‘Saudi First’ aid policy marries geopolitics with economics

 

By James M. Dorsey

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When Mohammed al-Jadaan told a gathering of the global political and business elite that Saudi Arabia would, in the future, attach conditions to its foreign aid, the finance minister was announcing the expansion of existing conditionality rather than a wholly new approach.

Coined ‘Saudi First,’ the new conditionality ties aid to responsible economic policies and reforms, not just support for the kingdom’s geopolitics.

For the longest time, Saudi Arabia granted aid with no overt strings. The aid was policed by privately demanding support for the kingdom’s policies, often using as a carrot and stick quotas for the haj, the yearly Muslim pilgrimage to the holy city of Mecca allotted to countries across the globe.

As a result, over the years, Saudi Arabia poured tens of billions of dollars into black holes, countries that used the aid as a band-aid to address an immediate crisis with no structural effort to resolve underlying causes.

For countries like Lebanon, Egypt, and Pakistan, this meant stumbling from one crisis to the next.

“We are changing the way we provide assistance and development assistance. We used to give direct grants and deposits without strings attached, and we are changing that. We are working with multilateral institutions to actually say, we need to see reform,” Mr. Al-Jadaan told this month’s World Economic Forum in the Swiss resort of Davos.

Saudi First serves multiple Saudi purposes.

It ties geopolitical drivers of Saudi aid to economic criteria that are likely to enhance the kingdom’s influence, create opportunities for Saudi investment and business, and enhance the kingdom’s ties to recipient countries.

In doing so, the additional conditionality positions the kingdom as a constructive, forward-looking member of the international community. It aligns Saudi Arabia more closely with multilateral institutions like the World Bank and the International Monetary Fund (IMF), regional development banks, and major donors such as the United States and the European Union.

It also enables Saudi rulers to circumvent the implications of the principle of ‘no taxation without representation’ that traces its roots to the American revolution.

Saudi Crown Prince Mohammed bin Salman's social and economic revamping of the kingdom while tightening the political screws as part of his plan to diversify the kingdom's economy has involved introducing taxes with no political participation.

“Saudi people see their resources going abroad while they're being asked to pay taxes, have their benefits cut, and so on. So, I think this Saudi first stance really serves as a way to both court and contain populism,” said Gulf scholar Kristin Smith Diwan.

Saudi circumvention of the American revolutionary principle, irrespective of whether it helps pacify Saudis, has already had unintended consequences.

Earlier this week, the Jordanian parliament fired a deputy, Mohammad Al-Fayez, for asking Mr. Bin Salman to stop aiding Jordan.

“All your aid lands in the pockets of the corrupt. Your donations pay bills that have nothing to do with the Jordanian people. We hear about aid coming in for the state. However, this aid only goes to a corrupt class that is getting richer at the expense of the proud Jordanian people,” Mr. Al-Fayez said in a letter to the crown prince.

The Jordanian parliament’s measure coincided with the Saudi finance minister’s announcement. Mr. Al-Fayez wrote his letter in December at the height of clashes in the southern city of Maan between security forces and protesters angry about rising fuel prices and poor governance.

Countries like Lebanon, Pakistan, and Egypt that are potentially most impacted by the new conditions for Saudi aid illustrate the geopolitical complexities of the change.

For Saudi Arabia, Lebanon is about countering Iran and its Lebanese Shiite proxy, Hezbollah, a powerful militia and political movement with significant influence in government and the country’s power structure.

Saudi Arabia hopes that the new conditionality will force a change in Lebanon’s power dynamics.

“The whole world knows what the kingdom offered Lebanon…until it…was back on its feet. But what can we do if current Lebanese policy chooses to surrender the reins of an ancient Arab nation to Iran’s proxy in that country?” asked Saudi columnist Hammoud Abu Taleb.

To be sure, the Lebanese establishment is responsible for the country teetering on the brink of collapse.

The World Bank has described the crisis fuelled by corruption, waste, and unsustainable financial policies as one of the worst globally since the mid-19th century.

This week’s judicial battle over holding powerful figures accountable for the 2020 Beirut port explosion that has spilled onto the streets of the Lebanese capital reflects the establishment’s determination to shield itself no matter the cost to Lebanon as a whole.

The explosion in a warehouse in the port housing hundreds of tons of ammonium nitrate, a material used in fertilizers, killed 218 people, injured more than 6,000, and damaged large parts of Beirut.

A Saudi contribution to forcing political change, a sine qua non for putting Lebanon on a path toward recovery, would be welcome.

It would also go some way towards the kingdom taking responsibility for its role in fighting a decades-long proxy war with Iran that helped bring the Mediterranean nation to its knees.

That is, if the conditions imposed by Saudi Arabia are tailored in ways that contribute to change while seeking to alleviate the pain the Lebanese endured, with the Lebanese pound losing 95% of its value, prices skyrocketing, and purchasing power demolished.

One way would be making accountability for the Beirut blast a condition for future aid.

Recent Saudi standoffishness towards the regime of Egyptian general-turned-president Abdel Fattah al-Sisi, was evident in the kingdom’s conspicuous absence at a gathering of regional leaders in Abu Dhabi earlier this month. Mr. Al-Sisi was one of the attendees.

The standoffishness reflects the fact that Egypt is a black hole. Saudi Arabia, the United Arab Emirates, and other Gulf states have injected tens of billions of dollars with few tangible results except for keeping in power a regime that emerged from a 2013 military coup supported by the kingdom and the Emirates.

Saudi Arabia and the UAE backed the coup as part of a campaign to roll back the achievements of the 2011 popular Arab revolts that toppled four leaders, including Egyptian President Hosni Mubarak.

The coup also ended the flawed presidency of Mohammed Morsi, Egypt's first and only democratically elected leader. Because he was a member of the Muslim Brotherhood, Mr. Morsi was like a red cloth to a bull in the two Gulf states.

The UAE recognised early on that it needed to ensure its billions were judiciously deployed. So it based a Cabinet-level official in Cairo to advocate reforms and assist in crafting policies that would help put the economy back on track.

The Emirati effort came to naught, with Egypt continuously needing additional funds from the Gulf and the IMF, and the UAE, allowing Mr. Al-Sisi to turn the military into the country’s foremost economic player.

The impact of the Covid-19 pandemic and the Ukraine war on commodity and energy prices only aggravated Egypt’s economic crisis that is largely the result of Mr. Al-Sisi’s economic mismanagement

Mr. Al-Sisi unsuccessfully tried to manipulate Egypt’s currency, set misguided spending priorities, launched wasteful megaprojects, and expanded disruptive state and military control of the economy.

Time will tell what lessons the Saudis may learn from the Emirati experience. Unlike Lebanon, the question is whether Saudi Arabia will strictly impose its news aid policy conditionality or continue to view Egypt as too big to fail.

The problem for Saudi Arabia and the Gulf states is that popular discontent is simmering just below the surface in Egypt and could explode at any time. What makes things potentially more volatile is the possibility of the plight of the Palestinians, aggravated by the policies of Israel’s new hardline, Jewish nationalist government, becoming the catalyst for anti-government protests.

“Such demonstrations have a life of their own, and in a moment, they can turn into a protest against the government, against poverty and waste, and we have a direct confrontation whose results can be lethal," said an Egyptian journalist.

One factor in Saudi thinking about Egypt may be the perception that the North African country, which refused to get sucked into the kingdom’s war in Yemen, may no longer be the security buffer in Africa it once was together with Sudan, a country in transition following a 2019 popular revolt.

That seemed to be one reason for this month’s signing of a memorandum on defence cooperation between Saudi Arabia and Chad, a nation in a region wracked by ethnic and jihadist insurgencies.

The memorandum signals a potential Saudi interest in playing some security role in West Africa at a time that France is on the retreat while Turkey, Iran, and the Wagner Group, Russian mercenaries with close ties to President Vladimir Putin, are on the march.

Last year, Qatar mediated a peace agreement between the Chadian government and more than 30 rebel and opposition factions. However, nine groups, including the Front for Change and Concord in Chad (FACT), the most powerful insurgent faction, refused to sign the deal.

The likelihood of Saudi Arabia taking on an expanded security role far from its shores may be slim in the immediate future.

Even so, creating building blocks that include tighter relations with recipients of Saudi foreign aid through sensible strings attached is one step towards cementing the kingdom’s geopolitical influence.

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Dr. James M. Dorsey is an award-winning journalist and scholar, an Adjunct Senior Fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies, and the author of the syndicated column and blog, The Turbulent World of Middle East Soccer.