SAUDI PALACE COUP

Saudi prince Mohammed bin Salman 'buys £452m yacht' but slashes public spending

The maverick royal has slashed the state budget, frozen government contracts and cut civil employees pay at a time of low oil prices

http://www.independent.co.uk/news/world/middle-east/saudi-prince-mohammed-bin-salman-yacht-france-new-york-times-a7365261.html

SPA,the official Saudi Press Agency reported that HRH Mohammad bin Salman Al Saud was convalescing in Lausanne Switzerland.He was said to be recuperating from an undisclosed illness and was not expected to return to Riyadh in the foreseeable future.

The news has caused  a flurry  of activity in western capitals,with significant anxiety about the potential geopolitical fallout:both in oil markets and for the balance of power in the Gulf region.

The 31 year old Mohammad bin Salman bin Abdulaziz Al Saud is the son of  King Salman 80. Salman is the last surviving son of  King Abdulaziz Ibn Saud the founder of the modern Saudi State.

The new King's appointment,in early 2015, of then 29 year old bin Salman to be effectively Saudi Arabia's second most powerful man, had not been well received within the Royal Family.This elevation of his youngest son over three much more accomplished offspring from earlier marriages led to rumours of dementia and the undue control by one part of the family over access to Salman.

 In what had been a very traditional gerontocracy,King Salman made his son deputy Crown Prince, passing over dozens of older princes to put him second in line to the throne. He swiftly accumulated more power than any Prince has ever held, upending a longstanding system of distributing positions around the royal family to preserve unity.  http://www.nytimes.com/2015/06/07/world/middleeast/surprising-saudi-rises-as-a-prince-among-princes.html?_r=1


Prince Mohammed became chief of the Royal Court ,took control  of Aramco,the state oil monopoly, the sovereign wealth fund and public investment company, economic policy and the ministry of defence. He is the most visible and aggressive promulgator of the Saudi war in Yemen .                                                                                                                                                                                                                                         

Riyadh is a buzz with rumour,speculation and counter rumour. His departure follows public unhappiness in Washington with the mishandling  of the war in Yemen and recent spats with President Sissi of Egypt.The US is Saudi's chief arms supplier and maintains its sixth fleet in the Gulf.Egypt has very long and deep collaboration with the Saudi's and has the largest Sunni military in the region.

There have been a number of problems that some lay at the door of the young Crown Prince.

• He removed the long time oil minister Ali bin Ibrahim Al-Naimiand [1995-210] who had previously been  head of Aramco [1983-1995].
• It is widely believed that the Saudi's overplayed their hand in the policy of keeping oil prices low at the expense of Iran and the US fracking industry.
• The recent attempt to induce a rise in oil prices has had limited success.
• The perception is that the Kingdom which dominated global oil markets for nearly 40 years,has lost its grip. http://www.cnbc.com/2016/09/28/opec-deal-shows-saudi-oil-strategy-has-backfired-says-john-kilduff.html
• Most damaging politically is a view that Iran has bested the kingdom in recent OPEC deliberations. http://economictimes.indiatimes.com/news/international/business/in-oil-price-battle-with-saudi-arabia-its-advantage-iran/articleshow/54540733.cms
• Low oil prices have severely affected the government budget and led to a deficit of almost 20% of GDP.
• Salaries have been cut as have the payments to many Princes,other Royals and their households.
• Saudi forex reserves may have dropped  by a third from $750 to 500 billion over the last two years,
• Three months ago Prince was responsible for launching a dramatic economic plan to restructure the economy and remove its dependence on oil  within a decade.This was widely derided  as a fantasy even ,privately, within the kingdom.
• He plans to "list" ARAMCO on international stock markets,requiring serious disclosure of its finances,governance , oil reserves base and production capacity..These last two,in particular, have always been a closely guarded state secret.
• While international investment bankers are salivating over the prospect of huge fees,other observers have ridiculed the idea and suggest simply making a major series of bond issues would be more sensible.
• The Prince also announced the creation of a new Sovereign wealth fund to be financed by the ARAMCO IPO.In the meantime he replaced the staff at the existing state investment fund.
• The first investment of the new fund,even before it is fully funded is $3.5bn in Uber.This is largest single investment ever made in a private company;the 5% stake values UBER at $70 billion
• Some may see this as impetuous.

In general ,there has been open grumbling about the Princes High handedness.Offending nearly all segments of Saudi society

• Senior technocrats have been retired and the Prince's loyalists promoted.
• He displaced the long serving oil minister & the central bank chief http://www.bloomberg.com/news/articles/2016-05-07/saudis-announce-government-overhaul-as-part-of-post-oil-plan
• Generally disrespecting the old guard
• Reigning in the Religious police
• Slashing subsidies and handouts
• Criticising Saudi youth

A major mark of the discontent was the accusation that he covered up the the tragedy of the "Mina Stampede" in which hundreds of HAJ pilgrims died in September 2015.An  AP analysis of  media reports in Muslim states calculated a death toll of 2,411. Iran was most affected by the tragedy with at least 464 deaths.

It is said that "Sources"claim the crush was due to attempts by the personal convoy of Mohammed bin Salman to force itself through the crowd, and due to several road closures in the area. Bin Salman was then personally put in charge of the Saudi government's investigation of the stampede after Saudi attempts to impose a media blackout.

Whether or not plausible, this is an extraordinary rumour and such muttering would have been unthinkable in the past.

Those of you who have not seen this announcement it may be because it is not true---YET