Saudi austerity, lavish life of its royals

Even as the Saudi government cancelled a quarter of a trillion dollars’ worth of projects back home as part of a fiscal austerity programme, workers hustled to finish bright blue landing pads for helicopters at the vacation compound and to erect a tent the size of a circus big-top where the king could feast and entertain his enormous retinue. 

The royal family’s fortune derives from the reserves of petroleum discovered during the reign of Salman’s father, King Abdulaziz ibn Saud, more than 75 years ago. The sale of oil provides billions of dollars in annual allowances, public-sector sinecures and perks for royals, the wealthiest of who own French châteaus and Saudi palaces and stash money in Swiss bank accounts. 

King Salman serves as chairman of the family business unofficially known as “Al Saud Inc.” Sustained low oil prices have strained the economy and forced questions about whether the family — with thousands of members and still growing — can simultaneously maintain its lavish lifestyle and its unchallenged grip on the country. 

These are anxious times for the royals, led by an 80-year-old who has already had at least one stroke and is likely to be the last of six sons of the founding monarch to serve as sovereign. He must wrangle a band of relatives, from the merely well-off to billionaires, who are accustomed from birth to privilege and plenty. While there are serious problems beyond the borders — a costly war in Yemen, violence in Iraq and Syria, an emboldened Iran — it is the country’s economic troubles that risk roiling ordinary citizens, if their own cradle-to-grave benefits are cut too much. 

Revenues from the national oil company, Saudi Aramco, have long been the lifeblood of government spending. Some in the family have resisted a proposal by the king’s son Deputy Crown Prince Mohammed bin Salman to partly privatise it, since listing it on stock exchanges in New York or London would bring new audits of Aramco and possibly more insights into government funding, and in turn, money for the royals. 

Facing huge budget gaps, the government has cut public-sector pay along with subsidies, sending gasoline, electricity and even water bills higher. The kingdom has begun borrowing by the billions both at home and abroad. And hiring by the government — a large and sought after employer for Saudis — has been cut, instilling fear for the future in younger people who cannot find work.  Royals are sharing the pain, according to Anas al-Qusayer, the spokesman for the Ministry of Culture and Information, who said that their allowances had been reduced. At least some royals, though, have seen no decline in their stipends, according to several Saudis close to the family. 

“Under Salman, princes again appear to enjoy a lot more material privileges, and the core allowance system has not been changed,” said Steffen Hertog, an associate professor at the London School of Economics who wrote a book on the political economy of Saudi Arabia, “Princes, Brokers and Bureaucrats.” Some royals are still spending big. Dania Sinno, a real estate agent with Belles Demeures de France, said that multiple family members had been buying property in Paris in the last year. She recently sold a nearly 11,000-square-foot apartment on the exclusive Rue Octave-Feuillet for more than $30 million to a Saudi princess. 

Through dozens of interviews with diplomats and money managers, economists, real-estate and travel agents, interior decorators and members of the House of Saud and by reviewing court records and real-estate documents, The New York Times has pieced together details of the family’s spending. The scale of the clan’s fortune is a closely guarded secret. The money is divided among many relatives and spread across several continents, making a precise accounting difficult. The funding mechanisms are opaque by design. 

While chinks in the wall of secrecy appear through legal cases and tabloid reports overseas, the royals have learned not to flaunt their wealth before the nation’s 30 million commoners. The family members have erected high walls around their palaces, bought overseas assets with shell companies, used intermediaries for large investments and demanded nondisclosure agreements from employees. 

The so-called Panama Papers released in April revealed that King Salman was involved in offshore companies in Luxembourg and the British Virgin Islands. The records linked him to a yacht and multimillion-dollar properties in London. The relatives in the royal family number in the thousands, but from there, estimates diverge, said Joseph Kechichian, who has studied the family for three decades and wrote a book, “Succession in Saudi Arabia.” He estimates that there are now 12,000 to 15,000 princes and about as many princesses. Princess Basmah bint Saud, a daughter of King Saud, five years ago put the number of royals at 15,000. 

But the Saudi Ministry Spokesman Qusayer said there were no more than 5,000 members of the House of Saud. The difference may stem in part from whether or how one counts distant relatives and families who ruled back before the time of King Abdulaziz, the current king’s father. At some point, the family could grow too large to support. 

Saudi middle class

 As the size of the family and the general population have grown, some observers say, the balance of rewards has become harder to maintain. Despite a robust social safety net — including free education and health care — there are poor Saudis, and many in the middle class barely make ends meet. “At the top level, they know that they have to leave something for the rest of the country, otherwise they’ll be out on their ear,” Jean-François Seznec, senior fellow at the Global Energy Center at the Atlantic Council, said of the royal family. “If you ask the population to make sacrifices in order for the state to get money, you can’t have one part of the society take advantage.” 

Senior members of the House of Saud are keenly aware that they lost their previous kingdom in the 19th century because of family infighting. King Saud was deposed in 1964 and replaced by his brother King Faisal, who, in turn, was assassinated by a nephew. When upheaval occurred in countries all around Saudi Arabia during the Arab Spring, King Abdullah’s response was to spend $130 billion on salaries and social programmes. 

Salman, who succeeded Abdullah in January 2015, bestowed an estimated $32 billion on his subjects, including bonuses of two months’ salary to government employees. Oil prices had begun their precipitous decline, but it was not yet clear how far they would fall. Three months later, the king promoted his nephew Prince Mohammed bin Nayef, now 57, as the first crown prince among the founding king’s grandsons, and his own son, Prince Mohammed bin Salman, now 31, as next in line. 

While members of the family have been investing overseas for decades, the pace of buying homes abroad has quickened in the last two years, according to Ardavan Amir-Aslani, a business lawyer who has advised Saudi princes on real estate acquisitions in France.