The Collapse of Saudi Arabia is Inevitable
By Nafeez Ahmed
September 28, 2015 "Information
Clearing House" - "MEE"-
On Tuesday 22 September, Middle East Eye
broke the story of a senior member of the Saudi royal family
calling for a “change” in leadership to fend off the kingdom’s
In a letter circulated among Saudi princes, its
author, a grandson of the late King Abdulaziz Ibn Saud, blamed
incumbent King Salman for creating unprecedented problems that
endangered the monarchy’s continued survival.
“We will not be able to stop the draining of
money, the political adolescence, and the military risks unless we
change the methods of decision making, even if that implied changing
the king himself,” warned the letter.
Whether or not an internal royal coup is round the
corner – and informed observers think such a prospect “fanciful” –
the letter’s analysis of Saudi Arabia’s dire predicament is
Like many countries in the region before it, Saudi
Arabia is on the brink of a perfect storm of interconnected
challenges that, if history is anything to judge by, will be the
monarchy’s undoing well within the next decade.
Black gold hemorrhage
The biggest elephant in the room is oil. Saudi
Arabia’s primary source of revenues, of course, is oil exports. For
the last few years, the kingdom has pumped at record levels to
sustain production, keeping oil prices low, undermining competing
oil producers around the world who cannot afford to stay in business
at such tiny profit margins, and paving the way for Saudi
But Saudi Arabia’s spare capacity to pump like
crazy can only last so long. A new peer-reviewed
study in the Journal of Petroleum Science and Engineering
anticipates that Saudi Arabia will experience a peak in its oil
production, followed by inexorable decline, in 2028 – that’s just 13
This could well underestimate the extent of the
problem. According to the Export Land Model (ELM) created by Texas
petroleum geologist Jeffrey J Brown and Dr Sam Foucher, the key
issue is not oil production alone, but the capacity to translate
production into exports against rising rates of domestic
Brown and Foucher showed that the inflection point
to watch out for is when an oil producer can no longer increase the
quantity of oil sales abroad because of the need to meet rising
domestic energy demand.
In 2008, they
found that Saudi net oil exports had already begun declining as
of 2006. They forecast that this trend would continue.
They were right. From 2005 to 2015, Saudi net
exports have experienced an annual decline rate of 1.4 percent,
within the range predicted by Brown and Foucher. A report by
Citigroup recently predicted that net exports would
plummet to zero in the next 15 years.
From riches to rags
This means that Saudi state revenues, 80 percent
of which come from oil sales, are heading downwards, terminally.
Saudi Arabia is the region’s biggest energy
consumer, domestic demand having increased by 7.5 percent over the
last five years – driven largely by population growth.
The total Saudi population is estimated to grow
from 29 million people today to 37 million by 2030. As demographic
expansion absorbs Saudi Arabia’s energy production, the next decade
is therefore likely to see the country’s oil exporting capacity ever
Renewable energy is one avenue which Saudi Arabia
has tried to invest in to wean domestic demand off oil dependence,
hoping to free up capacity for oil sales abroad, thus maintaining
But earlier this year, the strain on the kingdom’s
finances began to show when it announced an eight-year
delay to its $109 billion solar programme, which was supposed to
produce a third of the nation’s electricity by 2032.
State revenues also have been hit through blowback
from the kingdom’s own short-sighted strategy to undermine competing
oil producers. As I previously
reported, Saudi Arabia has maintained high production levels
precisely to keep global oil prices low, making new ventures
unprofitable for rivals such as the US shale gas industry and other
The Saudi treasury has not escaped the fall-out
from the resulting oil profit squeeze – but the idea was that the
kingdom’s significant financial reserves would allow it to weather
the storm until its rivals are forced out of the market, unable to
cope with the chronic lack of profitability.
That hasn’t quite happened yet. In the meantime,
Saudi Arabia’s considerable reserves are being depleted at
unprecedented levels, dropping from their August 2014 peak of
$737 billion to $672bn in May – falling by about $12bn a month.
At this rate, by late 2018, the kingdom’s reserves
could deplete as low as $200bn, an eventuality that would likely be
anticipated by markets much earlier, triggering capital flight.
To make up for this prospect, King Salman’s
approach has been to accelerate
borrowing. What happens when over the next few years reserves
deplete, debt increases, while oil revenues remain strained?
As with autocratic regimes like Egypt, Syria and
Yemen – all of which are facing various degrees of domestic unrest –
one of the first expenditures to slash in hard times will be lavish
domestic subsidies. In the former countries, successive subsidy
reductions responding to the impacts of rocketing food and oil
prices fed directly into the grievances that generated the “Arab
Saudi Arabia’s oil wealth, and its unique ability
to maintain generous subsidies for oil, housing, food and other
consumer items, plays a major role in fending off that risk of civil
unrest. Energy subsidies alone make up about
a fifth of Saudi’s gross domestic product.
As revenues are increasingly strained, the
kingdom’s capacity to keep a lid on rising domestic dissent will
falter, as has already happened in countries across the region.
About a quarter of the Saudi population lives in
poverty. Unemployment is at about 12 percent, and affects mostly
young people – 30 percent of whom are unemployed.
Climate change is pitched to heighten the
country’s economic problems, especially in relation to food and
Like many countries in the region, Saudi Arabia is
already experiencing the effects of climate change in the form of
stronger warming temperatures in the interior, and vast areas of
rainfall deficits in the north. By 2040, average temperatures are
expected to be higher than the global average, and could increase
much as 4 degrees Celsius, while rain reductions could worsen.
This would be accompanied by more extreme weather
events, like the 2010 Jeddah flooding caused by a year’s worth of
rain occurring within the course of just four hours. The combination
could dramatically impact agricultural productivity, which is
already facing challenges from overgrazing and unsustainable
industrial agricultural practices leading to accelerated
In any case, 80 percent of Saudi Arabia’s food
purchased through heavily subsidised imports, meaning that
without the protection of those subsidies, the country would be
heavily impacted by fluctuations in global food prices.
“Saudi Arabia is particularly vulnerable to
climate change as most of its ecosystems are sensitive, its
renewable water resources are limited and its economy remains highly
dependent on fossil fuel exports, while significant demographic
pressures continue to affect the government’s ability to provide for
the needs of its population,”
concluded a UN Food & Agricultural Organisation (FAO) report in
The kingdom is one of the most water scarce in the
world, at 98 cubic metres per inhabitant per year. Most water
withdrawal is from groundwater, 57 percent of which is
non-renewable, and 88 percent of which goes to agriculture. In
addition, desalination plants meet about 70 percent of the kingdom’s
domestic water supplies.
But desalination is very energy intensive,
accounting for more than half of domestic oil consumption. As oil
exports run down, along with state revenues, while domestic
consumption increases, the kingdom’s ability to use desalination to
meet its water needs will decrease.
End of the road
In Iraq, Syria, Yemen and Egypt, civil unrest and
all-out war can be traced back to the devastating impact of
declining state power in the context of climate-induced droughts,
agricultural decline, and rapid oil depletion.
Yet the Saudi government has decided that rather
than learning lessons from the hubris of its neighbours, it won’t
wait for war to come home – but will readily export war in the
region in a madcap bid to extend its geopolitical hegemony and
prolong its petro-dominance.
Unfortunately, these actions are symptomatic of
the fundamental delusion that has prevented all these regimes from
responding rationally to the
Crisis of Civilization that is unravelling the ground
from beneath their feet. That delusion consists of an unwavering,
fundamentalist faith: that more business-as-usual will solve the
problems created by business-as-usual.
Like many of its neighbours, such deep-rooted
structural realities mean that Saudi Arabia is indeed on the brink
of protracted state failure, a process likely to take-off in the
next few years, becoming truly obvious well within a decade.
Sadly, those few members of the royal family who
think they can save their kingdom from its inevitable demise by a
bit of experimental regime-rotation are no less deluded than those
they seek to remove.
Nafeez Ahmed PhD is an investigative
journalist, international security scholar and bestselling author
who tracks what he calls the 'crisis of civilization.' He is a
winner of the Project Censored Award for Outstanding Investigative
Journalism for his Guardian reporting on the intersection of global
ecological, energy and economic crises with regional geopolitics and
conflicts. He has also written for The Independent, Sydney Morning
Herald, The Age, The Scotsman, Foreign Policy, The Atlantic, Quartz,
Prospect, New Statesman, Le Monde diplomatique, New
Internationalist. His work on the root causes and covert operations
linked to international terrorism officially contributed to the 9/11
Commission and the 7/7 Coroner’s Inquest.