The Crown Prince of Saudi Arabia, Mohamed bin Salmán, met last November with the Crown Prince of Abu Dhabi, Mohamed bin Zayed

Saudi crown prince launches new internal purge and oil price war to consolidate power

Mohamed bin Salmán has launched a new purge of rivals within the Royal House and has launched a price war to try to defeat Russia.

Mohamed bin Salman (MbS) has been rushed again. With the clear intention of guaranteeing his succession to the throne that his weakened father, Salman bin Abdulaziz, has held since 2015, the brand new crown prince has dedicated last weekend to give two more blows on the table that are explained in that key.

On the one hand, he has re-launched (although his father has signed the orders) a purge against possible rivals to access the throne. In one fell swoop, and as a continuation of the one he carried out in November 2017 – when he locked up dozens of princes, high officials and businessmen in the luxurious Ritz-Carlton Hotel – he has detained such prominent figures as the princes Ahmed bin Abdulaziz, brother of the current monarch and main internal critic of MbS; Nayed bin Ahmed bin Abdulaziz, son of the former and so far chief of the ground forces; Mohamed bin Nayef, displaced by MbS himself as heir in June 2017; and Nawaf bin Nayef, younger brother of the previous one. All of them have been accused of carrying out a coup d’etat in contact with unidentified foreign actors.

The MBS movement betrays his growing nervousness in an environment defined by the bad news that accumulates around him, and that directly questions his figure. His image, in fact, is already very much touched by now, both for his personal imprint of authoritarianism, which negates his alleged liberal cravings, as well as for his disastrous management of the military campaign in Yemen and for his personal involvement in the murder. From the journalist Jamal Khashoggi.

In economic terms, last year it closed with a meagre growth of 0.3% (one-tenth less than expected and very far from 2.4% the previous year), and in recent days Aramco’s shares have fallen 9, 1%, jeopardizing its IPO and, even more, the future of the ambitious Vision 2030 that aims to unite the kingdom’s economic future from its high dependence on hydrocarbons.

Added to this is the political fear that Donald Trump will not be re-elected in November or, what is the same, that a Democratic candidate, Joe Biden or Bernie Sanders, who is openly critical of the absolutist regime, may occupy the White House.

Consequently, MbS speeds up the process to reach the throne before his father passes away. He calculates that his early abdication would allow him not only to host the G-20 summit scheduled for next November in Riyadh but, above all, to get rid of the tricky trance of submitting to Hay’at al-Bay’ah, the Council of the Loyalty, conformed by 34 select members of the Royal House to whom it corresponds to ratify the appointment of the new monarch and between which rivals and opponents still move.

Simultaneously, and also fundamentally in terms of internal economy, MbS has decided to force oil markets in the hope of taking advantage in several directions. It is true that, in current conditions, with a daily production of 9.7 million barrels and a price of a barrel that last week was around 52-55 dollars, the Saudi budget could go ahead (provided it does not drop, in principle, of the 40 dollars).

However, the prospects were bleak and even more after the Russian rejection of the reduction in production proposed by Riyadh: cut a million barrels by OPEC and another half a million by Russia and countries associated with the agreement reached in the OPEC + framework in December 2018.

Riyadh’s goal was to provoke a change in trend in prices that were already pointing downward, but the chosen path, in a gesture that seems more like a Saudi diktat in response to Russian humiliation of its claims, now leaves the way open for a price war in which a prompt Russian reaction can be expected. Instead of reducing production, as it originally proposed, Saudi Arabia has opted for the opposite path and has started offering discounts to its Asian customers and plans to step up it’s pumping.

In any case, the Saudi response has brutally hit markets already mired in the panic caused by the economic impact of the coronavirus, generating a downward spiral for which the end is not guessed. The price of oil fell almost 25% on Monday in what was the worst day for crude oil since the first Gulf War (1991)

Meanwhile, Riyadh is offering substantial discounts to its customers (which has pushed barrel prices to just $ 27), in an attempt to capture more market share at the expense of its competitors. At the same time that this decision aspires to bend the Russian resistance (considering that Moscow had calculated in its budget for this year an average price of a barrel of oil of $ 57.7), it also aims to ruin as much as possible the US producers. Fracking (given that with such low prices their farms are unsustainable) and even cooling the business expectations of producers of electric vehicles and alternative energy sources.

The bet is very risky because neither Riyadh nor OPEC (even assuming that all its members align with the Saudis) have had enough weight to impose their wishes on the world market. But MbS seems determined to keep a pulse as he prepares to manage the massive Hajj pilgrimage in an environment very directly affected by the coronavirus.

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