Saudi Prince's Death Puts Focus on Succession
Anchor, CNBC (EMEA)
The death of Saudi Arabia’s Crown Prince Sultan brings into play the system for choosing a new heir to the country's throne, and as one of most high-profile governments still resisting changes brought on by the Arab Spring, the importance of communicating stability affects investor sentiment across the Arabian Peninsula and energy markets around the world.
May Yamani, a scholar of Saudi politics and author of "Cradle of Islam," believes the challenges are many, but “to be stable, the royal family must retain near complete unity and establish clarity and transparency in its system of succession."
And so the “Allegiance Council” comes into play, a 34-member body set up by King Abdullah to select successors. Each member represents a family of a son of the country’s founder, King Abdulaziz Al Saud. It could become the first time, five years since its inception, that the council is put to the test. Reports suggest that Prince Nayef, the country’s second deputy prime minister and long-serving interior minister, is almost certain to be chosen. Prince Salman, the current governor of the nation’s capital Riyadh, would most likely be next in line thereafter.
Known for his tough security stance in response to a wave of Al-Qaeda attacks on expatriate and oil infrastructure locations eight years ago, Prince Nayef is frequently cited as more conservative than the incumbent king, who is also his half-brother.
Angus Blair, head of research at Beltone Financial, told CNBC that while it may be natural to make Prince Nayef the crown prince, he believed that “most Saudis would welcome someone younger to reflect the wider changes in both Saudi Arabia and the region." It would also send a helpful signal to investors about the longevity and consistency of policies coming out of Saudi Arabia.
“Below the surface cracks are visible,” Yamani wrote in an article for "Contemporary Arab Affairs" in 2009. But if the necessary reforms are undertaken, the Al Saud “could remain in power.” The Arab Spring has piled the pressure on Saudi authorities, which have since embarked on a series of economic reforms and limited political and social changes. The immediate line-up for the throne would all be in their late 70s, with the jump to the next generation widely seen as more complicated. The rules governing such a transition are unclear.
King Abdullah, 87, has been in power since 2005. He has been hospitalized on several occasions in 2011, the latest last week for a back operation.
As the world awaits word from either the “Allegiance Council” or the Royal Court, Gulf markets have shrugged off any uncertainties in the succession process. Amid a flurry of third-quarter earnings, the Saudi Tadawul, the region’s largest stock market, edged higher on Saturday. It continues to be one of the more resilient markets in the region, although still largely unfriendly to foreign investors, losing 7.7 percent so far this year.
Saudi Arabia is a G20 member and the largest oil exporter in the world. Its massive government spending programs were ramped up earlier this year to pre-empt domestic instability.