Some unusual things are happening in this most hidebound of kingdoms.
On Sept. 24, one of the young sons of King Abdullah bin Abdulaziz, Prince Mishaal, who holds the post of minister plenipotentiary at the foreign ministry, gave an interview to the Saudi English-language paper Arab News.
“My father is deeply concerned with matters including the stock market crash and the rising prices of essential commodities that directly affect the lives and welfare of citizens,” he said. “The king has taken practical measures to solve these problems, after consulting experts.”
What the Saudi prince was saying in his stilted fashion was that the king had taken steps to bring down rising prices of essential commodities, while not departing from his predecessors’ policy of a fixed rate of 3.75 Saudi Arabian Riyals to the US dollar.
On May 20, Kuwait cancelled the fixed rate of its currency to the dollar.
Shortly before Prince Mishaal’s statement, Riyadh declined to follow the US Federal Reserve’s lead and cut interest on credit (Saudi Arabia has no official interest which is banned under Muslim law).
This decision fueled expectations that the Saudis would cancel the peg like Kuwait.
Since 1986, the Saudi Monetary Authority (SAMA) has priced the kingdom’s exports in US dollars. The dollar maintained its international stability for most of the period as well as representing a steady factor in the kingdom’s traditional ties with the United States.
However the US currency’s recent slide has drawn speculators to the riyal, in the expectation of the SAMA dropping the peg between the currencies.
Prince Mishaal appeared to cool this anticipation.
Royal clean sweep of top oil council
He was backed up by SAMA officials, who assured their anxious contacts in the US Treasury that no imminent changes were afoot and, in any case, they would be coordinated with Washington.
But their US contacts were not entirely convinced. They understood that while interchanges and adjustments to meet the interests of both sides would continue, ultimately the decision rested with the King.
Then, on Tuesday, Oct. 16, there was a fresh rumble.
Without warning, a royal decree made a clean sweep of the powerful Saudi Council for Petrol Minerals Affairs, all of whose members were dropped in favor of new faces.
This key body is responsible for such major policies as oil pricing.
DEBKA-Net-Weekly‘s Saudi experts scanned the list of new appointees and found that the majority, led by the Labor and Social Affairs Minister Ghazi Al-Gosaibi, belong to the faction pushing for the riyal-dollar peg to be abandoned, whereas the ex-members by and large oppose de-linkage.
While this discovery had Washington worried, it was not taken as the final word on a changed Saudi policy.
The kingdom’s financial and business leaders are divided on policy, but they are less exercised by possible Saudi losses from the declining dollar and a lot more concerned to establish whether or net removing the peg will help curb inflation which has risen to more than 4 pc a year, and bring down soaring prices.
This overriding concern certainly found expression in Prince Mishaal’s press interview.
The opponents of change argue that Saudi Arabia is amply compensated by the constant rise in oil prices which shot up this week past $87 a barrel, a new record.
Even so, the real price is below its 1980 level.
Oil prices still below 1980 level in real terms
To attain that level in real terms, the price of a barrel should go up to $90.46, they say.
In other words, the Saudis are not losing from the falling dollar. In fact, their economic shoulders are broad enough to contain inflation in the long term, while at the same time sustaining rapid economic growth of around 5 pc a year.
Our Gulf sources report that, for the time being, King Abdullah, while intent on de-emphasizing the kingdom’s close ties to the United States, has taken these arguments on board. The clean sweep he made in the Council for Petrol Minerals Affair was motivated more to ventilate domestic grievances and show the anti-peg advocates that he has not dismissed their arguments out of hand. Yet, although he does not buy their case, he is not averse to letting them reach influential positions in the kingdom’s economy.
This reading of the situation was further validated Tuesday. Oct. 16.
When the governor of the United Arab Emirates state bank, Sultan Nasser Al Suweidi, was asked whether he would consider a shift in currency policy if the dollar fell another 20 per cent, he replied he would consult with other central bankers in the Gulf region. He was clearly referring first and foremost to Saudi Arabia.
The debate in the oil kingdom over whether or not to drop the peg also has domestic political ramifications relating directly to the standing and ability of the king to perform his duties.
The champions of de-linkage, many of them young princes and tycoons, find fault with the 85-year old monarch’s ability to govern. They say he is getting too old to keep up with the swift changes of today’s volatile international markets and that important snap decisions on economic strategy which should be taken in days or even hours, are often dragged out for weeks or even months.
No more equestrian sports
Abdullah is evidently aware of this criticism, and this would explain some other passages in his son Mishaal’s press interview.
Speaking about his father’s daily court routine, the young prince said it differed from one day to the next, depending on political events and the visits of dignitaries. “The king usually rests between Asr and Maghreb prayers after having his lunch,” Mishaal revealed, outlining a daily three-hour royal siesta. The rest of the time, he is fully occupied in affairs of state, he said.
The prince added another personal note, even more unusual in the intensely private royal court. He said the king used to play polo with his sons and often defeated them. “In the past, he used to ride every week as he enjoys equestrian sports. He loves horses very much and hunting is one of his hobbies. But he has had to stop hunting for the past 15 years as result of official engagements.
“The king also closely follows the sessions of the National Dialogue and what is written in local newspapers and he often points out some of the articles in meetings,” the prince said.
DEBKA-Net-Weekly‘s Saudi experts say this account of King Abdullah’s state of health and work schedule was clearly airbrushed. The king did not give up his equestrian hobbies – first as crown prince who acted for the ailing King Fahd fifteen years ago and later as king – because he was too busy with affairs of state. He stopped playing polo and hunting because of his age and state of health.