The world’s No. 1 oil exporter faces the twin challenges of creating jobs for a young population at a time of unrest in the Arab world, and pursuing economic reforms with a royal succession looming.

The stability of Saudi Arabia is of global importance since the kingdom sits on more than a fifth of oil reserves, is home to the biggest Arab stock market, is a major owner of dollar assets and acts as a regional linchpin of U.S. security policy.

King Abdullah, who is around 87, unveiled $93 billion in social handouts in March, on top of another $37 billion announced less than a month earlier.

But this apparent effort to insulate the kingdom from Arab popular protests sweeping the region has not stopped activists, including liberals, Shi’ites and Islamists, calling in petitions for more political freedom. Saudi Arabia is an absolute monarchy with no elected parliament.

Riyadh has not seen the kind of mass uprisings that have shaken the Arab world this year, but Shi’ites in the kingdom’s oil-producing east have staged a number of protests.

Almost no Saudis in Riyadh answered a Facebook call for protests on March 11 in the face of a massive security presence.

Saudi Arabia has been ruled by the Al Saud family for 79 years, with influence from clerics following the austere Wahhabi school of Islam, and many oppose the very reforms the king has started.

However, slowing down reforms to modernise education might affect government plans to create jobs — unemployment last year reached 10 percent.

And with around 70 percent of Saudi Arabia’s almost 19 million people under the age of 30, the pressure to find them gainful employment is huge.

SUCCESSION

King Abdullah returned home in February after spending three months abroad for medical treatment, during which he underwent two surgeries after a blood clot complicated a slipped disc.

With the slightly younger Crown Prince Sultan also in poor health, the throne could eventually go to Interior Minister Prince Nayef, a conservative who could put the brakes on some reforms started by Abdullah, analysts say. Nayef, around 77 years old, was promoted to second deputy prime minister in 2009.

He has supported the religious police who roam the streets to make sure unrelated men and women do not mix in public and that shops close during prayer times.

To regulate succession, Abdullah has set up an “allegiance council” of sons and grandsons of the kingdom’s founder but it is not clear when, or how, it will work in practice.

So far only sons of the kingdom’s founder Abdul-Aziz Ibn Saud have ascended the throne, and the remaining 20 or so are mostly in their 70s and 80s. Leaders have been reluctant to hand senior jobs over to the next generation.

If a younger generation were unexpectedly to come into play, prominent potential candidates include Nayef’s son Mohammed, who as the anti-terror chief was the target of an al Qaeda suicide attack in 2009. Another leading face among the grandsons of Ibn Saud is Sultan’s son Khaled, the assistant defence minister.

WHAT TO WATCH:

- The health of senior royal family members and their involvement in day-to-day affairs of running the kingdom

- Any sign of abrupt cancellation of scheduled programmes such as foreign visits by senior leaders

- Any signs that the elder generation is passing on more responsibility to the grandsons of Ibn Saud, and to which ones

REFORMS

Officials who back Abdullah say they fear that young Saudis frustrated over their failure to find work could provide potential recruits to violent Islamists who want to overthrow the House of Saud.

Abdullah started some narrow reforms to overhaul education and the judiciary after taking office in 2005 but diplomats say his reform drive has run out of steam.

He has not altered the political system of an absolute monarchy that analysts say has fuelled dissent, with democracy activists, liberals and Islamists calling on the king in petitions to allow elections and more freedom.

Abdullah’s handouts focused on social largesse and a boost to security and religious police, but included no political change.

The kingdom in March also announced it would hold long-delayed municipal elections but said women will not be allowed to vote. With no elected assembly, Saudi Arabia has no political parties.

Saudi analysts say the king could reshuffle the cabinet, where some ministers have been on board for decades, or call fresh municipal elections, a plan that was shelved in 2009 due to the opposition of conservative princes.

WHAT TO WATCH:

- Any signs of protests or petitions by activists demanding political reforms

- Any signs of a cabinet reshuffle or plan to hold fresh municipal elections

- Any approval of a much-delayed mortgage law, which aims to ease pressure on the housing market

SHI’ITE MUSLIMS

Saudi Arabia, a Sunni-led regional diplomatic heavyweight, has sought to contain Iran’s influence since the 2003 U.S.-led invasion of Iraq produced a Shi’ite-led government in Baghdad.

With majority Shi’ites in neighbouring Bahrain having protested against the Sunni government there, analysts say there is a risk that unrest could spread to Saudi Arabia’s own Shi’ite minority, which lives in the oil-producing Eastern Province just across from Bahrain.

Shi’ites in the east have held a number of protests calling for prisoner releases and a withdrawal of Saudi forces sent to Bahrain to help put down the unrest.

Saudi Shi’ites have long complained about marginalisation and have started small protests to demand the release of prisoners they say have been detained without trial. Riyadh denies any charges of discrimination.

Riyadh also shares U.S. concerns that Iran wants to develop nuclear weapons in secret. The United States and Israel have not ruled out military action against Iran, which says it is developing nuclear energy only to generate electricity.

Saudi Arabia has publicly tried to stay out of the dispute over Tehran’s nuclear programme but a series of U.S. diplomatic cables released by whistle-blowing website WikiLeaks portrayed Riyadh as pressing for a U.S. attack.

King Abdullah was said to have “frequently exhorted the U.S. to attack Iran to put an end to its nuclear programme,” a cable printed in Britain’s Guardian newspaper said.

WHAT TO WATCH:

- Any signs of further protests and a deterioration in the eastern province

- Any possible military action against Iran and its impact on the Gulf region

- Any Saudi diplomatic moves to tighten sanctions on Iran and any signs of Saudi facilities offered for military action

AL QAEDA THREAT

Saudi Arabia, with the help of foreign experts, managed to quash an al Qaeda campaign from 2003 to 2006 that targeted expatriate housing compounds, embassies and oil facilities.

Riyadh destroyed the main cells within its borders. But many militants slipped into neighbouring Yemen where al Qaeda regrouped to form a Yemen-based regional wing that seeks, among other things, the fall of the U.S.-allied Saudi royal family.

The Yemen-based al Qaeda arm shot to the global spotlight after it claimed responsibility for a failed attempt to bomb a U.S.-bound passenger plane in December 2009.

Despite the U.S. killing of al Qaeda founder Osama bin Laden on May 1, the Yemeni wing of the militant Islamist group is expected to remain active, and exploit political instability in Yemen as well.

WHAT TO WATCH:

- Whether al Qaeda’s resurgent Yemen-based branch mounts more operations in Saudi territory, as it has within Yemen

- Riyadh wants to build a fence to seal the mountainous 1,500-km (930-mile) Yemen border, which could help stop militants from crossing.

 

Iran warned Saudi Arabia on Monday of the dire consequences of Riyadh’s intervention in Bahrain.

Supreme Leader Ayatollah Ali Khamenei’s adviser for military affairs, Maj. Gen. Yahya Rahim Safavi, told journalists, “The presence and attitude of Saudi Arabia (in Bahrain) sets an incorrect precedence for similar future events, and Saudi Arabia should consider this fact that one day the very same event may recur in Saudi Arabia itself and Saudi Arabia may come under invasion for the very same excuse.”

A post-U.S. Iraq renders the Saudi kingdom vulnerable to a future Iranian invasion.

The remarks made by Safavi, who formerly served as commander of Iran’s elite military force, the Islamic Revolutionary Guards Corps (1997-2007), constitute the first time Tehran has issued such a direct warning. The Saudis and the Iranians have had tense relations since the founding of the Islamic republic in 1979 and increasingly so since the U.S. invasion of Iraq toppled the Baathist regime, which led to a Shiite-dominated Iraqi state and the empowering of Iran. But never before has Iran issued a public statement about an invasion of the Saudi kingdom.

So, why is the Persian Shiite state engaging in such threats now? The Saudi move to intervene in neighboring Bahrain, where popular unrest was largely waged by the Shiite majority, threatened to topple a Sunni monarchy. Well aware of the implications, the Saudis embarked on their first long-term, overseas military deployment, sending in 1,500 troops to help Bahraini forces crush the Shiite opposition.

The Saudi move succeeded in quelling the unrest (for now at least), which placed Iran in a difficult position. Lacking the capability to physically aid their fellow Shia in the Persian Gulf, the Iranians were caught in an awkward situation. Iran had to do more than issue diplomatic statements and engineer protests against the Saudis and their allies.

Warning the Saudis that they too could be invaded on the same pretext that they used to go into Bahrain is definitely an escalation on the part of the Iranians. Since Iran making good on its threat is unlikely to happen anytime soon (given that the United States would not stand by and allow Iran to attack Saudi Arabia), this can be argued as yet another hollow threat. A more nuanced examination of the situation, however, suggests that Tehran is not just simply engaging in bellicose rhetoric.

Instead, Iran is trying to exploit Saudi fears. The Wahhabi kingdom fears instability (especially now when it is in the middle of a power transition at home and the region has been engulfed by popular turmoil). The clerical regime in Iran sees regional instability as a tool to advance its position in the Persian Gulf region.

Riyadh can never be certain that Tehran won’t ever attack but Iran would have to overcome many logistical difficulties to make good on its threat. The Saudis are also not exactly comfortable with the idea of overt military alignment with the United States. The last time the Saudis entered into such a relationship with the Americans was during the 1991 Gulf War and it lead to the rise of al Qaeda.

Put differently, any conflict involving Iran entails far more risks than rewards for the Saudis. Cognizant of the Saudi perceptions, the Iranian statement is designed as a signal to the Saudis that they should accept Iran as a player in the region or be prepared to deal with a very messy situation. The key problem for Saudi Arabia is that Tehran doesn’t have to actually resort to war to achieve its ends. But Riyadh’s efforts to counter Iran and its Arab Shiite allies are likely to create more problems for the Saudis because crackdowns are contributing to long-term instability in the region and causing agitation among the Shia, which Iran can use to its advantage.

 

Hundreds of Saudi Shi’ites in the oil-producing east took to the streets in protest on Thursday, calling for the release of prisoners held without trial and an end to human rights violations, activists said.

The main rally took place in the Shi’ite centre of Qatif in the Eastern Province and a smaller one in a nearby village. Activists said there was very little police presence.

“Now in the centre of Qatif there are around 500 men and women, carrying candles and chanting for the release of prisoners and their right to protest,” said one activist who declined to be named for fear of being detained.

Another activist said around 50 women gathered in Awwamiya village, near Qatif, also carrying candles and chanting for the release of prisoners held without trial and for an end to female discrimination in the absolute monarchy.

A police spokesperson in the Eastern Province did not answer calls for comment.

Saudi Arabia, the world’s top oil producer and major U.S. ally is an absolute monarchy that does not tolerate any form of dissent. It has not seen the kind of mass uprisings that have rocked the Arab world in the last few months.

Shi’ites in the Eastern Province have held some protests over the past few weeks, resulting in police detentions of some of the demonstrators, but almost no Saudis answered a Facebook call for protest on March 11, amid a huge security presence.

Saudi Arabia’s Shi’ite minority, mostly living in the Eastern Province which holds much of the country’s oil wealth, have long complained of discrimination, a claim the government denies.