Despite doling out billions to welfare, Gulf sheiks turn shaky

Saudi Arabia pledged $500 billion for ‘welfare’ this year—most to be spent on social security subsidies.

This summer, disgruntled Saudis took their grievances online in droves, complaining of ever-growing inequality, rising poverty, corruption and unemployment. Their Twitter campaign became one of the world’s highest trending topics. It caused great alarm within elite circles in Saudi Arabia and sent ripples throughout the region. The rallying cry that “salaries are not enough” helped to prove that the monarchy’s social contract with its people is now publicly coming unstuck, and on a significant scale.

Many experts believe that the Gulf states have survived the Arab Spring because they are different. After all, they have weathered numerous past storms -- from the Arab nationalist revolutions of the 1950s and '60s to Saddam Hussein’s 1990 invasion of Kuwait to an al-Qaida terror campaign in 2003. But they are not different in any fundamental way. They have simply bought time with petrodollars. And that time is running out.

The sheiks of the Persian Gulf might not face the fate of Moammar Gadhafi of Libya or Hosni Mubarak of Egypt next year, but the system they have created is untenable in the longer term and it could come apart even sooner than many believe. Saudi Arabia is the kingpin of the six Gulf monarchies, so its internal stability is crucial for the region, especially since so much attention has now been turned toward these anachronistic political systems in the wake of the 2011 uprisings.

Although it’s never healthy to treat any state as exceptional, Saudi Arabia is indeed a bit different from its neighbours. Unlike Mubarak or Gadhafi, Saudi Arabia’s octogenarian king, Abdullah bin Abdulaziz al-Saud, has had the oil-financed means to buy off protesters. He has managed to calm the anger that has flared up in his backyard by ramping up subsidies, dramatically increasing public-sector employment and announcing huge and unprecedented government spending programmes. So far, this has been a fast and effective way to keep the masses off the streets.

But this is not evidence of royal resilience, as some Western diplomats and academics have argued. On the contrary, Saudi Arabia’s resource-fuelled strategy is a response to rising discontent across the region, and it is driven by a deep-seated fear that restive populations across the Arab world could incite unrest closer to home. Moreover, spending for stability’s sake in Saudi Arabia and the other Gulf monarchies will necessarily be quite short-lived. The kingdom pledged a record-breaking $500 billion for ‘welfare’ this year - most to be spent on social security subsidies and new public sector jobs.

Such vast wealth distribution can’t be kept going for much longer. That level of public expenditure is not sustainable and it flies in the face of decades of efforts to promote better fiscal accountability in the kingdom and wean the population off handouts and public-sector entitlement.

Thus, on top of declining oil reserves, rapidly rising domestic energy consumption and increasing energy-supply diversification among its allies, the kingdom’s spiralling spending is also fast raising the break-even oil price for Saudi Arabia and all five of the other Gulf monarchies; in other words, the price of a barrel of oil that these states need in order to balance their books is getting higher and higher. In Bahrain it’s now over $115 (far higher than last week’s price of around $102) while in Oman it’s up to $104.

In Bahrain and Oman, dependency on a high oil price is becoming perilous, while in the small oil-rich monarchies, ministers are starting to talk openly of a break-even price. That would have been unimaginable just a few years ago. In early October, even Kuwait received a warning from the International Monetary Fund. It was told it had to rein in its spending on welfare and public sector jobs and boost non-oil income as soon as possible.

Ruling families

Much worse for the Gulf’s ruling families than the looming economic crisis is the fact that their repressive response to protests is now starting to have a demonstrable impact on their legitimacy as carefully honed social contracts begin to fray. The initial slew of arrests and small number of deaths in the first half of 2011 have since been dwarfed by huge crackdowns. Bahrain and Saudi Arabia have been the most brutal, with dozens dead in Bahrain and about 18 killed in Saudi Arabia. All the neighbouring states have taken many political prisoners. Last year, Qatar even sentenced a poet critical of autocracies to life imprisonment, later commuted to 15 years.

These moves have caught the international community off guard - especially those institutions and governments that had bought into the myth of Gulf monarchies’ benevolence. But far more important, the rulers’ increasing heavy-handedness has not gone unnoticed by domestic populations.

In countries that enjoy some of the highest broadband and smartphone penetration rates in the world, there is more access to information than ever before. People are now openly questioning the large numbers of political prisoners, the use of counterterrorism laws to justify mass arrests and the open assaults being made on what’s left of civil society, academia and the media.

Bahrain is a tiny island just a few miles across a causeway from Saudi Arabia and now increasingly something of a vassal state to Riyadh. The country’s pro-democracy activists have borne the brunt of state repression. Their protests, which were on the cusp of full-blown revolution in mid-2011, were repeatedly attacked by mercenaries - often from Pakistan and Jordan - while the government invited direct military interventions by Saudi Arabia and the United Arab Emirates. The bulk of the country’s population - who are Shiites - are unlikely to ever again accept living under a traditional Sunni monarchy.

The iconic Pearl Roundabout, which had served as a rallying point in Manama, was bulldozed in 2011, and dozens of Shiite mosques were destroyed. More dangerously, Shiites in Bahrain and eastern Saudi Arabia have been victims of a vicious sectarian strategy, as the Saudi government has sought to persuade Sunni citizens and Western allies that they are fighting against the proxies of a dangerous, expansionist Iran, rather than the democratic vanguard of a popular revolt.

Even the UAE has played this foreign boogeyman card. Lacking a substantial Shiite population of its own, the Emirati authorities have instead attacked what they claim to be the “Emirati Muslim Brotherhood” by arresting hundreds of citizens, including dozens of members of a peaceful longstanding local Islamist organization. Now, with one of the highest political prisoner per capita rates in the world, the UAE has human rights lawyers, academics and students behind bars. Even a former judge and a ruling family member have been accused of “plotting to overthrow the state.”

Much like the spending strategy, these clampdowns have bought some time, but at a huge cost to rulers’ legitimacy. Divide-and-conquer measures like stoking sectarian tensions and blaming foreign meddling can keep attention away from autocratic political systems for only so long.

When the Gulf monarchies’ exceptionalism inevitably runs out of steam, and it will, their populations will be well placed to take their part in the bigger, regionwide shift in the political order that is happening at the expense of unaccountable repressive elites and in favour of a more vocal, politically conscious and better-connected youth.