**Written and disseminated to select contacts on March 10, 2020**
WHAT YOU SHOULD KNOW
Senior princes, including King Salman’s brother Ahmed bin Abdulaziz Al Saud and his son Nayef, head of Land Forces Intelligence and Security Authority; and Mohammed bin Nayef, former Crown Prince and interior minister and his younger half-brother Nawaf, were arrested last week. Others who have reportedly been detained include the former head of intelligence, General Yusuf bin Ali Al Idrisi, and Prince Mutaib bin Abdullah. Mutaib was previously detained in the Ritz Carlton roundup of Nov 2017, when over 200 leading businessmen and senior royals were arrested and detained at the five-star Riyadh hotel in what was billed as a corruption crackdown.
WHY IS IT IMPORTANT?
The move is intended to remind senior members of the ruling Al Saud family that, should King Salman suffer a debilitating health issue or die, current Crown Prince Mohammed bin Salman (MbS) will succeed smoothly, and any attempt to disrupt his succession will be thwarted and dealt with severely. MbS places a high priority on consolidating his position within the ruling family and guaranteeing succession over attracting foreign investment.
- The crown prince’s dramatic domestic and foreign policy initiatives have served to undermine investor confidence in the stability of the kingdom’s business environment. This move will only add to the growing uncertainty.
- Efforts to re-orientate the image of Saudi Arabia in North America and Europe – an endeavour supported by the appointment of new Western-friendly ambassadors – will be undermined.
- The success of the G20 and efforts to co-ordinate and align policies with the UK’s hosting of COP26 will likely be compromised; this will further undermine confidence in Saudi Arabia’s reform agenda.
- All of the above will significantly slow progress on Vision 2030 goals, making modest gains the most likely outcome.
- In the long term, MbS will have to rely upon repressive measures to assuage growing levels of dissatisfaction among youth that Vision 2030 has not delivered on its promises.
The arrest of senior princes, interior ministry officials and senior army officers suggests a coup was in the offing. However, there is very little evidence so far to support that theory. It is much more likely that the move is intended to send a strong signal to senior princes known to oppose MbS that his succession will take place unopposed, and that any signs of dissent will be addressed in a ruthless fashion – and no member of the ruling family, no matter how senior, will be exempt.
MbS is impatient for success and places enormous importance on attracting foreign investment into the kingdom. 2020 is a key year given that Saudi Arabia will host the G20 summit in November. However, a number of factors – both indigenous and exogenous – have frustrated efforts to meet Vision 2030’s key performance indicators and are largely contingent upon the kingdom’s continuing vulnerability to the oil price and its failure to attract foreign investment.
For example: the Aramco IPO was seen by many as a failure given its domestic listing; PIF investments have performed poorly;COVID-19 has affected oil demand; and failure to secure a deal with Russia to cut production has seen the oil price plummet to the $30 over the weekend. Although FDI flows to Saudi Arabia increased from $1.4bn in 2017 to $3.2bn in 2018, they are still significantly below the 2008 peak of $39bn.
MbS reshuffled his Cabinet on Feb 25 to address some of the shortcomings. The move saw the return to government of Khalid Al Falih, who was ousted as energy minister just six months ago, and integrates various government agencies into formal ministries to centralise decision-making in key sectors such as tourism, foreign investment and sports development. No changes were announced to the major ministries of energy, foreign affairs, defence and interior, which house influential ministers and drive MbS’s policy.
The decision to bring Al Falih back into government so soon after his earlier, unedifying, removal, is a surprise but will be viewed as a positive development for international investors. It indicates a more tactical approach by MbS to prioritise delivering on the G20 objectives as well as Vision 2030, even if that means putting aside previous differences with Al Falih.
It not only shows that Al Falih is a prominent and leading Saudi technocrat, but also suggests that MbS is short on options. The crown prince ate a slice of humble pie in giving Al Falih the kingdom’s investment portfolio, where it is failing badly. It will also likely mean that his close confidante, PIF governor Yasir Al Rumayyan, will soon leave office, as the competition between Al Falih and Rumayyan is fierce.
Slow progress on Vision 2030, the prospect of losing support not only from among his youth constituency, but more importantly younger-generation princes, combined with continuous rumours that senior princes with strong links into the interior ministry could challenge his authority, led MbS to take pre-emptive action against his uncle and cousins.
Neil Quilliam | CEO Castlereagh Associates | email@example.com
 Hope, Bradley, Justin Scheck, Summer Said, and Rory Jones, “How a Reality-TV Producer Became Rainmaker to $300 Billion Saudi Fund,” Wall Street Journal, 10 February 2020, https://www.wsj.com/articles/how-a-reality-tv-producer-became-rainmaker-to-300-billion-saudi-fund-11581380021
 UNCTAD, World Investment Report 2019.