Austerity in Saudi Arabia, but not for royals

This 2011 video is called Mal3ob 3alena: Poverty in Saudi Arabia. English Version.

From daily The New York Times in the USA:

Saudi Royal Family Is Still Spending in an Age of Austerity

By NICHOLAS KULISH and MARK MAZZETTI

DEC. 27, 2016

TANGIER, Morocco — Behind a tall perimeter wall, studded with surveillance cameras and guarded by Moroccan soldiers, a sprawling new palace for King Salman of Saudi Arabia rose on the Atlantic coast here last summer.

Even as the Saudi government canceled a quarter of a trillion dollars’ worth of projects back home as part of a fiscal austerity program, workers hustled to finish bright blue landing pads for helicopters at the vacation compound and to erect a tent the size of a circus big-top where the king could feast and entertain his enormous retinue.

The royal family’s fortune derives from the reserves of petroleum discovered during the reign of Salman’s father, King Abdulaziz ibn Saud, more than 75 years ago. The sale of oil provides billions of dollars in annual allowances, public-sector sinecures and perks for royals, the wealthiest of whom own French chateaus and Saudi palaces, stash money in Swiss bank accounts, wear couture dresses under their abayas and frolic on some of the world’s biggest yachts out of sight of commoners.

King Salman serves as chairman of the family business unofficially known as “Al Saud Inc.” Sustained low oil prices have strained the economy and forced questions about whether the family — with thousands of members and still growing — can simultaneously maintain its lavish lifestyle and its unchallenged grip on the country.

“The people have less money than before, but the royal family have the same,” said Prince Khalid bin Farhan al-Saud, a dissident member of the extended family living in Germany. “There is a lot of state money which is concealed from the budget, which is determined by the king alone.”

These are anxious times for the royals, led by an 80-year-old who has already had at least one stroke and is likely to be the last of six sons of the founding monarch to serve as sovereign. He must wrangle a band of relatives, from the merely well-off to billionaires, who are accustomed from birth to privilege and plenty. …

While there are serious problems beyond the borders — a costly war in Yemen, violence in Iraq and Syria … — it is the country’s economic troubles that risk roiling ordinary citizens, if their own cradle-to-grave benefits are cut too much. Many royals are wary of any disclosures about their wealth that could provoke public criticism. …

Facing huge budget gaps, the government has cut public-sector pay along with subsidies, sending gasoline, electricity and even water bills higher. The kingdom has begun borrowing by the billions both at home and abroad. And hiring by the government — a large and sought after employer for Saudis — has been cut, instilling fear for the future in younger people who cannot find work. …

At least some royals, though, have seen no decline in their stipends, according to several Saudis close to the family.

“Under Salman, princes again appear to enjoy a lot more material privileges, and the core allowance system has not been changed,” said Steffen Hertog, an associate professor at the London School of Economics who wrote a book on the political economy of Saudi Arabia, “Princes, Brokers and Bureaucrats.”

Some Saudi royals are still spending big. Dania Sinno, a real estate agent with Belles Demeures de France, said that multiple family members had been buying property in Paris in the last year. She recently sold a nearly 11,000-square-foot apartment on the exclusive Rue Octave-Feuillet for more than $30 million to a Saudi princess.

King Salman already had significant holdings in France. Property records there show that he owns a dozen apartments in the affluent 16th Arrondissement of Paris, worth an estimated $35 million. He also maintains a luxury chateau on the Côte d’Azur in France and a palace in Marbella on Spain’s Costa del Sol.

The king, of course, does not lack for options at home, with a network of marble-columned palaces and countryside retreats stretching from the Red Sea to the Persian Gulf. But the Tangier compound appears to be his current favorite getaway.

During his visit this summer, some hundred black Mercedes sedans and Range Rovers were waiting to chauffeur the royal party around town. The palace complex includes its own medical facilities and top-flight restaurant kitchens that turn out dishes with lobster, caviar and truffles flown in from France.

Many staff members had to leave their phones at the gate so photos did not leak out. But a Twitter gadfly working under the pseudonym Mujtahidd, who has successfully predicted some major royal news in the past, broadcast to his 1.7 million followers details about the construction, luxury cars and five-star hotels for the entourage. …

The scale of the clan’s fortune is a closely guarded secret. The money is divided among many relatives and spread across several continents, making a precise accounting difficult. The funding mechanisms are opaque by design. The share of the Saudi budget that ultimately makes its way into royal coffers is not disclosed. Even people who closely follow the Saudi royal family said they could not estimate its total assets.

While chinks in the wall of secrecy appear through legal cases and tabloid reports overseas, the royals have learned not to flaunt their wealth before the nation’s 30 million commoners. The family members have erected high walls around their palaces, bought overseas assets with shell companies, used intermediaries for large investments and demanded nondisclosure agreements from employees.

The so-called Panama Papers released in April revealed that King Salman was involved in offshore companies in Luxembourg and the British Virgin Islands. The records linked him to a yacht and multimillion-dollar properties in London — one a majestic home with a balustraded balcony near Hyde Park in the tony Mayfair district.

Saudi Arabia is not nearly as affluent on a per-capita basis as Qatar or Kuwait, which are also rich from oil and gas but support far fewer people than their large neighbor. (Both also have been hit hard by the low oil prices.) Despite a robust social safety net — including free education and health care — there are poor Saudis, and many in the middle class barely make ends meet.

Princes and princesses can take advantage of privileges like special hospital wings decorated like palaces with five-star hotel service, and royal airport terminals with enormous chandeliers, intricate tilework and rich carpets. But even among royals, there are big differences between direct heirs to the kings and cousins on the fringes. Some younger princes live in large, but not palatial, modernist homes outside Riyadh that would not be out of place in upscale California neighborhoods. They drive Range Rovers and boxy Mercedes S.U.V.s rather than the Lamborghini or Bugatti supercars their better-off cousins race around the Knightsbridge section of London.

And their ranks continue to swell. The founding king’s many children had many of their own — King Saud, the second king, alone had an estimated 53 sons. “Only a stadium suffices to hold the ever-expanding Al Saud clan,” an American diplomat wrote in a memorandum in 2009.

The relatives number in the thousands, but from there, estimates diverge, said Joseph A. Kechichian, who has studied the family for three decades and wrote a book, “Succession in Saudi Arabia.” He estimates that there are now 12,000 to 15,000 princes and about as many princesses. Princess Basmah bint Saud, a daughter of King Saud, five years ago putthe number of royals at 15,000.

But the Saudi ministry spokesman, Mr. Qusayer, said there were no more than 5,000 members of the House of Saud. The difference may stem in part from whether or how one counts distant relatives and families who ruled back before the time of King Abdulaziz, the current king’s father.

At some point, the family could grow too large to support. …

Dipping Into the Till

Members of the royal family rely on allowances, government jobs and positions in business, aided by the status and connections conferred by nobility. Exactly how benefits are parceled out beyond seniority and service is unknown, said Mr. Kechichian, who is a senior fellow at the King Faisal Center for Research and Islamic Studies in Riyadh.

“What we do know is that the monarch has, for lack of a better term, let’s say petty cash to distribute to various members of the family for their projects, for their businesses, for their life,” he said in an interview.

Perhaps the deepest look inside the royal family’s finances came when an official at the United States Embassy in Riyadh was granted unprecedented access to the Ministry of Finance Office of Decisions and Rules in 1996. The office, the American noted, was “bustling with servants picking up cash for their masters.”

The stipends then ranged from up to $270,000 a month for a son of the founding king to $8,000 a month for his great-great-grandchildren, the official reported. Bonuses of $1 million to $3 million were given to some royals as wedding gifts for palace construction. The official estimated in a memorandum, released with other documents by WikiLeaks five years ago, that the allowances, which included payments to other prominent families around the kingdom, accounted for roughly $2 billion of the government’s total $40 billion budget, or 5 percent of all public spending. …

The United States memo cited Prince Alwaleed bin Talal, the billionaire investor, as having told the American ambassador that revenue from one million barrels of oil per day went into off-budget programs under the control of the king and several top princes.

An adviser to several members of the family and a former senior American government official said that the off-budget programs still existed; it is unclear in what amounts. Both spoke only on the condition of anonymity, for fear of alienating the Saudi government. …

The line between family and state assets can be blurry. United States officials have described in multiple memorandums significant land transfers to sons and grandsons of the king, and even outright grabs, such as one prince who simply had the fence line around his property slowly expand outward to encompass another 30 square miles.

Prince Bandar bin Sultan, a longtime ambassador to the United States, and Prince Abdulaziz bin Fahd, a favored son of the late King Fahd, made hundreds of millions of dollars selling the land for a centrally planned megacity north of Jidda that is still under construction, according to an American diplomat in a 2007 memorandum. In an interview with PBS in 2001, Prince Bandar famously defended corruption in the kingdom.

“If you tell me that building this whole country, and spending $350 billion out of $400 billion, that we had misused or got corrupted with $50 billion, I’ll tell you, ‘Yes,’” he said. “But I’ll take that anytime.”

Many royals have succeeded in business by acting as the exclusive agents for foreign companies in the kingdom. Others are involved in enterprises that depend on government spending doled out by relatives or that thrive on heavy state subsidies.

“As long as the royal family views this country as ‘Al Saud Inc.,’ ever increasing numbers of princes and princesses will see it as their birthright to receive lavish dividend payments, and dip into the till from time to time, by sheer virtue of company ownership,” the American embassy official concluded.

As the size of the family and the general population have grown, some observers say, the balance of rewards has become harder to maintain.

“At the top level, they know that they have to leave something for the rest of the country; otherwise they’ll be out on their ear,” Jean-François Seznec, senior fellow at the Global Energy Center at the Atlantic Council, said of the royal family. “If you ask the population to make sacrifices in order for the state to get money, you can’t have one part of the society take advantage.” …

Tales of excess abroad, such as the princess who skipped out on $20 million in Paris shopping bills in 2009, typically would not reach the king’s subjects back in the Arabian Peninsula because the Saudi news media is strictly controlled by the family. Critical voices have been jailed or silenced. …

Nicole Pollard Bayme, the founder and chief executive of the LalaLuxe fashion styling firm in Los Angeles, said her Saudi royal clients last summer bought Hermès Himalayan Birkin bags made of crocodile skin with diamond and gold hardware and couture gowns for hundreds of thousands of dollars. The Saudi economy “is in some kind of a crisis, but they are still spending,” she said.

Prince Khalid, the exiled prince in Germany, said it would be difficult for the deputy crown prince, who has led the austerity drive, to squeeze his most important constituency if he wishes to reach the throne. “He won’t be king without the support of the royal family,” he said.