar to Saudi Arabia’s bin Salman, Putin used the need for a crackdown on corruption and for economic reforms as pretexts to eliminate wealthy and powerful individuals who challenged his position as the sole source of power, wealth and decision making in Russia.
Putin has also sought to control the Russian media and, since 2000, the level of state control over the media has reached similar degrees of suppression as during the period of the Soviet Union. In the case of Saudi Arabia, bin Salman knows that in addition to removing his opponents from government and being the sole decision-maker for all official matters in the kingdom, consolidating power requires his control over all official narratives which emanate from the Kingdom’s media. Thus, by arresting Waleed al-Ibrahim, the chairman of MBC media group, and Saud al-Dawish, the former CEO of Saudi Telecom Company, bin Salman has shown that he wants to control all major media networks and ensure that they publicly defend him and his policies (Bremmer, 2017).
William Dobson, in his 2012 book entitled “The Dictator’s Learning Curve,” has argued that “a new breed of strongmen” and authoritarian rulers around the world have developed and learned “a set of tricks to maintain control that are far more clever and sophisticated than in the past” (Zakaria, 2017). Among those tricks, Dobson notes that “rather than forcibly arrest members of a human rights group, today’s most effective despots deploy tax collectors or health inspectors to shut down dissident groups. Laws are written broadly, then used like a scalpel to target the groups the government deems a threat” (Zakaria, 2017). Dobson adds that modern authoritarian leaders are avoiding using overtly oppressive methods of control, such as mass arrests and executions, and instead use covert methods to manipulate legal systems and isolate their opponents. Autocrats around the world are aware that appearances matter and have held rigged elections to “pay lip service to democracy to distract attention from their abuses” (Ikenberry, 2013). For example, in Saudi Arabia, municipal elections held in December 2015 allowed women to vote for the first time and elected the first female Councilor to power, however, these elected officials are granted limited decision-making power on low profile issues, such as street maintenance and rubbish collection (Al Jazeera, 2015). Thus, external observers should not be distracted by the recent cultural flourishes occurring in the Kingdom and should instead focus on bin Salman’s hidden motives of concentrating coercive power within his own hands.
C. The consolidation of financial power:
For years, Saudi Arabia’s economy has relied heavily on oil with the petroleum sector accounting for approximately 87 percent of the Kingdom’s budget revenues, 42 percent of its GDP, and 90 percent of its export earnings (Forbes, 2016). Saudi Arabia’s high oil revenues have allowed the ruling family to maintain a social contract with its citizens, who receive state subsidies and handouts in return for loyalty to the regime (Hodgson, 2017). Many goods in Saudi Arabia are still exempt from a standard Value-Added-Tax of 5 percent and a high proportion of the Saudi workforce, 67 percent in 2016, is employed in the public sector, which pays on average almost double the wages of the private sector (Hodgson, 2017).
However, as oil prices and state resources continue to shrink, the royal family is becoming increasingly aware that the social contract which has suppressed popular revolts in the Kingdom for years is becoming unstainable and popular dissatisfaction is likely to arise. Oil prices have fallen sharply in the past four years, from a high of $107.65 per barrel in 2013 to a low of $33.62 in 2016. Additionally, according to predictions from the International Monetary Fund, Saudi Arabia “could run out of resources within five years, if its rate of spending and the oil price slump continue” (Hodgson, 2017). Saudi Arabia is under even greater financial pressure given that its population is booming and a large proportion is now under the age of 30. Under the Kingdom’s current system of handouts, a larger population requires the spending of more money, money which is quickly running out of state coffers.
In a recent NYT interview, Crown Prince bin Salman stated that, while it is “ludicrous” to suggest that this anti-corruption purge is a power grab, he expected the state to obtain $100 billion in settlements from those who had been detained. Thus, there is reason to suggest that bin Salman’s recent anti-corruption effort may be part of a drive to increase state resources in a time where the Kingdom’s budget deficit has been attributed to low oil prices. According to BBC journalist Lyse Doucet, one of the only international journalists to enter the Ritz Carlton in Riyadh, 95 percent of those detained have reached a settlement deal with the royal family. They have reportedly been asked to hand over their assets and as much as 70 percent of their personal wealth in exchange for their freedom. Additionally, Doucet has reported that over 1,900 bank accounts have been frozen, including ones belonging to the family members of those detained (Doucet, 2017). Prince Alwaleed bin Talal has reportedly let go of $750 million of his personal fortune in exchange for his release.
Conclusion
All in all, while Saudi Arabia’s new reforms led by the current crown prince have been heralded by some as an “Arab Spring from the top-down” (Friedman, 2017), Western observers should not be fooled by bin Salman’s liberal rhetoric. The evidence presented above points to the fact that bin Salman is hiding behind progressive reforms and a “modernization” drive to establish his political and economic dominance over the Kingdom. The recent cultural flourishes enabled by bin Salman’s so-called reforms only seek to distract observers within Saudi Arabia and abroad as money and power continue to flow towards him and his cronies. Saudi Arabia’s next generation of royal leadership is consolidating and strengthening its grip on power, making the likelihood of an Arab Spring and true reforms led from the ground-up increasingly unlikely and unachievable.
Works Cited
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Simply yet intelligently written, great work!