A week before recording this episode, the U.S. Congress released a report directly naming Saudi Arabia's Crown Prince Mohammed bin Salman as the party responsible for the October 2018 murder of the Saudi columnist and dissident Jamal Khashoggi. The Biden administration has imposed a ban on several leading Saudi officials who were also implicated in that crime, but it has conspicuously avoided slapping sanctions on the crown prince himself, setting off a debate in this country about the proper U.S. relationship with Saudi Arabia and with Saudi Arabia's leaders. MEI Faculty Director Tarek Masoud sat down with Professor Bernard Haykel of Princeton University to discuss Saudi Arabia, its leader, and the future of U.S.-Saudi Relations.
Tarek Masoud:
I'm Tarek Masoud. I'm a professor at Harvard Kennedy School of Government and the Faculty Director of the Middle East Initiative, and it's my tremendous pleasure to welcome you to today's conversation with Professor Bernard Haykel of Princeton University on the eminently timely subject Whither Saudi Arabia. Now, as most of you will know Professor Haykel and I are sitting here about a week after the U.S Congress has released a report directly naming Saudi Arabia's Crown Prince Mohammad bin Salman as the party responsible for the October 2018 murder of the Saudi columnist and dissident Jamal Khashoggi.
Tarek Masoud:
The Biden administration has imposed a ban on several leading Saudi officials who were also implicated in that crime, but it has conspicuously avoided slapping sanctions on the crown prince himself, setting off a debate in this country about the proper U.S relationship with Saudi Arabia and with Saudi Arabia's leaders.
Tarek Masoud:
Now, there are powerful arguments on both sides of that debate. Those who call for punishing the crown prince, who's known by his initials MBS, and for rethinking the U.S relationship with Saudi Arabia. Those people note the heinousness of the crime against Mr. Khashoggi and they point to a longer record of U.S-Saudi friction over human rights, and that country's history of producing and exporting extremist interpretations of Islam. Now, their opponents in the debate will note that MBS has been the principal driver of current efforts to root out those extremist interpretations of Islam. And that while admittedly a muscular autocratic leader, he has nonetheless used his power, not just to silence dissidence, but also to do things like liberate women from the shackles of fairly oppressive Saudi laws, to open up the country to foreign tourists and visitors, and to enable Saudi young people to partake of a global culture whose fruits they had long been denied.
Tarek Masoud:
Now there's nobody who is better positioned to help us understand this debate than our guests today, Bernard Haykel. Professor Haykel is an historian and a social scientist who studies questions of religious identity and authority in the modern Middle East. He holds a tenured full professorship in Princeton University storied Department of Near Eastern Studies. And he's the director of Princeton's Institute for the Transregional Study of the Contemporary Middle East. His first book was a magisterial study of Islamic reformist thought in 18th and 19th century Yemen. And he's also the co-editor of an important book published in 2015, entitled Saudi Arabia in Transition, which is essential reading for anybody who wants to understand the immediate pre-history of Saudi Arabia's current political and economic and social moment. Now he's published widely on Saudi politics and society. He's a frequent traveler to that land. He's a frequent interlocutor of its leaders and its intellectuals.
Tarek Masoud:
He's far gotten more about Saudi Arabia than I will ever know, and I grew up there. So it's a great pleasure to have him with us today. Dr. Haykel will speak for about 35 minutes on the theme Whither Saudi Arabia, after which I'll engage him in some conversation and then we'll open up the forum to questions from you, our audience. Now, if you're not comfortable having your face and voice recorded or having your name mentioned, you can send me your questions at any time during the discussion using the chat function in Zoom, and I will do my best to weave your questions into the conversation with Professor Haykel. And now without further ado, let me see the floor to our guest Professor Bernard Haykel.
Bernard Haykel:
Thank you. Thank you so much Professor Masoud. Of course, you're a dear friend. Thought it's a real pleasure and honor to be invited. I particularly want to also welcome your students because I know that this is part of your class and that you had asked me to speak about Saudi Arabia, but also to mention something about energy and oil, and I will do so. And I am actually teaching a course called Oil and Energy in the Middle East at the moment, and it is very much on my mind.
Bernard Haykel:
So let me begin. I'm going to speak to a general audience and then I'm happy to do deep dives during the Q and A. So I think to understand what's happening in Saudi Arabia today, one has to understand a bit about the nature of the government, the regime, the royal family, and that there were certain structural features or factors that were in the works, in the making and that go a long way to explaining what we see happening today. So let me mention some of these structural factors.
Bernard Haykel:
The first is that the sons of the founder king, this is King Abdulaziz who died in 1953. His sons were getting quite old and increasingly the regime that was in charge had become a gerontocracy with very old individuals who were sort of dying in very fast sequence. You had two crown princes in the arts who died one after the other. And the king at the moment is 85 or so. And it was clear to anyone who was watching this system, this political system that transfer in power to a younger generation of princes was inevitable. And now the question was, how would that transfer happen? Would it be a stable transfer or a messy and bloody one? And how would that be managed?
Bernard Haykel:
There are lots of princes as most of you know, I mean, hundreds and thousands, in fact, and many of them think that they are both eligible for the position of king, but in fact, think that they should be king. And so when I began doing fieldwork in Saudi Arabia in 1998, it was clear that that would happen, and most people one would speak to in the kingdom, including Jamal by the way, who I met in the 90s would say that somebody would come and it would have to be very messy and probably quite bloody because there was a strong sense of entitlement that had permeated into the culture of the royal family and into certain princes. It would be very difficult to get rid of them peacefully or without bloodshed, not least because the way the different institutions of government and power centers had been divided up and allocated to different princes and their sons.
Bernard Haykel:
So there was a prince in charge of the national guard and his son was, and this was then Crown Prince Abdullah, later King Abdullah and his son Mutaib. You had someone who was in charge of the Ministry of the Interior. This was Prince Nayef, and then his son Muhammad bin Nayef. The Ministry of the Interior, by the way, employs close to a million people, has probably the most formidable domestic security forces in the kingdom. And there were other princes in charge of different elements of the state. And that inevitably these princes would clash with one another, not at least because they have military capacity and capability. So, what has happened is unlike anything anyone that I know predicted, which is that a king assumed exceeded to the throne in January 2015. He then accepted the order that had been established before him in terms of succession, but then soon after altered that and handed the position of crown prince in June of 2017 to his son Muhammad bin Salman, otherwise known as MBS.
Bernard Haykel:
And while it is true that certain princes were arrested and others are under house arrest as we speak, the bloodshed, the kind of wanton and massive bloodshed that many had expected to happen has not happened. And you have a sovereign decision by an absolute monarch to have his son succeed him.
Bernard Haykel:
The other structural feature, other than the fact that the regime was becoming a gerontocracy and you had this succession issue that had to be dealt with is that oil, as most of you know, is a rapidly depleting resource commodity. And increasingly as the world needs to transition to other less polluting, less climate changing fuels, it is going to become lesser in value as a commodity. It'll become less valuable even though the kingdom Saudi Arabia has something like 23% of the world's proven reserves, meaning this is the cheapest and most abundant supply, and most easily transportable supply of oil in the world.
Bernard Haykel:
Nonetheless, the leadership has known that a transition has to happen and will happen. The economy has to diversify away from oil, which is the principal source of revenue for the government. And this is a government by the way, which until quite recently, did not tax its population, it still does not have an income tax, and employs 70% of the working population. So this is a state that is in a sense, a nanny state that is a redistributive state that essentially redistributes the wealth to its citizenry. And that is as a function of the growing population and the ever increasing proportion of the budget that goes to public sector employees. This was unsustainable, could not be sustained. They were going to hit a wall very soon in the next 10 years, and something had to be done about it.
Bernard Haykel:
Now, the kingdom has, since the early 1960s repeatedly wanted to diversify its economy, it's been aware that oil is a depleting resource and that this situation cannot remain as is, but it has repeatedly also failed at diversifying away from oil. The government remains the principle economic force in society and in the economy, government spending determines how the private sector performs, and now you have a new vision. It's not the first. You have a new vision, which is called Vision 2030, that is pushing very hard to accomplish what has not been accomplished in the past.
Bernard Haykel:
Now, the other thing about the nature of the regime is that the size of the family, and I alluded to this earlier, the size of the royal family had become very, very big, many thousands of princes and princesses. And increasingly these individuals were not able to live off of the stipend that they received. In fact, they were engaged in predatory behavior muscling in on the private sector, muscling in on government contracts, taking kickbacks, creating an endemic form of corruption that again was also proving economically and financially unsustainable. And that had to also be dealt with.
Bernard Haykel:
And as most of you know, if you're dealing with mafias, which is what many of these individuals can be thought of as being, it's very difficult to disenfranchise them politely and peacefully. They often will not give up their entitlements easily.
Bernard Haykel:
And lastly, and I'm sure there are other factors that need to be taken into account. But lastly, on my list is that the U.S was pivoting away from the region. The U.S was sending signals that it was tired of the middle East. It had engaged in several Wars in the middle East from Iraq and Afghanistan and that there was little to be gained there, and it had to think more and more increasingly about China.
Bernard Haykel:
And so the Middle East was a problem. And that it's allies in the region either have to carry as it were their own water, militarily and politically to manage the region. And with president Obama, there was this idea that the region had to be shared, and there should be a balance of power between Iran and the other Arab countries. And that there should be some sort of system of spheres of influence that again, terrified the Saudis. And so they felt they have to develop their own capabilities and capacities, not least their military. The Saudi military had been, and until quite recently, a kind of parade ground military, it was deliberately kept weak because of the experience of repeated coups in the Arab world in the 1950s and 60s. The Saudi regime did not want the military to engage in a coup against it, although there were attempts in the 60s for that to happen.
Bernard Haykel:
And so it was deliberately kept weak and also oversupplied with high-tech weaponry that could not really be used by the Saudis. And the reason for the high-tech weaponry was, I mean, there are two reasons that are positive for that, for this one is that they were there because they were kind of forward deployed armaments for the U.S in case the U.S had to come in and use them should the need arise. And this was partly true and it happened in 1990, 1991, when Iraq invaded Kuwait. The other was that this high-tech stuff, which by the way was often not interoperable, these systems didn't work with one another, was a tremendous source of graft and corruption for individual members of the royal family and other hangers on.
Bernard Haykel:
So, there is a desperate need for reform. Now reform as far as the regime is concerned, can come in obviously various forms. One is to reform the regime politically to allow for more representation in governance. And this was something that basically the Saudi royals have not, and this is true of all of them, I think, have not been really interested seriously in adopting an agenda of political reform where you would have meaningful participation in governance.
Bernard Haykel:
Some cosmetic attempts of course have been undertaken. Municipal voting, for instance, is one example of this. And incidentally, every time you've had voting in Saudi Arabia, the Islamists, who are until recently the best organized force in society, would almost always win hands down in elections. So when speaking to Saudi royals, you had different sort of views on this.
Bernard Haykel:
If you spoke to someone who was heavily influenced by the Harvard Business School, you would get the Harvard Business School kind of view of how politics should be run. So the king would be chairman of the board, and then you would have a prime minister who was another prince, but who would be fungible as it were, he could be replaced. Sort of a Jordanian style kind of monarchy but that would on paper look like a democracy of sorts.
Bernard Haykel:
And then you have another view, which is no. If you really want to tackle these structural impediments and features of this system, you need Xi Jinping style leader who would basically crack the whip and would not allow for political opening or reform, but rather the opposite would crack down on all the scent and would consolidate and centralize all power in his hands. And that is effectively what has happened.
Bernard Haykel:
However, other forms of reform have been adopted by MBS and by his father, namely the economic diversification plan, but very importantly, also a social reform of the kind that would allow for more women in the workforce, more women in public space, a crackdown on religious reactionaries, the religious police can no longer arrest people, can no longer harass people. And you really see this. I mean, visibly if you visit the kingdom, you see it on the streets. I remember in the 90s and 2000s the odds were, it was very difficult for any woman to walk, even fully veiled, in the street without getting harassed. Now I'm sure there's still harassment, but you can get into very serious trouble for doing that. And I hear from various women that things are easier and less harsh in terms of street culture and in terms of harassment in the street.
Bernard Haykel:
So you have that going on. Now is MBS likely to succeed in his economic diversification project? It's really hard to say. It's hard to say. And his record so far has been quite mixed. And I would say the verdict is still out. So, as I said, he's adopted very repressive measures. Saudis are afraid to speak in a way that they were not before. You often, if you go to the kingdom, people will put their telephones, their cell phones, either in the fridge or somewhere and walk in the garden to talk freely and openly to you. This was not the case in the arts when I visited.
Bernard Haykel:
And you have a number of people, Islamists, but not only Islamists, including liberals, women who are imprisoned and being accused of being traitors and having taken money from outside countries, the kinds of things that many of us find really difficult to stomach and distasteful and unacceptable. Although I hasten to add that very often the views that are expressed about this in the West, about the repression in Saudi Arabia, the people that are often discussed as needing to be freed and from prison are the liberals and the women, but no one ever speaks for the Islamist. It's fine if you repress the Islamists, if you repress Al-Qaida type supporters or sympathizers and so on. And he's also by the way toned down, that is MBS, and his father have reduced the number of capital punishments and sentences in the kingdom.
Bernard Haykel:
So the record, at least as far as politics is concerned, is one that is distasteful to Westerners and Western sensibilities and to human rights advocates. On social liberalization, as I said, I think the record is much better, especially when it comes to women in the workforce and in public. I think the record also in terms of better and greater government efficiency is much better. He's instituted all kinds of e-government type processes so that you can get your driver's license and your residence permit, your passport in record time, and you don't have to bribe anymore to do all of that. So there is a significant improvement there. And he ultimately wants to, and this is MBS now I'm speaking about, he really wants the country to be able to compete with regional countries that he benchmarks himself against. And namely, the UAE is the key country here.
Bernard Haykel:
He wants Saudi Arabia to function like Dubai or an Abu Dhabi in terms of efficiency. And he also has, like the UAE, these big projects, Neom being one of them, which is this big city in the NorthWestern corner of the country. I'll get to that in the Q and A if you want to talk about Neom. Now let me get to oil briefly. So in understanding the kingdom's ability to perform and to do all the things that it wants to do, oil is a key factor. And there's a rule of thumb, which is that if oil prices are up, you have all this extra money that you can dole out either to your people or on big projects. And if oil prices down in a [inaudible].
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Bernard Haykel:
Big projects, and if oil prices down on a sustained basis then you have much less money, you have to borrow a lot more and you end up with government deficits and an economy that's in contraction. Now, people who look at the oil markets say that for a number of reasons, we're looking at at least one more [inaudible] supercycle, which means that we still are dependent on oil. There's been a tremendous amount of retrenchment from investment in exploration and development around the world because of sustained low oil prices since 2014, which means that a country like Saudi Arabia which can still produce 10, 11, 12 million barrels of oil a day as other fields with their declines and the lack of investment continue producing less and less, there will be a return of demand after COVID and Saudi Arabia will reap the benefit of that increased demand and declining production from other places around the world, which means that the price could hit a hundred or more.
Bernard Haykel:
When it hits those levels, all kinds of things become possible because the revenue stream is just so enormous, especially if it's sustained. Which is what happened for instance between 2004 and 2014, which is known as the period of the second paphra, the second boom that the kingdom and other oil producing countries experienced. And by the way, you can make comparisons also with countries like Russia where President Putin for instance was hugely popular in the period between 2004 and 2014 because Russia was flush with money because of its oil revenue and people were happy because their living standard was improving. Now he's a lot less popular given where the price of oil is.
Bernard Haykel:
And I think the same type of logic applies to a place like Saudi Arabia as well. Now, one of my worries is that the long-term model of governance for countries like Saudi Arabia, but not just Saudi Arabia, I would include the UAE as well and Qatar and others, is that the model of governance is not us. It's not sort of accountable representative governance but rather the Chinese model. And by that I mean that legitimacy becomes based on performance of a certain kind. The state provides order, provides stability, economic opportunity and the delivery of certain services, but people are expected to shut up and not to speak and not to voice an opinion.
Bernard Haykel:
And I think that that long, and as China becomes the competitor to the United States, that model's appeal is likely to increase. And we have to think of ways to prevent that from happening frankly, for Saudi and for other countries. Now let me end in the sort of five minutes that I have to mention President Biden and former President Trump. So as you started out with your introductory remarks, clearly President Biden has made a decision, a determination which every American president has made once they stopped being on campaign and actually get into the Oval Office, which is that the relationship with Saudi Arabia is simply too important, too structurally important in terms of strategic interests to be decided, as Secretary of State Antony Blinken said, to be decided on the basis of the fate of one person or one man.
Bernard Haykel:
And by this I think he meant both, unfortunately, Jamal on the one hand and MBS on the other, right? That this is a country that is too important to sever ties with or to sanction its leader because of the consequences of such a decision would be unpredictable and would be ultimately deleterious and harmful to US as strategic interest. And here, US strategic interests are fairly clear when it comes to the kingdom. Firstly, you want the kingdom to remain a responsible actor in the global energy market.
Bernard Haykel:
So when for instance, in last March, the oil price collapsed because of the client and because of the demand destruction that was caused by COVID, President Trump called MBS I think at least five times begging him to cut production and to reach an agreement with Russia so as to save the US energy industry, right? And that is not an insignificant factor in US politics. Second, you need Saudi Arabia if you want to have some resolution of the Yemen war. Third, you need Saudi Arabia also if you're going to come to a permanent solution to the nuclear file with Iran.
Bernard Haykel:
And you need it also for a number of other, of course Israel is another one in case you want more Arab countries to normalize relations with Israel and also Saudi gives money to Egypt and it gives money to the Sudan and it has in the past given money to Lebanon and potentially to, and it continues to give money to Jordan and so it has this massive stabilizing role in the region. And stability is I think a very important element in US thinking, whether it wants to stay in the middle East or not, stability in the region is fundamental and Saudi Arabia is absolutely crucial to achieving that.
Bernard Haykel:
So it didn't come as a surprise to me that President Biden took the decision that he did, not least also because the assessment that was released did not have in it any direct evidence of MBS's involvement that, direct sort of calling for a murder. It was an assessment that the CIA made based on its reading of how the Saudi system functions and who the people around MBS are. Had the Biden administration released direct evidence of his direct involvement in the murder, I also suspect that Biden wouldn't have released such information, although I do think it does not exist either. So again, no surprise.
Bernard Haykel:
And I would say one more thing, which is, I think that president Biden is in fact a great thing for both Saudi Arabia and for MBS because President Biden will establish a relationship that is based on mutual strategic interests, will base it on institutional relationships between the militaries, between the intelligence services of the countries, between the foreign ministries of the two countries and we'll move away from this highly personalized WhatsApp based relationship that is transactional and in which President Trump invariably insulted the Saudis.
Bernard Haykel:
I mean, if you actually listen to how he spoke about them and about the crown prince, there was nothing in it for Saudi Arabia, frankly. And they put up with him of course but I think that Biden in the end is a very good thing. And for that relationship to move away from the way in which President Trump handled the country is indeed a very good thing. I'll end there, thank you.
Tarek Masoud:
Great. Thank you very much, Bernard. Just a wealth of information and insight as always. And so I just wanted to maybe ask you a few questions and get some reactions from you and then open it up to our audience, many of whom have been writing to me with questions that I'll also try to integrate in our discussion.
Tarek Masoud:
So I guess you've laid out very clearly the two potential paths forward for Saudi Arabia that were envisioned before MBS rose to the scene. The one would be Saudi Arabia evolves into this kind of constitutional monarchy, akin to Morocco or Jordan, or Saudi Arabia gets a kind of strong man who can be a kind of pocket Ataturk who can push through a set of reforms to finally bring that country into the 21st century. And I guess I would, before going further, I mean, we're clearly in the second universe, we have MBS and his appeal such as it exists, rests on his ability to make the claim that he is a pocket Ataturk, if you will.
Tarek Masoud:
And I guess the question I want to ask you is where do you come down on this? Do you think in fact, that only somebody like Crown Prince Mohammed bin Salman could have brought about these reforms or could the reforms have been brought about in a manner that might've been more sustainable, if in fact the Saudi system had evolved into a more, I don't want to say democratic, but a more inclusive constitutional order?
Bernard Haykel:
So my answer to that, the question is sort of a two-stage answer. I would say that if you had developed sort of a Moroccan or Jordanian style government with these different princes and their various power centers, you would have ended up with a kind of a farcical country in which you wouldn't have democracy and you would not be able to deal with the structural problems that the country has.
Bernard Haykel:
Okay, so I would say once you disenfranchise the various power centers of the Royal family like MBS has done, now, you have a good chance of moving forward with a better, less intrusive in the sense of Royals intruding constantly and making the system impossible to run. So this is again an opportunity I think for President Biden to sort of push MBS in this direction, now that you no longer have uncles and cousins with different militaries and deep pockets to, as it were, corrupt and corrode the system from within.
Tarek Masoud:
Do you think that the crown prince is pushable in this direction? I mean, if we look at the way he has conducted himself, he certainly doesn't seem like somebody who believes that the future lies in having a constrained executive. He seems to me like somebody who believes that you have to centralize power, wield it with an iron fist and that's the only way that Saudi Arabia can prosper, change, et cetera.
Bernard Haykel:
Yeah. So, I mean, look, I think in terms of his incentive structure, I mean what is it that he cares about more than anything else? It is regime survival, right? All authoritarian regimes in the middle East are concerned about that first and foremost. So if you want them to reform and to change, you have to put it in such a way that if you want to guarantee your regime survival, this is what you need to do. You cannot have a, you're not China, you're not Xi Jinping, you're not Putin, you don't have those capacities and capabilities. And in fact, you need to engage your society in ways that will guarantee your regime survival. Otherwise, you are likely not to survive into the future. So I think you have to package it like that for it to make sense to him. But you're right, it would be a heavy lift.
Tarek Masoud:
Yeah, and it sounds also like part of the argument that you're making is that, because the crown Prince's constituency is a different constituency than has ever existed before for a Saudi King and that in the past Saudi Kings would rely on either, obviously the family was a big part of the constituency but then you really have got oil and you've got religion. Well, Mohammed bin Salman doesn't have the oil, he's rooting out religion and he's not really relying on the family and so it sounds like his constituency really is these young people who believe he opened a window in a dark room. And I guess the question is, if that's your constituency, for how long will they be satisfied with a completely closed order where they have to put their cell phone in the fridge if they want to talk? Is that a fair extension of what he has done?
Bernard Haykel:
Yeah, I think that's right. I mean, essentially what he's done is he's decided that nationalism and a form of populism that only targets or almost exclusively targets the young is what he's going to base his legitimacy on, but he has to deliver for these young people and he has to deliver jobs. And if he doesn't deliver jobs, they are ripe for being captured and mobilized by forces that exist still in society who hate him and who would like to topple him.
Tarek Masoud:
So, I'm trying to bring in some of the questions in the chat before I open it up to the audience and one thing that I'm seeing a lot of is an interest in having you react to the New York Times column by Nicholas Kristof last week in which he was very harsh on the Biden administration for not imposing sanctions on the person of Mohammed bin Salman and any agency associated with him.
Tarek Masoud:
And I think Nicholas Kristof's argument, if I can try to steal it for a minute, his argument is that it is absolutely possible to pressure the Saudi King into removing Mohammed bin Salman from the line of succession. Crown princes have been removed from the line of succession before, and it is too costly for the United States to have this very young man rise to the pole position in Saudi Arabia and stay there for 50 years, because even if he hadn't killed Jamal Khashoggi, he's engaged in all kinds of other adventurism in the region beginning with Yemen, but of course including the kidnapping of the prime minister of your ancestral country, Lebanon.
Tarek Masoud:
I mean, I think Nicholas Kristof would really argue with your characterization of Saudi Arabia as a stabilizing influence particularly under MBS. He would say, "Deeply destabilizing and it's because this man's nature is he shoots first, ask questions later, and what needs to happen for Saudi Arabia's own good and for the American interest is for the US to use its leverage to get King Salman to change the line of succession." What do you think of that argument?
Bernard Haykel:
Yeah, I bristle at that argument because it reminds me of kind of a form of gunboat, gringo diplomacy in Latin America where we come and we decide who is going to be the leader in another country. We've done that at great cost in the past. And the decision to appoint Mohammed Salman as the crown prince of Saudi Arabia is a sovereign decision, right? It's a decision of a sovereign, literally a sovereign decision and absolute monarch and there is no history of American involvement in Saudi Arabia's succession. There were crown princes who were deposed but not because of the United States, this was always an internal matter that was handled within the Royal family in conjunction with some religious clerics. So I think this would be seen as an infringement on their sovereignty, it would actually alienate a tremendous number of Saudis, including people who hate MBS, they will rally to his side for this.
Bernard Haykel:
And I'm surprised that kind of well-meaning liberal like Nicholas Kristof is arguing for kind of American imperialism of this kind in Saudi Arabia. And moreover, the people who have been arguing for replacing Mohammed bin Salman and typically the candidate that they love is someone called Mohammed bin Nayef, the former crown prince who is the minister of the interior, and then crown prince. If anyone looks at the history of Saudi Arabia in the arts, in the first 10, 15 years of the kingdom when he was in charge of the ministry of the interior. And if you visited the jails in Saudi Arabia under his watch, he is no liberal democrat and he is no human rights activist, okay.
Bernard Haykel:
NBN was a very harsh ruler with extremely despotic tendencies as well. So, my view is we don't interfere in the internal workings of other countries, we shouldn't and certainly not on some premise that we're doing good, because in fact, we could seriously destabilize the country and we could end up with an internal war and that would have terrible consequences for the Saudis first and foremost, but also for us.
Tarek Masoud:
Another name that is often mentioned is, and was mentioned in the Kristof column was Prince Ahmed bin Abdulaziz, who had been in living in London and then went back to Saudi Arabia and is now I think under house arrest. And the raising of these names as potential alternative candidates seem to suggest to me that there is some kind of opposition bubbling within Saudi Arabia. That in other words, it's not completely that the United States would show up and dictate something, but rather that the United States would be putting its thumb on the scale in support of an opposition movement if you will, within the Royal family to take a new direction.
Tarek Masoud:
And that does seem to me to be different from the kind of muscular imperialistic but it's not like Nicholas Kristof is saying that the United States should try to root out the Saudi Royal family. It's saying, "Look, we've got a lot of business that we do with that country, pick a better CEO." It's like we're a shareholder in Saudi Arabia and we don't like the CEO you've picked. I mean, is it really as intrusive and as insulting as you would make it out to be?
Bernard Haykel:
I mean, look, first of all, it's true that there is opposition, there has been opposition to the rise of MBS for quite some time. In fact, he became his father's favorite in the arts and I know without revealing sources, I mean, I know people within the Royal family, people who are extremely close to him and by blood, who didn't want him to be the favorite and who went to the king or then crown prince, or even before that when he was still defense minister and asked him, "Don't choose MBS, choose someone else," they gave their reasons and so on. And then Prince Salman, now King Salman was very adamant that this is the person he wants to succeed him.
Bernard Haykel:
That is a sovereign decision. It really is. I mean, I would just not involve myself in the internal workings. Moreover, just to add one bit of an additional data point, the CIA in US intelligence services who by the way got us into the war in Iraq, by again with their mistaken assessment, thought when Crown Prince Abdullah was about to become king, there were all these assessments that Abdullah is this bedouin, he's an Arab nationalist or he's an Islamist, he hates America. There was all this assessment about, it's kind of a form of Kremlinology.
Bernard Haykel:
So, you look at the guy and you assess from Langley, Virginia whether, does he drink coke or does he drink tea? And what does that mean? So Abdullah was very, very favorably disposed to the United States. He was neither an Arab nationalist, he was back in the fifties and sixties, but not in the nineties or arts and he was certainly not a bedouin. And so they were wrong about this. So I would just be a bit more humble, a bit more modest in the kinds of claims that Prince Ahmed is better than this one or that one. I just wouldn't get involved in those kinds of decisions.
Tarek Masoud:
Yeah. I think that's well taken and you and your book about Saudi Arabia, the 2015 book really chronicled how there were lots of reforms happening and those things were happening under King Abdullah who I don't think gets enough credit for actually being the precursor of some of the liberating reforms.
Bernard Haykel:
That's right. And in fact Tarek, actually most of what MBS is up to, in fact, all of it started on the King Abdullah.
Tarek Masoud:
Yeah, yeah, no, that I think is an important point. I guess though, I mean, we could debate how advisable or how normatively acceptable or unacceptable it is for the United States to try to meddle in the Saudi line of succession. But a separate question is just, what kind of King do we think MBS is going to be? Clearly your argument that the United States shouldn't meddle in the Saudi line of succession is conditioned on a belief that MBS is not going to be so bad.
Bernard Haykel:
Yeah, I Mean, he's not going to be bad for the United States. He might be bad for his own people, but he's not going to be bad for the United States.
Tarek Masoud:
Well, I mean, so how bad would he have to be for reasonable people like you and me to start to think that, well, maybe it would be a good idea for the Biden administration had a heart to heart with.
PART 2 OF 4 ENDS [00:48:04]
Tarek Masoud:
It wouldn't be a good idea if the Biden administration had a heart to heart with a King Salman... That look... How bad would MBS have to be before you could justify the United States really leaning on Saudi Arabia to make a different decision about its next CEO?
Bernard Haykel:
Frankly, I would never, advocate for the U.S. to interfere in the in such a determination that's made within the Royal family. I would send signals about you're doing is not in America's interest and we will do X and Y and Z if you continue doing this... I mean, I would always argue from the point of view of what is in America's interests. I would never presume to know what is in Saudi Arabia's interests. That is for the Saudis to decide.
Tarek Masoud:
And I think the argument that you've made, quite powerfully, as you actually think that having professionals, once again, in charge of the American foreign policy apparatus will result in some constraint being imposed on MBS.
Bernard Haykel:
Yes.
Tarek Masoud:
And so we'll get better behavior out of Riyadh. In part you're implicating the Trump administration and really some of the chaos that was emerging from Riyadh in those years.
Tarek Masoud:
Okay. I want to open this to our audience who are just very eager to engage with you. So, the first person I'm going to call on is, George Whitford. And I think... Maybe I have to unmute you but go ahead.
George Whitford:
Hey. So, I was just wondering, going back to the oil question. It seemed to be what you were insinuating with the drop in prices and Trump sort of asking Saudi Arabia to cut down production to bring prices back up... That sort of maybe as we move away from fossil fuels, that we might have to rely on Saudi Arabia more than we would today. Just because, obviously the U.S. has an interest in the energy sector and lower prices aren't good for us either. So, do you think that maybe, the sort of opposite assumption that everyone carries about the U.S. and Saudi Arabia might be true and we'll rely on them more?
George Whitford:
And as sort of a second part of that, if in fact oil prices do go up in the future, do you think that'll be an impediment for Saudi Arabia actualizing its 2030 vision? Just because, if a domestic, diversifying the economy and everything gets tough and maybe they get scrutiny, it's sort of an easy thing to lean back on, sort of kicking the can down the road.
Bernard Haykel:
Yes, that's it and those are excellent questions, George. Thank you.
Bernard Haykel:
So, first I think that the last barrel of oil that will be consumed in the world is going to come from the Persian Gulf. And probably from Saudi Arabia. Simply because it is the cheapest oil in the world. And as prices go down, more expensive oil will be driven out of the market, right? So Canadian tar sands, ultra deep Brazilian oil... Shale will be driven out. So, the Saudis are ultimately their oil, but also the Kuwaitis and the Iranians and others will have this oil that will be the cheapest to produce and will come to market last before the transition happens. And also I should add, that if you look at Saudi oil in particular, in terms of methane emissions, it's the quote unquote cleanest oil and you know, one of the cleanest oils in the world because the Saudi Aramco, the oil company, is very careful not to release methane. Unlike the Russians and their pipelines, for instance, or many in the Permian and here in America.
Bernard Haykel:
So, Saudi oil can make claims for itself to be quite clean. As well as being cheap and easy to market. So, the other question that you asked, which is, "What happens if you have a super cycle and the price goes up to a hundred?" Well, if the past is any gauge to go by, whenever oil goes up and you have all this money flooding in, then you take shortcuts and you typically, the government doesn't have the discipline to impose taxes, to restrain its spending. And you'll not affect the necessary changes that are required for diversifying the economy and building up a private sector.
Bernard Haykel:
So yes, my fear definitely would be, oil goes way up and it's like a person like me who's a bit overweight, goes to the doctor, gets a clean bill of health and says, "You know what? I don't have to go to the gym anymore. You know, because I just got this clean bill of health." And that is definitely a fear that I have. And it's true, by the way, for Saudi, as well as for most resource dependent producers... In the world, not just the Saudis.
Tarek Masoud:
Great. You made a point about how the diversification of the economy under Ahmed [foreign language] is not really working out. And you mentioned also, some of the mega projects that the Crown Prince has championed, foremost among them being, Neom, in that city, in the Northwest of the country. And of course, when you think about the public investment fund, which is the main vehicle for funding a lot of these mega projects, it feels to me like the Crown Prince knows the end point that he wants to get to. Which is the right end point, to diversified economy. But the mechanism, he... The only mechanism he can envision is the same old, highly centralized, top-down, state led development strategy. So, it sounds like one of the notes of pessimism I got from your comments, is that you really don't see him succeeding on the economic development front. Or you think things are going to have to get a lot worse before he recognizes that what you really need to do is throw open the economy, liberalize the economy, et cetera.
Bernard Haykel:
Yeah. So, I mean, I would say that the... I didn't say that the diversification is not working. I just said it's extremely hard to accomplish the goals that have been set in Vision 2030. And it would be hard by the way, for any country that is an oil producer, like Saudi Arabia. There's nothing kind of unique or re-generous about the challenges that diversification poses.
Bernard Haykel:
But, you're right. It is very hard. It involves building up human capital, which can not be done very quickly. It involves also changing the work ethic of the population to change expectations of entitlements, for work in the public sector, to moving to the private sector where employment is much more precarious and less secure. So, those are really tough things to deal with. And you're right. The model that he has as one of the top down model, it is one that he has seen in the UAE being adopted. And but a lot of Saudis say, "You know, what, if he accomplishes 20% of what he says he wants to accomplish in that vision statement, that would be terrific."
Bernard Haykel:
That would already be much better than having done nothing at all. Which would have guaranteed the complete collapse of that state in that society... Once oil runs out.
Tarek Masoud:
Okay, let's get some more questions in here. So, the next person I have is Constanza Castro.
Constanza Castro:
Thank you. And thank you for being here. So, my question also relates to oil, but it relates to the power balance in OPEC and specifically the Saudi Russia relationship. As we know, because of global warming, the Arctic shipping lanes and Arctic oil is becoming an increasingly more realistic possibility for Russia. And as we've seen Saudi Arabia and Russia have, kind of, had disputes within OPEC, how do you think that shifts the power balance for Saudi Arabia in that body? And what do you think it means for the future sustainability of OPEC?
Bernard Haykel:
All right. So, for oil fields to be developed and to eventually produce is very long, I mean, process. It takes up to a decade to it up... Especially, in harsh conditions. Even if you don't have much as much ice as you do in the Arctic. So, the Saudis will remain extremely powerful in the global energy market because of something that they have, which is called spare capacity. So, this is production capacity that they deliberately choose not to produce. Most countries don't do that. Most companies, in fact, almost no country does that. So, this is oil that they can produce at will to either ramp up or ramp down the supply to the market. Now, the Russians don't do that. At least not at the same scale. Now, the collaboration with the Russians is extremely important because it basically, in a market where you have declining demand, you have to basically agree on limiting supply to the market in order to prevent the price from collapsing and that's what's happening.
Bernard Haykel:
So, both countries are doing this collaboration because it serves their interests. Ultimately, though the world, the energy world, is divided up into three kind of powers. If you like. So, you have the Russians on the one hand. You have the United States, which is the largest actually producer of oil in the world. And you have the Saudis. And those three countries are essentially going to be competing with each other. Especially, against America. Because American shale is a real challenge to both Russia and Saudi Arabia. And that's really what's going on behind the scenes. So, if the U.S., the Russians and the Saudis can agree, then that the market will remain stable and you know... But it's very hard to get the Americans to agree because the United States doesn't operate as a single entity when it comes to oil. It has lots and lots of private oil companies. So, there's always going to be this tension and competition in this sector and in this market.
Tarek Masoud:
Great. The next person I have is Joseph Farsakh.
Tarek Masoud:
Joseph. Okay, I'll come to the next person then. Well, I see Joseph, but he's not able to... Let me try to unmute him.
Joseph:
There it is. It wasn't allowing me to unmute there.
Tarek Masoud:
No problem. Go ahead, sir.
Joseph:
Great, thanks professor. And good of you to be with us professor, today.
Joseph:
I'd like to explore the other side of the Kristof position. And that's the argument, that sidelining the conference too much and potentially a desire to even humiliate him might lead to a backlash from an abrasive young leader, who wants to work with the U.S. But at the end of the day, will likely do whatever it takes to survive, as you mentioned. Or if it isn't a backlash from the Crown Prince, does a tough Biden administration stance, unintentionally signal to other members of the Royal family an American green light to challenge MBS? So, if you were advising the administration, the Biden administration, given your understandings of the inner workings in the kingdom, what would your guidance be on this?
Bernard Haykel:
The the King of Saudi Arabia and MBS, I mean are limited in what they can do, vis-a-vis, the United States. I mean, what they have done in the past and what they will continue to do, is to send out signals or flirt with the Russians and the Chinese. Okay. They'll say to the Americans, "You know, we're not going to put all our eggs in the American basket. We're going to build relations with the Chinese and the Russians."
Bernard Haykel:
But there are limitations to that. Let's call it flirtation. And the reason for the limitation is that, again, the relationship with the United States is a very profoundly structural relationship. The Saudi elite is educated in the United States, isn't in English speaking. And many invest all their money in the United States or most of their money in the U.S. They have homes here and so on.
Bernard Haykel:
You also have... The Saudi military is entirely supplied by either, primarily by American, but also by British and some French weapons systems. If they start buying Russian and Chinese weapons systems, they will alienate the U.S. military and the Pentagon. And that would cause a serious rift in the relationship. So, there are many, sort of reasons why the U.S. is not easily replaced by either Russia or China. Although, I do think that the long-term trajectory is one where the Saudis will increasingly get closer and closer to the Chinese. And that is something that we need to absolutely try to limit and not lose that relationship to the Chinese. Because the future is one in which, there will be a cold war with China. And we must keep Saudi Arabia as it were, on our side, in as much as we can.
Tarek Masoud:
You know, to just pick up on that point. Reading for example, David Ignatius's columns about Mohammed bin Salman, I think one of them was an interview with either Ignatius or Jeffrey Goldberg. I can't remember, but Mohammad bin Salman said something that I found to be quite striking. I think it was quoted in... It was also quoted in Ben Hubbard's book. Where he basically said, "Look, if it were not for the United States, Saudi Arabia would have been North Korea." And so that spoke to me of a potential recognition on the part of somebody like Muhammad bin Salman, that you've got to keep looking westward. I mean, it sounds like you're telling me that's actually a wrong interpretation. That the flirtation, the seduction of the Chinese autocratic model is a real one.
Bernard Haykel:
Yeah. I mean, I definitely think it's not just for him, but I think for most autocrats around the world. But I do think culturally, lets say, he's absolutely. And in terms of business and entrepreneurship. I mean, all his models are the Steve Jobs's of the world. The Elon Musks. His lawyers are all American. His financiers are principally American or American. I mean, there's the one Japanese guy with Masayoshi Son.
Bernard Haykel:
But essentially, he's entire setup is an American setup. And it is a Western setup and he doesn't want to give that up. He really doesn't. He doesn't trust the Chinese. Very few Saudis do trust the Chinese. Anytime they've done dealings with the Chinese, like when they built joint oil and refineries and so on, it's been very difficult to get those two sides to work with one another. He wants to be, absolutely in the Western camp. But, as President Biden has reminded him, that that comes with certain limitations and certain responsibilities. And I'm hoping that he understands that.
Bernard Haykel:
Look, the guy is also 35 years old. Okay. And there's hope, ideally that he will also mature and change as all people do.
Tarek Masoud:
Yeah. Yeah. That's a very important point. I mean, I certainly was much dumber when I was 35.
Tarek Masoud:
Okay. The next person I have is Nas Azizi. Go ahead Nas. Are you able to unmute? Let me... There we go.
Nas Azizi:
Thank you. Thank you for being with us, Dr. Haykel. My question is, again about the oil. And you might have touched on this already a little bit, but I would like to hear your views on the national security challenges pose, both the United States and the Saudi as a result of the current status, the demand status for oil in Saudi. Demand of supply status.
Bernard Haykel:
You mean domestic, you mean domestically how much Saudi Arabia is consuming domestically and what that means?
Nas Azizi:
Right.
Bernard Haykel:
Yeah.
Nas Azizi:
The trends, the current trends. What kind of national security challenges is opposing both Saudi and to the U.S. in the short-term and the long-term?
Bernard Haykel:
Yeah, I think that's an excellent question. And look, if you look at domestic consumption of energy in Saudi Arabia. The trend line was that, and I think this was predicted by one of the management consulting firms, or it could have been Sydney Bank. I can't remember exactly. But basically, if Saudi consumption remained the way it was going in terms of its upward trajectory, that the Saudis would stop exporting by 2030, or somewhere around there. Because of the demand domestically. So, demand domestically, was because they were burning crude oil to desalinate water and to produce electricity. There were extremely profligate and I'm disciplined in how they consumed energy. It was also subsidized. It was a super cheap to buy oil and gas in Saudi Arabia. So, all of that is... I mean, the leadership in Saudi Arabia is aware of this. Has been aware of this for a long time. Which is why they've moved into both nuclear and solar energy and renewables. Because they want to use energy from these other renewable resources and nuclear.
Bernard Haykel:
I worry about the nuclear by the way. Dimension of it. But increasingly, they want to free up as much oil for export because they will be using renewable sources domestically. And they seem to be quite serious about this now. And this is, by the way, true also for other oil producing countries. So, if that happens and it's successful, then Saudi oil production will remain important in terms of export to the rest of the world. Now, the other thing that they're doing and that they realize, is that as you use... Instead of exporting oil, if you export it as a finished product of, let's say a petrochemical finished product. Saudi Arabia for instance, produces a lot of the headlights in cars that we use around the world. A huge proportion of them are produced by Saudi. So, that is more valuable than the amount of oil that you would otherwise sell that went into the production of that commodity. Of that item.
Bernard Haykel:
So, they want to do that as well. But essentially, you have 270 billion barrels of oil or 260 billion barrels of oil in Saudi Arabia. It's just the scale of its oil fields will remain super important. You have to also go... One other factor that I would add is that, we will see a decline in oil consumption around the world as we move increasingly towards renewables. With one possible exception. Which is if we see India develop in the way China developed in the arts. And if India really ramps up and every Indian family wants to have a car, and that car is an oil car and not a battery operated car. Then, demand will continue to increase. I hope I've answered your question.
Tarek Masoud:
Great. Okay. The next person I have is Katie Suarez.
Tarek Masoud:
Oh, I, you know what I think I have to unmute. Okay. There we go.
Katie Suarez:
Perfect.
Katie Suarez:
Thank you again for joining us. And I wanted to go back to the conversation you were having a bit before about the U.S. and China. And how Saudi Arabia falls within that. And so you mentioned that MBS has cultural ties with the U.S. He has more trust with U.S. than he may with the Chinese. But aligning with the U.S. does come with restrictions. And so how do you think, and what do you think the U.S. can do, if anything, to kind of help keep the Saudis on our side without kind of surrendering, kind of the moral or human rights high ground that the Biden administration? And I think a large part of America really wants to maintain.
Bernard Haykel:
So, the U.S. has... Thank you, Katie, for that question. I mean, the U.S. has tremendous leverage, you know. Because the U.S. has massive force projection in the region in the Gulf. I mean, we have one of the largest air force bases in the world. In Qatar... One of the largest naval bases in Bahrain. The Chinese are nowhere near being able to project this kind of force into the region. Also financially, economically, culturally, the U.S. and the West in general, is hugely influential in Saudi Arabia. So, there's a lot of influence there. And it doesn't need to be used coercively for the Saudis to realize... And as they do, that the relationship with the West is extremely important. They don't want to alienate the West.
Bernard Haykel:
But, having said that, the Chinese are coming. And the Saudis are watching the Chinese as are others. And once the Chinese start having aircraft carriers around the Persian Gulf, and once they start building military bases and other installations around the region. As they have, for instance, in Djibouti, in the horn of Africa, there will be this ability for Saudi and other countries to play off the superpowers against one another. As we saw during the cold war between the Soviet Union and the United States. So, we need to remain attractive to these countries, not just Saudi. As China increasingly competes with us and comes in with zero conditions in terms of human rights and political values. Luckily for us, when the Chinese do come in, not in countries like Saudi, but in other countries that are poor, they give them these loans that are prohibitive and that causes a tremendous amount of anger against the Chinese. So, hopefully the Chinese will be their own worst enemy in this competition.
Tarek Masoud:
I mean, I do think that the point that you made about, how interpenetrated Saudi Arabia and the Arab world in general, is with the West and how... For the longest time it may be changing, but for the longest time, the benchmark really was the West in the United States. In particular, when you're talking about, any kind of best practice, it was always, "What do they do in the U.S."
Tarek Masoud:
I do think it's going to be hard to pivot to China, or to have the same kind of relationship with China that these have with the United States. I do want to come back, just maybe bang this drum of the Kristof op-ed just one last time to feel that we did full justice to that argument. Because, you made the argument that, " Look, the Crown Prince is fairly young, he can evolve." That's also an aruge-
PART 3 OF 4 ENDS [01:12:04]
Tarek Masoud:
The crown prince is fairly young, he can evolve. That's also an argument that was made at the end of Ben Hubbard's book about MBS. And certainly as I pointed out flippantly, I feel I'm a lot smarter now than I was at 35, although that may not be true. Now at the same time, look, at the age of 35, I wasn't ordering people to be murdered. So you could make the argument that the current crown prince has really demonstrated himself to be the kind of reckless, chaotic, brutally authoritarian leader that we in the United States can't afford to have in Saudi Arabia. Now I have made the argument that's very congenial to yours, Bernie, which is that the US shouldn't try to do anything, but I come from the Kantian point that ought implies can, [foreign language], if you want to be obeyed, order that which is obeyable, and the United States has no leverage. Okay?
Tarek Masoud:
You are making a different argument, it seems. It seems to me, you're saying the US, as you just pointed out, actually has a lot of leverage. The issue is that you just think it's normatively unappealing for the US to tell Saudi Arabia who should or shouldn't lead it. And I just want to add, so it sounds like you disagree with Christophe, but for normative reasons, but you also disagree with me. You would say to me, no Tarek, actually, the US could do this if it wanted to, it could impose a different line of succession on Saudi if it wanted to, it just shouldn't want to.
Bernard Haykel:
Yeah, no, I actually, I mean, I appreciate your question and it's a very smart one. No, my objection is not a normative one. My objection is actually based on pure, real politic and hard nosed assessment. You try to mess with MBS who controls all the military in Saudi Arabia. He can mobilize his forces against any other group that tries to stand up to him. You could end up with a civil war. Or you could end up with Saddam Hussein type person. Why push him to become that? Why risk the possibility of a civil war in Saudi Arabia? I think one has to be super careful and cautious and prudent when trying to decide who should or shouldn't rule another country, especially when the forces that are arrayed out there. I mean, yes, the US has power, but believe me, inside Saudi Arabia, MBS has a lot more power than the US does. Okay? And he won't be shy to use it.
Tarek Masoud:
Right. Okay. So let's take some more questions. The next person I have on my list is Adam Novak.
Adam Novak:
Hey, I appreciate the time. My question kind of evolves around the cooling US Saudi relationship, especially as the United States looks to rejoin or renegotiate the JCPOA. If the United States renegotiates this treaty again, excuse me, this security agreement again, but fails to address Saudi Arabia's primary security concerns, especially that within Yemen, in increased Iranian proxy activity in Yemen. How does Saudi Arabia kind of negotiate being snubbed twice as a major piece of diplomatic security agreement as agreed upon?
Bernard Haykel:
So, I mean, if that happens, let's just take the hypothetical scenario that you outlined. So I think what would happen would be that you would see more weapons systems, especially drones being blocked by the Saudis from the Chinese and the use of that kind of technology. But also you will see a rapprochement, even more of a rapprochement between Saudi Arabia and Israel. Because they both face the same threat from Iran and they have almost identical assessment of the threat that Iran poses to them.
Tarek Masoud:
Great. The next person I have is [inaudible].
Speaker 2:
Hi. Can you hear me now? Thank you very much. Thank you, Professor Masoud and thank you, Professor Haykel. [inaudible] speaking to you here from London. On the subject of oil, one of the sort of most significant moments since MBS ascended to deputy crown prince ship, and then crown prince ship was of course, the Aramco IPO. And arguably sort of two or three of the main objectives around it were to sort of develop transparency, which I think they've been fairly successful at with, quarterly budgets, et cetera. The other was to attract FDI. Jury's still out. And the other is to support the local capital market, whereas unfortunately, what we've seen is opportunity costs. A lot of the sort of purchases of shares of other companies from SABIC to some of the family business conglomerates, those have been diverted to the IPO.
Speaker 2:
So I'd be interested to hear your sort of appraisal of the IPO. It was meant to be internationally listed, nobody wanted to touch it with a barge pole after some of the political risk sort of moments from [inaudible] to [inaudible] to Yemen and so on and so forth. So be interested in your thoughts on that and if I may, just a mini follow-up would be, if you could say anything around refund competition in the GCC. So while Saudi and UAE have this joint committee and so on and so forth, we have the [inaudible] in Qatar. Qatar has 0% VAT, Saudi has 15%. I mean, the UAE, we've heard about this regional HQ competition, the UAE is opting for market share. Saudis is opting for market share, Saudi's opting for a price. When you have this sort of UAE, Russia alignment within OPEC. So it'd be interesting to hear your thoughts on how this comes together and whether we can put the cooperation back into the GCC as an intersex fifth decade come May 25th of this year. Thank you very much.
Bernard Haykel:
Thank you. Thank you [inaudible] for the questions. So, as far as I understand, I mean, the IPO was something like between 25 and $30 billion. You're right, it was regional and domestic sources for Aramco's IPO. I think the reason why they didn't go international, let's say in New York was not so much because of the political problems, as much as it was that it would expose the company to all kinds of legal risks from shareholders for all kinds, because it would be seen as a government entity. So I think it was principally for that reason. And I think that you're right that the foreign direct investment, aside from that, that goes into oil and gas and the downstream activities has not materialized as it was hoped to do. Whether it will come or not, will be dependent on the kind of regulatory environment that is developed in the kingdom, and whether people have confidence in the courts and the rule of law, all the kinds of things that were in fact harmed greatly by for instance, the Ritz Carlton arrests and so on.
Bernard Haykel:
So I don't think there's a quick fix to any of these problems. It'll take quite some time to build that kind of confidence. In terms of your second question, I think that the competition is definitely there between the different GCC countries. You will have in the UAE, for instance now, an opening up of, I think nationality, in fact, they're even willing to give nationality. And what I suspect will happen is that there will be competition for the best and brightest Arabs, the best and brightest Egyptians and Lebanese and Palestinians and Syrians, and so on, between these different countries, in order to build a human capital that is needed and that is required. Of course, many of these people already are in situ. I mean, there are in the country.
Bernard Haykel:
Whether that economic competition between them will ultimately materialize into sort of a serious political rift is a good question and I don't know the answer to that. Especially between the UAE and Saudi Arabia. But I think they will try to avoid it if they can. But there's no question for instance, that Niamh is intended as a replacement for Dubai. I mean, it's better situated, it's cooler, there's less heat there. It's more beautiful, et cetera. And it's intended to attract the same kind of investment, the same kind of lifestyle, et cetera.
Tarek Masoud:
Yeah. I think that this development that we're having, particularly in the Gulf to kind of open up the countries and attract, as you said, the best and brightest of the Arab world, I think is actually one of the most exciting developments in the region. If I had to make a bet, I'd say the UAE definitely has a first mover advantage because not only are they starting with this, but they've also got a substrate of rule of law that outstrips what you have in Saudi Arabia. And so Saudi Arabia needs to catch up on that too and I think MBS has taken Saudi in the wrong direction. So I wonder really, is there a grand gesture that could signal a credible commitment on the part of the Saudi leadership to actually start observing rule of law and creating a government of laws? And that I don't know. Okay. We've got 10 minutes left and I want to get a couple of more questions. So the next person I have on my list is John Lamb. And I'm going to ask him to unmute.
John Lamb:
Hi, thanks. Thanks Tarek for another wonderful session and thank you, Professor Haykel. Back in the early '80s, my law farm seconded me to the Royal Commission for Jubail and Yanbu. And now mind you, they didn't have the social thinking behind a Niamh, but I'm wondering, 40 years later, how have those industrial cities worked out in your view?
Bernard Haykel:
Yeah, thank you. I think actually from my understanding, and I've met a number of the people who have either worked there, in one case, a person who headed the Royal Commission. My understanding is that they've worked extremely well, largely because they've been involved in sort of downstream activities, petrochemical, sort of in sectors where Saudi Arabia has a comparative advantage and can compete. And so those have been very successful, just like Saudi Aramco has been very successful. The key is whether once you move away from those sectors, those economic and manufacturing sectors, where you have a comparative advantage to something else, are you able to still compete and still be successful? And that's the $64,000 question.
Tarek Masoud:
The next person I have is Shung Jang.
Shung Jang:
Thank you very much professor, for your speech. By the way, I'm from China. So my concern is in different direction of rest of the cast. So as far as I know, the Chinese strategy toward Middle East is that we don't want to seek any sort of formal block or alliance because we see that Middle East is too dangerous and too difficult to deal with. But we want to use Middle East as like using low cost to create troubles, distracting the US attention. And the second thing is to make money. So my question is about the investment part. What do you think are the largest problems of Chinese... In the trade relationship between China and Saudi Arabia, what are the existing dissatisfaction that the Saudis have toward Chinese investment? Thank you.
Bernard Haykel:
Okay. So I have to plead a bit of ignorance here. I haven't followed specifically the Chinese, Saudi economic relationship, other than the one big refinery that they negotiated. Also, the Chinese have been involved in mining, especially in terms of uranium mining in the kingdom. And the Chinese have sold some weapon systems to the Saudis. So look, as far as I can tell, and this is sort of big, from 30,000 feet, China is a huge beneficiary of American power and force projection in the Middle East, and specifically in the Persian Gulf, because all this oil comes to China or to Japan, or to Korea, and without the Chinese having to deploy military force to protect it, right? That maritime shipping and all this energy is coming to you, at the expense of the American taxpayer, because the aircraft carriers and the boats and the ships and the planes and so on are all paid for by the US.
Bernard Haykel:
I don't see why the Chinese would want to change that because you're basically free riders on this system. And then, but it does seem to me that the Chinese do. The Chinese leadership does want to involve itself much more militarily in the Middle East. And I don't understand why it would want to do that. But the trade between Saudi and China is a fairly simple one. I mean, most of the trade from the Saudi side to the Chinese is energy. And most of the trade from the Chinese side to Saudis are manufactured goods and that are produced in China. Increasingly also solar panels and solar wafers, because the big solar projects in Saudi Arabia are now being conducted with joint ventures, with Chinese companies.
Tarek Masoud:
Why isn't the Chinese oppression of weaker Muslims a bigger deal in Saudi Arabia?
Bernard Haykel:
So I think actually for ordinary Saudis, it is a big deal as it is for most Arabs and Muslims around the world. I think that the Saudi leadership has basically decided that there was this model that they followed during the cold war, largely at America's insistence, by the way, beginning with the Eisenhower administration, which is that you use Islam as a political tool to project your cultural influence, your political influence around the world. And this ended up with Al-Qaeda and with Jihadi movements. And someone like MBS basically says, "This model doesn't work. In fact, it only produces trouble for us, and we need to move away from that kind of Panislamic diplomacy." I mean, the Turks want to take it up now and good luck to them as they do so, but the Saudis basically don't want to engage at that level. I personally think that there are cases like that of the Uyghurs where it behooves the Saudis and all humans in all countries to say it's unacceptable to behave that way and to have concentration camps.
Tarek Masoud:
Okay. So we have one last question from [inaudible]. Go ahead.
Speaker 3:
Okay. Thank you. Thank you, Professor Masoud and thank you, Professor Haykel. So my question is more on the religious establishment in the kingdom. So I'm drawing parallels to what the Shah of Iran did to the real establishment of Iran in the '60s, and then kind of the blow back that came out in 1979. Do you see a parallels in the kingdom where kind of MBS going against the Wahhab establishment, and then kind of coming back to curse them in 20, 30 years from now? Thank you.
Bernard Haykel:
Look, basically there are certainly parallels between what the Shah did and what is what MBS is doing now, but there are also differences. I mean, the Iranian clerics had a relationship with particular sectors of Iranian society for religious and other reasons, commercial reasons that I don't think exists in Saudi Arabia. So for instance, the official religious establishment doesn't control the equivalent of the Bazaar, of the market. Or doesn't have strong relations with the private sector in Saudi Arabia. Nor is it being disenfranchised in the same way. The deal is, for the religious sector is you keep your jobs, but you don't interfere anymore in the public space. So, the religious beliefs haven't been fired from their jobs, the religious clerics are still there, but they're being told, "You can't interfere anymore." Can they mobilize the population against the regime? Maybe. But not before there's kind of a real despondency that prevails, especially among the young, if and when they don't get the jobs that they feel they deserve. So I don't think there's an immediate threat, but there's certainly a threat from religious reactionaries, say 10, 15 years down the road. If the economic diversification plans, the boosting of the private sector, all of that doesn't work out.
Tarek Masoud:
Okay, well, Professor Haykel, we've come to the end of our time and I want to extend my apologies to all of those who had their hands raised and didn't get to ask questions, but I'm hoping that we'll have the opportunity to have Professor Haykel again with us to share his insights on Saudi Arabia and on the Middle East more broadly. Thank you so much, Bernie.
Bernard Haykel:
Thank you, you're very kind. And I'm going to have you in Princeton for sure as well soon.
Tarek Masoud:
Well, I think your audience is getting the raw end of the deal there. My audience gotten a much better deal. So, and thank you all for coming, for your tremendous questions. To keep in touch with our event, please go to our website, belfercenter.org/middleeastinitiative to keep in touch with what we're doing, and thanks once again, Bernie, we'll see you soon.
Bernard Haykel:
Thank you.
Tarek Masoud:
All right. Bye everybody.
Bernard Haykel:
Bye bye.
PART 4 OF 4 ENDS [01:32:02]