Anti-Corruption: Saudis Use China’s Playbook
Saudi Crown Prince Mohammed bin Salman is playing the corruption card to strengthen his control over the country.
November 12, 2017
Combine oil and multi-billion dollar investments flowing across the globe with authoritarian power – and you have the classic recipe for grand corruption.
Like so many other dictators who seek to boost their powers through populist appeals, Saudi Crown Prince Mohammed bin Salman, 32, backed by his father, King Salman bin Abdulaziz, is playing the corruption card.
We are just witnessing the first act of a multi-act drama that could lead Saudi Arabia towards a more diverse economy from its current total reliance on oil. Or it could all end in utter chaos.
Fighting on multiple fronts
MBS, as the Crown Prince is widely called, is arresting princes, military officials and leading businessmen at the very same time as he pursues a war in Yemen against Iranian-backed terrorists.
As if that weren’t enough, he is waging a diplomatic war against Qatar and moving to undermine the influence of Iran-backed Hezbollah in Lebanon.
It seems as if Saudi Arabia’s putative future ruler is just taking on too many battles on too many fronts. Under any circumstances, his domestic purge of actual and potential opponents, now underway, is a battle he must win.
Prominent people are being detained in Saudi Arabia on vague charges of corruption. Their bank accounts are being frozen. Saudi attorney-general Saud al-Mojeb said more than 200 people have been arrested in the last few days with over 1,700 bank accounts frozen with assets of more than $100 billion, the AP reported.
Beyond that, MBS is keen to strengthen his direct control over the nation’s internal security, its military and its staggering hoard of oil-produced cash.
MBS is seeking to build a national base of support among the nation’s youth and here an anti-corruption campaign is likely to have strong appeal. Nepotism and embezzlement by the powerful are widespread complaints by young Saudis.
The Oil Prize
MBS also wants to control the giant Saudi state-owned Aramco oil enterprise all by himself. And it is he who wants to determine whether or not to privatize some of it — and who will get the multi-billion dollar commissions if this happens.
The privatization of Aramco is controversial within the Saudi royal family and the new arrests may have muted some of the opposition.
Financiers in the City of London and on Wall Street, strongly backed by the UK and US governments, are lobbying MBS right now.
After all, Aramco may be worth more than $2 trillion so an initial listing of just five percent of the company would generate vast commissions for the bankers and brokers involved in the deal in the City of London.
Geopolitically, the far more sizzling possibility is that the Saudis will go for a private placement in China. If that happens, it will be a truly earthshaking event. It would be the clearest signal yet of the West’s diminishing allure.
The dictator’s playbook
That commercial possibility is also why MBS’s move to turn to the latest dictator’s playbook – the one written five years ago by China’s president Xi Jinping – is only logical.
Xi used corruption charges very effectively to move against perceived rivals and enemies. MBS is now applying Xi’s medicine to once-powerful princes and some of the most prominent Saudi tycoons.
In 2012, Xi declared war on corruption, knowing well the popular appeal of this cause. The result has been that more than 200,000 Chinese Communist Party officials and businessmen have been punished.
Today, thanks to decisions at the recent 19th Communist Party Congress in Beijing, Xi is the unrivaled dictator of his nation with hundreds of former politicians and businessmen languishing in prison on charges of corruption.
The Chinese anti-corruption approach involves arresting people and prosecuting them without any form of due process. The same approach will be seen in Saudi Arabia. And, in both countries, there is no clear definition of corruption.
Many of the arrests in China have been made without any public charges being posted.
In Saudi Arabia, King Salman has just created a new anti-corruption committee chaired by MBS, without explaining its terms of reference.
Ruling by decree
The problem with this is simple: Corruption is usually seen as the abuse of public office for private gain, but this definition does not quite mesh with Saudi political realities. Saudi Arabia does not have a governing constitution. The royal family decrees.
With the Saudi people viewed as subjects, the royal family sees all income flowing to the country as its own, to be disbursed as it likes, be it on fleets of Rolls Royces or on public health clinics.
None of that fazes Donald Trump. He forged a personal bond with MBS when he visited Saudi several months ago. Moreover, in the last few weeks, MBS has met at his palace with Trump son-in-law and White House adviser Jared Kushner and with U.S. Treasury Secretary Steven Mnuchin.
No wonder then that, right in the midst of the first news announcements of the arrests, corruption charges and cabinet replacements on November 4 in Riyadh, it was Donald Trump who went online.
Trump dutifully tweeted:
“Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!”
Takeaways
Like some other dictators, Saudi Crown Prince Mohammed bin Salman is playing the corruption card.
Some regimes use anti-corruption charges in order to eliminate political rivals. This is where Saudi Arabia is most like China.
Corruption is the abuse of public office for private gain. That's hard to establish in Saudi Arabia since it does not have a constitution. The royal family rules by decrees.
The Saudi royal family sees all income flowing to the country as its own -- to be disbursed as it likes.
In China, people are arrested for corruption and prosecuted in show trials without due process. The same approach is likely in Saudi Arabia.