Kemp: Saudi Reform Efforts Wax and Wane with Oil Revenues

There are important differences between the price crisis in 1998 and the price crisis in 2016, not least that the former was triggered by a slump in demand while the latter stemmed from rising supply.

But the similar rhetoric employed in 1998 and 2016 is a reminder that efforts at political, social and economic reform in Saudi Arabia have waxed and waned with oil revenues.

Oil And The State

Oil revenues have been fundamental in shaping the modern state and economy of Saudi Arabia, according to Steffen Hertog at the London School of Economics.

The fiscal autonomy provided by immense oil revenues gave a handful of senior princes the freedom to create and mould the modern Saudi between the 1950s and 1980s.

"Decisions were taken in a top-down fashion but often resulted in the oil-funded recruitment of many clients into the growing state apparatus, not least to co-opt and control society - essentially exchanging jobs and state services for political quiescence," according to Hertog.

Distribution of oil revenues became the most important organising characteristic of Saudi Arabia's economy, society and the state ("Princes, brokers and bureaucrats: oil and the state in Saudi Arabia", Hertog, 2010).

Declining oil revenues as in the late 1990s and again in the mid-2010s have presented the most serious challenge to the political, social and economic order of the kingdom, intensifying the pressure for change.


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