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Financial Times

Politics

Simeon Kerr in Dubai

Greed and intrigue grip Saudi Arabia

A prime minister vanishes. A ballistic missile explodes. An Arab prince rounds up some of his relatives on corruption charges and detains them in a deluxe hotel where they sleep on cheap mattresses under ornate, corniced ceilings. If it were a Hollywood script, producers would reject the plot as fanciful, but this week’s story of greed and intrigue in a Saudi Arabia steered by its brash 32-year-old crown prince, Mohammed bin Salman, is anything but.

When Saad al-Hariri, Lebanon’s prime minister, turned up in Riyadh, the Saudi capital, last Saturday afternoon to announce his resignation on state TV no one predicted what would follow. He read the speech with the conviction of a kidnap victim, blaming Iran for destabilising his homeland with their local partners, the Shia group Hizbollah — a message that chimes with Riyadh’s depiction of Tehran as the main source of the region’s ills. That evening, Iran-allied Houthi rebels in Yemen launched a ballistic missile towards Riyadh only for it to be blown out of the sky near the airport.

Overnight, news emerged of the arrest of princes, ministers and tycoons, in what has developed into a probe of more than 200 people on allegations of “systematic corruption” amounting to at least $100bn — roughly equivalent to the national debt. Among them was the flamboyant billionaire Prince Alwaleed bin Talal, the global investor dubbed the “Warren Buffett of Arabia”.

The private airport in Riyadh, which last month hosted the jets of the world’s financial elite for a Davos-style investment conference, was closed to prevent wealthy suspects fleeing. By Sunday, diplomats across the Middle East feared that the cold war between Sunni Saudi Arabia and Shia Iran would open a new front in multi-confessional Lebanon.

Advisers in Riyadh and beyond received calls informing them that their bosses had been arrested by black-clad security forces. One banker desperately tried to reach his business partner, only for an aide to tell him that the multi-billionaire and his immediate family had gone awol. Another executive was told that his boss could no longer travel.

“We are living in a bifurcated world,” says a senior Saudi banker. “The masses are happy for elites to be held accountable, whereas the outside world is seeking clarity and transparency.”

In a uniquely Saudi style of arrest, Riyadh’s Ritz-Carlton, which hosted US President Donald Trump earlier this year and more recently the high-profile investment conference, turned into a five-star detention centre, surrounded by black SUVs.

As arrests continued, the authorities ordered banks to freeze accounts linked to the suspects. The purge, lauded by many ordinary Saudis fed up with a culture of corruption, alarmed domestic elites and left international investors in dismay at the fall from grace of longstanding associates.

Oil prices rose and equities fell, prompting an injection of state funds to prop up the country’s Tadawul bourse. Rich Saudis started to liquidate assets, bankers say, for fear of a broader crackdown.

In the White House, Mr Trump, who has befriended the new Saudi leadership, tweeted his approval for the measures, saying the king and his son “know exactly what they are doing”. Some of those they are harshly treating, he said, “have been ‘milking’ their country for years”. Much of the rest of the world, however, was less certain.

Diplomats were stunned by what looked like impetuous moves that blurred the vision of modernity that the crown prince has been trying to project.

Rumours spread that the crackdown was a response to a coup attempt against Prince Mohammed, who could any day assume the throne with the abdication of his ailing father King Salman. The conspiracy theories continued to swirl after the death of Mansour bin Muqrin, the son of the former crown prince, in a helicopter crash near the Yemen border. His brother later said it was an accident.

This maelstrom marks the most dramatic chapter in the rise of Saudi Arabia’s millennial prince whose stated aim is a radical transformation of an oil-dependent kingdom into a more open society and a more competitive economy.

Prince Mohammed has promised to forge a dynamic private sector to deliver jobs to a growing legion of unemployed youths susceptible to radicalisation. Pledging to turn the country away from the puritanical Islam that shares common ideology with jihadism, he is balancing the medicine of austerity with social freedoms, allowing women to drive and encouraging entertainment.

Officials argue that the corruption dragnet is sending a severe message to the royal family that their days of wealth and privilege are over. “This is a cultural revolution,” says Jean-François Seznec, non-resident fellow at the Atlantic Council. “The prince is using the corruption issue to change the way business is done — it is the end of wasta [influence], ending the royal family’s grip over business with the big families, allowing young entrepreneurs to step up.”

Power in Saudi Arabia has traditionally been spread across layers of princes, whose loyalty has been secured via a vast patronage system of public defence and infrastructure procurement, facilitated by middlemen and fixers. Prince Mohammed is purging princes and businessmen associated with the late King Abdullah, to help him consolidate control of the economy and the state.

His most powerful rival, Prince Miteb bin Abdullah, was sacked as head of the National Guard, the elite internal force that could have posed a threat to his rule. Once seen as a potential successor, the son of King Abdullah is now under investigation over accusations of embezzlement, according to a Saudi official.

“But once you start this type of shakedown, where does it end,” says a former diplomat. “The whole family has been doing the same thing, for generations.”

Many Saudis welcomed the corruption campaign under the trending Arabic Twitter hashtag, the “November 4 Revolution”, drawing parallels with the Arab uprisings of 2011. Others anointed him as “Mohammed the decisive, [who] uproots the corrupt”.

“People are sick and tired of getting poor while princes, ministers and connected businessmen get rich,” says a senior Saudi executive. Another observer was more direct: “Love this guy, he’s got balls.”

Yet there is also scepticism. Few expect a probe of the business dealings of the king’s sons, including Prince Mohammed, who is reported to have bought a yacht for €420m in 2015 and to have used his status to further business dealings in his youth.

The scope of his ambition and the speed with which he has acted over the past six months, could yet backfire. The economic and social revolution under way upends decades in which Saudi rulers have balanced conservative and liberal ideals with the complicated web of tribes and clerics underpinning the loyalty to the House of Saud.

“This [purge] is the surest sign yet that the crown prince is abandoning the traditional model of elite-level consensus governance for a more centralised system,” says James Pothecary, an analyst with risk consultancy Allan & Associates.

Prince Mohammed’s fiscal reforms have cut spending and energy subsidies while raising taxes; tough economic conditions have seen companies go bankrupt as the cost of living and unemployment rises. Any further austerity measures could alienate public opinion if an economy struggling under recession fails to grow fast enough to make up for the phasing out of a patrimonial welfare state.

“Prince Mohammed’s enhanced control is based on ruthlessness rather than consensus and his significant popular support is largely grounded in expectations that have yet to be either institutionalised or fulfilled,” says James Dorsey, a senior fellow at Singapore’s Nanyang Technological University who follows the country closely.

Prince Mohammed’s rising confidence is being felt across the region, revitalising the Sunni Arab challenge to Iranian influence in the Middle East. Along with Mohammed bin Zayed, his counterpart in Abu Dhabi, the Saudi leader is doubling down on their new-found alliance with Mr Trump, backing his hawkish pivot on Iran, and hoping that Washington can help build a broader case for containment of Tehran.

Family tree: A who’s who of Saudi Arabia’s royal family

The mystery of Mr Hariri’s resignation, and his failure to return to Lebanon, has fuelled speculation that he is acting on Saudi orders and perhaps being held in Riyadh against his will. The fear is that with Saudi Arabia looking to check Iran’s Lebanese influence via Hizbollah, a Saudi-Iranian proxy war looms in the only country in the Middle East where Riyadh and Tehran had been coexisting in relative calm.

The long-running rivalry is already playing out, with deadly consequences, in Yemen, where Riyadh in 2015 launched a war against the Houthi militia. The war has cost 10,000 lives and the Houthis are still able to launch rockets at its neighbour. Saudi Arabia, meanwhile, has conceded defeat in Syria, where President Bashar al-Assad, backed by Iran and Russia, is seeing off rebels funded by Riyadh after six years of civil war. With the UAE, Saudi Arabia has also ostracised Qatar, once an ally against Mr Assad in a squabble frustrating the Gulf states’ western backers.

Prince Mohammed’s domestic supporters are cheering him on as he tries to reshape the country while simultaneously leading a Sunni alliance against Iran. Outsiders remain sceptical. “Domestic renewal is going to be very tough, a transformation like no other,” says one regional observer. “Saudi Arabia is encircled by the perceived enemy, so had to draw a line in the sand. But its foreign adventures haven’t gone well.”