FACTBOX-Political risks to watch in Saudi Arabia

RIYADH, April 1 (Reuters) – 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 as 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
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
rocked 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 major cities answered a Facebook call
for protests on March 11, in the face of massive security
presence around the country.

The monarchy is ruled by the Al Saud family 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 some 70 percent of Saudi Arabia’s almost 19 million
population 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 76
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 has started cautious reforms to overhaul education
and the judiciary to create a modern state. But he faces stiff
resistance from a religious elite that has been given wide
powers according to a historical pact with the Al Saud family.

There have been few political reforms during Abdullah’s
reign, which 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 $93 billion handout 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’ITES

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 protesting
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.

Saudi Shi’ites have long complained about marginalisation
and have started small protests to demand the release of
prisoners they claim to be 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.

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 Yemen border, which could help stop militants from
crossing.

(Editing by Mark Heinrich)

FACTBOX-Political risks to watch in Saudi Arabia