Collapse of oil prices expose fragile foundations of oil Gulf monarchies

A seemingly inexhaustible oil tap had been used by many of the ruling elites in the Middle East to not only enrich themselves profusely, but to cushion social conflict with their own populations. After the 2011 revolutionary uprisings that shook the region, the panicked ruling monarchies of the Gulf countries provided larger handouts to their citizens to ward off the contagion of unrest.

The collapse of oil prices on the world market has turned what was an advantage into a hugely destabilising factor for these regimes. The recent slide in oil prices is organically linked to the crisis of the capitalist system and the related overproduction in the energy sector. While world energy demand is declining, notably as a result of the slowdown of the Chinese economy, the fierce competition between giant producers is leading to a “war of position”, fuelled by their respective unwillingness to give up market shares.

With oil prices now hovering around $40 a barrel, the six oil-exporting Kingdoms of the Gulf Cooperation Council (GCC), which have lost already a total of more than $390 billion in oil income last year, have all started to transfer the bill onto their own populations, via sweeping programmes of privatisations, cuts in social budgets, wage freezes, declining state subsidies and the introduction of taxes on their “subjects”.

Oman has cut subsidy spending by 64%. Qatar has scrapped gas subsidies and Qatari companies such as Al Jazeera have started sacking hundreds of workers. The Emirati government cut fuel subsidies last year and announced the privatisation of public services. Bahrain removed subsidies on some food and energy items, and Saudi Arabia has taken a radical austerity turn with price hikes, privatisation and cuts in welfare benefits. Unsurprisingly, the International Monetary Fund, along with many capitalist spin-doctors, are urging more spending cuts and ‘structural reforms’.

Turbulent times ahead

In April, 13,000 oil workers held a three-day strike in Kuwait, to protest at cuts in wages and privatisation - the first oil workers’ walk-out in that country for two decades. Neoliberal commentators complain that the Kuwaiti government has been slower to act in implementing the reforms they are wishing for, in comparison to the other Gulf States. The Times of Oman business paper argues that “Kuwait’s government is having a harder time imposing austerity policies than its counterparts”. Kuwait has indeed a more important tradition of industrial battles than most of its neighbours.

But it is all across the Gulf that a very quick and radical reversal of the economic basis, upon which the social foundations of the Sunni dictatorial monarchies had been sustained, is taking place. As the whole region and many other countries are tied up in various ways to the Gulf economies, the instability affecting them will have major implications far beyond their borders.

In the Gulf States themselves, this is set to generate sharp changes in the outlook of all social classes - starting with the rich elites, who understand that the time when they could rule unchecked is coming to an end. Following on that logic, the British commentator Patrick Cockburn has correctly put his finger on a less evident reason to explain the privatisation of the state-owned Saudi oil company ARAMCO: “If the Saudi royals ever have to flee like the Shah [of Iran], then it is much in their interests to have their wealth in a form that they can be held abroad or swiftly moved to safety.”

As often witnessed by regimes on the edge of strong turbulence, the elites are proceeding to what they hope will be controlled reforms from the top, in an attempt to avoid social explosions from below. This is what is fundamentally behind the recent unveiling of the Saudi monarchs’ new reform programme called “Vision 2030”, aimed at reducing the economy’s dependence on oil revenues. “You can clearly see that there is fire under the seats of the rulers”, Adeel Malik, an economist on Muslim societies at Oxford University, commented.

In April, King Salman sacked the water and electricity minister Abdullah al-Hasin, who had come under a barrage of criticism for the extremely unpopular cuts in energy subsidies and the water price increase. A survey released recently found that 86% of Saudi youth want the water and electricity to continue to be subsidised by the government. Why should they pay high prices when their rulers are immersed in obscene luxury, embroiled in costly wars abroad, having spent billions boosting their military arsenal and in shoring up other dictatorships across the Middle East?

The move was followed by a broader ministerial reshuffle, replacing among others the oil minister Ali al-Naimi, in charge of the Kingdom’s energy policy for 21 years. This decision centralizes power further within the inner circle of King Salman’s son, the Deputy Crown Prince and Defence Minister, Mohammed bin Salman. The growing tensions and antagonisms within the ruling establishment express the state of alarm shaking the very top of the House of Saud.

Rising discontent

As economic growth is nosing down, discontent is mounting. Youth unemployment is already 29.5% according to the World Bank, in a country where 70% of the Saudi population is 30 years of age or younger. Particularly among these layers there is a widespread yearning for democratic rights and for a more open society, reinforced by the use of internet and social networks (Saudi Arabia has the highest number of YouTube users in the world).

In an attempt to curb unemployment rates among a burgeoning population, a new plan for “Saudisation”, ie the hiring of Saudi nationals in place of foreign workers, has been decided. But it is not a new recipe at all, and is highly unlikely to be crowned with any lasting success. The use of the ‘kafala system’, allowing unrestrained exploitation of extra-cheap and pliable South Asian or Arab migrant workers stripped of their passports, is much more profitable for private businesses than the hiring of Saudi citizens. All previous attempts by the Saudi regime to push companies to hire more locals have failed for this very reason.

In Qatar, piling reports have shed light about the ruthless abuse and hundreds of deaths of migrant workers building football stadiums and infrastructure for the 2022 World Cup. This several million strong army of foreign labourers, living and working in conditions of modern slavery, represents a gigantic social time-bomb for all the Gulf-based capitalist elites. In recent weeks, workers from one of Saudi Arabia’s largest construction group (incidentally, founded by Osama bin Laden’s father) set buses on fire after the company decided to sack at least 50,000 workers, cancelled their work visas and told them to leave the country immediately, all after not having paid them for several months.

The Shia minority, which represents about 15% of the Saudi population and is concentrated in the oil-rich Eastern Province, is also facing entrenched state discrimination. Street protests openly calling for the fall of the Saud family erupted there in January following the execution of a Shia cleric who had articulated support for the mass protests in the province in 2011. Women, subjugated by backward religious laws, will not stay quiet forever either, and middle class households are getting worried for their future.

In short, under a façade of strength, Saudi Arabia is set for very serious political and social upheavals in the period to come. The recent creation of a “Commission for Recreation” in the country, echoing the establishment of a “ministry of happiness” in the United Arab Emirates, highlights the search by these regimes of entertainment and diversions for their growingly restive population.

Moves by the Saudi rulers to curb in the influence of the abusive religious police (officially, the “Commission for the Promotion of Virtue and the Prevention of Vice” - which was recently asked to be “gentle and kind” in its conduct), shows the U-turns the regime can be compelled to take in order to stay in control. It also highlights the possibilities of more open splits developing between elements of the Saud family and the ultra-conservative Wahhabi clergy. More importantly, in the suffocating atmosphere of a brutal religious dictatorship, any attempt to liberalize social and cultural structures might well open a Pandora’s Box of demands for more freedom, eventually turning against the royal family itself.

Showing muscle

The German intelligence agency BND published a memo at the end of last year saying that Saudi Arabia had newly adopted “an impulsive policy of intervention.” Indeed, recently, the Saudi regime, under the lead of King Salman and his son, escalated its involvement in the Syrian conflict, launched a devastating and failing war in Yemen, engaged in sectarian anti-Shia provocations, and stepped up its execution rate at home - which is set to reach a new annual record with already 90 beheadings since the beginning of 2016. In February, it also launched its largest military exercise in the Kingdom’s history. As the base of its regime is seriously undermined, the Saudi elite feel an urge to project its force on both the domestic and regional fronts.

As Karl Marx explained, it is a historically established maxim that obsolete social forces summon all their strength before their agony of death. But the recent history of the Middle East shows that a regime’s death agony can be quick and short, as it can be long and painful - and the elites in the Gulf will undoubtedly try every trick in the book to keep a grip on their power and privileges. That is why a clear political alternative needs to be built out of people’s rising thirst for change, seeking to unite and organise the ‘99%’ of the population in a mass struggle against the ruling parasites of Saudi Arabia and of all the GCC theocratic States, and against the reactionary system they represent.

This struggle should incorporate demands on long overdue democratic rights, such as the dismantlement of the religious police, the end of state censorship and the death penalty, the right to free speech and assembly, the right to form political parties, to strike and to form free trade unions, equal political rights for all including women and migrant workers, and the legitimate right of the Shia minority in the Eastern Province to democratically determine its own destiny.

But these democratic demands have to be linked to a programme of fundamental economic change to end workers exploitation, unemployment, and end the dictatorial mismanagement and decadent waste of resources used solely to benefit autocratic families. This must include the defence of welfare benefits and free access to public utilities, the abolition of the kafala system, and above all, the ownership and democratic control of the main economic levers by the workers themselves, starting with the oil industry. A voluntary and democratic socialist confederation of the Gulf countries could lay the basis for a planned way out of the dependence on oil that would ensure both people’s jobs and needs and the respect of the environment.

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