Less than four months into his reign, Bloomberg reports that Saudi Arabia’s King Salman is consolidating power with a major reshuffle of succession lines and government officials. "The new king has proved consistent in his determination to elevate members of his close family to key positions," noted one analyst. As the world’s top oil exporter plays a more prominent role in the region’s power struggles, it apears Salman wants family close. Oil policy is unlikely to change, notes Bloomberg's Julian Lee, as this brings younger men into top government positions, paving way for transfer of power to new generation of princes.
As we noted 3 months ago, [12]
The Saud dynasty views itself as the rightful leader of the Muslim world, but Iran has challenged that leadership for several decades. Although Saudi Arabia has a Sunni majority, its rulers fear Iran’s potential influence over a sizable, and sometimes-restive, Shi’ite population concentrated in the kingdom’s oil-rich Eastern Province.
Any new leader is unlikely to change the larger contours of Saudi foreign policy — or the kingdom’s use of oil to enforce its interests and try to keep Iran at bay. But the new king and his inner circle will face decisions on succession that could reshape the ruling family and the monarchy’s future for generations to come.
And sure enough, as Bloomberg reports, changes have been made...
The monarch elevated Muhammad Bin Nayef to crown prince after Prince Muqrin, the king’s brother, asked to step down, the royal court said on Wednesday. Prince Mohammed Bin Salman, Salman’s son and current defense minister, was named as deputy crown prince and therefore second in line to the throne.
“The new king has proved consistent in his determination to elevate members of his close family to key positions,” said Crispin Hawes, managing director of research firm Teneo Intelligence in London. “The elevation of the king’s own son reinforces his rapid rise to become one of the two or three most powerful men in the kingdom.”
[13]
The changes come as Saudi Arabia’s new leadership heads a bombing campaign against Shiite Houthi rebels in Yemen and adopts a tougher stance on confronting Islamic State extremists. The appointments put power in the hands of a younger generation of princes who will have to prevent instability from spilling across the country’s borders as they develop new policies to manage the conflicts in Syria and Iraq.
The decision to promote Prince Mohammed Bin Salman will surprise some given his youth -- he is thought to be in his 30s -- and relative inexperience, said Fahad Nazer, a political analyst at JTG Inc. in Virginia.
“Few seem to know that much about him and he rarely speaks in public,” said Nazer, who worked at the Saudi embassy in Washington. “That will likely change going forward.”
...
King Salman has made substantial changes to the government since ascending to the throne in January. He set up new committees to oversee security, political affairs and economic development, removed senior princes from their positions and changed the governors in provinces.
Prince Mohammed bin Salman “is more than capable and qualified to take on heavy responsibilities” that are required by his new role, the royal court said. This is “evident to everyone through his work and his fulfillment of all the tasks he was entrusted with,” it said.
His appointment was supported by the majority of the allegiance council, according to the decree.
Diplomats in Riyadh had speculated how much further the king’s son would rise after being made defense minister, head of the royal court and the economic affairs council.
“King Salman is creating an impetus for the younger generation to be involved in the state of affairs,” said John Sfakianakis, the Riyadh-based director of the Middle East at U.K. investment manager Ashmore Group Plc. “There was a lot criticism about Saudi Arabia appointing only octogenarians in senior positions. Now the grandsons of the founder of the country are in the number two and three slots.”
King Salman also replaced Prince Saud al-Faisal, one of the world’s longest-serving foreign ministers, with Adel Al-Jubeir, who is the country’s ambassador to the U.S. He also appointed Adel Faqih as economy minister. Hamad al-Suwailim was named as new head of the royal court.
Al-Jubeir’s appointment “implicitly suggests a desire to have a key voice in Washington,” said James Dorsey, a senior fellow in international studies at Nanyang Technological University in Singapore. Al-Jubeir has “an understanding of how Washington works that few in the kingdom can match,” he said.
As the new generation of princes rose to power, Saudi Arabia abandoned a tradition of cautious cash-backed diplomacy with an activist policy. The kingdom started using its armed forces last month to defend its perceived interests in Yemen against Iran, and has built a predominately Sunni-Muslim coalition to support its efforts.
In addition, it’s clamped down on Islamic State militants with a series of arrests within the kingdom.
The appointments “could serve as an indication of a new Saudi strategy for Syria and Yemen,” Ibrahim Sharqieh Frehat, a conflict resolution professor at Georgetown University in Qatar, said by e-mail. “Escalation, whether in Yemen or Syria, could be a main feature of the kingdom’s new regional strategy.”
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It appears Saudi stocks, after initial weakness, liked the news as The Tadawul surged when the West caught on to the headlines...
[14]
There was some mild volatility in Crude when the headlines hit but that has been dominated by European and US opening swings...
[15]
This reshuffle appears to be US-friendly (from a diplomatic perspective) and oil-unfriendly (from a production, crush non-OPEC perspective).
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As OilPrice's Andy Tully notes [16], the Saudis have been oin a sales offensive in Asia...
Saudi Oil Minister Ali al-Naimi says his country, which is already pumping oil at a near-record pace, is prepared to produce even more to satisfy what appears to be a rising demand in Asia, particularly China.
“Asian demand for oil remains strong, and we are ready to supply whatever is required,” al-Naimi, quoted by the Saudi Press Agency [17], said in a speech on April 27 in Beijing. “As the Asian population grows and as the middle class expands, so the demand for energy will increase. Oil will retain its preeminent position and Saudi Arabia will remain the number one supplier.”
Al-Naimi’s words are backed up by analysis issued by the energy news service Platts [18], which reported that Chinese demand for oil in March was 44.73 million metric tons, or 10.58 million barrels a day on average, 6.5 percent higher than in the same month in 2014.
Still in Beijing the next day, al-Naimi repeated his message of increased demand for oil by Asia’s growing economies, but he added the caveat that “sudden rises or falls in the cost of oil are not welcome.”
Al-Naimi said such drops in oil prices, even when followed by small rallies, complicates the energy business in the long run, especially by stunting investments in the industry. “Oil is a long-term business, requiring long-term plans and investment,” he said [19].
Nevertheless, it is al-Naimi who is seen as the driving force behind the persistence of oil’s low price. The average global price of oil peaked at over $110 per barrel in late June 2014, but began to fall primarily because of a boom in US shale oil production, which often requires relatively expensive hydraulic fracturing, or fracking.
At its November meeting in Vienna, OPEC had the opportunity to cut production and was urged to do so by some of its members, but under al-Naimi’s leadership, the cartel decided to maintain output at 30 million barrels a day. Later al-Naimi stated the strategy was to regain market share [20] by keeping prices low long enough to make US shale production unprofitable.
Saudi Arabia has adhered closely to al-Naimi’s plan. In March it produced a near-record 10.3 million barrels of oil per day [21], and the minister said output will probably stay at or near that level for some time, indicating, at least to some extent, that the Saudi strategy is working: It’s gradually restoring market share and making sure it has the supply to match demand.
“Saudi Arabia is a consistent, stable and reliable supplier of quality oil,” al-Naimi: “We are the most reliable supplier on earth. Quality and quantity is assured. We have proved over many years to be a reliable partner for China as its energy demands have increased. We remain committed to this partnership, and to this friendship.”
If al-Naimi’s words sound like a hard sell, they are. Saudi Arabia appears determined to go out and drum up more business rather than wait for customers to come calling. For example, last week he was in Seoul, doing his best to sell the South Koreans on the value – and quantity – of Saudi oil whenever they want it.
