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Saudi Oil Reform Risks 'Unrest at Best, Arab Spring Turmoil at Worst'

© AP Photo / Hassan AmmarSaudi Arabian city view with the 'Kingdom Tower', background, and 'Al-Faislia Tower' in Riyadh. (File)
Saudi Arabian city view with the 'Kingdom Tower', background, and 'Al-Faislia Tower' in Riyadh. (File) - Sputnik International
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Saudi Arabia, the world's largest petroleum exporter, has recently unveiled an ambitious plan to restructure its oil-based economy, but the push comes at a difficult time and could well lead to a major unrest that will leave the Gulf kingdom shaken to the core, Sagatom Saha wrote for the National Interest.

US President Barack Obama (R) and  King Abdullah of Saudi Arabia during meetings in the Oval Office at the White House in Washington on June 29, 2010 - Sputnik International
Saudi Arabia Still a 'Client of Angry American Empire'
Riyadh possess nearly a fifth of global petroleum reserves. It is not surprising then that the country relies heavily on oil to fill its coffers. Petroleum is estimated to account for more than 90 percent of Saudi budget and export earnings, as well as 55 percent of the nation's GDP.

Needless to say, the collapse of crude prices has had an adverse effect on Saudi Arabia that now wants to boost its non-oil revenues under a plan dubbed Vision 2030. The strategy, devised by Deputy Crown Prince Mohammed bin Salman, involves creating the world's largest sovereign wealth fund, partially privatizing state-owned oil giant Saudi Aramco and cutting welfare benefits.

"Even if he can check off all the items on his wish list, the deputy crown prince may not guarantee a prosperous future for his kingdom. By cutting subsidies and ceding some control over its oil industry, Saudi Arabia might surrender an asset rivaling oil in value: political order in a region engulfed in conflict," the analyst noted.

FILE -- In this Dec. 14, 2015 file photo, images of King Salman, center, Crown Prince Mohammed bin Nayef , left, and Deputy Crown Prince Mohammed bin Salman hang at the entrance of a shopping center in Riyadh, Saudi Arabia to mark the country's 85th anniversary - Sputnik International
Achilles’ Heel: Cheap Oil Risks Plunging Saudi Arabia Into Political Crisis
The reason is simple – these reforms, known as the National Transformation Plan, are coming too late. What could have been smooth sailing several years ago will now be complicated by a budget deficit and low oil prices. Additional challenges include creating jobs in the private sector at a rate unseen in the country's history. Riyadh will also have to satisfy skyrocketing domestic petroleum demand and keep the ruling family happy.

This strategy and King Salman's leadership in general have already caused a rift among princes, with some advocating a "regime change." But this is only half the problem.

"The risk from the country's elite is matched with risk from the general populace. Saudi Arabia has already started removing subsidies and cutting public spending. Although many of these expenditures are economic inefficiencies, they also form the basis of a payment-based social contract," Sagatom Saha noted.

Implications of this decision could be profound and far-reaching.

The welfare cuts, according to the expert, "portend unrest at best, and Arab Spring turmoil at worst." After all, the subsidies are what kept the oil kingdom peaceful and stable when Tunisia, Libya, Egypt and others were set on fire by popular uprising in 2011.

"There is a long, well-established history linking subsidy cuts to political instability. Neighboring Yemen and fellow oil producer Nigeria are recent examples country where of price hikes incited violence," the analyst observed.

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