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Michael Michaud is the founder of Invest2Success.com (http://www.invest2success.com/) and the Invest2Success Blog (http://invest2success.blogspot.com/). He has been investing and trading in the financial markets since 1989. He founded Invest2Success.com to empower individual institutional... More
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  • Saudi Next Generation Has U.S. Imprint As King Picks Leaders 0 comments
    Mar 7, 2013 6:45 PM

    King Abdullah

    March 06, 2013 - Saudi Next Generation Has U.S. Imprint as King Picks Leaders - By Bloomberg

    As he opens Saudi Arabia's top government jobs to a new generation of princes, King Abdullah may also be rebooting the kingdom's ties with the west.

    Abdullah, who turns 89 this year, has picked younger royals with international and security experience, often involving the U.S. Bandar bin Sultan, named head of intelligence last year, was ambassador in Washington for more than two decades. Mohammed bin Nayef, the recently appointed interior minister, worked with the Americans on measures to fight al-Qaeda, while Khaled bin Bandar, the new Riyadh governor, is a graduate of the British Royal Military Academy at Sandhurst.

    On issues from Iran's nuclear program to Syria's civil war, the revamped Saudi government's approach may overlap with western priorities. That would strengthen ties between the world's biggest oil exporter and the U.S., its main arms supplier. The decades-old alliance has showed signs of wavering, first after Saudis were involved in the Sept. 11, 2001 attacks, and then as differences arose over the Arab uprisings in 2011.

    "Abdullah is saying with these appointments that a shift in thinking is important for the direction of the country," said Crispin Hawes, head of the Middle East program at the New York-based Eurasia Group, which monitors political risk. "The king sees the U.S. strategic relationship as a cornerstone of Saudi foreign policy for the next decade. Saudi Arabia also needs to feel secure to address some of the fundamental issues at home."

    Avoiding Unrest

    Since the Arab revolts, King Abdullah has been seeking to ease domestic problems such as unemployment which had the potential to stoke similar unrest. About a quarter of Saudis aged between 20 and 30 are out of work. The kingdom is investing $500 billion to build industrial cities in the desert and new airports and universities, as it seeks to create jobs and diversify the economy away from oil.

    Government spending has helped push the main index for the Middle East's largest stock exchange up 2.9 percent in the first two months of this year, while the MSCI Emerging Markets benchmark fell 0.8 percent. As political threats recede, Saudi Arabia's five-year credit default swaps are trading at about 67 basis points, near a five-year low. They reached more than twice that level in February 2011 when uprisings were spreading across the Arab world.

    Saudi and U.S. responses to that wave of unrest diverged. Saudi Arabia stood by Egypt's Hosni Mubarak, a longtime ally against the Muslim Brotherhood's influence in the region, right up until he was pushed out by protesters. The Saudis also sent troops to Bahrain in support of a crackdown on Shiite-led protests by the Al Khalifa rulers. The U.S. eventually abandoned its support for Mubarak and backed a transition, while it called for dialogue in Bahrain.

    'Getting Closer'

    Any tensions that emerged in that period are easing, said Paul Sullivan, an economics professor specializing in Middle East security at Georgetown University in Washington.

    In Riyadh on March 4, Secretary of State John Kerry and his counterpart Prince Saud al-Faisal stressed shared interests, including helping the Syrian opposition overthrow Bashar al- Assad and preventing Iran from getting nuclear weapons. The U.S. is tightening sanctions on Iran's oil industry.

    "As the results of the Arab Spring get more questionable, and as energy markets get more complex, U.S.-Saudi relations seem to be getting closer," Sullivan said.

    The U.S. has narrowed Saudi Arabia's lead in production to 1.9 million barrels a day this year, the smallest since 2002, according to data compiled by Bloomberg. Saudi Arabian Oil Co. is "committed" to exports to the U.S., Chief Executive Officer Khalid Al-Falih said yesterday at a conference in Houston.

    'Bandar Bush'

    Among the new appointees, Bandar has been nicknamed "Bandar Bush" for his close connection to the family of two U.S. presidents. Mohammed Bin Nayef, the new interior minister who was injured in a failed suicide bomb attack in 2009, has won American plaudits for his work to counter threats from al-Qaeda.

    Prince Mohamed "has proven himself to be very successful in fighting al-Qaeda and terrorists," said Khalid al-Dakhil, a politics professor at King Saud University in Riyadh. "That is the core interest of the regime here. It happens that it goes along very well with the Americans."

    Saudi Arabia signed a $29.4 billion accord to buy Boeing Co. (NYSE:BA) F-15 fighters in the last week of 2011. More than half of that year's $66.3 billion in U.S. arms sales agreements were with the Saudis, according to a Congressional Research Service report last year. The Pentagon said in November that Saudi Arabia is planning to buy 20 military transport planes from Lockheed Martin Corp. (NYSE:LMT), valued at about $6.7 billion.

    USS Quincy

    Saudi Arabia's alignment with the U.S., whose support for Israel and military operations in the Middle East are unpopular among Muslims, is often cited by Islamist opponents of the Saudi monarchy.

    Militants attacked an oil installation and stormed a housing complex in the city of al-Khobar in 2004, killing 22 foreign workers. Two years later, a group linked to al-Qaeda tried to penetrate the southern gate of Abqaiq, the world's largest oil facility, with twin car bombs. The New York Times reported last month that the U.S. Central Intelligence Agency operates a drone base out of Saudi Arabia.

    The U.S. alliance was cemented when King Abdul-Aziz Al Saud met President Franklin D. Roosevelt aboard the USS Quincy in 1945. The next generation of Saudi leaders may oversee a shift in its nature as U.S. strategic attention shifts toward Asia, said Theodore Karasik, director of research at the Institute for Near East and Gulf Military Analysis in Dubai.

    Attitudes Changing

    "You could argue that Saudi Arabia is going to take a more pro-active role in the region as the U.S. footprint starts to decline," he said.

    Abdullah, who underwent back surgery in November, is only the sixth king since Saudi Arabia was founded in 1932. The ruler must by law be a son or grandson of Abdul-Aziz. The heir apparent is Crown Prince Salman, the king's half-brother, born in 1935.

    Next in line is Prince Muqrin, another half-brother born in 1945, who was named as second deputy premier last month. Muqrin trained as an air force officer in the U.S. and U.K. before serving as a provincial governor and intelligence chief. Prince Mohamed, who as interior minister is the most senior of the founding king's grandchildren, was born in 1959.

    A decade ago, the pro-American reputation of these younger royals might have hurt them in the eyes of the Saudi public, said Mustafa Alani, an analyst at the Geneva-based Gulf Research Center. Attitudes toward the U.S. under President Barack Obama are more favorable, he said.

    "The people like Bandar, like Mohammed, like Muqrin, who have connections to the U.S., I don't think people look at it negatively," Alani said.

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