Replay — The Making Of The Modern Middle East (Part 4)

Saudi Arabia and Iran are at war with each other. None of the parties admits it, but their rivalry is evident and it drives every interaction between the various states in the Middle East.

Because on this matter one could write an entire book, I will try to keep my points as short as possible. I hope our most precise readers will forgive me.

By far, Saudi Arabia’s biggest challenge is the price of oil. It used to be 100$ per barrel in mid 2014, it sunk to less than 50 by the end of that year and it has remained around that number for the last three or so years. Saudi Arabia’s unbelievable welfare system that could be sustained only with such prices, now it’s draining the Kingdom’s finances: foreign exchange reserves have diminished from 750 billions in mid 2014 to 480 billions at the end of 2017. It doesn’t take a PhD in Economics from Harvard University to figure out that, at the current pace, in six years the party is over. And when it’s over, it’s colossal problem not just for the region but for the world as well. The situation of the State’s finances is so dire that both Saudi Arabia and the United Arab Emirates have introduced a 5% VAT Tax, in the lands where tax doesn’t even exist in the dictionary. It would help balancing the books and accelerate economic development if the Kingdom didn’t spend 10% of its budget on defence, the third largest defence spending in the world. Hence, Saudi Arabia is now in a race against time to diversify its economy sufficiently away from oil. In this reasoning, “Saudi Arabia Vision 2030” inserts itself. The Vision is founded on 3 pillars to move the economy in the post-oil era: first, being the heart of the Muslim world; second, an investment powerhouse; third, a hub at the centre of three continents. Then, the targets are three: a vibrant community (which the Kingdom wants to achieve with further steps, like preserving and investing on heritage, increasing spending on cultural and entertainment activities, attention to sports and exercise, have Saudi cities rise in international rankings, top-notch healthcare and other measures); a thriving economy (supporting entrepreneurship, lowering the unemployment rate, bring women into the workforce, increasing the assets owned by the State’s Investment Fund, attracting foreign investments and other measures ) and an ambitious nation (digitalising the state and administration, maximising non-Oil economic sectors, increase GDP and its share due to no-profit). Now, this looks fine and dandy by any measure but, as we know, there is a difference between words and actions. This is the plan, the Vision. Getting to the results it’s always a different matter. In any case, Saudi Arabia has plenty of work to do: in just about every ranking of quality of life, from the Freedom Index by Freedom House or the Democracy Index by The Economist, the Kingdom is firmly in the top 10 of the ranking for the least free/least prosperous/ least democratic countries in the world. Even if one was to look at individual cities’ rankings, like the prestigious Mercer Quality of Life, he/she would find Riyadh and Jeddah in the 165th and 168th position, on par with Accra, capital city of Ghana, and Moscow. They rank below Libreville, capital city of Gabon and Dakar, capital city of Senegal.

Opening up Saudi Arabia to the rest of the world will necessitate guaranteeing freedoms that clash with Wahhabi teaching: it’s still difficult to imagine that Riyadh will ever compete with London or New York as the global centre when nothing but Wahhabi Islam can be professed, the education system and the judiciary is run by the House of Muhammad ibn Abdul Wahhab (who, is worth remembering, met Muhammad bin Saud after being expelled by most of the Sunni religious scholars of the time of its own tribe, including his father and brother, for being un-Islamic) and its descendants (the House of the Al ash-Sheikh) and couples can’t hold hands on the street.

There is a further economic and religious motive for Saudi Arabia to dissociate with Wahhabism. Wahhabism is the breeding ground for ISIS, Al-Qaeda and the other terrorist groups, so much so that in ISIS’ “schools” Saudi textbooks were used. Foreign investors, which the Kingdom is adamant to bring into the country, most certainly do not want to be associated in any way shape or form with terrorism. Now, of course, the association of Saudi Arabia and ISIS is a gross mistake: ISIS and Al-Qaeda organised multiple terrorist attacks in the Kingdom and came this close to blowing up the Holy Mosque of Mecca. Furthermore, they clearly menaced the Kings that they were coming for them. Nevertheless, may it be for the history of financing Sunni groups, Osama Bin Laden, 9/11 or whatever else, the association of Saudi Arabia and terrorism is in the minds of many, especially in the Western world that Saudi Arabia is courting. Sidelining the hard-line religious preachings seems to be a good policy if the objective is to make foreign (Western) capital flow into the Kingdom.

With regard to the religious motive, it all goes back to 2016, when a a group of 200 top Muslim religious leaders like the Grand Imam of Al-Azhar, Sunni-Islam most prestigious University, Ahmed al-Tayeb, the Grand Mufti of Egypt Sheikh Chawki Allam, the former Grand Mufti of Egypt Ali Gomaa, the former Grand Mufti of Jordan Sheikh Abdul al-Karim al-Khasawneh and the Grand Mufti of Damascus Abdel Fattah al Bezm gathered to discuss the question of “Who are Ahlul Sunna wal Jama’ah? [aka, who are the real Sunnis? nda.]”. Well, in the conclusive statement of the conference, Ahmed al-Tayeb wrote “Ahluls Sunna wal Jama’ah are the Ash’arites or Muturidis [the two theological schools of Sunni Islam (nda)]. In matters of belief, they are followers of any of the four schools of thought [also known as the four legal schools of Sunni Islam (nda.)] (Hanafi, Shaf’ai, Maliki or Hanbali) and are also the followers of pure Sufism in doctrines, manners and [spiritual] purification.” What is the problem with the statement? Salafism is not included. Wahhabism can be considered the “fourth” branch (purists, activists and jihadis being the other three) of Salafism, a school of thought that understands Islam only through the companions of the Prophet together with the second and third generation of Muslim Scholars.

Saudi Arabia was incensed over this: this is as close as it gets to a “excommunication” of sorts of the Kingdom by the top Sunni leaders in the world.

That’s intolerable for a King whose position of “King of Saudi Arabia” is nothing compared to being “The Custodian of The Holy Mosques” of Mecca and Medina. Thus, it’s also religiously convenient for the Kingdom to roll back the most divisive policies, not just for Westerners it wants to bring to the country, but to be in good standing with Sunni Muslims as well.

Spearheading all these changes in what was the most boring country in the Middle East until three years ago (and whenever something happened, one would always predict correctly what was going to happen), is the Crown Prince of Saudi Arabia, Mohammad Bin Salman (known to most as MBS), arguably both the most innovative and most divisive leader in the Middle East in the last 20 or 30 years. With regard to the religious matter discussed above, he declared to The Guardian: “what happened in the last 30 years is not Saudi Arabia. What happened in the region in the last 30 years is not the Middle East. After the Iranian revolution in 1979, people wanted to copy this model in different countries, one of them is Saudi Arabia. We didn’t know how to deal with it. And the problem spread all over the world. Now is the time to get rid of it. […] We are simply reverting to what we followed – a moderate Islam open to the world and all religions. 70% of the Saudis are younger than 30, honestly we won’t waste 30 years of our life combating extremist thoughts, we will destroy them now and immediately.” He is the driving force behind much of what is happening of good and bad in and around the Kingdom. Until 2015 nobody even knew who he was. Since then, his political career has skyrocketed, becoming first Minister of Defence and then Crown Prince in 2017, after ousting then Crown Prince Mohammed bin Nayef (known to most as MBN), one of the most respected leaders not just by the Saudis but Western powers for his counterterrorism work as the Chief of Saudi intelligence. Details are blurry, but major newspapers have reported that MBN was forced to give up his place by MBS. Much like it has been reported for the now famous corruption purge in November 2017, when 11 princes and dozens of officials, businessmen and clerics were brought to the Ritz-Carlton in Riyadh and were kept there, in what many consider to be a power-grabbing or power-concentration move. The House of Saud is as secretive as it comes, but it has been reported that with the move MBS has made many enemies inside the family and terror pervades their lives. Ever since these two events, MBS has often been defined “ruthless”.

Harsh has, for sure, been Saudi’s foreign policy in recent years: apart from the Yemen quagmire in which Saudi Arabia now finds itself, one can add the feud with Qatar, which has slowly driven the neighbour into Iran’s hands, the suppression of revolts in Bahrein, the resignation of Lebanese Prime Minister Saad Hariri, the newly-found love for Iraq and on and on it goes.

Many of these moves are justified by the Saudis as a response to Iran’s expansionism.

This is true. After all, the Supreme Leader Khomeini time and time again stressed that Iran was working on “exporting our revolution to the world”. The intent has never left. As already discussed in this series, Iran’s engagements around the Middle East have been numerous. They are today as well: Lebanon (Hezbollah being, by far, the greatest success in Iranian foreign policy since the Revolution), Syria, Iraq, Yemen and, of course, Israel. Evidently, Saudi Arabia is always the greatest enemy: it’s still unacceptable that the two Holy Mosques in Mecca and Medina are ruled over by the the House of Saud. Together with the militias and the IRGC, counting around 140.000 members, it is worth mentioning the Quds force, the special forces of the IRGC, which respond directly to the Supreme Leader of the Islamic Republic and that is considered a supporter of terrorism by the United States. “Iran is winning”, President Trump would say. And it’s not even close. Even if, in the eyes of the Muslim world, Iran was seen supporting a dictator that was barrel-bombing his own (Sunni) people. You add to this successful territorial and influence expansion the nuclear agreement signed in 2015 by the 5+1 plus the EU, which lifted many of the economic sanctions, and one can understand why in Riyadh everybody is absolutely losing his mind.

Nevertheless, the government headed by Hassan Rouhani has not been able to deliver economic prosperity to its country: the average income has declined over the last five years, 40% of the Iranians live in poverty and inequalities are widening. It’s not by chance that, between the end of 2017 and the beginning of 2018, students and poor people took to the streets of more than 70 cities in the country protesting against the government, corruption and the religious establishment. And, indeed, Iran is facing the same dilemma that Saudi Arabia is facing: a pivot toward the West and international capital markets will imply a reduction of the adherence to the revolutionary agenda. In other words, it’s difficult for investors to want to have anything to do with a country in which “Death to the West! Death to Saudi Arabia! Death to Isreal!” is the equivalent of “Good morning” or “Good night”. Iran, hence, will soon have to decide (Saudi Arabia as well, for that matter) what it’s better : having the economy implode together with a national insurrection while being ideologically pure or having a prosperous economy while being ideologically impure. It is especially painful for Iran having to compromise on this because Iran can play the ideological card much better than the religious card: after all, approximately 85% of Muslims are Sunni and only 15% are Shias. For a nation that aspires to be the leader of all Muslims, stoking the sectarian fire in an overly plain fashion would end blowing up right in their faces. It’s also painful because Iran is full of very-educated individuals who, if given a chance, could really benefit their country. Instead, most of the money is wasted away as the religious establishment spends more and more time undermining the Prime Minister and clamping down on the society.

The smart reader will have noticed how the section of this article allocated to Saudi Arabia is much larger than to Iran. That’s not a chance. The reality is that not much is happening in Iran compared to Saudi Arabia: there is no Iranian MBS who is taking over the country, there is no religious fracture to deal with, there is not an economic challenge in Iran like in Saudi Arabia as, potentially, Iran’s economy is more diversified than the Saudi’s. It’s not a coincidence that I wrote a few lines above that Iran is winning. When things go well, there is not much to say (at least comparatively to Saudi Arabia. If any European economy was in Iran’s situation in Brussels the bureaucrats would be restless to say the least). When things do not go well, there is much to plan, discuss and act upon.

As this long-winded series comes to an end, it is very important to make a point: the Saudi-Iran conflict is only taking place because of an institutional collapse in the Middle East. What we are beholding in the Middle East is as close as it gets to a real life experiment of what Hobbes referred as “the state of nature” or “the natural condition of mankind”. States in the Middle East were not built and, when they were, they were built in an extraordinarily bad manner. Societies need to have inclusive economic and political institutions to achieve long-term prosperity. All the research in Institutional Economics, conveniently summed up in books like Why Nations Fail by Daron Acemoglu and James Robinson, The Origins of Political Order and Political Order and Political Decay by Francis Fukuyama, Institutions, Institutional Change and Economic Performance, Structure and Change in Economic History and Understanding the Process of Economic Change by Douglass North and many others, is there to prove this point. There can’t be no continuous and stable growth with only one of the two (and especially none of the two). It’s only because States do not hold power that a group like Hezbollah can act as it most pleases it inside Lebanon, that inside Syria one finds no less than eight different actors, that Iraq is completely up for grabs, that Yemen is turning into the largest humanitarian crisis of the new century. Until state-building won’t be a common practice in the Middle East, the Cold War between Saudi Arabia and Iran, for economic and religious supremacy in the region and in the world, will continue to tear the Middle East apart proxy by proxy. Replay.

Marco Canal
Aspirante economista, lettore, amante dei dibattiti intellettuali e gin&tonic, alpinista, film il pane, viaggio il vino e i Pink Floyd come religione. Pecca di insaziabile curiosità, battuta facile, smodata ambizione e decisione. Alea iacta est.

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