BEIRUT — Persistently low oil prices appear to be taking a heavy toll on Saudi Arabia, spurring rare labor unrest as the kingdom’s rulers pursue radical changes to stabilize the economy.
Companies in the oil-exporting country have been forced to shed tens of thousands of employees in recent months. The government, in turn, has imposed painful austerity measures on citizens, ripening conditions for Arab Spring-like turbulence, analysts say.
Late last month, construction workers torched buses during demonstrations in the holy city of Mecca because they hadn’t been paid in months.
Adding to unease has been the meteoric rise of King Salman’s 30-year-old son, Mohammed bin Salman. He has taken charge of economic reform, but rival royals and religious elites appear rankled by his attempts to consolidate power.
“The conditions that produced the Arab Spring five years ago haven’t gone away, and they seem to be even more of a concern in Saudi now,” said Bruce Riedel, a former foreign policy adviser to President Obama and a senior analyst at the Brookings Institution. Saudi Arabia — with its generous oil-financed welfare system — managed to avoid significant unrest while the 2011 uprisings took hold in Egypt, Libya and Syria.
Saudi Arabia, a U.S. ally and the world’s biggest oil exporter, is still a wealthy country and has bounced back from times of low oil prices before. But even as crude has risen recently to nearly $50 a barrel from around $30 earlier this year, analysts do not foresee a return anywhere close to the sky-high prices of two years ago.
Rising international energy competition is partly to blame for the price collapse. So, too, is the Saudi policy of trying to bankrupt competitors in other countries by keeping oil production relatively high.
Still, Saudi officials appear to recognize the pressing need to reduce the country’s overwhelming reliance on oil sales, which account for an estimated 80 percent or more of government revenue. Last month, Prince Mohammed, the deputy crown prince and defense minister, announced a major economic restructuring dubbed Vision 2030. The plan intends to bring transparency to opaque government institutions and substantially boost income from non-oil-related industries.
The plan includes the partial privatization of the state oil company, Saudi Aramco, and envisions massive job creation. Unemployment has become especially problematic for Saudis younger than 30, the majority of the kingdom’s 22 million citizens.
Economic growth has tapered off recently and budget deficits have grown, spurring the International Monetary Fund to warn last year that Saudi Arabia could run out of cash if it failed to make reforms.
Authorities have responded to the crisis by cutting subsidies for water, fuel and electricity, but financial experts say more is needed — possibly taxation, a hot-button issue for Saudis.
Some Saudis may be ready to accept the changes.
“They have to be gradual and accepted, but people understand that they are needed,” said Abdulaziz Sager, chairman Gulf Research Center who lives in the coastal city of Jiddah.
But many doubt whether the necessary changes can be introduced fast enough in such a conservative society that is run by an absolute monarchy with little apparent desire for political reform.
Simon Henderson, an expert on Saudi Arabia at the Washington Institute for Near East Policy, said the powerful religious establishment has not responded to the Prince Mohammed plan, which suggests they disapprove of it.
“There’s nothing in the recent changes that would be a cause for joy among the religious establishment,” Henderson said.
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