Middle East At Point Of No Return As Saudi-Qatar Rift Deepens

Authored by Cyril Widdershoven via Oilprice.com,

Saudi King Salman’s decision to appoint his son Mohammed Bin Salman (MBS) as the new crown prince did not come as a surprise. For months, the power struggle between former crown prince Mohammed Bin Nayef (MBN) and MBS happened in plain sight, and a confrontation was imminent. However, King Salman made his own calculations and decided to remove MBN in favor of MBS, providing a continuation of his own family line in the future. Over the last week, the media has been overwhelmed with assessments of the House of Saud and the role MBS will play or has been playing. The family feuds in the House of Saud are notorious, whenever a king dies an internal power struggle will emerge, regardless of what strategies have been implemented before.

At present, the Young Prince of Riyadh, Mohammed Bin Salman, has been given the key to power. This has happened at a very difficult time for not only the Kingdom, but also for the whole Gulf region and its neighbors. The choice made by King Salman to promote his son is a remarkable one but could, from a Saudi perspective, be the only viable choice. The need for a 180 degree change in the economic and social policy which keeps Saudi Arabia a strategic regional player is essential. Without radical changes, such as those presented in Vision 2030 or the Aramco IPO project, the Kingdom’s future could be bleak, as the era for “Rentier States” is over.

The challenges MBS faces are enormous. Due to lower hydrocarbon revenues, he will need to change an oil-based economy into a more open, liberal and high-tech economy, capable of taking on global competition in these fields. By opening up the Kingdom via Vision 2030 and the expected billions of dollars from IPO revenues, this could become a reality, not a fata morgana.

A successful economic transformation and increased participation of Saudi youth (including women) could stabilize the Kingdom in the future. MBS relies on this economic transformation to silence opposition inside the House of Saud, as other princes are vying for the crown. While the Saudi leading ulema have pledged allegiance to the new crown prince, the reality remains complex.

Even though MBS holds vast powers and influence at present, the situation is far from stable. King Salman’s royal decree to extend the Eid al Fitr holidays by a week or the reinstatement of financial perks for the military and other government officials, should be assessed as a pay-off and cooling-down period to quell possible opposition.

At the same time, the region is at a point of no return if the Syria-Iran and Qatar issues are not solved soon. The Qatar–Saudi confrontation is still heating up, already threatening a regional conflict, with the possibility of bringing in Iran and Turkey at the same time. Mohammed bin Salman has already been able to tackle the Qatari issue inside of the Kingdom, as former crown prince Mohammed Bin Nayef openly criticized the Arab pressure on Qatar.

After the (perceived) removal from power of MBN, the new crown prince will be able to continue with his own regional strategies, which don’t lack some confrontational features as we have seen already. MBS will for sure up the pressure on Iran, not only in the Syrian proxy war but increasingly in Yemen. The intensifying operations by Houthis and others in the Bab Al Mandab, and a growing missile capability onshore, is not taken lightly by the Saudi military command and MBS. Last week’s terrorist act against a Saudi offshore oil field in the Gulf by Iranian (some indicated Qatari) assailants has only put new oil on the fire. Some could argue at present - without the possible mitigating political cloud of MBN - no real soft approach is being discussed in Riyadh.

MBS will pursue a hardline power strategy to block Iran, Syria’s leaders and Shi’a opposition, while trying to force all Sunni Arab states in the region to follow suit. According to Saudi analysts, one of the main reasons for the current Qatari conflict is the rapprochement with Iran and a growing military presence of Turkey on Qatari soil.

At the same time, the rapprochement between Saudi Arabia and Egypt, as shown by the legalization of the two island deal (Sanafir and Tiran), is another major support for the current hardline position against Qatar. It seems that the Egyptian president and the two young wolves, MBS and Mohammed Bin Zayed (Abu Dhabi), are working well together. A new kind of power brokerage has emerged in the region, the period of traditional Arab politics (based on the Shura approach) is over. Arab regional politics in the 21st Century seems to have embedded Sun Tzu and Clausewitz, leaving no room for traditional pow-wows but only a political and economic Blitzkrieg, until now without diplomacy by other means (military).

On a totally different level, beyond his heavy hand in the Vision 2030 strategy and the defense strategy, MBS is also very well inclined and positioned to decide the coming Saudi strategy for OPEC’s production agreements. The blooming friendship between Russia’s Putin and MBS will strengthen in - the short term - the cooperation between OPEC’s leader and non-OPEC member Russia. Both have the same target, a stabilization of the oil and gas markets, not only to support their own economies, but also as a means to reinforce their military capability. Without a coordinated effort, oil and gas prices will be in limbo. MBS’s love for Putin is also based on the possibility of weakening the Moscow-Tehran cooperation, which is seen by Saudi Arabia and its allies as the main cause of instability in the region.

In stark contrast to former Saudi princes and kings, MBS seems to be able to understand the options of playing many cards at the same time. While putting on a charm offensive for U.S. president Trump, which seems to have worked without any flaws, Riyadh’s new crown prince is opening up to Moscow. A multibillion investment spree partly focused on oil and gas followed. Next to this, the Saudi market opened up for Russian companies such as Rosatom. The combined Russian-US technological push will support Saudi Vision 2030 and will also strengthen the Kingdom’s military power in the region. At the same time, Russian oil companies and technology institutes are preparing themselves for a major gold-rush in the Kingdom. Gazprom, Rosneft, Transneft and others are already booking their tickets to Riyadh and Dammam as the gates to oil and gas heaven have cracked open. A stronger Russia-Saudi oil and gas cooperation is in the offing, leaving less room for others to spoil the fun.

How far the current power surge of the new crown prince will be successful is unclear. MBS is a young prince, even for European standards. If he would become king soon, it is possible that instability would hit the streets before too long. However, if he is able to force Qatar to its knees, removing the possible opposition in Doha and anti-Saudi/Egypt groups (Muslim Brotherhood), some room will be available to deal with the other issues. Looking at the signs in Arab media, a peaceful solution is still far from reachable. Arab leaders show an increasing reluctance to become soft with regards to Qatar. A possible unexpected move should be expected if the demands currently on the table are not met. A full military confrontation could ignite the region.

The latter could involve both Iran and, another major Sunni power, Turkey. Ankara’s ongoing support for Qatar’s political standpoints and support of the Muslim Brotherhood, is not taken lightly by MBS, Sisi and Mohammed Bin Zayed. Turkey’s ongoing cooperation with Russia (military) and Iran (economically) could lead to a confrontation with Saudi-UAE and Egypt in due course. The combination MBS and Sisi should not be underestimated, they are smelling blood already. Putin and Trump are currently sidelined by the ambitions of a young Saudi crown prince. Support for his economic dreams could however take some of the sharp (military) edges of his current strategies. All in all, MBS economic and societal changes are worthwhile to pursue.

Hopefully MBS’s ambitions are not standing in the way of progress. Stability is supportive to global oil and gas markets. Cooperation between OPEC and non-OPEC is needed, not only for financial gains but also to support a sustainable supply of oil and gas in the future. Military conflicts in the Gulf region or instability in Saudi Arabia would destroy this for a long time, without any real other solutions or supply options in the short term. A major disturbance of oil and gas (LNG) supplies from the Gulf could stymie global economic growth. The young prince is ambitious, but hopefully his shoulders are strong enough to bear all the global and regional pressure currently put upon him.

Comments

giovanni_f WTFRLY Wed, 06/28/2017 - 07:03 Permalink

"will need to change an oil-based economy into a more open, liberal and high-tech economy, capable of taking on global competition in these fields."Yes. The Saudis will change their ingrained habits and tribal mentality, become a modern civilization in no time, will work hard and invent new things that benefit mankind, replace oil pumps with transgender toilets and introduce legislation to allow same-sex marriage and foster diversity and, boosted by an inflow of talent from all over the planet, will not only be able to protect themselves from the impending global financial crisis but provide a sanctuary for our core western civilization values.

In reply to by WTFRLY

NuYawkFrankie Wed, 06/28/2017 - 04:40 Permalink

re ...the region is at a point of no return if the Syria-Iran and Qatar issues are not solved soon.

Instigated, fanned & provoked, it goes without saying, by the 'Usual Suspects'

RTP Wed, 06/28/2017 - 04:49 Permalink

The reason why the degeneration of Monotheism is on a point of no return is because it is used for more than 2000 years as a war strategy...camouflaged as a religion. After domination of the whole planet, after nothing is to conquer anymore the monotheistic sects now turn on each other.Monotheism is racism, because no other god, no other divine entity is accepted. The self proclaimed holy lands will turn into a real hell.The bloodline history of the old testament is ancient fake news! 

webmatex Wed, 06/28/2017 - 04:53 Permalink

The U.S. does not seek peace - ever.Indeed it cannot afford peace as it has only weapons to sell to keep the MIC economy going.SA is like Game of Thrones - and apart from dwindling oil supplies has very little future as a "developed" country as it has no resources (or water) and everything is imported.The article is pro SA and paints a rosy future picture, however a happy ending is very doubtful.If they cannot find peace they will certainly find collapse, chaos, and probably confiscation.That may be the the real plan.The controversial Aramco IPO will be very interesting and will probably be the make or break moment.Popcorn advised. 

EuroPox Wed, 06/28/2017 - 04:57 Permalink

An "open, liberal, high-tech ecomony" - LOL!!  Just how are they supposed to do that - given that they are muslim and live in a country with an average IQ of 84?  Flip flops are high-tech in Saudi cos they save you from stepping in all the camel shit.

Ital Scratch Wed, 06/28/2017 - 05:27 Permalink

whenever a king dies an internal power struggle will emerge, regardless of what strategies have been implemented before.

 Someone in Saudi Arabia is playing too much of Crusader Kings 2...Unfortunately that game covers timeline from 867 (Viking invasions) - 1453 (Fall of Constantinople) yet here we are today and they are still into it. That's called progress.

Kyddyl Wed, 06/28/2017 - 05:28 Permalink

The arbitrary lines on a map today mean little in the face of ancient arguments, religious lines and allies such as are found in the Middle East. The US has never learned this lesson. Russia and China are far handier geographical allies when it comes to many things. Don't forget, as Wane Madsen pointed out " While vaudevillian comedy-like shouting matches broke out in the West Wing of the White House between President Donald Trump and his senior advisers and between the White House press secretary and various presidential aides, world leaders gathered in Beijing to discuss the creation of modern-day land and maritime «silk roads» to improve the economic conditions of nations around the world." The US has made too many enemies for this to end well.https://www.strategic-culture.org/news/2017/05/20/world-leaders-gather-…

BitchezGonnaBitch Wed, 06/28/2017 - 06:06 Permalink

"Last week’s terrorist act against a Saudi offshore oil field in the Gulf by Iranian (some indicated Qatari) assailants has only put new oil on the fire."

Bitch, please... We're too old for this shtick. MBS should try something a bit more subtle next time.

smacker Wed, 06/28/2017 - 06:18 Permalink

Well, even if MB Salman does manage to reinvent the Saudi economy and it miraculously becomes a global manufacturing nation or something, it will never change my personal policy of ((never)) voluntarily buying anything that comes out of that rotten country run by sub-human in-bred terrorist savages. 

TeethVillage88s smacker Wed, 06/28/2017 - 07:32 Permalink

Where is Mika and Marrow and Gang on Analysis of our Friends & Allies?

- Turkey, under Martial Law, 1000s arrested
- China, Tank-Man, Tinamin Square Massacre, Clinton sponsored for WTO & UN
- S.A Kingdom, sets record for human rights abuses
- Corporations & State Capitalist Corporations ship jobs out of economy, destroy Tax-Base, use offshore tax jurisdictions, refuse to invest in USA or preserve US Economy

https://www.sott.net/article/343781-Rachel-Maddow-Corporate-shill-for-t…

We would support UK today if they were using gun-boat diplomacy to force opioids on Asia... (we probably are)

- NPR/PRI Watered down war supporters
- MSNBC & MSM watered down NEOCONS
- Progressives apparently have never seen a war the USA should not fight these days "We came, we saw, he died" Churtle! Snort!

In reply to by smacker

Onehunglo Wed, 06/28/2017 - 07:02 Permalink

The 2030 vision was written by McKinsey .. you can find that on line .. so many flaws! Aramco is the private "piggy" bank of the house of Saud but the IPO is the only thing that prevents the Saudi monetary authority from runnng out of money. Does anybody thing they are going to be truly transparent over that .. or for that matter why would a country accused of terrorist financing be allowed to list anything on a western exchange (NYLNHK or whoever) and not have the arrangers and distributors be accused of and fined or debarred for breach of AML and terrorist financing regs.. maybe Goldman could answer that. The vision also demands that Saudi government employees join the private sector and start creating a non oil dependent economy... good luck with that...40 years of trying to development the industrial sector, they are still only capable of investing at the level of plastic bottle manufacturing, local Saudis still think the government will pay for everyone forever. More hilarious, the former DCP now CP is also behind a plan to develop new cities to rival Bali, Singapore etc as tourist destinations with entertainment sectors outside the reach of the religious police... well light blue touch paper on that one. When I left there last year, a great number of local Saudis seemed to be rather worried about what the future held... a peaceful future? In shallah.

WhyWait Wed, 06/28/2017 - 07:07 Permalink

So there will be war. And it's about the dollar. . And the rest of this article is helpful but basically wishful thinking.

So how does THAT unfold?

gregga777 Wed, 06/28/2017 - 07:18 Permalink

Oh, yeah, sure. The Wahabbis are not about to allow MBS to "liberalize" the economy of the KSA (Kingdom of Saudi Arabia). For one thing, the Saudis have to direct huge sums of money, skimmed right off of the top from ARAMCO's revenue streams, to the Wahabbis just to stay with in power. The Wahabbis use that to strictly enforce their will inside the KSA (Kingdom of Saudi Arabia) as well as exporting their virulent ideology everywhere else. And who is going to buy ARAMCO stock knowing that a huge amount of the revenues and profits are skimmed right off the top by the House of Saud? Vision 2030? ROTFLMAO (rolling on the floor laughing my a** off).

gregga777 Wed, 06/28/2017 - 07:23 Permalink

The Saudis tried to diversify into agriculture if you can believe that. Brilliant idea. Not! They were growing water intensive crops in the desert watered by "fossil" water pumped from underground aquifers that had taken many millennia to accumulate. They emptied the aquifers in just a few short years. Better get those desalination plants built and operating really quickly or they're going to be spending more importing water than they get from the oil that they are exporting.

Centerist Wed, 06/28/2017 - 07:29 Permalink

Two passages are curiously contradictory:"MBS’s love for Putin is also based on the possibility of weakening the Moscow-Tehran cooperation, which is seen by Saudi Arabia and its allies as the main cause of instability in the region.In stark contrast to former Saudi princes and kings, MBS seems to be able to understand the options of playing many cards at the same time. While putting on a charm offensive for U.S. president Trump, which seems to have worked without any flaws, Riyadh’s new crown prince is opening up to Moscow. A multibillion investment spree partly focused on oil and gas followed."And....."Turkey’s ongoing cooperation with Russia (military) and Iran (economically) could lead to a confrontation with Saudi-UAE and Egypt in due course. The combination MBS and Sisi should not be underestimated, they are smelling blood already."If MBS is trying to solidify relations with Russia, he would not serve his cause very well by increasing tensions with another Russian ally.  Saudi is approaching economic dire straits, and doing something that would cost them money would be foolish.  They are realists when it comes to their foreign relations, and that means that Saudi (or at least the Royal Family) have to get something in return.  Compromising a relationship with Russia by going into conflict with Turkey would gain them nothing.

Stud Duck Wed, 06/28/2017 - 08:15 Permalink

There once was a house of Saud,on their people they perpetuated a fraud,A man name Lawrence,provided a desert tribes king with the power,to topple twin towers.    

dogismycopilot Wed, 06/28/2017 - 09:03 Permalink

Clearly the author of this shit article has never set foot in the Kingdom.For those of us who have, the phrase "more open, liberal and high-tech economy, capable of taking on global competition in these fields."begs the question: does this mean they will start letting expat employees keep their passports or will they continue to lock them in the company safe?

mabuhay1 Wed, 06/28/2017 - 09:23 Permalink

This was one of the best Zero Hedge articles in recent memory.  I agree with the main points of the article.  One thing though, while I agree war in the Middle East will make things harder for everyone, the fact remains that a large and destructive war is a virtual certanty in the not too distant future.  In general, there is a large war in the Middle East every generation, caused by the new generation not knowing the true costs of war, because they have not been in one yet.  Based on this, the Middle East is actually overdue for a war.

Boogity Wed, 06/28/2017 - 10:20 Permalink

Hopefully the Persians put the hurt on the SA sand n%ggers.  If it wasn't for Chevron geologist Max Steinecke discovering oil in SA in 1938, the SA sand n%ggers would still be living in tents, shitting in the sand, and doing anal with their camels and goats. 

allthegoodname… Thu, 06/29/2017 - 15:29 Permalink

 The you-know-who keeps stirring the pot, we can bet another expansion of you-know-what, you-know-where, is soon coming.  Look, I have no problem with Jews or Israel, actually, I don't care who runs the money markets, the Rothschild's, are the best at it, I think, since they have a century or two experience at it.  I don't care about the Palestinians, where they live or what they do, their religion teaches their children to hate white people, to want to kill white people, while the religion of white people teaches its children to love all people and hope for their long lives.  The contrast makes me get really mad, can't make it out, why should we care?  What bothers me and it should bother you is all this nation changing, the brainwashing, the destruction of western civilization, all this extra stuff, besides the money issues.  They, Jews, can run around in silk, we can do cotton quite nicely, but, why all the immigrating of people not like us, people who want to kill us, people who hate us.  Why all the filth, the Jews Hollywood, the race mixing, hey, blacks don't like it any more than whites do?  Blacks, are a people with a history, too.  Why the few homosexual's and other odd balls always running the show?  Why is the Jews Hollywood so intent on destroying western values?  WHAT'S GOING ON WITH ALL THIS EXTRA STUFF!?  What is listed above is just a little bit of the dirty tricks being pulled on us who have made a home for the Jews, Muslims and any other odd ball who wanted to just get along, and, we, the people, have given them, Jews and the like, everything, they have today.  Were the Jews, Muslims and the like, the odd balls, removed from our history, I can say, with certainty, each and every one of us would be much better off than we are with the Jews, the Muslims, the odd balls.  I, can say with certainty, and I can back it up, with facts: the Jewish peoples, the Muslim peoples, the odd balls, have contributed nothing to our civilization, but, they have taken everything good and wholesome from us.  In blood alone the Jews with their wars of conquest and people destruction, have cost us (all the people of the world) a river of blood, a mountain of young human flesh, human flesh, the best of us, destroyed intentionally, good people, who could be with us today, contributing to our growth and wellbeing.  Now the Jew in charge, the eldest son of the Rothschild clan, the King of the world, has set the Muslims lose on us.  Why?!  Is it land or oil he wants, from them, I know and you know, we want nothing from them or him.  How can we escape the Un-American, THE UNITED STATES COMPANY, owned, Politician's, who lord it over us today, paid off by the Jew's and supported by the Jews media and phony scholastic community?  These useless, good for nothing, couldn't fix a flat tire or make it on their own if they had to, these useless, blood sucking vermin, running our lives and our nations, into the ground.  How do we escape them and their self-love?  Where, we are being driven, by the Politician's, the Judge's, the Military and the Police, the dirty turn coat Educator's- (Teacher’s, these filth today, are nothing like a teacher should be, they are brainwashed, a disease, a misery, to us) -is not a good place, is no doubt intending the death of most of us and, what gives these ugly little fart arse Politician's, their Judge friend's and the Jew's any right to say, there are too many of us, so, wars and disease, must plague us?!  For how long!?  For sure there are way too many of them!  For how much longer, must we take it?  What we need is to be less concerned about the ME, about the odd balls, the filthy rich Politician's and their ilk, all of them and it.  We, the people, 1776, we need leadership, a leader, we need a new beginning away from all the scum bags that are tearing us apart today.  We, need an end to this world, a fresh start, for our children and future, a real hope and a real value to our money.   We don't need any more people who want us dead living in our nations, and, we don't need some Jew deciding our money for us, while stealing most of it from us.  We need a man or woman who can pull us together, who can give us a plan for the future, who can help us and teach us to load up and get the job done, once and for all.  He or she is out there, we just need them to step forward, and, that is all we need.