Fear and hope grip kingdom after night of the long knives

Andrew Critchlow THERE is a sense of fear and hope in Saudi Arabia after the arrests of dozens of princes and ministers in an unprecedented corruption crackdown.

It is hoped that the purge, which has been described as a “night of the long knives”, will sweep away the old guard of royals accused of cronyism and blamed for draining wealth from the world’s largest oil producer.

But handing a younger leadership free rein to push through broader economic and social reforms also brings with it giant risks in the traditionally conservative kingdom.

For the billionaire royals and once powerful technocrats currently being held in the luxurious temporary prison of Riyadh’s Ritz Carlton hotel, the future seems bleak.

According to the Saudi attorney general’s office, more than 200 officials were seized and questioned last weekend. Those being held include members of the upper ranks of the kingdom’s Al-Saud nobility. Their bank accounts were frozen as the state moved quickly to begin clawing back billions it alleges have been siphoned out of its coffers.

“Based on our investigations over the past three years, we estimate that at least $100bn has been misused through systematic corruption and embezzlement over several decades,” said Sheikh Saud Al-Mojeb, the kingdom’s top prosecutor.

More arrests are expected and overseas banks in the region have been instructed to freeze the accounts of many of those already being held.

Oil — the best barometer for stability in the world’s largest exporter of crude — jumped $2 following news of the arrests, to a new two-year high close to $65 per barrel as traders digested the unfolding events.

Some analysts have argued that the crackdown is part of Crown Prince Mohammed bin Salman’s plan to consolidate power before he succeeds his 81-year-old father who is expected to abdicate imminently.

The vigorous 32-year-old prince — who is known by his initials as simply MbS — ousted his elder cousin Mohammed bin Nayef to become first in line to the Saudi throne in June. He has now seized control of almost all elements of government from defence to oil production policy and the Mutawa religious police.

But of the 11 high-ranking princes arrested, only Mitab bin Abdullah — who was simultaneously removed as head of the National Guard — posed a serious political threat to the current line of succession. However, their sudden incarceration has ef- fectively ended any realistic aspirations any may have had to challenge the new regime.

“This is about consolidating power under Mohammed bin Salman,” said one source.

The sudden nature of the arrests may cause concerns, along with Saudi Arabia’s poor record on human rights, but a sustained top-down campaign to tackle systemic corruption in the kingdom is probably long overdue.

Scrutinising the finances of the army of Al-Saud princes and hangers-on could also help boost the public purse, which is still struggling to come to terms with lower oil prices. Funding of the royal family has also become unsustainable in a country that is being forced to impose austerity measures.

MbS has time to steady the ship. The first major test of confidence in the new Saudi Arabia being shaped will come in its plan to sell a stake in state oil driller Aramco. The world’s largest single producer of crude is bigger than Exxon Mobil, Royal Dutch Shell and BP combined. However, its plans to list a 5pc stake in the company by the end of 2018 on an international stock exchange have met with a cool response. The initial public offering — which is expected to value the company at $2 trillion — is the brainchild of Mohammed bin Salman.

The biggest immediate impact of the upheaval in Saudi Arabia and the consolidation of power under MbS could be on long-term oil prices and policy. The prince has signalled his wish to see the Organisation of the Petroleum Exporting Countries (Opec) extend its agreement with Russia and other major producers to limit output by 1.8m barrels per day. That deal has helped push crude prices closer to the $70 per barrel figure that Saudi Arabia requires to balance its budget and pursue its expensive proxy war against Iran and its Houthi rebels in Yemen.

Those higher prices will also be crucial to solving some of the kingdom’s pressing economic problems. Plans to cut unemployment to around 7pc, from 12pc at present, will require more funding and provide more opportunities for women to participate in the workplace.

‘This is about consolidating power under Mohammed bin Salman’