Iraq-Corruption

Iraq tightens its belt

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Iraq tightens its belt

The people of Iraq will face severe hardships under the country’s new austerity budget, writes Salah Nasrawi

With oil prices plummeting and the economy squeezed by inefficiency and corruption, Iraq’s parliament has approved a belt-tightening budget. The step is widely seen as having significant ramifications for the country’s volatile domestic politics and the war against the Islamic State (IS) terror group.

Iraq’s 328-member House of Representatives endorsed the country’s 2015 budget last week. The budget approval followed weeks of squabbles over cuts, allocations and what oil price the government should base the budget’s projected revenues on.

The lawmakers approved a cut of nearly three per cent in spending, bringing the total expenditure in the budget to $99.6 billion, down from the $102.5 billion the cabinet had initially proposed in the draft.

Before sending the bill to parliament for ratification, ministers warned that this would be an austerity budget, slashing the country’s bloated public sector and freeing up funds for military spending as Iraqi forces battle IS.

Iraq’s government had originally forecast a $125 billion budget for 2105, but faced with still-falling prices for its oil exports it was forced to slash this by some 20 per cent.

The new budget is based on a price of $56 for a barrel of crude, lowered from $70 and then $60 a barrel in earlier drafts. The expected budget deficit will still be around $19.1 to $21.1 billion, however.

One of the main hurdles that delayed the budget’s endorsement were objections from some Shia members to an oil-export deal struck in December between Baghdad and the Kurdistan Regional Government.The Shia MPs said the deal would unfairly benefit the Kurdistan Region at the expense of the Shia-populated oil-producing provinces in the south.

Sunni lawmakers also threatened to boycott the vote because the budget did not include funding provisions for a national guard, a new security force to be set up to fight IS and police Sunni-populated provinces.

Many lawmakers also objected to the oil price assumption in the budget, saying it was unrealistic as market prices had slipped below $50 a barrel with no concrete indications that they would rebound in the foreseeable future.

The reduction in oil prices is expected to strangle Iraq’s economy at a time when the country needs a boost in resources to cement its fractured national unity and sustain the war against terrorism.

While the government said it would not cut salaries or pensions, other reductions in the lavish spending of oil money, such as generous allowances, travel and office expenses, were announced.

But the bulk of the funds to cover the deficit will come from taxation, borrowing and withdrawals from the country’s reserves, estimated at $75 billion. While the Central Bank is expected to provide funds from its reserves, the government said it would also issue bonds in foreign currencies.

Under the provisions of the budget the government will be able to meet part of the deficit by introducing new taxes, levies and duties. Obligatory saving accounts are also to be opened for senior government officials to deposit part of their salaries.

Since the fall of the regime of former Iraqi president Saddam Hussein in the US-led invasion in 2003 Iraq’s parliament has had difficulty passing annual budgets in regular order. Wrangling over budgetary allotments are routine, and last-minute deals usually come at the expense of a solid fiscal plan.

Worse still, Iraqi governments throughout this period have failed to present their final revenue and expenditure accounts for review and endorsement before passing the next annual budget.

Last year, parliament was unable to approve the state budget because of a dispute between the central government and the autonomous Kurdistan Region over independent oil exports from the region.

The crisis allowed former prime ministerNuri Al-Maliki to use budget advances and emergency provisions, circumventing the checks and balances enshrined in the constitution to ensure limits imposed by parliament are respected.

As a result, billions of dollars in unchecked spending are now unaccounted for. Lawmakers have said that Iraq’s state coffers were nearly empty when the government of Prime Minister HaidarAl-Abadi took office in August. Iraq’s economy has been hard hit by decades of war, international sanctions and inefficiency.

But the country’s current economic ills are largely due to the abysmal economic policies of post-Saddam governments. Instead of working to rebuild the economy and sustain growth in basic sectors, they relied heavily on oil revenues to bankroll the budget.

Though Iraq is the second-largest producer of crude oil in OPEC, the oilproducers’ organisation, the country’s economy is in a shambles due largely to mismanagement, poor public spending and rampant corruption.Some 70 per cent of the budget has been going to pay for food imports, energy subsidies and funding an inflated bureaucracy and ramshackle armed forces.

Government policies are mainly responsible for the decline in productive sectors.Agriculture has been neglected, and less than 15 per cent of the country’s total area is now being cultivated. The agricultural sector, which used to employ one third of the work force, now accounts for less than four per cent of the country’s GDP.

The manufacturing, construction and electricity industries are in tatters and account for only eight per cent of national wealth. Thousands of state-owned industries andsubsidised factories have shut down because of a lack of electricity and poor maintenance.

Iraq’s banking system is largely dysfunctional, and without an overhaul, analysts say, the economy has little hope of competing with its oil-rich neighbours. Iraq has failed to invest in sovereign wealth funds, unlike oil-exporting countries in the Gulf, whose investments are now being used to cover budget deficits and public spending.

Corruption comes at the top of the reasons behind the depletion of Iraq’s coffers. According to some lawmakers, some $750 billion has been lost in corruption, waste and inefficiencies over the last ten years.Though Al-Abadi promised to combat corruption in his policy statement to parliament when he took office, there have been no signs that his government has taken concrete steps to bring corrupt officials to account or recover stolen money.

One day before the parliament passed the 2015 budget, a report by the World Bank warned that Iraq faces “a crisis which will have important implications for the welfare of its people.”The report said that about 20 per cent of Iraq’s population lived below the poverty line in 2012 and a significant portion of the Iraqi people was vulnerable to falling into poverty.

It said “poverty declined only modestly” since 2012 and “deep deprivations in non-monetary dimensions persisted.”The report painted a grim picture of Iraq before the current crisis. It said close to half the population had less than primary level education and almost a third of children aged up to five years old were stunted.

The report said over 90 per cent of households in Baghdad and the central and southern provinces received less than eight hours of electricity a day, a third of men and 90 per cent of women aged 15 to 64 were neither employed nor looking for work, and more than 60 per cent of the calories consumed by the poor came from a nationwide food subsidy programme.

“Addressing this crisis will take time and concerted effort,” the report said.

Looking forward, there are real concerns that the new belt-tightening budget will have serious impacts on the lives of most Iraqis. Moreover, there are concerns that the combination of falling oil prices and the austerity measures will have adverse implications for the country’s stability and hurt efforts to fight IS extremists.

This article appeared first in Al Ahram Weekly on Feb.5, 2015

ما بعد التجربة

After Abdullah

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After Abdullah

King Abdullah’s successor has pledged to make ‘continuity’ in the oil-rich kingdom a priority,  writes Salah Nasrawi

“I beg the Almighty God to help me to serve you and to bestow security and stability on our country and nation and to protect them from any harm and evil,” declared Saudi Arabia’s new monarch, King Salman bin Abdel-Aziz, in his first address to his people following his accession to the throne of the world’s largest oil exporter.

In the few hours before the new king received the crown and made his televised inauguration speech, Salman, 80, hurried to put Saudi Arabia’s royal house in order by swiftly defining the line of succession following the death of his half-brother King Abdullah, 91, on Friday.

While the move suggested that Salman was trying to show that he is in charge, it reflected the growing anxiety about the kingdom’s biggest dynastic challenge since it was established by Abdullah and Salman’s father, Abdel-Aziz Al-Saud, in 1932.

By upholding a decision by Abdullah to name his youngest half-brother Mugrin, 69, as crown prince and by appointing nephew Mohamed bin Nayef, 55, as deputy crown prince, Salman has tried to quell speculation about internal power struggles within the royal circle.

Abdullah named Mugrin as Salman’s successor in 2013, in what was an unprecedented move in Saudi leadership turnover. Under Saudi law, the Allegiance Council — a committee made up of of the most senior Al-Saud princes, set up by Abdullah in 2006 — is in charge of appointing the future king and ensuring a smooth succession.

Still, it was the designation of Mohamed as heir to the heir apparent that raised more eyebrows and shifted the focus to internal palace rifts in Riyadh’s precarious power transfer and its implications for both the kingdom and the region.

Speculation was high that the appointment of Mugrin was designed to pave the way for Abdullah’s eldest son, Prince Mitab, to become a crown prince after Mugrin. Abdullah was believed to have been grooming Mitab and his appointment to minister of the National Guard in 2013, making him a member of the cabinet, was meant to bring him closer to the succession.

Abdullah also named another one of his sons a deputy foreign minister, and two other sons as provincial governors of the capital Riyadh and the holy city of Mecca respectively, a move seen as an attempt to enable his clan to consolidate its grip on power after his death.

Abdullah’s promotion of his sons was also seen as part of a dynamic to ensure transition to suitable candidates in the next generation of Al-Saud and the kingdom’s future political evolution. Its aim, experts argue, was to avoid a succession struggle among dozens, and probably hundreds, of aspirants to the throne among Abdel-Aziz’s grandsons and great-grandsons.

But even with a smooth succession after Abdullah, Saudi Arabia’s transition remains contentious, with bloggers and commentators casting doubt over a long-term royal family accord. Most concentrated on the generational problem of succession confronting Saudi Arabia as the prolonged hold of Abdul Aziz’s sons comes to an end.

Some influential royal family members, like Prince Al-Walid bin Talal, an Abdul-Aziz grandson, have already shown signs of dissent. On 23 January, the multi-millionaire prince and business tycoon tweeted: “I have made my allegiance to father Salman bin Abdul-Aziz and father Mugrin bin Abdel-Aziz and congratulated my brother Mohamed bin Nayef.”

With all the potential discord that could follow the transition to the second generation of Al-Saud, King Abdullah’s successors are expected to face daunting challenges at home.

Among their biggest tasks, analysts say, are determining when and whether the kingdom will introduce political, economic and social reforms. For years, Saudis have been urging their government to initiate change, including opening opportunities for political participation.

Liberal-minded reformers have been demanding reform of the political system to initiate a constitutional monarchy and establish an elected parliament, instead of the consultative 120-member appointed Shura Council.

Saudis hope Abdullah’s successors will be able to solve these and other concerns, such as human rights issues and the role of the conservative religious establishment, and relinquish the long-held view that stability is the guarantor of security and peace for the kingdom.

Today, among the key challenges the kingdom faces is the fall in oil revenues that form the bulwark of its state budget. A prospected deficit of $39 billion in this year’s budget has forced the government to cut spending.

Though the government has said the deficit will be covered by its huge foreign reserves, the revenue plunge will force Saudi Arabia to cut back on salaries, wages and allowances, which make up about half of budgeted expenditures.

Externally, with the Middle East and the Arab Gulf region in turmoil, Abdullah’s successors will find their country at the centre of enormous regional conflicts. They will be challenged by a whole range of geopolitical developments.

One of Saudi Arabia’s biggest headaches is Persian-Shia Iran. With its ambitious nuclear programme, its patronage of Shia communities and spreading influence, Iran is emerging as a regional superpower in a clash with Arab-Sunni powerhouse Saudi Arabia.

With a substantial Shia minority in the Saudi eastern province and on the southern border with Yemen, the new leadership will remain jittery about the effect of Iran’s regional rise as an emerging Shia power on Saudi Arabia’s Shia community.

Also, fear that Washington may reach a détente with Tehran following an agreement over its nuclear programme has created a rift between the United States and Saudi Arabia.

Inevitably, the new leadership in Riyadh has to deal with many Middle East crises, which have so far left the Saudi regional power off-balance, largely because of their overwhelming nature and the new regional order they have launched.

In Yemen, Abdullah’s successors are facing an escalating disaster as Shia Houthis assume control. With a civil war looming large in the country, Saudi Arabia’s southern neighbour is turning into a thorn in its side.

In Iraq and Syria, the kingdom also faces difficult dilemmas. Islamic State (IS) militants are digging their feet into both countries close to northern borders, despite the war waged by the US-led international coalition to degrade the group.

Neighbouring Bahrain, dependent on generous Saudi aid and security assistance, is facing a relentless Shia uprising. In Egypt, Saudi Arabia’s vehement support for President Abdel-Fattah Al-Sisi’s political and economic programme remains vital to the region’s security and peace.

Despite good relations with other partners in the Gulf Cooperation Council, Riyadh’s new rulers will face a daunting challenge from Oman, Qatar and the United Arab Emirates, which are either showing independent foreign policy tendencies or increasing their regional power at Saudi Arabia’s expense.

Saudi Arabia’s political system has demonstrated a surprising resilience and stability in the past, but with many of its neighbours on fire, the country seems in need of more than simply the prayers of its new monarch to maintain its stability.

This article appeared first in Al-Ahram Weekly on Jan 29, 2015

Iraq-Inquiry

A botched inquiry?

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A botched inquiry?

People across the Middle East have a stake in the UK’s Chilcot Inquiry into the causes of the 2003 US-led invasion of Iraq, writes Salah Nasrawi

When former British prime minister Gordon Brown set up a panel in 2009 to look into the UK’s involvement in the 2003 US-led invasion of Iraq many Iraqis hoped that they would finally hear the truth about the invasion that left their country in ruins.

Britain, after all, was the US’s main ally in the war and its then prime minister Tony Blair was a key supporter of then US president George W. Bush, who still insists that the invasion was the “right decision” despite the hundreds of thousands killed and the numerous regional conflicts it has unleashed.

Nearly six years later the report of the UK’s Iraq War Inquiry has still not been made public, even though it was reportedly finalised in 2011. Last year it was disclosed that a deal had been reached between London and Washington to block essential documents in the inquiry, including critical pre-and post-war communications between Bush and Blair.

A new hurdle came this month when the inquiry panel, known as the Chilcot Commission after its chairman Sir John Chilcot, decided not to publish the long-awaited report, which will now be delayed until after the British general elections in May.

The delay has raised suspicions of a whitewash. The British Independent newspaper described it as “one of the most bitterly controversial episodes in recent British history.”

The leaders of both the ruling Conservative Party and the opposition Labour Party have been accused of a cover-up of what has been called the war of destruction on Iraq.

Deputy Prime Minister and Liberal Democrat leader Nick Clegg has suggested the delay of the report is an attempt to “sex it down.” Others have called it a scandal and urged voters to sign a petition calling for the publication of the report before the elections.

The criticisms go beyond the delay in the publication to include the alleged incompetence of the Chilcot Commission and the political calculations that have coloured its investigations, including caving in to pressure from the British and US governments.

What gives weight to charges that the inquiry process has been manipulated is the reluctance of both Prime Minister David Cameron and Labour leader Ed Miliband to push for publication of the report.

Both have been apparently engaged in an elections blame game. For many in Britain who have been demanding to know the reasons that pushed their government to submit to Bush’s whims, the postponement of the report has not been good news. They consider it to be a setback for justice, democracy and transparency.

For Iraqis, however, the war is history that cannot be forgotten. For 12 years, Iraq has been reeling in the apocalyptic aftermath of the invasion and occupation. For most Iraqis, these have been years of terror, grief and destitution. Their country now stands at a crossroads, with increasing fears that it will ultimately fall apart.

The majority of Iraqis do not need to know when Blair made commitments to Bush about the UK’s involvement in the invasion and its aftermath. But they expected the truth to be made public and the Chilcot Commission to disclose information about who did what in the plundering their country.

One of their expectations was that the commission would open a window of opportunity to expand the inquiry from merely probing Britain’s involvement and Blair’s secret deals with Bush to include the entire war and its devastating consequences.

Bereaved Iraqi victims of abuses committed during the war and the subsequent occupation also hoped a credible report would help them take those responsible for war crimes committed during the invasion and the occupation to court.

Hundreds of thousands of Iraqis were killed or wounded in the catastrophic occupation, while millions were forced to leave their homes and seek refuge abroad or within Iraq because of the sectarian violence triggered by the invasion.

Unknown numbers of Iraqis have been exposed to a range of environmental and chemical hazards caused by the allies’ use of weapons that carried potential health risks. The destruction of Iraq’s infrastructure has been immeasurable, along with the economic losses.

Other peoples in the Middle East also have a stake in the Chilcot report. The invasion of Iraq unleashed the turmoil that has culminated in the stunning advances of Islamic State (IS) forces in Iraq and Syria and the wave of religious radicalism it has unleashed in the region.

This threat of terrorism, which has hit Europe recently, should be underscored because Western politicians such as Blair still try to distance themselves and their policies from the snowballing problem and blame it on Muslims.

Last week, Blair claimed that a “closed-minded view of the world” was perpetuating what he termed a “culture of hatred.”

“At some point we have got to understand this extremism has grown up over a long period of time and over decades. Its roots are deep within a perversion of the religion of Islam,” Blair told participants at the Davos Economic Forum in Switzerland.

The outcome of the investigation should also have an impact on the US-led coalition which is fighting IS in Iraq and Syria. Iraqis are entitled to know that the war which the international coalition is fighting against IS is not driven by another conspiracy, and will not turn into an exercise in destruction like the one waged in 2003 to topple the regime of former Iraqi president Saddam Hussein.

As the recent exchange of blame over the efficiency of the coalition’s military aid in the war against IS has shown, the Iraqi government has little confidence in the coalition, something which makes observers believe it is undermining the campaign.

If the report of the Chilcot investigation is curtailed, the world will never know the truth of the secret deals between Bush and Blair that paved the way for the invasion of Iraq in 2003 and those responsible for Iraq’s misery will continue to escape being brought to account.

This article appeared first in Al-Ahram Weekly on Jan, 29, 2015

Iraq-Future

Is Obama’s strategy failing?

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Is Obama’s strategy failing?

The collapse of the US-led coalition against Islamic State forces in Iraq could only be a matter of time, writes Salah Nasrawi

When US President Barack Obama’s envoy to the US-led coalition against the Islamic State (IS) in Iraq, retired US general John Allen, visited the country last week, his discussions with government leaders were not short of moments of frankness.

Allen was told by the country’s Shia and Sunni leaders that the coalition needs to do more to help Iraq defeat the terror group that has seized large areas in the north and west of the country and in neighbouring Syria.

Shia Prime Minister Haider Al-Abadi told the American official that the US-led coalition should “increase the tempo of the effective air strikes on IS positions.” He also called for US-sponsored training of the Iraqi security forces to be expanded, according to his office.

Sunni Parliamentary Speaker Salim Al-Jabouri was even more vocal in his criticisms. “Until now our feeling has been that the international support is not convincing,” Al-Jabouri was quoted by Reuters as telling Allen.

The grievances listed by Iraqi leaders included ineffective air strikes against IS, poor coordination with the Iraqi military command, limited combat training of Iraqi soldiers, and a lack of intelligence and weapon supplies. But their main concern remains the political strategy of the US campaign against IS.

As expected, leaders of the Kurdistan Regional Government in the north have remained fully behind the international coalition, though they continue to complain about shortages of military supplies.

After the blitzkrieg carried out by IS in Iraq last June, Obama declared that US warplanes and an international coalition he had assembled would conduct a systematic campaign of air strikes against the militants while Iraqi ground forces went on the offensive.

Obama ruled out any direct combat involvement by US soldiers in Iraq, but promised a military package of aid that would include weapons deliveries, intelligence and training.

What began to be called the Obama Strategy for Iraq also entailed a political approach that called for national reconciliation among the country’s communities. The plans was to end Sunni exclusion by the Shia-led government and give the Sunnis an autonomy that included the policing of their own areas after taking them back from IS.

Obama made it clear that the US would take action against IS in Syria by training and arming the moderate opposition to President Bashar Al-Assad to enable it to fight IS militants and expel them from Syria.

Last week’s unexpected criticisms by the Baghdad government came as doubts started to emerge in the US media about the air strikes that the US and its allies have been conducting against IS targets in Iraq and Syria.

Critics of the air strikes point out that most of the territories the militants have captured since their major onslaught in mid-June, including major Sunni-populated cities, are still under IS control. In Syria, IS continues to gain ground and threatens key cities like Aleppo and Homs.

Though the US and its allies have continued pounding IS targets, the IS advance in Iraq has been largely contained by Iranian-backed Iraqi Shia militias and the Iraqi security forces. Kurdish Peshmerga fighters have also retaken territories that they claim belong to the Kurdish region.

Before leaving Baghdad last week, Allen attempted to respond to Iraqi concerns. He said the coalition has made “important progress” and reiterated Washington’s commitment to helping Iraq in the war against IS, including by carrying out air strikes, supplying weapons and training Iraqi troops.

Allen urged Iraqis to show “patience” and made it clear that “the pivotal battles” to defeat the terror group have not yet come. He reiterated Washington’s position that the defeat of IS does not depend solely on military success and urged Al-Abadi to deliver on his promise of “security reforms, advancing national reconciliation, and revitalising Iraq’s ties with its neighbours.”

The Obama Strategy is also irking some US Arab allies. The Arab media have been reporting a dispute between the United States and its Arab coalition partners over the anti-IS strategy in Iraq and Syria. On Saturday, the pan-Arab newspaper Al-Quds Al-Arabi reported from Amman that Arab US allies would now prefer an Arab-Islamic alliance to go after IS instead of the US-led coalition, which also includes Western powers.

The paper quoted Arab Gulf officials as saying that many Arab partners believe that Washington does not seem to be “serious in conducting radical operations to uproot IS, or at least weakening it on the ground.”

Some countries, including Saudi Arabia, want to include Yemen in the coalition’s mission and engage it in the fight against the Shia Houthis, who have taken control of the capital Sanaa. Other reports suggested that Saudi Arabia and its Gulf allies are concerned that a deal between Washington and Iran over its nuclear programme might affect Washington’s response to Tehran’s ambitions in Iraq.

Syrian opposition forces are also expressing increasing frustration with the Obama Strategy. Burhan Ghalyoun, a former leader of the opposition Syrian National Council (SNC), slammed Obama’s strategy in an interview with the Al-Arabiya TV network, saying that the plan to train moderate Syrian opposition forces is “a delaying tactic.”

The Obama approach is also coming under fire in Washington. Republican leaders have criticised Obama’s reluctance to engage militarily with IS. They have also questioned his “Iraq first” war, which they charge has enabled IS to make gains in Syria without weakening it in Iraq.

From the beginning, the Obama anti-IS strategy has come under fire for being weak and lacking in focus. Critics have pointed to its military flaws, such as the use of limited air to defeat a formidable terror group that controls large areas and enjoys local support.

To date, eight months into the seizure of most of Iraq’s so-called Sunni Triangle, IS militants have been able to stave off offensives intended to dislodge them from the safe havens they have established. They have also lured more foreign fighters into their ranks and sent terror threats to countries as far away as Europe and the United States.

The failure of the American military to achieve victory over IS, or even to degrade its combat capabilities, has indicated that critics were right to discount aerial bombardment as an effective strategy to defeat the group.

Obama’s political approach has also been challenged for being naïve in the way it looks at the geopolitical complexities of Iraq and the region. Its main flaw lies in its dealing with IS as merely a terrorism issue, while ignoring the deep ethnic and sectarian conflicts that divide the region.

A closer look at the war in Iraq reveals that the Shia-led government is not managing the fight against IS in the way that Washington had intended. Baghdad may still need US air power, advanced weapons and good intelligence capabilities, but it has been fighting the war in its own way.

It has depended largely on Shia Iran to repel IS advances. Tehran has sent military advisors to help train and equip troops and allied militias to drive the IS militants out of territories occupied in central Iraq.

As the conflict has demonstrated, Baghdad has made up for the need for dedicated army and security forces soldiers by mobilising well-trained and battle-tested Shia militias in the fight against IS. After routing IS militants in cities and towns in the Baghdad belt and the mixed Diyalah province, the government is now deploying Shia militias in Sunni-dominated areas in preparation for a counter-offensive.

Last week, Kurdish media outlets said that the government dispatched “several brigades of Shia militias” to the highly volatile and disputed Kirkuk province, reportedly to protect towns populated by Shia Turkmens.

On Saturday, the London-based Al-Hayat newspaper reported that Shia militias had arrived in the Sunni-dominated Anbar province and that they were expected to fight alongside Sunni tribes allied with the government against IS.

Significantly, Baghdad has been reluctant to allow the Sunni tribes to form national guard units to fight IS militants and police their own areas after retaking them from the group. Plans to launch national reconciliation that would fully integrate Sunnis into the government have also foundered.

Both the Sunni forces and the Sunni inclusion were prerequisites for the US-led mission and for sustainable US support for Baghdad, accepted by Al-Abadi when he was nominated to form his partnership government in August.

What all this means, at best, is that the US-led coalition will remain the décor for Obama’s wishy-washy partnership with Iraq. At worst, it means that Washington will try to find an exit strategy in order to suspend the coalition and leave Iraq once again to its fate.

This article appeared in Al-Ahram Weekly on Jan. 22, 2015

 

ما بعد التجربة

Kingdom at crossroads

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Kingdom at crossroads

Speculation in Saudi Arabia is growing over who will succeed the ailing King Abdullah, writes Salah Nasrawi

For more than two weeks now Saudi Arabia’s King Abdullah bin Abdel-Aziz has been battling for his life. As the days pass, there is growing concern surrounding the inevitable power struggle between members of the Saudi royal family.

Abdullah was admitted to a military hospital in the capital Riyadh on 31 December for medical tests. A statement from the court two days later said the king was suffering from pneumonia and needed help breathing.

Though the statement described the condition of the 91-year-old monarch, whose health has been in decline for years, as being stable, international attention has focused on the expected power shift in the oil-rich kingdom.

With Abdullah hospitalised, Saudi Arabia’s Crown Prince Salman bin Abdel-Aziz, who is also the first deputy prime minister and minister of defence, appears to have taken taking charge of the day-to-day running of the government.

Last week the 80-year-old prince delivered the monarch’s traditional address to the Shura Council, an advisory body whose members are appointed by the king. Salman warned that Saudi Arabia is facing unprecedented challenges resulting from several regional conflicts, but assured Saudis that their “leadership is aware of these challenges and their consequences.”

With wars raging in neighbouring Iraq and Yemen and lower oil prices casting a shadow over domestic policies, Salman sought to reassure Saudis that the government is responding to the critical position the country now finds itself in.

On 5 January, four gunmen attacked a Saudi security patrol near the Iraqi border, killing three soldiers and wounding at least three more. The daring assault was the first deadly attack on Saudi Arabia since it joined the US-led coalition against Islamic State (IS) militants.

Plummeting oil prices are the kingdom’s other major challenge. In his speech, Salman said Saudi Arabia will deal with the challenge posed by lower oil prices “with a firm will.” The collapse in the price of oil has raised the alarm about the prospect of budget cuts that could impact the kingdom’s policy of “buying loyalty.”

Abdullah’s failing health, the crown prince’s old age, as well as the unpredictable generational turnover in the leadership, have raised concerns about the future of the kingdom in the face of domestic and regional threats.

Abdullah assumed the throne in 2005 as the country’s sixth king and named his half-brother, defence minister Sultan, as crown prince.

When Sultan died in 2011, Abdullah named another half-brother, Nayef, the minister of the interior, as heir apparent.

The current crown prince, Salman, was appointed in 2012 after the death of Nayef in 2012. He is 80 years old and believed to be suffering from dementia.

According to Saudi tradition, and unlike in most other monarchies where sons usually inherit the throne, the monarchy passes down the line of sons of the founder of the modern kingdom, Abdel-Aziz ibn Saud, who died in 1953.

While age was the main qualification for succession, Abdel-Aziz’s older sons were sometimes passed over due to their low profile or a lack of the ability or willingness to take on the role.

As most of Abdel-Aziz’s 45 sons have now either died or are aging, the unstable and unprecedented conditions confronting Saudi Arabia today have come as the prolonged hold of this second generation comes to an end.

In March, Abdullah took Saudis and the world by surprise by naming his youngest half-brother, Mugrin, as deputy heir. In a royal decree, Abdullah also prevented Salman from rescinding the move. The successor is traditionally picked by the new king. Abdullah’s early appointment of a deputy heir left long-time observers of Saudi politics puzzled.

The appointment of Mugrin as second heir has prompted speculation about Abdullah’s intentions. Though there has been no public dissent, rumours on social media abound about strains within the House of Saud over Mugrin’s nomination, casting doubt on prospects for a smooth handover of power.

In addition to the generational problem and the imminent passing of the elder royal power-holders, there are other factors central to the Saudi succession.

The origin of the mother also plays a role in choosing a successor, as is the tradition in Arab tribal societies. While Abdullah’s mother belonged to a powerful Saudi clan, Salman’s mother was a member of the prominent Sudairi tribe and also gave birth to Abdullah’s predecessor, King Fahd, and former crown princes Sultan and Nayef.

While a remaining Sudairi, Ahmed bin Abdel-Aziz, a former interior minister, could still be considered a contender for the throne, Mugrin’s status could also be challenged because his mother was Yemeni.

All this has raised the question of why Abdullah chose Mugrin as deputy crown prince and sidestepped the Allegiance Council, an official body tasked with choosing the crown prince. Some rumours have suggested the move was designed to pave the way for Abdullah’s eldest son, Mitab, to become crown prince after Salman dies or abdicates.

Abdullah promoted Mitab to minister of the National Guard in 2013 and made him a member of the cabinet. The National Guard is a formidable force in Saudi Arabia and is larger and better equipped than the regular army.

He also appointed another of his sons deputy foreign minister and two other sons provincial governors of the capital Riyadh and the holy city of Mecca, moves seen as an attempt to enable his children to consolidate their grip on power after his death.

Whether Abdullah is grooming Mitab or simply trying to arrange for an orderly transition, his appointments have suggested that it is virtually impossible to assess the dynamics of the Saudi succession struggle and the kingdom’s future political evolution without analysing the role of the third generation in politics.

Whoever becomes the next Custodian of the Two Holy Shrines is likely to name his own brothers as future heirs, thereby cutting out multiple cousins from access to the throne and the political advantages it provides.

Based on this analysis there are several possible scenarios for succession in the post-Abdullah era, during which the incoming leadership could serve as the facilitator of political, social and economic changes in Saudi Arabia.

One possibility is that the succession will go smoothly, with Salman becoming the new king and Mugrin his successor, but with Salman not appointing Mitab as second deputy, a post traditionally his in the succession line.

Another scenario is that Salman may wish to nominate his own crown prince after taking the throne. He could either name his brother, Prince Ahmed bin Abdel-Aziz, the youngest Sudairi who was removed as interior minister in 2012, or one of his own sons as heir apparent.

A third scenario is for both Abdullah and Salman to abdicate and for the Mugrin-Mitab plan to be implemented but with a powerful Sudairi, such as interior minister Mohammad bin Nayef, nominated as deputy crown prince. This scenario envisions that both Abdullah and Salman would agree to abdicate or would both be declared unfit by the Allegiance Council.

But many in Saudi Arabia anticipate an uneasy transition following the deaths of Abdullah and Salman. One main problem is that a fraught succession could lead to sharp divisions within the House of Saud and ignite a power struggle.

The next leaders of the country will also have to deal with serious challenges internally and externally. Inside the country they will face threats from Islamist Sunni militants. There is a high risk of attacks similar to the assault on the border with Iraq, or the November attack on a Shia mosque in the kingdom’s Eastern Province, which killed five people.

They will have to cope with increasing Shia resentment against exclusion and discrimination. In recent months, clashes between the members of the Saudi Shia community and security forces in the Eastern Province have left many people, including policemen and activists, dead.

Tensions rose in October when a Saudi court sentenced the Shia cleric Sheikh Nimr Baqir Al-Nimr to death for encouraging “foreign meddling” in the kingdom, “disobeying” its rulers and taking up arms against the security forces.

Significant drops in revenues due to sliding oil prices have forced the government to cut spending. The state budget for 2015 has registered a $39 billion deficit and the growth forecast for 2015 is expected to be down to 2.5 from last year’s 3.6 per cent.

Though the government has said the deficit this year will be covered by its huge foreign reserves, the financial pressures will force Saudi Arabia to cut back on salaries, wages and allowances, which contribute to about half of budgeted expenditures.

That could spark resentment among low-income families, who make up a majority of the population and are increasingly struggling to make ends meet.

Ostensibly, there is common agreement between Saudis and Saudi watchers that the succession of either Salman or Mugrin will go forward. In the long run, however, the emerging leadership faces the problem of managing the transition of power to the new generation.

Analysis & views from the Middle East