THE DEATH OF RENTIERISM IN THE KINGDOM OF SAUDI ARABIA by Brianna Brooke Seymour ...

213 Pages·2012·1.21 MB·English

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THE DEATH OF RENTIERISM

IN THE KINGDOM OF

SAUDI ARABIA

by

Brianna Brooke Seymour

A thesis submitted to the faculty of
The University of Utah
in partial fulfillment of the requirements for the degree of

Master of Arts

in

Middle East Studies / Political Science

Department of Languages and Literature

The University of Utah

August 2012
Copyright © Brianna Brooke Seymour 2012

All Rights Reserved
The University of Utah Graduate School

STATEMENT OF THESIS APPROVAL

The thesis of Brianna Brooke Seymour
has been approved by the following supervisory committee members:

M. Hakan Yavuz , Chair 6/15/2012
Date Approved

John Francis , Member
Date Approved

Roxane Farmanfarmain , Member 6/15/2012
Date Approved

and by Kirk Jowers , Chair of
the Department of Languages and Literature

and by Charles A. Wight, Dean of The Graduate School.
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ABSTRACT

The premise of this research is to determine when the end of rentierism will occur
in the Kingdom of Saudi Arabia as well as what actions the government is taking to
prepare for it. After compiling population growth, domestic consumption demand, and
depreciating oil production into four separate future predictive scenarios, the results are
that the end of rentierism will occur between 2022-2033 in Saudi Arabia.
Analysis on the social, economic, and political landscapes was conducted to
illustrate the current social and economic obligations that the government currently has.
Alternatives to petroleum were analyzed, resulting in the finding that there are no viable
natural resource alternatives to oil in order to maintain rentierism.
The primary obstacles to preparing for the death of rentierism were found to be
the extreme dissent within and between the House of Saud and the religious
establishment, and the lack of stated goals with timelines and accountability for
implementing economic diversification goals.
“My grandfather rode a camel.
My father rode a camel.
I drive a Rolls Royce.
My son flies a jet plane.
His son will drive a Mercedes.
But his son will ride a camel”

Sheikh Rashid al Maktoum
Emir of Dubai
CONTENTS

ABSTRACT…………………………………………………………………………...…iii

LIST OF ABBREVIATIONS……………………………..…………………………....viii

INTRODUCTION……………………………………………………………………...…1

THE FORMATION OF A KINGDOM………………………………………………….. 5

Notes………………………………………………………………………….….23

THE SOCIAL LANDSCAPE IN SAUDI ARABIA………………………………….…26

Rentierism in Saudi Arabia………………………………………………………26
The Social Landscape in Saudi Arabia…………………………………………..33
Education………………………………………………………………...37
Health and Welfare………………………………………………………40
Notes……………………………………………………………………………..43

THE POLITICAL LANDSCAPE IN SAUDI ARABIA………………….……………..46

The Kingdom of Saudi Arabia…………………………………………………...46
Custodian of the Two Holy Mosques……………………………………………51
King Abdullah……………………………………………………………51
Crown Prince Nayef………………………………………………….…..55
The Religious Establishment…………………………………………………….57
Conflict Within the Ruling Elite…………………………………………………59
Other Sources of Political Influence……………………………………………..60
Branches of Government………………………………………………...60
Political Influence………………………………………………………..62
Middle East Relations……………………………………………………………63
Notes……………………………………………………………………………..66

THE END OF OIL………………………………………………….……………………70

The Definition of Petroleum……………………………………………………..70
Peak Oil Theory………………………………………………………………….72
Predicting Oil Reserves in Saudi Arabia…………………………………….…..76
The U.S. General Accounting Office Report……………………….……76
Saudi Aramco…………………………………………………………………….80
New Technology, Innovation and Investment…………………………...82
Depleting Oil Fields……………………………………….……………..86
Predicting the End of Saudi Arabian Oil Exports………………………………..88
Notes……………………………………………………………………………..93

OIL CURSE…………………………………..………………………………………….95

Increasing Domestic Consumption………………………………………………95
Are Alternative Resources the Solution?...............................................................98
Biofuels…………………………………………………………………..99
Wind…………………………………………………………………….100
Solar…………………………………………………………………….101
Petrochemicals………………………………………………………….102
Minerals and Mining……………………………………………………104
Hydrogen………………………………………………………………..105
Natural Gas……………………………………………………………..106
Nuclear Power……………………………………………………….….109
Notes……………………………………………………………………………114

THE ECONOMIC LANDSCAPE IN SAUDI ARABIA………………………………117

Challenges to the Saudi Arabian Economy……………………………….……118
Employment…………………………………………………………………….123
Agriculture………………………………………………………….…..125
Industry…………………………………………………………………126
Services…………………………………………………………………127
Avoiding Dutch Disease………………………………………………………..128
Notes……………………………………………………………………………131

PREPARATION FOR THE END OF RENTIERISM………………………………....133

Diversification…………………………………………………………………..135
Ninth Development Plan………………………………………………..135
Privatization………………………………………………………….....137
Sovereign Wealth Funds and International Investment………………...141
Parastatal Companies…………………………………………………...145
Taxation, Zakat and Hajj as Income Diversification…………………………...147
Taxation………………………………………………………………..147
Zakat……………………………………………………………….…..148
Hajj and Tourism………………………………………………………149
Private Sector Development……………………………………………………154
Women…………………………………………………………………154
Manpower………………………………………………………………………162
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Reducing the Foreign Workforce………………………………………162
Energy Security…………………………………………………………………165
Iran…………………………………………………………..................169
Securing Saudi Arabian Oil…………………………………………………….172
Preventing a Restive State…………………………………………......175
Conclusion……………………………………………………………………...178
Notes……………………………………………………………………………182

REFERENCES…………………………………………………………………………188
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ABBREVIATIONS

ARAMCO Arabian American Oil Company

CME Chicago Mercantile Exchange

EIA U.S. Energy Information Administration

ERI Energy Research Institute

ESIS Electronic Share Information System

EXPEC ARC Exploration and Petroleum Engineering Center

FMS Foreign Military Sales

GAO General Accounting Office

GCC Gulf Cooperation Council

IFP French Petroleum Institute

IMS Idea Management System

JORC Joint Ore Reserves Committee

KA-CARE King Abdullah City for Atomic and Renewable Energy

KACST King Abdul Aziz City for Science and Technology

Mbd Million barrels per day

MENA Middle East North Africa

MGS Master Gas System

MRC Maximum Reservoir Contact

NGIT Natural Gas Investment Tax
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NGL Natural Gas Liquids

OAPEC Organization of Arab Petroleum Exporting Companies

OPEC Organization of the Petroleum Exporting Countries

POWERS Parallel Oil, Water and Gas Reservoir Simulator

R&DC Research and Development Center

SABIC Saudi Basic Industries Corporation

SAMA Saudi Arabian Monetary Authority

SAMBA Saudi Financial Group

SAO Security Assistance Organization

SATORP Saudi Aramco Total Refining and Petrochemical Company

SBG Saudi Binladin Group

SEC U.S. Securities and Exchange Commission

SPE Society of Petroleum Engineers

URR Ultimate Recoverable Resources

US United States of America

VLCC Very large Crude Carriers

WEA Wind Energy Association

WPC World Petroleum Congress

WPOP World Peak Oil Production

WTI Western Texas Intermediate

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