After three years of high oil prices, and a record budget surplus （of $57 billion） last year, Saudi Arabia’s economic prospects have seldom looked brighter. Since most experts think relatively high oil prices are here to stay, the current oil boom – the kingdom’s third in as many decades -- looks set to last. This has already led to increased spending on defence, oil-sector infrastructure, and education and health. The Saudi dilemma, however, persists: petrodollars cannot by themselves solve the kingdom’s most pressing external and internal problems.
The Saudi princes felt bruised by the recent conflict in Lebanon, which reinforced their （perhaps exaggerated） fear of an Iranian-backed “Shi’a crescent” extending from Beirut, through Baghdad and the Gulf, to Tehran. They are also alarmed at the likelihood of a nuclear-armed Iran, a prospect which may stimulate their own interest in a clandestine nuclear programme. They see Iran as a threat from which their American ally may be unable to protect them, certainly as long as it remains bogged down in Iraq.
The 83-year-old King Abdullah, who succeeded to the throne last year, lacks a significant power base. He has gathered around him reform-minded princes （such as the foreign minister, Saud al-Faisal） and technocrats. But his powerful half-brothers – Nayef （interior minister）, Sultan （crown prince and defence minister） and Salman （governor of Riyadh） – resented his ascent to the throne, oppose serious reform, and are intent on limiting his freedom of manoeuvre. Should Sultan become king, the current gradual pursuit of reform might grind to a halt.
The desire to “Saudi-ise” a labour force heavily dependent on some 6mn foreign workers is now more urgent because the pool of unemployed young Saudis is growing at an alarming pace. But the private sector is unwilling to hire Saudis it regards as less productive than foreigners, and religious conservatives are blocking much-needed reform of the education system. The failure to curb unemployment is aggravating social problems （such as crime and drugs） and may be contributing to the alienation, and hence radicalisation, of Saudi youth.
The bombings and suicide attacks which began three years ago, when militants linked to Al-Qaida struck at residential compounds housing Western expatriates, are now few and far between. There are occasional shoot-outs when the security forces lay siege to a militant hideout, but the overall level of violence has fallen substantially. Its root causes, however – the war in Iraq, anti-Americanism, youth alienation, resentment at royal corruption and mismanagement – have not been eliminated. The revival of the insurgency is accordingly only a matter of time.
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