Saudi Arabia and the GCC in a Post-Arab Awakening World

Kennedy School of Government Harvard University

April 9th, 2012

Nawaf Obaid Senior Fellow

King Faisal Center for Research & Islamic Studies

Saudi Arabia Overview: 1

•  Custodianship of Mecca and Medina, Islam's two holiest sites.

•  The leading country in the Arab world (Arabs comprise a vast majority of the inhabitants of the MENA region).

•  One of the largest foreign aid programs in the world -- and by far the largest in the MENA region -- at $10 to $15 billion per year.

•  Strong strategic partnerships with the US, China, the EU, and other countries.

•  Sunni state in a world where Muslims are predominantly of this denomination.

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Saudi Arabia Overview: 2

•  Largest petroleum producer and exporter. •  Largest oil reserves and most spare capacity. •  Preeminent financial and economic power in Middle

East / North Africa (MENA) region. •  Nominal GDP grew 28% in 2011, according to data from

the Central Department of Statistics. •  Largest stock market (50%+ of total regional market cap)

and largest foreign reserves (~$650 billion) in MENA.

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3

Global Distribution of Sunni & Shia

85%-90% Sunni

Saudi Economic Overview

•  With 2011 GDP of $577 billion, Saudi Arabia represents approximately 21% of total regional GDP and over 25% of the Arab world’s economic output.

•  With nearly $650 billion in foreign reserves, the Kingdom is the third largest holder after China and Japan.

•  Saudi Arabia continues to improve on international rankings of competitiveness.

•  The Kingdom is the only MENA and Arab member state in the G20.

Source: Saudi Arabian Monetary Agency (SAMA). 4

Gross Domestic Product ($Billions)

Source: IMF and internal estimates. 5

Top Foreign Exchange Reserves ($Billion)

Source: IMF and central banks of various countries.

Rank Country Foreign Reserves

1 China $3,181 2 Japan $1,295 3 Saudi Arabia $650 4 Norway $580 5 Russia $498 6 UAE $425 7 Singapore $404 8 Taiwan $385 9 Brazil $352 10 Switzerland $340 11 Kuwait $325 12 South Korea $311 13 India $308 14 Hong Kong $285 15 Germany $285

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Massive Public Investments

•  Saudi Arabia retains its place at the top of the active projects list, with 1,026 projects valued at more than $1 trillion underway in the Kingdom.

•  $67 billion recently allocated for 500,000 new housing units. •  Massive public investments include housing, nationwide

transport and utilities infrastructure, industrial bases, ports on both coasts, and renewable energy projects.

•  In 2011, $6.72 billion was allocated to transportation and telecommunications projects, including 36,800km of new roads and four new airports.

•  Infrastructure completed to accommodate more than six million pilgrims who visit Mecca and Medina every year.

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Saudi Energy Sector Overview

•  Holds more than 20% of world’s proven oil reserves. •  Currently produces around 9.9 million barrels/day. •  The Kingdom has 90% of world's spare production

capacity at nearly 2.5 million barrels/day. •  The Kingdom is investing heavily in solar, nuclear and

natural gas to meet domestic demand and to curtail rising domestic oil consumption.

•  The Kingdom has created a 35,000 strong Facilities Security Force to protect oil fields and installations.

•  The Kingdom is the most influential member and de facto leader of OPEC.

Source: Saudi Aramco and internal research. 8

Total Proven Oil Reserves (Billion Barrels - 2011)

Source: EIA and internal estimates. 9

Oil & Refined Products Exports ('000 Barrels/Day – March, 2012)

Source: EIA and internal estimates. 10

0 1000 2000 3000 4000 5000 6000 7000 8000 9000

Norway

Canada

Iran

Iraq

Nigeria

Venezuela

Kuwait

UAE

Russia

Saudi Arabia

Poll: Saudi Arabian Respondents Confidence in Governmental Institutions*

54 60

34

48 54

22 28

23

35 34

25 26

13 11

20

11 9

28

2 4 7

4 3

13

4 3 4 4 9

12

0

10

20

30

40

50

60

70

80

90

100

The government (the cabinet)

The judiciary (the courts)

The Shura Council

Public Security (the police)

The armed forces (the

army)

Civil society institutions

associations, clubs, volunteer youth groups,

etc.)

I trust it to a great extent I trust it to a medium extent I trust it to a limited extent I absolutely do not trust it I don’t know/ Declined to answer

Source: The Arab Reform Initiative. 11

Poll: General Evaluation of the Government and its Institutions’ Performance

50

29

48

38

28 32

28 36

15

24

13 17

3 6 6 4 1 4 1 1 3 4 4 4

0

10

20

30

40

50

60

70

80

90

100

The Government The Shura Council The Judiciary The Police (Public security)

Very Good Good Neither Good nor Bad Bad Very Bad I don’t know/ Declined to answer

Source: The Arab Reform Initiative. 12

17

42

14 7

20

0

10

20

30

40

50

60

70

80

90

100

Definitely Yes Yes No Definitely Not I don’t know/ Declined to

answer

Poll: Saudi Arabians Confidence that State is Undertaking Radical Reforms in its Institutions and Agencies

Source: The Arab Reform Initiative. 13

The New Gulf Union

•  The Arab Gulf Union Council (“Gulf Union”) will be a cooperative union to promote economic, political, and military coordination as well as mutual defense against external threats.

•  Will include current Gulf Cooperation Council (GCC) members Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, and the UAE, and potentially Jordan and Morocco.

•  Modeled on the EU, the Union will have its “capital” in Riyadh with a decision-making body (modeled on the European Commission in Brussels) to replace the current GCC Secretariat.

•  Transforming the GCC into a Union will not affect the sovereignty of any member country. 14

The Proposed “Gulf Union”

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Timeline •  May 25, 1981 - The Gulf Cooperation Council is founded by

Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. •  Nov 11, 1981 - A unified economic agreement is signed

among the GCC states in Abu Dhabi. •  May 10, 2011 - GCC Summit in Riyadh - GCC is considering

requests from Morocco and Jordan to join the organization. •  Sep 2011 - Ministers from Jordan and Morocco attend GCC

meeting that puts forward a five-year economic plan for those countries.

•  Dec 2011 - Riyadh Declaration announces: "Adoption of the initiative of the Custodian of the Two Holy Mosques to move beyond the stage of cooperation to the stage of union….”

•  Feb 2012 – Expert’s panel met to discuss a Gulf Union. •  May 2012 – Bi-Annual heads of state meeting in Riyadh to

adopt experts panel recommendation. 16

17 Source: World Bank.

GCC Population (Millions – 2010)

27.4 7.5

2.7 2.7 1.7 1.2

Saudi Arabia UAE Kuwait Oman Qatar Bahrain

18 Source: SAMA, IMF, and various central banks.

GCC GDP ($Billions - 2011)

577

358

173

171 67

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Saudi Arabia UAE Qatar Kuwait Oman Bahrain

19 Source: Joint Organizations Data Initiative (JODI).

GCC Oil Production (‘000/day – April 2012)

9,900 2,870

2,514

893 730

46

Saudi Arabia Kuwait UAE Oman Qatar Bahrain

20

GCC Oil Exports (‘000/day – March 2012)

Source: Joint Organizations Data Initiative (JODI).

7,500 2,329

1,717 736 588

0

Saudi Arabia UAE Kuwait Oman Qatar Bahrain

21 Source: Various regional stock exchanges.

Stock Market Capitalization ($Bn – Mar 2012)

395.2

157.6

124.4

106.3

20.4 18.4

Saudi Arabia UAE Qatar Kuwait Bahrain Oman

22 Source: IMF and central banks of various countries.

Foreign Reserves ($Billions – 2012)

650

425

325

20.3 13 9

Saudi Arabia UAE Kuwait Qatar Oman Bahrain

GCC Military Spending ($Billions – 2010)

23 Source: Adapted from the IISS, Military Balance, 2011; and the Jane’s Sentinel series.

0 5 10 15 20 25 30 35 40 45 50

Bahrain

Qatar

Kuwait

Oman

UAE

Saudi Arabia

GCC Troop Totals (Armed Forces – ‘000)

24 Source: Internal estimates and the IISS.

0 50 100 150 200 250 300 350

Bahrain

Qatar

Oman

Kuwait

UAE

Saudi Arabia

Gulf Air Forces (High Quality Aircraft Only)

25 Source: Adapted from the IISS, Military Balance, 2011; and the Jane’s Sentinel series.

0 50 100 150 200 250 300 350

Qatar

Oman

Bahrain

Kuwait

UAE

Saudi Arabia

Saudi Arabia’s Key Role in Regional & International Stabilization

•  As the world’s central banker of oil, Saudi Arabia has expanded production capacity to meet global demand and ensure the stability of energy markets.

•  Main Arab state actively working to curtail the disruptive policies of Iran and Syria.

•  The Kingdom is the regional leader of the �stabilization� camp versus those fomenting chaos in the MENA region.

•  Saudi Arabia’s regional foreign aid program is geared to stabilizing fragile Arab and Muslim states.

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Saudi Foreign Assistance Program

•  By far the largest and most comprehensive program in the region at $10 - $15 billion / year in direct foreign aid.

•  An additional $4 - $5 billion in soft loans is made by the Saudi Development Fund (SDF) to specific projects in poor Muslim countries each year.

•  The Kingdom is the largest single donor to Egypt, Lebanon, Jordan, Pakistan, Palestine, and other Muslim countries.

•  It is among the top five foreign aid donors in the world (behind only the US, China, and Japan, and on par with leading EU countries).

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Nawaf Obaid

Nawaf Obaid is a Senior Fellow at the King Faisal Center for Islamic Studies & Research. Formerly he served as a strategic affairs adviser to HRH Prince Turki Al Faisal.

He is the author of The Oil Kingdom at 100: Petroleum Policymaking in Saudi Arabia (Washington Institute for Near East Policy, 2000) and co-author, with Anthony Cordesman, of National Security in Saudi Arabia: Threats, Responses, and Challenges (Praeger/CSIS, 2005). He has been published extensively, including in The Washington Post, The New York Times, The Financial Times and Foreign Policy.

From 1999 - 2000 he was a (Non-Resident) Research Fellow at the Washington Institute for Near East Policy (WINEP) and from 2004 - 2007 he was a (Non-Resident) Adjunct Fellow with the Arleigh A. Burke Chair in Strategy at the Center for Strategic & International Studies (CSIS) in Washington, DC.

He holds a B.S.F.S. from Georgetown University's Walsh School of Foreign Service, an M.P.P from Harvard University's Kennedy School of Government, and has completed doctoral courses at MIT's Department of Political Science. He has received an M.Phil. (and will complete a D.Phil. in War Studies in 2012) from King’s College Department of War Studies.

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