By Elodie Pichon

2017 WILL BE  a challenging year for Saudi Arabia, which  is losing its leadership position in the Middle East and faces looming economic challenges stemming from low oil prices.

SA has been humiliated in Syria, and embroiled itself in an endless and costly conflict in Yemen.

[caption id="attachment_69186" align="alignleft" width="171"] Elodie Pichon[/caption]

According to Reuters, Saudi Arabia is spending $175 million a month for bombings in Yemen and an additional $500 million for ground incursions.

The low oil prices and military expenses have created an unprecedented impact on Saudi foreign reserves, which depleted from $732 billion to $623 billion in 2015. However the main cost of these military failures is not a financial one, they also dealt a fatal blow to the Saudi monarchy who used military nationalism to foster support, and implement a personality cult for King Salman.

The Saudi propaganda relies on anti-Iranian rhetoric, and exaggerates Tehran’s geopolitical role to justify its foreign policy.

In Yemen, the Saudi monarchy has mischaracterized the Houthis as Iranian proxies. They claim that Tehran provides the Houthis financial and logistical support, as well as military advisers (Financial Times, Feb. 2014).

One of the arguments advanced is that the Houthis, who were isolated in the mountains in the North, would not have been able to gain such prominence without external support.

However, their growth is primarily due to the support of the ex-president Saleh, who still has tribal and military allies. Thus, the extent of Iran support in term of funding and supply of arms remains unknown.

The war in Yemen embodies a military nationalism, which fired the Islamists imagination but could turn against King Salman.

Islamists in Saudi Arabia expected a quick victory against the Houthis, qualified as blasphemer puppets of Iran. Moreover, defeated militants in Syria could return and reunite to canalise their military effervescence at home, accusing SA leaders for their defeat.

Saudi Arabia’s difficulties pose a threat to its hegemony in the region, which relies  on its allies support.

Egypt pursued its own national interest when SA was expecting total cooperation, and unconditional support.

There could be a backlash from the Saudi Arabia population which expects the country to keep its leadership in the region.

US Relations

Their lack of leadership is aggravated by the deterioration of its relationship with the USA.

The US  is increasingly  less dependent on SA oil and condemns its religious extremism, which has worsened since the accession of King Salman in January 2015.

Moreover, the Trump approach to foreign affairs means that Trump will be tough toward SA if they face economic hardships. And the absence of support for their  ally Mubarak in February 2011, has been perceived as a betrayal ny  the US. Despite the disagreements, the Saudi Arabia government knows that it  can’t afford to break ties with the USA.

They rely on the USA military presence in the region, and on American military equipment.

The economic difficulties only add pressure to the government, which  can’t afford to be present on all fronts. The collapse of oil prices cost the SA government 75 billions of euros, even though public spending increased to finance the war in Yemen. The country’s foreign reserves have dropped by a quarter since oil prices started falling in 2014, and the budget deficit skyrocketed from 6,7% of the PIB in 2015 to 20% in 2016.

Austerity

Consequently, Riyadh adopted a politic of austerity, and seized on every opportunity to squeeze costs: they cut construction projects, cut pay for ministers, put a freeze on hiring, raised fees for visas, increased fines for traffic violations .They also cut 80% of subsidies to public goods and services. The price for basic goods such as water and electricity has skyrocketed and spurred nationwide.

In addition to the cut of public spending, the government announced an ambitious plan to diversify the economy, which  currently relies entirely on oil. If the plan is successful, non-oil revenue will triple by 2020.

To do that, they want to expand the country’s mining industry to exploit gold, phosphate and uranium deposits and build up the financial, technology and entertainment sectors.

The challenge is high for King Salman, who massed extraordinary domestic power, using a wave of Sunni based Saudi nationalism.

The lack of leadership in the region, the military failures, and the economic difficulties poses a threat to the monarchy. For too long, the monarchy has postponed the necessity to implement economic reforms, cut public spending and diversify the economy. Indeed, the efforts put into place by Abdallah, who became a King in 2005, to implement reforms have been stopped when the fear of a contagion of the Arab Spring in 2011 led the im to spend 135 billions of dollars to buy social peace. With social and political tensions, the government tries to avoid economic reforms, which could spur dissatisfaction. But the situation is critical and the survival of the regime depends on the King’s ability to reform the country, and assure Saudi Arabia leadership in the region.