Saudi Arabia: Reform May Start Flowing

The big question is whether Abdullah can remake the state

For 10 years, King Abdullah, Saudi Arabia's new monarch, served as de facto regent to King Fahd, his incapacitated half-brother. During that time he bridled at not having full power to enact the reform agenda that he and his Western-educated advisers, including Foreign Minister Saud al-Faisal, thought was needed. Will things be any different now that Abdullah has taken the throne after Fahd's death on Aug. 1?

Reform-minded Saudis have high hopes that Abdullah will move faster on everything from giving an increasingly well-educated population the opportunity to participate more widely in politics, to expanding almost nonexistent rights for women, to liberalizing an economy that, while greatly improved, is still not creating enough jobs. The Bush Administration, which since September 11 has regarded internal Saudi affairs as vital to U.S. domestic security, will continue to press the Saudis to curb religious intolerance and crack down on Islamic militants. After a slow start, the Saudis are ruthlessly pursuing al Qaeda remnants. But many Saudis have joined the jihad against the U.S. in Iraq, and there is worry that they will become the vanguard of a new terrorist thrust at home and abroad.

As Fahd's caretaker, Abdullah, 82, once considered something of a bumpkin, surprised many observers with his efforts to foster Arab-Israeli peace and bring the kingdom's shaky public finances under control. There is little doubt that as long as his health and energy hold up, he will make some new splashes. In the past year or so, for instance, he ordered a multibillion-dollar expansion of Saudi oil production capacity, from 10.5 million barrels per day to 12.5 million by 2009. He has also brought in major oil companies such as Royal Dutch/Shell Group (RD ) and Total (TOT ) to explore for gas -- breaking a decades-old taboo. Far more than his predecessors, he is likely to travel the world in an effort to create goodwill and reassure Saudi oil customers. "I think he is going to be a creative thinker and communicator," says Sadad Husseini, the former executive vice-president of national oil company Saudi Aramco.

The big question is whether Abdullah will be able to reconfigure the creaky Saudi ship of state to weather the rigors of the coming years. At a time when pressures for political change are shaking much of the surrounding region, Saudi Arabia has major design flaws. One is the royal family's longstanding reliance on the support of the puritanical Wahhabi religious Establishment. The heavy involvement of Saudi nationals in the September 11 attacks and a series of bombings and other atrocities in the kingdom have forced the Al-Saud family to recognize the dangers of the radicalism that stems from Wahhabi teachings. And Washington, after ignoring the fundamentalists' influence for decades, no longer finds them acceptable. But reducing the clout of the clerics in areas such as education without undermining the ruling family's power base will be a risky exercise.

Platoons of Princes

The royal family itself presents problems that need to be addressed. Over time, Saudi Arabia needs to reduce the cost of maintaining the royals, who number in the thousands, and gradually ease princes out of key government positions. But the opposite is happening. Government departments such as Interior and Defense, presided over by Prince Nayef and Prince Sultan, both full brothers of Fahd, have turned into feudal kingdoms, with enormous powers of patronage and billions of dollars' worth of contracts to hand out.

The existence of such fiefdoms not only causes gridlock in decision-making but also contributes mightily to the widely held impression that the royal family is corrupt and unaccountable. Abdullah knows the dangers, but he also needs his brothers' support. He has already bowed to the inevitable and appointed Sultan Crown Prince.

Abdullah will be helped by the prosperity that has returned recently after the long dry spell caused by low oil revenues in the late 1990s. Saudi oil revenues hit $157 billion this year, a 48% increase over 2004, says Brad Bourland, chief economist at Samba Financial Group, a Riyadh bank. Real gross domestic product is likely to grow by 6.5%. Unlike past booms, which have been fueled by government spending, this one has a strong private sector element, with nonoil GDP expected to grow by more than 7%.

While oil prices are the key, Abdullah's earlier reforms have undoubtedly contributed to some of this success. The hope is that this boom buys him time to make even more fundamental changes.

By Stanley Reed in London

Edited by Michael S. Serrill

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