18 May 2017 - 20 May 2017

Can Saudi Arabia lead the Gulf to a knowledge economy and a sustainable and stable future?

Chair: Ms Karen Elliott House

This Ditchley conference was held in May 2017 as President Trump arrived in Riyadh for what turned out to be a pivotal visit by the new President, proclaiming Saudi Arabia as the United States’ ally in the region once more. Trump’s visit, not revealed until a few weeks before the conference, made it difficult to gather Saudi participants. Beyond this, there was probably also preparation going on behind the scenes for the ousting of Crown Prince Muhammad bin Naif (MBN) and his replacement by Crown Prince Muhammad bin Salman (MBS). This note differs from a standard Ditchley report of the discussion and has been deliberately delayed as the dramatic events in Saudi Arabia have unfolded, and looks at which of our questions have been answered by subsequent events and which remain in play. It examines what is now clear and what is not.

Karen Elliot House, a senior fellow at Harvard’s Belfer Center and author of “On Saudi Arabia: Its People, Past, Religion, Fault Lines – and Future”, chaired a group that included Saudi business leaders and academics, journalists, financial sector figures, diplomats, energy experts and technology entrepreneurs. Karen’s Belfer Centre report of late July 2017, “Saudi Arabia in Transition”, offers a fuller review of developments in Saudi Arabia since the conference.

We inevitably spent a lot of time debating whether or not MBS would and could move against MBN, given his control of the security forces. The consensus was that there would need to be some sort of deal with MBN, backed by Prince Mit’ab bin Abdullah, commander of the national guard, for MBS to leapfrog to power. It was expected that the Al-Sa’ud would continue to manage the transition of power peacefully but it was also noted that the biggest threat to the continued rule of the royal family lay in internal schisms if the tradition of peaceful transitions failed.  

We appear to have underestimated the impact of President Trump’s assumed assurances to the Saudis that he would back MBS as a strong anti-Iran ally in the region. But even more significantly, we underestimated MBS’s will to power and impatience. MBS is following Machiavelli’s playbook to the letter, following through on his decision to move with a decisive ruthlessness, not only replacing MBN but also stripping him of all power and confining him to his palace. The latest round of arrests of the wealthy and powerful accused of corruption has also removed other potential opponents from influential positions, such as Prince Mit’ab. MBS is creating a new generation of leaders who owe their positions to him alone. He is moving at a speed that is wrong footing and bewildering older Saudi leaders and making him very much the one-man encapsulation of the fate of the kingdom. He is allowing no peers to emerge. His oldest son is seven years old. There is great potential in the long rule ahead of MBS if all goes well but the kingdom is now also one assassination, one road accident, one death by natural causes away from an uncertain future. This is Renaissance princely politics played out in Silicon Valley and the sand for high stakes, both deeply modern and deeply traditional.

We saw Saudi Arabia set in a bleak regional context with Iran challenging for the role of lead Middle Eastern power. Iraq looked likely to remain closely aligned to Iran, its Shia majority suspicious of Saudi Arabia’s backing for Wahhabi Islam. The priority in Mesopotamia, even though it put Saudi Arabia on the same side as Iran, had to be bringing ISIS under control because of the threat it posed to the Saudis’ own security. There appeared to be no easy solution to the stalemate in Yemen, with Saudi Arabia unlikely to win a decisive victory against Iranian Houthi proxies. Another Iranian ally, President Assad, looked likely to survive the civil war after all and Hizbullah remained firmly in control of the south in Lebanon. Saudi Arabia would be willing to respond to American demands to do more on terrorism and Sunni extremism, perhaps, but there would be limits for fear of upsetting the religious majority in the Kingdom and of creating more space for Iran to fill. The Sunni Arab dominated regimes beyond the GCC, Jordan and Egypt, remained poor, economically broken and looking to Saudi Arabia for funding without being able to offer much beyond moral support in Saudi Arabia’s campaigns. The Turks were preoccupied with their internal security issues after the Gülenist coup and focused otherwise on the Kurds. 

In the five months since the conference, ISIS has been territorially defeated by a combination of Middle Eastern allies, Iranian and Hizbullah support to Assad, Russian and American bombs and missiles, and Kurdish troops. The low intensity war in Yemen grinds on with no end in sight. The big surprise was the Saudi-led GCC action against Qatar and now the Saudi deposing of the previously Saudi-backed Prime Minister of Lebanon, probably for being too soft on Hizbullah. All the evidence so far is that MBS will not put off conflicts today that he fears could be worse and more difficult to win in future. Backed by the Trump administration, we may see further escalation of proxy wars with Iran. Backing of Sunni proxies in Iran may, however, be too difficult to combine with a strong stance on terrorism.

The need for reform of the economy was generally recognised by educated Saudis. It was largely accepted that the current model could not be sustainable with oil prices unlikely to reach previous highs. MBS’ timing for reform was good. Nonetheless, Saudi Arabia was not used to austerity and MBS had already had to backtrack on hastily imposed and not fully understood cuts to public sector salaries and benefits. There were real question marks about Saudi Arabia’s bureaucratic and organisational ability rigorously to prioritise and to deliver the ambitious reform programme set out in Vision 2030.

The ARAMCO IPO was about much more than money. ARAMCO was the best symbol of the new Saudi Arabia that MBS appeared to want to create: technologically at the leading edge of its industry with ARAMCO filing more patents than Shell; an expanded role for female Saudis with ARAMCO’s chief engineer a woman; and a meritocratic and hardworking culture. The IPO would, however, also fuel plans for the world’s largest sovereign wealth fund which would not only be able to generate income but also invest in other industries in the country. There was debate over whether or not a high valuation of ARAMCO was essential to the success of the IPO.

Perhaps the biggest challenge for the move from state employment to private sector industry set out by Vision 2030 was education and skills. Not enough Saudis were being educated and trained appropriately for the high tech industry economy imagined. There was a need for more vocational training. Coding was a growth area and online courses could perhaps bypass Saudi social and religious difficulties around the education of women, as with the deal made with online training company, Udacity.  

No one was convinced that SAMI would be able to manufacture high tech military equipment for example. SAMI could manufacture low tech equipment and create jobs but the products would probably be more expensive than those imported. It was already clear that MBS was willing to make high risk investments in venture capital in technology in pursuit of high returns and a stake in the intellectual property of the future.  

There was concern that Vision 2030 and essential economic reforms were so closely tied to MBS’s personal star. A fall from grace could leave reform leaderless.

Since the conference, the identification of economic reform with MBS personally has increased further.  There is still no clarity over the ARAMCO IPO and how it will be played. Economic performance has been sluggish and is still absolutely linked to the oil price. It is possible that another motivation for moving against a range of princes is that MBS has concluded that economic reform is impossible with so many vested interests and so much embedded corruption to navigate and that therefore economic reform must be combined with a change in economic leadership on a broad scale and in depth. The arrest of so many prominent wealthy Saudis has certainly sent a clear messages that the proceeds of privatisation will not go to the usual suspects, although there remains a risk that a new coterie will emerge. MBS continues to make prominent venture capital investments in technology companies, partly through the Japanese company, SoftBank.

MBS had been successful and so far unchallenged in curbing the power of the religious establishment and particularly the religious police. The latter had become vulnerable when it was realised how many of their number had ISIS links. It was noted that, although it appeared uniform from the outside, the religious establishment was in fact not monolithic and was unlikely to be able to challenge MBS. Non-state clerics exploiting social media might be more of a concern but MBN’s security forces were in position to extinguish any challenge at an early stage if necessary. MBS was also developing powerful social media monitoring capabilities, leveraging technologies. It was stressed, though, that Vision 2030 should not be seen as a secularisation programme. The country would remain highly religious.

Social media played a special role in Saudi Arabia and Saudi was the largest per capita Twitter and YouTube user in the world. Social media provided much needed “open space” for discussion, especially for women. The government watched social media carefully but for most of the time was relatively tolerant of criticism and would respond to it, as with the retreat on the reduction in government salaries and benefits. Nonetheless, there were red lines as with the arrest of progressive bloggers.  Social media was the new battleground between social reformers, religious conservatives and religious extremists.

There are signs that Vision 2030 and MBS’ leadership are leading towards more de facto secularisation. The role of social media means that change and innovation spreads rapidly amongst the online elements of the population. It is not yet clear how the strong religious trend in the country will react as it becomes clearer that economic reform will bring social reform, as with the decision to allow women to drive as of 2018.

With backing from President Trump at least, if not his Secretary of State and broader administration, MBS is accelerating his takeover and reform of the Saudi Arabian state. It is not clear if his current moves, including the arrest of 200 prominent figures, are driven by strength and confidence or by fears and concern that reform could stall and his power could be blocked by a critical and unconvinced group of princes. It seems likely that, as MBS gets to grip with the challenge of Saudi Arabia, he is concluding, with a young man’s self-belief and willingness to roll the dice, that he is safer leaping across the chasm to the future, than edging along a precipitous path that will be both slow and dangerous to traverse.  This gamble of relentless action, and the prospect of a long rule ahead, could see Saudi Arabia transformed. Success would see Saudi Arabia emerge as the United States’ essential ally, the economy transformed and Iran contained. It would allow MBS to kick into the long-term distance any demands for political reform. Failure, or the death or fall of MBS, could see the House of Saud fall and the country enter a new and unpredictable phase.  

This Note reflects the Director’s personal impressions of the conference. No participant is in any way committed to its content or expression.


CHAIR: Ms Karen House  
Senior Fellow, Belfer Center for Science and International Affairs, Harvard Kennedy School; Chairman, RAND Corp.; author, 'On Saudi Arabia: Its People, Past, Religion, Fault Lines - and Future' (Knopf, 2012). Formerly: Publisher and correspondent, The Wall Street Journal; Senior Vice President, Dow Jones & Company.

Mr Adel Hamaizia  
DPhil Candidate, St Antony's College, University of Oxford; Committee Vice-Chairman, Oxford Gulf & Arabian Peninsula Studies Forum, University of Oxford; Senior Teaching Fellow, Department of Financial and Management Studies, School of Oriental and African Studies, University of London; co-Editor, 'Gulf Affairs'; independent consultant working with governments and private sector on development, economic and fiscal issues of the GCC and Maghreb countries.

Mr William Clegg  
DPhil Candidate in Modern History, Balliol College, University of Oxford.
Mr Tom Harley  
Joint Managing Director, Dragoman Pty Ltd; Chairman, Dow Chemical (Australia); Chairman, Menzies Research Institute; Chairman, Australia Saudi Business Council; Advisory Board Member, Centre for Arab and Islamic Studies, Australian National University.

Ambassador Ferry de Kerckhove  
Fellow, Canadian Defence and Foreign Affairs Institute; Senior Fellow, Graduate School of Public and International Affairs, Faculty of Social Sciences, University of Ottawa; Adjunct Professor, Department of Political Science, Cape Breton University. Formerly: Canadian Diplomatic Service (1973-2011); Ambassador to Egypt (2008-11); Director General, International Organisations (2004-06); Ambassador to Indonesia (2001-03); High Commissioner to Pakistan (1998-2001); Deputy Head, Policy Branch (1996-98); Deputy Head of Mission, Embassy of Canada to the Russian Federation (1992-95).
HE Mr Dennis Horak  
Ambassador of Canada to Saudi Arabia, Bahrain, Oman and Yemen. Formerly: Chargé d'Affaires/Head of Mission in Iran (2009-12); Director, Middle East Division (2012-15); Director, Gulf and Maghreb Division (2006-09).
Mr Douglas Nevison  
Director, Canada, Morocco, Jordan and Tunisia, European Bank for Reconstruction and Development, London (2016-). Formerly: Assistant Secretary to the Cabinet, Liaison Secretariat for Macroeconomic Policy, Privy Council Office (2014-16); General Director, Economic and Fiscal Policy Branch, Department of Finance Canada (2012-14); Director, Fiscal Policy Division, Department of Finance Canada (2009-11).

Robert Skinner PhD  
Executive Fellow, School of Public Policy, Advisor Energy Research, University of Calgary; President of a private strategy advisory service. Formerly: executive positions, oil sands business, Statoil Canada (2006-11) and TOTAL SA (1996-2001); Director, Oxford Institute of Energy Studies (2003-06); Director, Long Term Policy Office, International Energy Agency, Paris (1989-95); Government of Canada: Assistant Deputy Minister, Energy Commodities, Department of Energy, Mines and Resources (1985-88).

Dr Jamal Abdullah  
Academic Visitor, Middle East Centre, Saint Antony's College, University of Oxford (2016-); Visiting Lecturer, NATO Defense College, Rome (2012-); Visiting Lecturer, Diplomatic Institute, Ministry of Foreign Affairs of Qatar; member, Arab Foresight Group; Visiting Researcher, Middle East Center, London School of Economics and Political Sciences (2015-). Formerly: Researcher and Head of Gulf Studies Unit, Al Jazeera Centre for Studies, Doha.

Ambassador Günter Mulack  
Executive Director, German Orient Institute, Berlin (2008-). Formerly: Political Advisor to EU Chief Observer for the Afghanistan Presidential Elections (2009); Senior Advisor, Aga Khan Development Network; German Diplomatic Service: Ambassador to Pakistan (2005-08); German Commissioner for Dialogue with the Muslim World (2002-05); Ambassador to Bahrain; to Kuwait; to Syria.

Ms Aban Haq  
MPhil Candidate in Development Studies and Oxford-Weidenfeld-Hoffman Scholar, University of Oxford. Formerly: Head, Education Innovation Fund, DAI (2014-15); Chief Operating Officer, Pakistan Microfinance Network (2012-14); Country Economist, International Growth Centre-Pakistan (2011-12); Research Analyst, Pakistan Microfinance Network (2007-11).

Professor Madawi Al-Rasheed PhD  
Visiting Professor, Middle East Centre, London School of Economics; Research Fellow, Open Society Foundation. Formerly: Professor of Anthropology of Religion, King's College, London (1994-2013); Prize Research Fellow, Nuffield College, Oxford.
Mr Ahmed Alsaab  
PhD Candidate in Corporate Governance, University of Wolverhampton.
Dr Ghassan Alshibl  
Board Member and Managing Director, Saudi Research and Marketing Group.
Mr Mohammed Khalid Alyahya  
Nonresident Fellow, Rafik Hariri Center for the Middle East, Atlantic Council; Research Fellow, Gulf Research Center; member, advisory board, Future Trends in the GCC Program, Chatham House. Formerly: Associate Fellow, King Faisal Center for Research and Islamic Studies (2014-15).

Mr Javier Blas  
Chief Correspondent, Bloomberg News.

Mr Onursal Soyer  
Deputy CEO, Lambert Energy Advisory (2002-). Formerly: Corporate strategy, LASMO plc (1998-2001).

Miss Rawdha Alotaiba  
Deputy Head of Mission, United Arab Emirates Embassy to the United Kingdom.

Mr Neil Brown  
Commodore Royal Navy (Retired); Geopolitical strategist, CQS (UK) LLP, London. Formerly: Director, Defence and Security, Gulf Strategy Team, Cabinet Office (2013-15); Director, Naval Staff, Ministry of Defence (2011-13); Visiting Fellow, St Antony's College, and Changing Character of War Programme, University of Oxford (2010-11).
Mr Nick Butler  
Visiting Professor, King's College London; writer of 'Energy and Power' blog, Financial Times. Formerly: Group Vice President for Strategy and Policy, BP (2002-07); Senior Policy Adviser to the Prime Minister (2009-10); Special Adviser to the House of Lords Select Committee inquiry on the economic implications of shale gas (reported in May 2014), and to the Lords inquiry into UK energy policy (published in January 2017).
Sir Sherard Cowper-Coles KCMG  LVO  
Group Head of Government Affairs, HSBC Holdings plc; Chairman, HSBC Bank Oman; Director, HSBC Bank Egypt. Formerly: Business Development Director, International, BAE Systems; HM Diplomatic Service (1977-2010): Foreign Secretary's Special Representative for Afghanistan and Pakistan (2009-10); HM Ambassador to Afghanistan (2007-09); HM Ambassador to Saudi Arabia (2003-07); HM Ambassador to Israel (2001-03); Principal Private Secretary to the Foreign Secretary (Robin Cook) (1999-2001).
Dr Michael Denison  
Group Political Adviser, BP plc. London.
Lt Gen Sir Simon Mayall (Retd) KBE, CB  
Senior Advisor, Greenhill Bank (2015-); Chief Executive, Sandcrest (consultancy); author, 'Turkey: Thwarted Ambition', on Turkish security policy (2005). Formerly: British Army (1978-2015): Security Envoy to Iraq and the Kurdish Regional Government (2014-15); Defence Senior Adviser (Middle East) (2011-14); Deputy Corps Commander in Iraq; Assistant Chief of the Army; Deputy Chief of Defence Staff (Operations) (2009-11); involved in liberation of Kuwait, UN operations in Cyprus and KFOR in Kosovo; served in Sultan of Oman's Armed Forces.
Mr Tom McKane  
Senior Associate Fellow, Royal United Services Institute; Visiting Senior Fellow, London School of Economics and Political Science; member, European Leadership Network. Formerly: Director General, Security Policy, UK Ministry of Defence; Director General, Strategy; Director General Resources and Programmes, Ministry of Defence; and Deputy Head of Defence and overseas Secretariat, Cabinet Office.
Mr Richard Meredith  
Partner and Head of Corporate Crisis Advisory Group, Brunswick Group, London (2012-). Formerly: Communications Director for national security issues, UK Government (2009-12); HM Diplomatic Service.
Sir Mark Moody-Stuart KCMG  
Chairman, formerly Vice Chairman, Foundation for the UN Global Compact; Director, Saudi Aramco (2007-); Chairman, IVCC (Innovative Vector control consortium). Formerly: Chairman, Hermes Equity Ownership Services (2009-16); Board of Directors, Accenture (2002-15); Chairman, Global Business Coalition for HIV/AIDS, TB and Malaria (2002-11); Director, HSBC Holdings plc (2001-10); Chairman, Anglo American plc (2001-09); President, Liverpool School of Tropical Medicine (1997-2008); member, UN Secretary-General's Advisory Council on Global Compact (2000-06); Chairman, Royal Dutch/Shell Group (1998-2001); The Shell Group (1966-98).
Mr Paul Newman  
Director, NEX Group (2016-); Non-Executive Director, J. C. Rathbone Associates Ltd (2008-); Freeman of the City of London. Formerly: Chairman, ICAP Energy (2014-16); Managing Director, ICAP Energy Ltd (1990-2014); Prince's Council, The Prince's Charities (2009-12); Non-Executive Chairman, ICAP Shipping Ltd (2007-11); School Governor, City of Westminster (2001-03); Co-Founder (1993), ICAP Charity Day; MC Fellow, St Antony's College, University of Oxford (1989-90); Trustee Director, Epilepsy Research UK; Patron, Barts Hospital Appeal. A Governor and Member of the Council of Management, and a Member of the Finance and General Purposes Committee of The Ditchley Foundation.
Dr Farhan Nizami CBE  
The Prince of Wales Fellow in the study of the Muslim World, Magdalen College, Oxford (1997-); Founder Director, Oxford Centre for Islamic Studies; Emeritus Fellow, St Cross College; Member, Faculties of History and Oriental Studies, Oxford University; Series Editor, Makers of Islamic Civilization (OUP, 2004-); Founder Editor, Journal of Islamic Studies (OUP, 1990-).
Sir William Patey KCMG LLD  
Senior Adviser, AECOM (2017-); Government and International Affairs Adviser, Control Risks (2012-); Non-executive Director, HSBC Bank Middle East (2012-); Partner, The Ambassador Partnership (2012-). Formerly: HM Diplomatic Service: Ambassador to Afghanistan (2010-12); to Saudi Arabia (2007-10); to Iraq (2005-06); to Sudan (2002-05).
Mr Gerard Russell MBE  
Director, Pall Mall Communications Ltd (2014-); Senior Fellow, International Security Program, New America Foundation (2014-); Senior Associate, Foreign Policy Centre (2011-). Formerly: Senior Consultant, Quiller Consultants (2011-14); Research Fellow, Carr Center for Human Rights Policy, Harvard Kennedy School of Government (2009-11); Her Majesty's Diplomatic Service: Senior Political Affairs Officer, United Nations Assistance Mission to Afghanistan (2009); Financial Services in the Gulf, UK Trade and Investment (2008-09); Counsellor, British Embassy, Kabul (2007-08); Consul-General, Jeddah (2006-07); Counsellor, British Embassy, Baghdad (2005-06).

Mr Jonathan Paris  
London-based Middle East Analyst (2001-); Senior Advisor, The Chertoff Group; Associate Fellow, International Centre for the Study of Radicalisation, King's College London; Board Member, Global Diplomatic Forum. Formerly: Visiting Scholar, Shanghai University of Political Science and Law (Spring 2017); Senior Associate Member, St. Antony's College, Oxford (2004-05); Middle East Fellow, Council on Foreign Relations in New York (1995-2000).

Dr Jessica Ashooh  
Nonresident Senior Fellow, Rafik Hariri Center for the Middle East, Atlantic Council; Director of Policy, Reddit (June 2017-); term member, Council on Foreign Relations. Formerly: Deputy Director, Albright-Hadley Middle East Strategy Task Force, Atlantic Council (2015-17); Senior Analyst, Policy Planning Department, Ministry of Foreign Affairs of the United Arab Emirates (2011-15); consulting adviser to the Minister of Planning, Kurdistan Regional Government, Erbil, Iraq (2010).
Dr Helima Croft  
Managing Director, Global Head of Commodity Strategy, RBC Capital Markets, New York; member, National Petroleum Council; Life Member, Council on Foreign Relations. Formerly: Managing Director and Head of North American Commodities Research, Barclays; Lehman Brothers; Council on Foreign Relations.
Dr Jerrold D. Green  
President and Chief Executive Officer, Pacific Council on International Policy, Los Angeles (2008-); Research Professor of Communications, Business and International Relations, University of Southern California; Member, U.S. Secretary of the Navy Advisory Panel and U.S. Department of State Advisory Committee on International Economic Policy. Formerly: Director of International Programs, RAND Corporation; Director of Middle East Centers, RAND and University of Arizona; Research Fellow in Iran; Fulbright Professor in Egypt.
Mr Simon Henderson  
Baker Fellow and Director, Gulf and Energy Policy Program, The Washington Institute for Near East Policy. Formerly: journalist, Financial Times; consultant advising corporations and governments on the Persian Gulf.
Dr Matthew Spence  
William J. Perry Fellow, Stanford University; Partner, Andreessen Horowitz; Senior Fellow, Yale Law School Center for Global Legal Challenges. Formerly: Deputy Assistant Secretary of Defense for Middle East Policy, U.S. Department of Defense (2012-15); Special Assistant to the President and Senior Director for International Economic Affairs, National Security Council (2011-12); Senior Advisor to the National Security Advisor, The White House (2009-11).
Mr Casimir A. Yost  
Adjunct Professor, Institute for the Study of Diplomacy, Georgetown University. Formerly: Director, Strategic Futures Group, National Intelligence Council (2011-13); Director, Long Range Analysis Unit, National Intelligence Council (2009-11); Edmund A. Walsh School of Foreign Service, Georgetown University (1994-2009): Marshall B. Coyne Professor in the Practice of Diplomacy, Director, Institute for the Study of Diplomacy and Co-Chair, Schlesinger Working Group on Strategic Surprises; Director, Center for Asian Pacific Affairs, Asia Foundation (1990-94); President, World Affairs Council of Northern California (1986-90). A Member of the Board of Directors of the American Ditchley Foundation.