Saudi Perspective on the Middle East


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"Saudi Perspective on the Middle East: The View from Riyadh," is a briefing by Nawaf Obaid (May 11, 2012, Belfer Center for International Affairs) that provides background and context for current discussions of the issue of Gulf union and Saudi responses to regional challenges.

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Saudi Perspective on the Middle East

  1. 1. Harvard University Kennedy School of GovernmentSaudi Perspective on the Middle East: The View from Riyadh May 11th, 2012 Belfer Center for Science and International Affairs Director’s Lunch Nawaf Obaid Senior Fellow King Faisal Center for Research & Islamic Studies
  2. 2. Saudi Arabia Overview: 1•  Custodianship of Mecca and Medina, Islams two holiest sites.•  The leading country in the Arab world (Arabs comprise a vast majority of the inhabitants of the MENA region).•  One of the largest foreign aid programs in the world -- and by far the largest in the MENA region -- at $10 to $15 billion per year.•  Strong strategic partnerships with the US, China, the EU, and other countries.•  Sunni state in a world where Muslims are predominantly of this denomination. 1
  3. 3. Saudi Arabia Overview: 2•  Largest petroleum producer and exporter.•  Largest oil reserves and most spare capacity.•  Preeminent financial and economic power in Middle East / North Africa (MENA) region.•  Nominal GDP grew 28% in 2011, according to data from the Central Department of Statistics.•  Largest stock market (50%+ of total regional market cap) and largest foreign reserves (~$650 billion) in MENA. 2
  4. 4. Global Distribution of Sunni & Shia85%-90% Sunni 3
  5. 5. Saudi Economic Overview•  With 2011 GDP of $577 billion, Saudi Arabia represents approximately 21% of total regional GDP and over 25% of the Arab world’s economic output.•  With nearly $650 billion in foreign reserves, the Kingdom is the third largest holder after China and Japan.•  Saudi Arabia continues to improve on international rankings of competitiveness.•  The Kingdom is the only MENA and Arab member state in the G20. Source: Saudi Arabian Monetary Agency (SAMA). 4
  6. 6. Gross Domestic Product ($Billions)Source: IMF and internal estimates. 5
  7. 7. Top Foreign Exchange Reserves ($Billion) Foreign Rank Country Reserves 1 China $3,181 2 Japan $1,295 3 Saudi Arabia $650 4 Norway $580 5 Russia $498 6 UAE $425 7 Singapore $404 8 Taiwan $385 9 Brazil $352 10 Switzerland $340 11 Kuwait $325 12 South Korea $311 13 India $308 14 Hong Kong $285 15 Germany $285Source: IMF and central banks of various countries. 6
  8. 8. Massive Public Investments•  Saudi Arabia retains its place at the top of the active projects list, with 1,026 projects valued at more than $1 trillion underway in the Kingdom.•  $67 billion recently allocated for 500,000 new housing units.•  Massive public investments include housing, nationwide transport and utilities infrastructure, industrial bases, ports on both coasts, and renewable energy projects.•  In 2011, $6.72 billion was allocated to transportation and telecommunications projects, including 36,800km of new roads and four new airports.•  Infrastructure completed to accommodate more than six million pilgrims who visit Mecca and Medina every year. 7
  9. 9. Saudi Energy Sector Overview•  Holds more than 20% of world’s proven oil reserves.•  Currently produces around 9.9 million barrels/day.•  The Kingdom has 90% of worlds spare production capacity at nearly 2.5 million barrels/day.•  The Kingdom is investing heavily in solar, nuclear and natural gas to meet domestic demand and to curtail rising domestic oil consumption.•  The Kingdom has created a 35,000 strong Facilities Security Force to protect oil fields and installations.•  The Kingdom is the most influential member and de facto leader of OPEC. Source: Saudi Aramco and internal research. 8
  10. 10. Total Proven Oil Reserves (Billion Barrels - 2011)Source: EIA and internal estimates. 9
  11. 11. Oil & Refined Products Exports (000 Barrels/Day – March, 2012) Saudi Arabia Russia UAE Kuwait Venezuela Nigeria Iraq Iran Canada Norway 0 1000 2000 3000 4000 5000 6000 7000 8000 9000Source: EIA and internal estimates. 10
  12. 12. The New Gulf Union•  The Arab Gulf Union Council (“Gulf Union”) will be a cooperative union to promote economic, political, and military coordination as well as mutual defense against external threats.•  Will include current Gulf Cooperation Council (GCC) members Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, and the UAE, and potentially Jordan and Morocco.•  Modeled on the EU, the Union will have its “capital” in Riyadh with a decision-making body (modeled on the European Commission in Brussels) to replace the current GCC Secretariat.•  Transforming the GCC into a Union will not affect the sovereignty of any member country. 11
  13. 13. The Proposed “Gulf Union” 12
  14. 14. Timeline•  May 25, 1981 - The Gulf Cooperation Council is founded by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.•  Nov 11, 1981 - A unified economic agreement is signed among the GCC states in Abu Dhabi.•  May 10, 2011 - GCC Summit in Riyadh - GCC is considering requests from Morocco and Jordan to join the organization.•  Sep 2011 - Ministers from Jordan and Morocco attend GCC meeting that puts forward a five-year economic plan for those countries.•  Dec 2011 - Riyadh Declaration announces: "Adoption of the initiative of the Custodian of the Two Holy Mosques to move beyond the stage of cooperation to the stage of union….”•  Feb 2012 – Expert’s panel met to discuss a Gulf Union.•  April 2012 – At 32nd GCC Summit in Riyadh, Prince Saud Al Faisal, Saudi Arabias Foreign Minister, called on the GCC states to move to “a phase of union with full integration of key affairs to give greater impetus and strength to the six-nation Gulf Cooperation Council.” 13
  15. 15. GCC Population (Millions – 2010) 2.7 1.7 1.2 2.7 7.5 27.4 Saudi Arabia UAE Kuwait Oman Qatar BahrainSource: World Bank. 14
  16. 16. GCC GDP ($Billions - 2011) 26 67 171 577 173 358 Saudi Arabia UAE Qatar Kuwait Oman BahrainSource: SAMA, IMF, and various central banks. 15
  17. 17. GCC Oil Production (‘000/day – April 2012) 46 893 730 2,514 9,900 2,870 Saudi Arabia Kuwait UAE Oman Qatar BahrainSource: Joint Organizations Data Initiative (JODI). 16
  18. 18. GCC Oil Exports (‘000/day – March 2012) 0 736 588 1,717 2,329 7,500 Saudi Arabia UAE Kuwait Oman Qatar BahrainSource: Joint Organizations Data Initiative (JODI). 17
  19. 19. Stock Market Capitalization ($Bn – Mar 2012) 20.4 18.4 106.3 395.2 124.4 157.6 Saudi Arabia UAE Qatar Kuwait Bahrain OmanSource: Various regional stock exchanges. 18
  20. 20. Foreign Reserves ($Billions – 2012) 20.3 13 9 325 650 425 Saudi Arabia UAE Kuwait Qatar Oman BahrainSource: IMF and central banks of various countries. 19
  21. 21. GCC Military Spending ($Billions – 2010) Saudi Arabia UAE Oman Kuwait Qatar Bahrain 0 5 10 15 20 25 30 35 40 45 50Source: Adapted from the IISS, Military Balance, 2011; and the Jane’s Sentinel series. 20
  22. 22. GCC Troop Totals (Armed Forces – ‘000) Saudi Arabia UAE Kuwait Oman Qatar Bahrain 0 50 100 150 200 250 300 350Source: Internal estimates and the IISS. 21
  23. 23. Gulf Air Forces (High Quality Aircraft Only) Saudi Arabia UAE Kuwait Bahrain Oman Qatar 0 50 100 150 200 250 300 350Source: Adapted from the IISS, Military Balance, 2011; and the Jane’s Sentinel series. 22
  24. 24. Saudi Arabia’s Key Role in Regional & International Stabilization•  As the world’s central banker of oil, Saudi Arabia has expanded production capacity to meet global demand and ensure the stability of energy markets.•  Main Arab state actively working to curtail the disruptive policies of Iran and Syria.•  The Kingdom is the regional leader of the stabilization camp versus those fomenting chaos in the MENA region.•  Saudi Arabia’s regional foreign aid program is geared to stabilizing fragile Arab and Muslim states. 23
  25. 25. Saudi Foreign Assistance Program•  By far the largest and most comprehensive program in the region at $10 - $15 billion / year in direct foreign aid.•  An additional $4 - $5 billion in soft loans is made by the Saudi Development Fund (SDF) to specific projects in poor Muslim countries each year.•  The Kingdom is the largest single donor to Egypt, Lebanon, Jordan, Pakistan, Palestine, and other Muslim countries.•  It is among the top five foreign aid donors in the world (behind only the US, China, and Japan, and on par with leading EU countries). 24
  26. 26. Saudi Arabia’s Stance on Iranian Provocative Actions in the Region•  The Kingdom is leading the regional effort to contain Iranian influence and counter its aggressive policies in Iraq, Lebanon, Syria, Bahrain and Palestine.•  Saudi Arabia strongly condemns the Iranian plot to assassinate the Saudi Ambassador to the US and the Iranian-supported plan to bomb installations in Bahrain, including the King Fahd Causeway.•  Saudi Crown Prince Nayef conveyed “the kingdoms condemnation of the unacceptable attitude of neighboring Iran that continues to ignore the legitimate right of the United Arab Emirates over its three occupied islands.”•  Prince Nayef also pledged full support to the UAE and Bahrain, saying “their security and stability is part of the security of all GCC states. Any harm towards any of our [GCC] countries affects us all.” 25
  27. 27. Key Saudi Initiatives in Region – Bahrain•  The Kingdom calls on Iran to discontinue meddling in internal Bahraini affairs through Shia proxy groups.•  Recent action by Saudi Arabia in collaboration with GCC nations to support Bahraini government was requested and justified.•  The Kingdom is working with the Bahraini government to secure the country.•  Saudi Arabia led the $10 billion GCC economic stabilization plan for Bahrain. (Oman will similarly receive $10 billion from this plan.) 26
  28. 28. Key Saudi Initiatives in Region – Yemen•  The Kingdom is working to assure stability in Yemen to prevent civil unrest, cross-border incursions, and the proliferation of terror cells.•  It led the GCC to broker a peaceful transition from President Saleh to a national unity government that will draw up a new constitution and work to end the conflict.•  Economic, financial and energy support will continue for the good of the Yemeni people once situation stabilizes.•  Strengthening borders and increasing counter- intelligence and counter-terrorism efforts to destroy Al- Qaeda in Yemen. 27
  29. 29. Key Saudi Initiatives in Region - Palestine•  The Kingdom calls on all nations to support a Palestinian state through the United Nations.•  Best option remains the Arab Peace Initiative, launched by King Abdullah in 2002, calling on Israel to withdraw to its 1967 borders and the establishment of a viable and contiguous Palestinian state in return for Arab and Muslim recognition.•  Saudi Arabia is the largest single financial contributor to the Palestinian Authority. 28
  30. 30. Key Saudi Initiatives in Region – Iraq•  Iraq is an important member of the Arab community, a founding member of the Arab League and OPEC, and the holder of vast natural resource wealth.•  Unfortunately, Iranian meddling in Iraqi affairs continues to destabilize and weaken the country.•  Saudi Arabia will continue to work with the people of Iraq to assure that their country becomes strong, stable and remains a significant pillar of the Arab world. 29
  31. 31. Key Saudi Initiatives in Region – Egypt•  Egypt is a critical anchor of the Arab world and key player in the MENA region.•  Egypt is by far the most populous Arab country with long- standing and close ties to the Kingdom.•  The Saudi leadership has authorized over $4 billion in grants, loans, and deposits to Egypts emerging post-revolutionary government.•  The Kingdom regards the Egyptian military as the central institution of the state and will support it unconditionally during this transitional period to a stable democratically-elected civilian government. 30
  32. 32. Key Saudi Initiatives in Region – Syria•  Saudi Arabia has led the Arab League in establishing unprecedentedly strong sanctions against the Assad regime and its “killing machine,” including the expulsion of Syria from the League and isolating it within the Arab world.•  The Kingdom urges the Syrian regime to end killings and pull tanks and armored vehicles out of major urban centers.•  Saudi Arabia calls on Iran and its proxies to withdraw its support for the regime’s unconscionable actions.•  The Kingdom demands that Assad implement a credible plan to stop the bloodshed and bring security and stability to the country. 31
  33. 33. Key Saudi Initiatives in Region – Tunisia•  The Kingdom gave asylum to ex-president Zine El Abidine Ben Ali after his removal from power.•  As elsewhere, Saudi Arabia will continue to use diplomacy to support smooth transitions to stable governments.•  The Saudi government has forbidden Ben Ali from engaging in any activities from within the Kingdom that could destabilize the transitional political process in Tunisia.•  It will use financial pledges to offer incentives and development funds to Tunisia’s post revolutionary government. 32
  34. 34. Nawaf ObaidNawaf Obaid is a Senior Fellow at the King Faisal Center for Islamic Studies & Researchand also serves as the private counselor to HRH Prince Turki Al Faisal.He is the author of The Oil Kingdom at 100: Petroleum Policymaking in Saudi Arabia(Washington Institute for Near East Policy, 2000) and co-author, with AnthonyCordesman, of National Security in Saudi Arabia: Threats, Responses, and Challenges(Praeger/CSIS, 2005). He has been published extensively, including in The WashingtonPost, The New York Times, The Financial Times and Foreign Policy.From 1999 - 2000 he was a (Non-Resident) Research Fellow at the Washington Institutefor Near East Policy (WINEP) and from 2004 - 2007 he was a (Non-Resident) AdjunctFellow with the Arleigh A. Burke Chair in Strategy at the Center for Strategic &International Studies (CSIS) in Washington, DC.He holds a B.S.F.S. from Georgetown Universitys Walsh School of Foreign Service, anM.P.P from Harvard Universitys Kennedy School of Government, and has completeddoctoral courses at MITs Department of Political Science. He has received an M.Phil.(and will complete a D.Phil. in War Studies in 2012) from King’s College Department ofWar Studies. 33