Samuel Hyravý^[1], Bratislava International School of Liberal Arts

Abstract

The purpose of this study is to examine the process whereby countries that seem to be predominantly affected by their ideology overcome their narrative and become willing to negotiate with their enemies. The case study featured involves Saudi Arabia and its willingness to co-operate with its ideological enemy, Iran. The hypothesis of this article is that existential threat and a potential increase of power lead to co-operation even among enemies. Saudi Arabia is threatened by volatile oil prices, domination of one sector and increasing state expenditure; Iran's increase of power threatens the position of Saudi Arabia in the region, while low oil prices are also threatening it internally. Saudi Arabia introduced economic reform that could significantly increase its powers; however, large governmental investment is required. In order to increase its income Saudi Arabia is willing to co-operate with Iran, which will result in a short-term power increase for Iran; however, this co-operation will result in a long-term increase in power for Saudi Arabia. This article concludes that the hypothesis was proven and countries are willing co-operate when their power position is being threatened.

Keywords: Saudi Arabia, Iran, oil, ideology, power, international co-operation.

Introduction

What drives countries to overcome their disputes and co-operate with their enemies? Is such co-operation among enemies even possible? To explain this phenomenon, this article will examine a case study from the Middle East. The Middle East is a region marked with brutal wars and numerous foreign interventions; a place where three major religions emerged and clashed. Out of blood and sand, great nations emerged, and these nations compete for dominance over the region. Ideology is everywhere, and some of the countries have the role of religion written into their constitutions. The present case study examines Saudi Arabia and its position towards Iran; two countries that are currently geopolitical enemies. Each uses hostile rhetoric against the other, such as 'serpent's head', members of 'Axis of Evil', 'sponsors of terrorism', 'mad mullahs', and so on (Beeman, 2005: 69)

Iran and Saudi Arabia are sworn enemies fighting their ideological proxy wars in Yemen, Syria, and Iraq. However, we have seen signs of co-operation previously among these two enemies. Under what conditions are these two players willing to co-operate? The main scope of this research is to provide an explanation of the seemingly irrational behaviour of the state. The main theoretical framework used is realism, notably Hans Morgenthau and his work Politics Among Nations: The Struggle for Power and Peace (1948) and in following additions his six principles of realism. Realism in international relations stresses the omnipresent possibility of war. The nature of the states, their selfishness, their competitiveness, and lack of institution that would maintain world order and peace results in this aggressive environment.

For realists, the international arena is anarchy where each state is pursuing its own interests. For Morgenthau, each state is pursuing interests in terms of power. States are not primarily concerned with morality, religion, ideology or identity. They are mainly driven by their own national interests of pursuing power and survival. Realists view nations as selfish competing players in a game without a referee. States are engaging in wars to eliminate their rivals, just as they are forming alliances to fight their common enemies. States, for realists, are always anticipating conflict. In his six principles Hans Morgenthau argues that politics is also governed by laws rooted in human nature. Despite the fact that realism is preoccupied with interest defined in terms of power, he claims that realists also acknowledges different associations with power with regard to changes in time and circumstances. Morgenthau also points out the realist's awareness of moral significance for the state and decision itself. However, successful political actions remain the central priority.

In his fifth article, Morgenthau articulates that realists refuse to identify the moral values of one nation as universal, superior values governing the universe. Ironically, fighting in the name of morality and higher values is often used as a framework of mobilisation for conflict (Morgenthau, 1978). He argues that countries' decision-making is driven by interest defined in terms of power. Morgenthau emphasises the rationality in the international relations. He argues that rational foreign policy is essentially a good foreign policy, because the outcome of foreign policy is the rational calculation of the costs and gains of each decision. This rationality focuses on minimising costs and maximising benefits. Therefore for realists, prudence, the ability to successfully make a decision, is the most important trait of a leader.

Realists also argue that states are not primarily concerned with ethical, ideological, religious interests; rather they use them as political tools in order to maximise their power. Just like states are focusing on increasing power and their survival, so are leaders of the countries pursuing the same goal inside the country. In this case, the al-Saud clan is focusing on their survival and maintaining power inside Saudi Arabia. This article argues that it is rationality of the careful calculations that led to the shift in approach that might seem irrational to some observers.

Realist approaches argue against Hinnebusch's (2003) analysis of the region, where he argues that it is also pan-Arabism and the identity of belonging to an Arab nationality that drives countries to fight or co-operate. However, since the Gulf War, it is evident that this connection between Arabs and Persians is not particularly significant. The same logic can be applied to the sectarian question. One might argue that it is the ideology of the particular branch of Islam that drives countries in their decision-making. Islam is of course significant for Saudi Arabia and Iran, but how decisive is this factor? This article argues that it is used only for political reasons as a tool how to increase power.

Barnett (1998) describes the birth of Iran and Saudi Arabia. He argues that Islam played a significant role in the development of both countries and of the Middle East region in general. Early origins of their sectarian conflict emerged in the seventh century when the polarisation of the whole region into Sunni and Shia Islam began. It was under the Safaris, a militant Shiite group, when Shiism became the state religion in Iran. But the majority of Iranians were still Sunni; this all changed with the rule of Ismail around the year 1500 when he began the brutal campaign to convert Sunnis to Shiism. Barnett identifies three significances of Islam for the leaders in the region: moral order, social organisation, and political mobilisation. Wehrey (2009) argues that clearer connection between the countries of the Middle East happened after the fall of Saddam Hussein in Iraq.

Both Iran and Saudi Arabia represent two major sectarian groups. Shia and Sunni support different sides in the whole region. Proxy wars between the two groups in Syria and Yemen resulted in an antagonistic relationship between two states, at least on the rhetorical level. Wehrey (2009) claims that Saudi Arabia's support of Wahhabism was primarily used as a tool to gain dominance in the region. But ideological conflicts can be overcome, as Wehrey (2009), and Fürtig (2002) argue. Wehrey gives us an example of Lebanon, where both sides co-operated to alleviate the situation in the country. Or during Saddam Hussein's invasion of Kuwait where both sides agreed that they needed to oppose such violation of regional balance (Fürtig, 2002). Beydoun and Zahawi (2016) argue that Islam became the primary strategy for Iran and the Sunni Gulf states to increase their regional power. They also classify this as the main reason why the whole region became polarised. This fits with the realist approach that perceives the struggle for power and survival as the primary goal of states.

The recent significant shift in the balance of power happened when the nuclear deal between Iran and the United Nations Security Council's five permanent members (China, France, the Russian Federation, the UK and the USA) was signed. Beydoun and Zahawi (2016) consider this deal as significant in the normalisation of relations with the Gulf States and Iran. They highlight the fact that commerce and economic benefits are the main driving force of this normalisation. Hussain and Abdullah (2015) in their work analyse outcomes of the Iranian isolation that lasted for years and consequences of nuclear deal on Iran. For them, the whole deal strengthened the position of Iran in the region and its power to negotiate with others. Despite the opposition to the deal from the entire Gulf block, but mainly Saudi Arabia, Hussain and Abdullah (2015) expect increasing co-operation between the two states. They agree with Beydoun and Zahawi that co-operation bewteen Saudi Arabia and Iran is expected due to the possible economic gains for both of them. Iran, as a major economy, re-entered the market and is aiming to boost its oil production.

Sudden co-operation

On 30 November 2016, Oil Petroleum Exporting Countries (OPEC) members met in Vienna, Austria for their 171st meeting. The members agreed to adjust oil production once again to increase crude oil prices. OPEC abandoned production quotas and price targets in November 2014 (World Bank Group, 2017a: 14). Two months of intense negotiations preceded the agreement. The agreement was based on recommendations of the High-Level Committee that was set up after the extraordinary 170th meeting in Algiers. As a result, producers agreed to cut 1.2 million of barrels per day (mb/d) from October 2017 oil output, targeting 31.9 mb/d. Saudi Arabia agreed to reduce its production by 0.49 mb/d while agreeing to allow the Islamic Republic of Iran to increase its production by 0.09 mb/d. To maintain production at the agreed levels, OPEC members also agreed to establish a High-Level Monitoring Committee responsible for monitoring production levels in each country ('OPEC 171st meeting concludes', 2016). This agreement came into effect on 1 January 2017. OPEC members also met with non-OPEC oil producers to mutually agree on the cuts; these producers agreed to also reduce their production and establish a high-level monitoring committee with the same purpose. This agreement reduced oil production due to cuts from the 151st Extraordinary OPEC meeting in Oran, Algeria in 2008. Iraq participated in the cuts for the first time since 1998. For the first time, non-OPEC countries are involved in the production adjustments ('Oil Price Volatility', 2016).

The fact that Saudi Arabia was willing to cut its production, while Iran was allowed increase its own, goes against the previous strategy of the monarchy. Reducing its own potential economic gains and agreeing to increase Iran's would be hard to imagine several years earlier. Even a few months before OPEC reached agreement the Saudi oil minister intervened and refused to agree to a similar proposal. So why would Saudi Arabia, so vocal about the 'Iranian threat', suddenly agree to co-operate with Iran? This article argues that it is a result of the calculation of the potential risks and benefits. The global situation is radically changing, both politically and technologically. The power of Saudi Arabia is being threatened both internally and externally. While threats and state expenditure are increasing, income is decreasing. All of these factors contributed to the recent political shift. However, it is the power position of a country impacted by external economic pressures, the vulnerable national economy due to the domination of one sector, and the changing power relations that led to the shift in position.

Iranian nuclear deal

On 14 July 2015 the permanent members of the United Nations Security Council and Germany reached an agreement with Iran on the Joint Comprehensive Plan of Action (JCPOA) also known as the Iranian nuclear deal. This deal significantly increases the time necessary for Iran to develop nuclear weapon also known as the 'breakout time'. In exchange, the international sanctions imposed on Iran were lifted. The main concern of the Gulf countries, regarding the nuclear deal, is Iranian use of the new capital. The Gulf countries are less concerned about the Iranian nuclear programme and more with its geopolitical plans, particularly in light of the recent increase of the Iranian influence over the region (Ibish, 2015).

As a result of the deal, an economy of Iran will significantly improve. The immediate result of the sanction was the release of frozen assets, up to $107bn. The World Bank estimated that sanctions reduced Iranian exports by $17.1bn between 2012 and 2014 (Devarajan and Mottaghi, 2015). Exports are expected to increase rapidly. Up to $50bn of Foreign Direct Investments (FDI) are projected to pour into the Iranian economy following the deal (Motevalli, 2016). Hassan Rouhani, president of Iran, conducted a series of official state visits across Europe, where he signed contracts on behalf of Iran. Iran reached a deal with the French PSA Peugeot Citroën worth €300m and Italian steelmaker Danieli worth up to $6.2bn. Besides these deals Iranian and Italian companies also signed deals worth $18.36bn (Meichtry and Wall, 2016). The need for modernisation in the aviation sector resulted in agreements with Boeing for 80 aircraft worth $16bn and with Airbus for over 100 A330 models (Motevalli and Kamel, 2016). Iran also re-entered the oil market. Significant investments are expected in this sector since Iran decreased its production because of the sanctions. The oil sector is expected to rise since a majority of the oil reservoirs are unused. Economic sanctions were first imposed by the United States in 1979. However, Iran managed to keep growing and diversifying its economy despite the sanctions. The Iranian economy is one of the most advanced and diverse economies in the region with 70% of its revenues coming outside of the oil sector (Young, 2015; Beydoun and Zahawi, 2016). This makes Iran less dependent on the oil price and less vulnerable to its volatility, potentially allowing Iran to use oil as the strategic tool once again. US President Donald Trump, during his campaign, repeatedly criticised the Obama administration for the Iran nuclear deal. However, a repeal of the deal is very unlikely, and even if the US decides to re-impose sanctions under the Trump administration, the European Union will not.

Summary of the economy of Saudi Arabia

Revenues from the oil are a crucial part of the Saudi state budget, and therefore survival of the country depends on oil, at least for now. Revenues from exports reached $205.3bn in 2016, and petroleum and petroleum related products represent 90% of this income (CIA, 2017). Saudi Arabia is a country with the second largest proven oil reserves; at least 260 billion barrels. This would last for the next 68 years at current production levels (CIA, 2017). Most of these reserves were discovered in the eastern, predominantly Shia, province of Saudi Arabia. However, Saudi Arabia aims to increase its production and continues to search for new reserves of crude oil. This requires significant investment in the oil sector. The Saudi oil ministry estimates that the government will need to invest $70bn to meet its goal of producing 20 to 30 m/bpd in 2025 (Al-Naimi, 2006). The price of oil fell by 80% between June 2014 and February 2016 according to the World Oil Outlook (Organization of the Petroleum Exporting Countries, 2016) Existential dependence on oil prices due to the lack of alternative income for the country, in combination with low oil prices, resulted in a record state deficit. In 2015, Saudi Arabia hit a record state deficit of $98bn (Freedom in the World, 2016).

Another important feature of the Saudi Arabian economy is the royal family itself. In 2005, there were around 3200 royal members in King Abd al-Aziz's immediate family. The annual average cost to sustain each of the members was $1m. However, when counting also the king's half-brothers, all the cousins and families into which the Al-Saudi clan married, the number of the royal family members dramatically increases. Under this calculation, there are approximately 30,000 members of the royal family. The cost of sustaining them could add up as much as $10 billion a year (Raphaeli, 2003). Another problem of the economy is youth unemployment, and currently, it presents one of the biggest challenges for the country. As much as 45.41% of the population are under 24 years old (CIA, 2017). Another major problem for the Saudi economy is foreign workers: in 2008 there were approximately 8 million foreign workers without citizenship compared with 24.7m citizens of Saudi Arabia (Varia, 2008: 15). The Kafala, or the sponsorship system where foreign workers are required to have a Saudi sponsor to enter the kingdom, results in low mobility across occupations since employees are bonded with the employer. This sometimes creates conditions that are almost like slavery (Varia, 2008: 3).

All of this results in the the private sector contributing little to the economy. The majority of the business are controlled by the royal family, and Freedom House ranked Saudi Arabia in 94th position ('Freedom in the World', 2016) in the ranking of how easy it is to do business in the country. On a scale from 1, representing the best environment for the start of new business, to 190, Saudi Arabia compared with its regional partners is ranked 8th out of 20 out of the Middle East and North Africa (MENA) region (World Bank Group, 2016a). The regime for decades subsidised its citizens in exchange for obedience. All of these features of the Saudi Arabian economy also contributed to the fact that only 10% of the state budget comes from the oil sector.

Existential dependence on oil revenues and the location of the majority of the oil wells in the East Shia province led to increased budget spending on the security. However, it is not only the importance of oil, oil locations and volatile oil prices that threaten Saudi Arabia. Saudi Arabia is also using the Strait of Hormuz as a means of transporting the oil. 17 million oil barrels are shipped through the Strait of Hormuz each day. It provides the only sea passage from Gulf of Oman to the Persian Gulf, and 30% of the world trade in oil is shipped through it. It is the most important oil trading route in the world (EIA, 2014), and the main trading route to the Asian markets. Saudi Arabia's main export partners are China (13.2%), Japan (10.9%), the United States (9.6%), India (9.8%) and South Korea (8.5%) (CIA, 2017). In total, up to 68% of Saudi Arabia's export goes to Asia. The Strait of Hormuz is the potential weakness of Saudi Arabia, and potential blockade can further decrease oil revenues. Iran repeatedly threatened to 'close the Strait'.

Changes in oil prices

The role of supply and demand is one of the most important factors affecting crude oil prices. The provision and demand of oil are being impacted by both market and non-market conditions. Oil is also frequently used as speculation tool in the stock market, adding to the volatility of oil prices (Mottaghi, 2016: 3). Countries also tend to use oil as a strategic tool, significantly affecting its price and adding to the volatility. Another element is the inelasticity of supply and demand in the short term. It takes time to adjust production and in the case of consumption new technologies or sources are required to replace the oil as a source of energy.

As mentioned before, oil prices fell by 80% from June 2014 to January 2016 (Organization of the Petroleum Exporting Countries, 2016: 1). In June 2014 the price of a barrel of oil was around $100; this fell to $22.40 in January 2016. This means that the daily decrease in income to the state budget, based on production form the January and compared with the prices from January and June, was $814,800,000. Oil prices were even higher when they peaked at $140 in June 2008. Economic think tanks, OPEC itself, the World Bank and others analyse the current situation and forecast oil prices and the demand and supply numbers to be expected in years to come. The problem is that markets can change rapidly, particularly due to international events such as war or major terrorist attack. The growth of major economies such as those of China, the US and Germany also significantly affects demand, as do environmental policies and technological advances in transportation and industry.

The World Bank Global Economic Prospects report (2017) dropped the forecasted gross domestic product (GDP) growth of Saudi Arabia. In 2015 it reached 3.5% growth, in 2016 it was 1% growth, and it is expected to reach 1.6% in 2017; this can be comapred with Iran, where GDP rose in 2015 by 1.7% despite the sanctions, and in 2016 reached 4.6% as result of the sanction lift. In 2017 Iran is expected to grow as much as 5.2%. European energy consumption has been decreasing for past six years, and it is very unlikely that anything will change (Eurostat, 2016). The European Union adopted the Europe 2020 strategy (2016) that sets up the target of 20% of energy coming from renewable energy sources and a 20% increase in energy efficiency. The 2030 Energy strategy aims for 27% of energy to come from renewables (A policy framework for climate and energy in the period from 2020 to 2030,2014). However, OPEC in its World Oil Outlook 2016 (Organization of the Petroleum Exporting Countries, 2016) expects the European Union to review its goal from 27% to 30% of energy coming from renewable sources (Organization of the Petroleum Exporting Countries, 2016: 48; 2030 Energy Strategy). In the WOO 2016, OPEC displays analysis of the current markets and forecasts demand, supply and possible changes in the economy. Most of the oil demand is expected to come from the emerging markets (Organization of the Petroleum Exporting Countries, 2016: 11).

OPEC acknowledged dramatic technological development achievements, energy efficiency, and environmental policies and adjusted their forecast for 2040. They decreased expected demand by 0.4 mb/d (Organization of the Petroleum Exporting Countries, 2016: 2). Global macroeconomic conditions have continued to offer challenges that might pose problems for the stability of prices. Questions about global economic growth, environmental policies and political uncertainties in both oil-producing and oil-consuming countries constitute a threat to oil prices ('Oil Price Volatility', 2016). In the report, OPEC forecasted three different scenarios; the most optimistic one is used for the reference. However, the most pessimistic one is worth mentioning since it shows how uncertain these projections are. According to the most pessimistic forecast, oil demand will reach only 98.3 mb/d in 2040, representing a 11.1 mb/d decrease compared with the most optimistic scenario (Organization of the Petroleum Exporting Countries, 2016: 19). These changes depend on the uncertainties in the forecast. Technological developments and political effects on the economy are hard to predict; therefore actual demand might be even lower. Another factor that might dramatically influence world oil demand is the US. OPEC expects US energy demand to rise. However, this might change with new president Donald Trump. OPEC mentions two major uncertainties that might significantly affect actual demand, and that is the development of the Chinese economy and the impact of Brexit on the European and world economies (Organization of the Petroleum Exporting Countries, 2016: 28). OPEC in its forecast depends heavily on the Asian markets and developing countries. These countries are experiencing significant environmental issues, and further governmental interventions are expected. For example, Hong Kong provides subsidies for some electric cars. And according to the official press agency of the People's Republic of China, Car Qi, acting mayor of Beijing, promised to continue improving Beijng air quality also in 2017. Last year Beijng targeted coal use and high polluting vehicles. This year, Beijing's last coal power plant will be shut down, coal consumption will be cut by 30%, and about 300,000 high-polluting cars will be taken down (Xinhua, 2017).

Implications of the changes in oil prices

As mentioned before, Saudi Arabia relies heavily on revenues from oil, and the drop in oil prices led to a record state deficit. The International Monetary Fund estimates that oil prices of $105.60 are needed to balance the budget, which is more than twice the current levels (World Bank, How is Saudi Arabia Reacting to Low Oil Prices?, 2016). Decreasing reserves and the shrinking state budget are threatening the position of Saudi Arabia. Revenues from oil are used for subsidies and military operations in the region. Long lasting low oil prices are posing an existential threat to Saudi Arabia, both internally and externally.

Internal

The royal al-Saud family maintained its power in the kingdom through a 'social contract' with the citizens. Residents gained economic benefits in exchange for fewer political rights; however, total elimination of these benefits could reduce support for the royal family and with increasing external pressure from Iran the unsatisfied Shiite minority might revolt. Saudi Arabia witnessed Arab Springs in its neighborhood, some of the protests even spreading to the kingdom. This contributed to an increase in governmental spending on internal security undertaken to maintain the order. Members of the royal family are still on alert for a potential revolution. Like many other oil producing countries, Saudi Arabia subsidises a huge variety of products to maintain political stability. This policy began in 1970 when subsidies on food and electricity alone reached $1.6 billion. New cuts that were introduced following the economic crisis in 1998 did not last long. In 2002 subsidies again skyrocketed and reached $2.652 billion (Gürer and Ban, 2000). Mann (2010) concluded that it is most likely that the royal family would prefer to maintain the current conditions and not take the risk of changing the status quo. However, the state deficit keeps increasing, and the state budget income shrinking. A recent decision made in Saudi Arabia is a sign that the status quo is slowly changing. Deputy Crown Prince Muhammad bin Salman al-Saud introduced his 'Vision 2030' as part of the National Transformation Program. However, fast reforms might pose a risk. Iran witnessed revolution due to financial problems, decreasing support for the government and a sudden series of changes. Financial problems resulting from low oil prices pushed the royal family to take extreme steps. For the first time, Value Added Tax (VAT) will be introduced to Gulf Co-operation Council members. Following the record state deficit, the government reduced subsidies for fuel, water, and electricity as a result price of these commodities have risen by 60% (Freedom in the World, 2016).

The Eastern Province poses a threat to the Saudi Arabia; it is a strategic region for the economy, but it is home to a suppressed religious minority. Citizens witness the power of protests in neighbouring countries; they realise how important the oil fields are to the regime and how they can be used as the source of funds for a potential rebellion. Possible conflict in this area could paralyse the entire country as it would significantly lower the kingdom's income.

The radicalisation of political opposition alongside Shia and Sunni fundamentalists led to increased Saudi spending on security following an increased number of terrorist attacks and illegal protests in the Eastern Province (Mann, 2010). According to the data accumulated from 1970 to 2015 by National Consortium for the Study of Terrorism and Responses to Terrorism (START), Saudi Arabia witnessed a massive rise in the number of terrorist attacks on its soil. In 2015, 103 cases of terrorist attacks were reported; this compares with just 14 cases in 2014. The previous all-time high was in 2004 when 17 attacks happened (START, 2016). It was in this period when an 18% increase in state expenditure occurred in the years between 2001 and 2003, due to the war in Iraq and increased terrorist activities in the country (Mann, 2010). Terrorist activities are growing in the whole region; they peaked in 2014 with 7000 reported terrorist attacks in the Middle East and North Africa region (START, 2016). Most recently in 2015 governmental spending increased by 13%, as a result of previously planned additional salaries for civil and military employees (Khatteeb, 2016). Riyadh's defence budget has been rising by 19% annually since the Arab Spring uprisings in 2011. This clearly reflects fear of potential protests and regional unrests (Khateeb, 2016). These concerns are based on previous actions of Iran. Iran provided funding and support for uprisings and coups across the Middle East (Molavi, 2015).

External

In their geopolitical struggle in the region, Saudi Arabia and Iran are supporting different groups across the area. In Syria, for example, Saudi Arabia is supporting rebels in opposition to the Syrian President Bashar al-Assad while Iran supports the government. Both countries realise that if their proxy wins, they will control the path of the country. Behind the mask of the sectarian struggle between Sunni and Shia, a complicated geopolitical game is being played. Saudi Arabia expanded its indirect support to direct military intervention in Yemen. Here, sides are flipped, and it is Saudi Arabia that supports the ruling regime while Iran supports the Houthi rebels who are attempting to overthrow the Sunni government. However, these military operations, both direct and indirect, are very expensive. A huge portion of the recent increasing military spending is connected with Saudi Arabia's interventions and proxy wars (Khateeb, 2016). According to the Stockholm International Peace Research Institute (SIPRI), governmental spending on defence reached 27.4% of the entire governmental spending in 2005; this represents 13.7% of Saudi Arabia's GDP. It is the third largest expenditure of GDP in percentage terms. In the year 2015, Saudi Arabia allocated $20 billion just for military operations in Yemen (SIPRI, 2016).

With decreased finances for the state budget, new austerity measures are being introduced. Waging proxy wars in Yemen and Syria is financially demanding, but military spending will not reach the heights of 2008, when oil prices were around $140 per barrel. Supporting various Sunni groups across the region against Shia groups is a crucial strategy for Saudi Arabia for preserving its power. The nuclear deal led to an increase in Iranian power; as a result, enormous amounts of funds are being unfrozen, and investments are pouring into the country. This allows Iran to increase its military capabilities and boost support for their proxies. Saudi Arabia shares its fears over Iran with its GCC counterparts. Wehrey and Sokolsky (2015) argue that Iranian support for Bashar al-Assad's regime in Syria, Houthi rebels in Yemen and Shia militias in Iraq added to unprecedented unity among the GCC members. Therefore, we see that it is an existential threat that brings Arab countries together and forces them to create strong alliances to survive. This evidence contradicts Barnet's (1998) claims over pan-Arabism and shared identities that drive countries to co-operate.

Conclusion

To conclude: Saudi Arabia is facing a new reality. The world is changing, and due to technological advances oil is becoming a less important commodity. The Saudi economy is heavily reliant on the income from oil revenues. Oil prices are extremely volatile, resulting in enormous changes in the state budget over the years. The power of Saudi Arabia is being threatened by the rising threat of the terrorist attacks, and unrest in the Eastern Province. State budget expenditure is also increasing due to the military operations in Yemen, Syria and Iraq. To continue fighting its external enemies, Saudi Arabia was forced to adopt austerity measures. However, Saudi Arabia for years provided its citizens economic benefits as part of the 'social contract' in exchange for total obedience; any decrease in these benefits might result in unrest and protests, eventually crippling the country and weakening the kingdom.

During the Arab Springs, Saudi Arabia increased its subsidy programme and increased its restrictions over a Shiite minority. Even with the current austerity measures, this system is unsustainable. To balance the budget, oil prices would need to double. Saudi Arabia is also facing an external threat from Iran. Internal threats from unsatisfied citizens, terrorists, and political opposition need to increase its revenues to keep order in the country. As the result, Vision 2030 was introduced – a programme to reform the economy of the country, decrease governmental spending and increase revenues by diversifying the economy and supporting private companies to enter the market. This reform requires massive governmental spending; Saudi Arabia plans to gain funds through partial privatisation of the state-owned oil company. Successful implementation would eventually result in increased Saudi power. This careful calculation of risks and benefits led to the OPEC deal that was reached on 30 November 2016. In the short term, it gives a certain economic advantage to Iran that can be used against Saudi Arabia; however, in the long term this minor increase in the state budget can significantly strengthen the kingdom. This deal represents a willingness to overcome ideological – in this case, sectarian – differences, to increase the power position of Saudi Arabia. This article has proven that even countries with strong ideological positions are willing to co-operate with their enemies when their power position is being threatened.

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Notes

[1] Samuel Hyravý, Department of International Relations, Central European University

References

 

To cite this paper please use the following details: Hyravý, S. (2017), 'Comprehensive Principles of Decision-Making in Saudi Arabia', Reinvention: an International Journal of Undergraduate Research, Volume 10 Issue 2: Featuring the Eramus+ BLASTER Project, https://warwick.ac.uk/fac/cross_fac/iatl/reinvention/archive/volume10issue2/blaster/hyravy. Date accessed [insert date]. If you cite this article or use it in any teaching or other related activities please let us know by e-mailing us at Reinventionjournal at warwick dot ac dot uk.