Saudi Crown Prince launches corruption crackdown
Saudi Arabia has shocked the world with a wave of arrests of princes, tycoons and former ministers as part of an anti-corruption drive initiated by the Crown Prince Mohamed Bin Salman. Siona Jenkins discusses the lightning crackdown with Simeon Kerr, Anjli Raval and Arash Massoudi
Presented by Siona Jenkins and produced by Fiona Symon
From the Financial Times in London, I'm Siona Jenkins, and this is FT News. Saudi Arabia has shocked the world with a wave of arrests of princes, tycoons, and former ministers, as part of an anti-corruption drive initiated by the Crown Prince, Mohammed Bin Salman. In a move likened by some to a Saudi Games of Thrones, the country's newly created anti-corruption commission detained 11 princes and dozens of others. Among them, the billionaire tycoon Prince Alwaleed bin Talal.
Here with me to discuss the lightning crackdown is our Gulf correspondent, Simeon Kerr, our Oil Markets Reporter, Anjali Raval, and Arash Massoudi, our M&A Correspondent. Siemian, if I could start with you, what is the background to these arrests? And is there a political side to the Crackdown
Crown-Prince Muhammad Bin Salman previously has said that he was going to make cracking down on corruption a priority. And that no one would be spared. But the speed and pace of which this has happened really comes as a surprise.
They're arguing that you need to crack down on corruption in order to create a business environment in which you can change the economy from one depending on the oil revenues, into one that is driven by the private sector. But there are many within the kingdom who do feel that this is, indeed, following a political path as well.
I mean, Muhammad Bin Salman has spent the last couple of years consolidating his power base after his father took the throne in 2015. He's gradually broadened his grip over all levers of power. And now this crackdown has come at the same time as one other prince, Mutaib Bin Abdullah, the son of the former King, has also been thrown out of his position of the National Guard, which is a very important security force in the kingdom.
And also, has been accused of corruption as well. Prince Mutaib Bin Abdullah has been seen as a potential contender to the throne, or someone who can challenge Muhammad Bin Salman's rise within the family. So people are seeing that there's a blend of using a corruption campaign to try to appeal to the Saudi people. And to say, that we are going through tough economic times. But look, I'm willing to take on these vested interests in the economy, even if they're from my own family.
But other people also do see it as a way of sidelining those who were associated with the former king, and potentially trying to make sure that any dissent or opposition to his reform programme and his elevation to the throne, can be dismissed. Now, you mentioned Prince Mutaib. And we've mentioned Prince Alwaleed. Are there any other key figures who've been arrested? And why, particularly, were they picked?
Well, the report suggested it's 11 princes, maybe 40 or so ministers and businessmen. There is also a surprise mention of a former Finance Minister, Ibrahim Al-Assaf, who was on the board of Saudi Aramco, who's reportedly been taken into detention. And there are prominent business magnets from various families throughout the kingdom.
It's been a broad-based approach. But with some who will argue that to crack down on corruption is very difficult. Because so much of the way that politics and business interact with each other has been based on corrupt grounds for decades. . And it's very difficult to root it out without taking down the entire system.
Turning to you, Anjali, how have the oil markets reacted?
Oil prices have risen now, to a fresh two-year high, above $62 a barrel. The reason behind this is look, the oil market was already on the up, with a lot of British sentiment anyway. While people are obviously paying attention to political uncertainty, this is the world's largest oil exporter.
Market participants are probably now looking towards the next OPEC meeting later this month. Is there going to be a big surprise from Saudi Arabia after this episode? But most people that I've spoken to still believe that they will maintain the current policy of annexing production cuts alongside other OPEC and non-OPEC countries.
After all, it was Mohammed Bin Salman that really did show leadership on this front. And not only will that policy continue, as most expect, but people also expect other drives. For example, the big push for the planned IPO of state energy giant Saudi Aramco, that will also continue.
Arash, can you tell us about Prince Alwaleed, who is perhaps the best known of those in detention? He's publicly backed the Prince's reforms. So isn't he an unlikely target? And will his arrest have any wider repercussions?
Yeah, that's certainly been the name that has captured the headlines. Though as Simeon points out, some of the other members who were arrested may have more political implications. Alwaleed is undoubtedly the person we're most familiar with in the West. He first emerged on the scene in the 1990s, with a remarkably-timed investment in Citigroup, which was then called Citicorp. And you know, that led a succession of deals which, by the end of the 1990s, led Time magazine to claim him as the Warren Buffett of Arabia.
But what has gone on behind the scenes, it's hard to tell. I think, you know, he's a grandson of Saudi Arabia's founder, as is Mohamed Bin Salman. So the level of politics and history between the two men may go back. The level of intrigue within the court may go back.
Alwaleed has always been an outsider from the sort of inner sanctums of Saudi power, and has sort of made his name by focusing outwards. He's got close relationships with big tycoons in the West, including Rupert Murdoch. He backed Steve Jobs quite aggressively. He stuck close to Citigroup, even through the 2008 financial crisis.
So Alwaleed is very much a Western figure, but is not seen, despite his wealth and estimated fortune, as a major player in Saudi. So what sort of dynamic exists between him and the young prince and the Prince's inner circle? It's not clear. He has gone out of his way, in the last 18 months, to signal his support for the reforms that are being run through by Muhammad Bin Salman.
When Saudi broke diplomatic ties with Iran, Alwaleed declared that he would cease all discussions with Iranian entities where he was looking to do business, when Muhammad Bin Salman seemingly overthrew his cousin and became the crown-prince. Alwaleed declared his allegiance to Muhammad Bin Salman.
And just recently, as there was a conference with all the world's leading financiers in the Ritz-Carlton Hotel in Saudi Arabia, Alwaleed appeared on television, on the fringes of the conference, to declare his support for the reforms that are being pushed through in Saudi Arabia. And now, less than a week later, just over a week later, Alwaleed is in detention in the same Ritz-Carlton Hotel. So quite a twist in the story.
It certainly is. Simeon, Prince Mohammed Bin Salman must be creating a lot of powerful opponents with this move. Who are his allies? And do you think he has enough support to retain control of what must be a highly-volatile situation?
Well, I mean, I think he would say that his greatest allies are Saudi youth. Even he, himself, is 32. 70% of Saudis are under 35. And he has managed to generate a lot of support amongst the youth, who want to see some changes. He's been very quick to bring more social freedoms to the country, which have been applauded.
He does have enemies within his family. But he has been spending the last couple of years consolidating his control there. Older people are more sceptical about some of his reforms, which they think may be going too fast, and worried about the state of the economy, which is basically in recession at the moment. And conservative groups in the kingdom also are concerned about his push for bringing the Kingdom back to Moderate form of Islam.
But he does have support within technocratic groups within those who want to see change in the economy. So he does have this base of support. And so whether we will see great challenges from within the family, it's certainly seen as a risk these days, and much more of a risk, maybe, than before this. Because it is such a bold move that could spark a reaction.
His allies would say that most people are behind him. And certainly, a crackdown on corruption is long overdue. So they will hope that the goodwill for that will help him through any opposition from either within the family or outside the country.
But from investors' point of view, looking from outside, all they just see is political risk going through the roof, and a really crazy situation where these pillars of industry that they've been doing business with, like Prince Alwaleed, are slowly banged up.
So Simeon, what do you think will happen to these people? And what are the wider repercussions in the region?
We are in uncharted territory. There are some examples, in Saudi history, of a ruler trying to bring his family to account and trying to bring in reforms. King Faisal, back in the day. But I think now, it's very difficult to see what will happen.
They say that it's going to be an investigation. There are going to be trials. And I think the assumption amongst insiders in the kingdom is that the government will seek to recover corrupt money, which could prove to be a very lucrative process, and one that the state coffers, which have been buffeted by the lower price, could really do with. I mean, regionally, certainly people around the Gulf are looking, with interest and shock, at what is going on.
He's maybe too ambitious to draw too many implications for other places. But they're very much looking on it with interest and see it as a defining moment in Saudi history.
Thank you, Simeon, Arash, and Anjali. And thank you for listening. We'll be keeping a close eye on this story.