The Saudi King's speech had 21 royal orders but very little to comfort reformists. It appears that the authorities have used its biggest political crisis to launch an economic bailout.
The Saudi King has spoken, and it appears that instead of talking of reforms he has stepped back into his comfort zone: using oil wealth and backing the original power base of conservatives.
To be sure, there were $93-billion of benefits offered, his most generous yet, but we will let other analysts dissect that.
Also Read: Saudi Arabia's 21 Royal Orders
As John Sfakianakis, chief economist, Banque Saudi Fransi notes: "The initiatives announced on Friday appear to target a comprehensive range of concerns among Saudi citizens and lend support particularly to those in lower income brackets who would benefit tremendously from an expansion in social security benefits and housing.
"The government must continue to make targeted efforts to entice and support those most in need of assistance. The changes required are structural and require long-term planning. Housing cannot be fixed in one or two years but the attention given by the government at this stage is on the right track. We do believe more economic measures will be announced in the following weeks, including a cabinet reshuffle."
It's the last point that offers some hint of political reform, but the king has not expressly mentioned it in his speech.
King Abdullah bin Abdul Aziz was often characterised as the 'reformer', the man who stood in the middle of his far-right political bank of religious clerics and royal family members, and the liberals who wanted to see Saudi Arabia shed its image as a closed society.
"I am proud of you," the King told his subjects, according to a Saudi Press Agency translation. "Words and meanings cannot describe you. I say this to make history bear witness, pens write and national memory keep that after Allah Almighty, you are the guarantee for the unity of this country and that you hit falsehood with truth and betrayal with loyalty and solidness of your faithful will."
Twitter, the 140-character outlet for the dissappointed, was afire:
"350 Billion riyals total of Saudi handouts. Divide that by 19 million Saudis= only 18,000 SAR or $4800 = price of silence", noted one tweet.
"Those who didn't ask for reforms, got more powers and money while [those] who have been asking for reforms and freedom got nothing," tweeted another.
In many ways, the Saudi authorities are looking to extend the welfare system that it is already in place for the Saud family. A wikileaks cable sent by a U.S. official way back in 1996 gives a rare insight into the Saudi welfare system:
"The most common mechanism for distributing Saudi Arabia's wealth to the royal family is the formal, budgeted system of monthly stipends that members of the Al Saud family receive, according to the cable. Managed by the Ministry of Finance's "Office of Decisions and Rules," which acts like a kind of welfare office for Saudi royalty, the royal stipends in the mid-1990s ran from about $800 a month for "the lowliest member of the most remote branch of the family" to $200,000-$270,000 a month for one of the surviving sons of Abdul-Aziz Ibn Saud, the founder of modern Saudi Arabia.
"Grandchildren received around $27,000 a month, "according to one contact familiar with the stipends" system, the cable says. Great-grandchildren received about $13,000 and great-great- grandchildren $8,000 a month.
"Bonus payments are available for marriage and palace building," according to the cable, which estimates that the system cost the country, which had an annual budget of $40 billion at the time, some $2 billion a year.
Read the full story here: Saudi Wikileaks
We believe that the Saudi moves is a win for non-reformists and more conservative elements of the country.
More importantly, the Saudi King has pinned his hopes on his trusted oil fields and oil markets.
"The latest measures are significant in size as they amount to 21% of the country's 2010 GDP or 56% of last year's actual budgetary expenditures," notes Sfakianakis of Banque Saudi Fransi.
"In total, both measures [including the earlier $37-billion] amount to 29.7% of last year's GDP and more than half of the $203.2 billion in oil export revenues accrued during the past year.
"We believe the measures can be comfortably sustained as WTI is above $103 a barrel and Brent crude climbing to more than $113 a barrel this week. High oil revenues could be used to support the announced spending as well as tapping into the country's $444.5 billion in foreign assets," the chief economist says.
Of course, this royal decision will not be lost on oil markets. By taking on such fiscal burdens and new jobs for at least 60,000 in the Interior Ministry, among others, the Kingdom would no doubt like to see oil prices to remain perpetually high. With the world short on other energy resources (Read Gas To The Rescue), at least the King has some cushion there.
While the world is used to an era of high oil prices, it was less than 12 years ago that crude prices stood at $10. However, few analysts are betting on a return to such low levels, especially as the Opec kingpin will likely move less quickly next time oil prices spike up.
In short, the Saudi authorities have found this a most opportune moment to bail themselves out. But by coming out with an economic response to a political crisis has the royal family read the situation correctly?
AlifArabia 2011
