TIME energy

New King In Saudi Arabia, Same Old Oil Policy

Whether it is Abdullah or Salman, the Saudi royal family’s preeminent concern is to ensure the longevity of its petrol kingdom

The death of Saudi Arabia’s King Abdullah made international headlines on January 22, raising questions about the future of the Middle East. News of his death briefly rattled the oil markets, but the media attention paid to the event outstrips the significance: it is business as usual in the Arabian Peninsula.

The outpouring of praise for King Abduallah was bizarre. The Washington Post labeled him a “reformer,” and The New York Times said he was a “force of moderation.” U.S. Secretary of State John Kerry took to Twitter to pay his respects. “King Abdullah was a man of wisdom & vision. US has lost a friend & Kingdom of #SaudiArabia, Middle East, and world has lost a revered leader,” he tweeted.

Sure, King Abdullah fought Al Qaeda and joined the World Trade Organization. But he also maintained an iron grip over his monarchy, a country in which women cannot legally drive and risk being beaten by religious police if they go out in public without facial covering.

So in many ways, King Abdullah was more of the same. And his successor, King Salman, will continue conservative geriatric leadership over his oil kingdom. This is evidenced by his speech earlier in the month, on behalf of the late King Abdullah, that Saudi Arabia will face the challenge posed by low oil prices with a “firm will.”

But in reality, the question of what happens to Oil Minister Ali Al-Naimi – and with him, Saudi oil policy – was in some ways much more important than which specific successor takes the throne. For now, Al-Naimi appears set to stay on according to the AP, at least through OPEC’s next meeting in June.

The Saudi government quickly assured the world that its oil policy will remain unchanged. The smooth succession and adherence to current policy calmed the oil markets, which saw prices retreat after briefly jumping by nearly 2 percent.

As a result, Saudi Arabia will continue its pursuit of market share – oil output will remain steady in the face of depressed prices.

The Saudi budget breaks even at somewhere around $63 per barrel, suggesting they will run a significant deficit this year. That is something the kingdom is willing to take on, given the $800 billion in cash reserves it has stashed away for a rainy day.

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The November 2014 decision to maintain output, followed by the collapse in oil prices, fueled some rather triumphalist speculation about how U.S. shale killed off OPEC. Yet the strategy Saudi Arabia laid out in November, which will be continued by King Salman, demonstrates full well Saudi Arabia’s influence over oil markets. As the only significant source of spare capacity in the world, it alone has the ability to voluntarily ramp up or down several million barrels of oil per day. For now, it is keeping the taps open, forcing a contraction from others.

And it has more staying power than U.S. shale producers. The number of active rigs in the U.S. fell by 209 between December and mid-January 2015. That is the fastest decline since data collection began by oil services firm Baker Hughes, dating back to 1987. Production cuts will eventually follow.

“Everyone tells us to cut. But I want to ask you, do we produce at higher cost or lower costs? Let’s produce the lower cost oil first and then produce the higher cost,” OPEC Secretary General Abdullah al-Badri said at the World Economic Forum in Davos.

Saudi Arabia is willing to wait out low prices. That means that the pain for U.S. shale producers should continue, and will likely grow worse before it gets better.

Claudio Descalzi, the CEO of Italian oil giant Eni, called on OPEC to cut oil production in order bring supply and demand into balance. “What we need is stability… OPEC is like the central bank for oil which must give stability to the oil prices to be able to invest in a regular way,” he said in Davos, according to Reuters. Descalzi says that OPEC’s failure to cut production could lead to oil prices skyrocketing to $200 because many private oil companies will push off drilling.

But that is exactly what Saudi policy could be aiming for: maintain market share, force others to cut back production, and reap the rewards of higher prices once they do.

Saudi Arabia’s entire economy is based on oil. The government brings in 85 percent of its revenues from petroleum exports. Whether it is Abdullah or Salman, the Saudi royal family’s preeminent concern is to ensure the longevity of its petrol kingdom. For now, that means no change in its current oil strategy.

This post originally appeared on OilPrice.com.

Read more from Oilprice.com:

TIME Saudi Arabia

Know Right Now: Saudi Arabia Has a New King

King Salman is 79 years old

With the death of Saudi Arabia’s King Abdullah came the crowning of King Salman.

Salman bin Abdulaziz, who was named crown prince in June 2012, was Abdullah’s third heir to the throne after two elder brothers died in late 2011 and mid-2012. As the new King of Saudi Arabia, home to 28 million people, he will also serve as Prime Minister and Defense Minister.

A longtime governor of the capital, Riyadh, Salman has a reputation as a progressive and practical prince similar in bearing to his late brother.

Find out more about who he is and what his policies are by watching today’s Know Right Now. Or read more about the King here.

TIME Saudi Arabia

King Abdullah’s Death Shows Saudi Arabia’s Declining Clout

King Abdullah, left, with then-Crown Prince Salman, right, in 2010.
AP King Abdullah, left, with then-Crown Prince Salman, right, in 2010.

The death of Saudi Arabia’s King Abdullah has momentarily grabbed the world’s attention, but the real story is that his kingdom matters less than it used to

Ten years ago, the death of a Saudi king would have sent shock waves through Washington. Today, as the Kingdom recovers from the death of King Abdullah yesterday, Saudis don’t carry the same clout. In part, that’s because the U.S. is much less dependent on Middle Eastern oil than it was a few years ago, as U.S. companies have reinvented the way oil and natural gas is produced. Hydraulic fracturing has opened access to liquid energy deposits locked inside once-impenetrable rock formations, and breakthroughs in horizontal drilling methods have made the technology more profitable.

By the end of this decade, the United States is expected to produce almost half the crude oil it consumes. More than 80% of its oil will come from North or South America. By 2020, the United States could become the world’s largest oil producer, and by 2035 the country could be almost entirely self-sufficient in energy. Relations with the Saudis are no longer a crucial feature of U.S. foreign policy, and the surge in global supply, which has helped force oil prices lower in recent months, ensures that others are less concerned with the Saudis as well.

In addition, outsiders are not worried that King Abdullah’s death will make the Kingdom unstable. Newly-crowned King Salman is plenty popular, and other key players—Crown Prince Muqrin, National Guard head Prince Miteab, and Interior Minister Mohammed bin Nayef—have pragmatic working relations with the new king and with one another. The succession process will appear uneventful from the outside, but Salman will spend the next several months consolidating his authority and building a stable balance of power among factions within the family and across the government.

Another reason the Saudis matter less: They’re now bogged down in the region. Saudi worries that Iran can make mischief even under harsh sanctions only raises fears should a deal be made with the West later this year over its nuclear program, which would ease those sanctions, Tehran would only become a more troublesome rival. But even if there is no deal and sanctions are tightened, Iran will probably become more aggressive to demonstrate its defiance, creating new headaches along Saudi borders.

How will the Saudis manage its local security worries? Along the border with violence-plagued Iraq, the Saudis are actually building a 600-mile wall complete with five layers of fencing, watch towers, night-vision cameras and radar. Terrorist violence in neighboring Yemen and the fall of its government this week add to the Saudi’s sense that their country is under siege. They’re building a wall along Yemen’ s border as well. Fights with ISIS and al-Qaeda in the Arabian Peninsula will demand attention and money.

King Salman is 79, and he’s been central to Saudi policymaking for 50 years. One day soon, we’ll see generational change in the Saudi leadership. When that happens, we might see a fresh approach to the Kingdom’s two biggest problems: Its inability to build a dynamic, modern economy to harness the energies of Saudi Arabia’s millions of young people and its growing marginalization as an international political and economic force.

That day has not yet come.

Foreign-affairs columnist Bremmer is the president of Eurasia Group, a political-risk consultancy. His next book, Superpower: Three Choices for America’s Role in the World, will be published in May

TIME portfolio

The Best Pictures of the Week: Jan. 16 – Jan. 23

From escalating violence in eastern Ukraine and a thousands strong march in honor of Martin Luther King Jr. in Selma, Ala. to priests photographing Pope Francis in the Philippines and a surprising, glowing seascape in Hong Kong, TIME presents the best pictures of the week.

TIME Saudi Arabia

Saudi Arabia’s Billionaire King to Be Buried in Unmarked Grave

The body of Saudi King Abdullah bin Abdul Aziz is carried during his funeral at Imam Turki Bin Abdullah Grand Mosque, in Riyadh, Jan. 23, 2015.
Faisal al Nasser—Reuters The body of Saudi King Abdullah bin Abdul Aziz is carried during his funeral at Imam Turki Bin Abdullah Grand Mosque, in Riyadh, Jan. 23, 2015.

While mourning will last for three days during which kingdom's flags will fly at half staff, businesses and shops will remain open

RIYADH, Saudi Arabia — There will be no golden carriages.

The funeral of Saudi Arabia’s King Abdullah, whose death was announced early on Friday, is set to be a simple affair in line with the austere form of Islam practiced by one of the world’s wealthiest ruling families.

The body of the former custodian of Islam’s two holiest cities, Mecca and Medina, will be bathed according to Islamic ritual. The late ruler, whose net worth has been estimated to stand at around $20 billion, will then be wrapped in two pieces of plain white cloth — the standard shroud for all Muslims.

According to tradition, nothing out of the ordinary will be done to King Abdullah’s body, and after it is prepared it will be taken to the Imam Turki Bin Abdullah Grand Mosque in the capital Riyadh for the funeral prayers at around 3:15 p.m. (7:15 a.m. ET).

Read the rest of the story from our partners at NBC News

TIME Yemen

U.S. Downsizes Yemen Embassy Staff as Crisis Builds

Houthi fighters ride a truck near the presidential palace in Sanaa, Jan. 22. 2015.
Khaled Abdullah—Reuters Houthi fighters ride a truck near the presidential palace in Sanaa, Jan. 22. 2015.

U.S. officials say that the embassy won’t be closing

The U.S. has decided to reduce its embassy staff in Yemen following the collapse of the nation’s government at the hands of rebel Houthi fighters.

“The safety and security of U.S. personnel is our top priority in Yemen,” White House spokesperson Jen Psaki said in a statement. “We are evaluating the security situation on the ground on an ongoing basis. We call on all parties to abide by their public commitments to ensure the security of the diplomatic community, including our personnel.”

The move comes four months after U.S. President Barack Obama lauded Yemen as a model for “successful” counterterrorism partnerships.

The reduction of embassy staff, mainly in response to the security situation, comes at a time when Washington is trying to secure partnerships in the war against the Islamic State of Iraq and Greater Syria while trying to limit Iran’s influence in the region, according to Reuters.

The situation is alarming neighboring Saudi Arabia, which sees Tehran’s military and financial support for the Shi‘ite Houthis as a sign of their growing regional clout.

Former Yemeni President Abdel Rabbo Mansour Hadi, who resigned Thursday along with a slew of government officials, was seen as a key ally in the war against jihadist groups like al-Qaeda. However, the Houthis, who now control the capital, are said to loathe al-Qaeda as much as they do the U.S., reports Reuters.

Hadi’s resignation will “absolutely” limit drone strikes and counterterrorism operations in the immediate future, a former U.S. official told the news agency.

TIME Saudi Arabia

Global Leaders Pay Respects After the Death of Saudi Arabia’s King Abdullah

President Obama meets King Abdullah in Saudi Arabia
Kevin Lamarque—Reuters U.S. President Barack Obama meets with King Abdullah at Rawdat al-Khraim (Desert Camp) near Riyadh in Saudi Arabia, March 28, 2014.

"An important voice who left a lasting impact on his country"

U.S. President Barack Obama paid tribute to Saudi Arabia’s King Abdullah on Friday, hailing the late monarch’s contributions to peace in the Middle East and the relationship between the two allies.

“As our countries work together to confront many challenges, I always valued King Abdullah’s perspective and appreciated our genuine and warm friendship,” Obama said in a statement. “The closeness and strength of the partnership between our two countries is part of King Abdullah’s legacy.”

Former President George H.W. Bush also released a statement calling Abdullah “a wise and reliable ally, helping our nations build a strategic relationship and enduring friendship,” according to CBS News.

Messages came in from leaders around the world, with British Prime Minister David Cameron and Indian Prime Minister Narendra Modi both expressing regret at Abdullah’s demise. Cameron, who visited Saudi Arabia in 2012, said he was “deeply saddened” and expressed hope that the “long and deep ties between our two Kingdoms will continue,” while Modi took to Twitter to commemorate “an important voice who left a lasting impact on his country.”

Abdullah’s spearheading of the Arab Peace Initiative, which was cited by both Obama and U.S. Secretary of State John Kerry as one of his key achievements, was also included in U.N. Secretary General Ban Ki-Moon’s condolence message as “a tangible legacy that can still point the way towards peace in the Middle East.”

TIME energy

Oil Prices Spike After Saudi King’s Death

King Abdullah waves as he arrives to open a conference in Riyadh.
Zainal Abd Halim—Reuters King Abdullah waves as he arrives to open a conference in Riyadh on Feb. 5, 2005

Last month, Saudi Arabia pumped 9.5 million oil barrels a day, but uncertainty clouds the future of oil prices

Oil prices spiked following the death on Friday of Saudi Arabia’s King Abdullah, whose country’s oil production is the largest of any state in the 12-member Organization of Petroleum Exporting Countries (OPEC), a cartel responsible for approximately 40% of the global oil supply.

The monarch’s passing also increased oil futures in New York by 3.1 and London by 2.6, according to Bloomberg. As the globe’s biggest exporter of crude oil, Saudi Arabia helped maintain an OPEC production quota last year that helped keep oil prices low by ensuring a high supply of crude in the worldwide market. Prices nearly halved last year when OPEC’s output did not drop to reflect oversupply, as the U.S., the globe’s largest consumer of oil, pumped more oil than it had in over three decades.

“The passing of King Abdullah is going to increase uncertainty and increase volatility in oil prices in the near term,” said financial analyst Neil Beveridge in a phone interview with Bloomberg.

U.S. crude stockpiles jumped by 10.1 million barrels, its largest volume increase since early 2001, according to the Energy Information Administration’s reports up to Jan. 16.

Crown Prince Salman bin Abdulaziz succeeds King Abdullah, who helmed the kingdom for nearly a decade and significantly enlarged Saudi Arabia’s economy, which is now the largest in the Arab world in terms of total GDP.

[Bloomberg]

TIME Foreign Policy

Why Saudi Arabia’s Neighbor Is the Real Concern for the U.S.

Saudi Arabia's King Abdullah receives U.S. Defense Secretary Robert Gates at the king's Riyadh Palace on April 6, 2011 in Riyadh, Saudi Arabia.
Chip Somodevilla—Getty Images Saudi Arabia's King Abdullah receives U.S. Defense Secretary Robert Gates at the king's Riyadh Palace on April 6, 2011 in Riyadh, Saudi Arabia.

A smooth succession is all but guaranteed in the Kingdom — but that won't help imperiled U.S. allies in Yemen

King Abdullah of Saudi Arabia died Thursday of natural causes at age 90, leaving in place what appears to be a well-laid succession plan that U.S. analysts hope will assure continued stable relations between Washington and the oil-rich country that dominates most of the peninsula.

Unfortunately, in neighboring Yemen, the government of U.S. ally President Abdel Rabbo Mansour Hadi also died Thursday, leaving nothing but the prospect of a failed state and increased sway for Iran-backed Houthi rebels and a powerful and dangerous branch of al Qaeda.

On balance, the bad news outweighs the good.

Abdullah’s successor, Crown Prince Salman, is an established figure in U.S.-Saudi affairs, with a history of collaboration on national security matters dating to his fundraising for the Afghan Mujahedeen during their war against the Soviets in the 1980s, says Bruce Reidel of the Brookings Institution. One of Salman’s sons, Reidel reports, “led the first RSAF mission against Islamic State targets in Syria last year.”

But while oil futures soared on the news of Abdullah’s death as traders worried about potential instability in Saudi Arabia, former U.S. officials viewed the collapse of central governing authority in Yemen as the real cause for concern. “Rule number one of contemporary national security policy is allow the emergence of no new failed states,” says former State Department Coordinator for Counterterrorism, Amb. Daniel Benjamin.

The power vacuum is most worrying because it imperils U.S. intelligence and counterterrorism operations against one of the few al Qaeda off shoots that retains the U.S. as its primary target. Al Qaeda in the Arabian Peninsula (AQAP) has a talented bomb-maker in its upper ranks, a Saudi fugitive named Ibrahim al Asiri. U.S. officials believe al Asiri is behind several near-miss attempts to bring down Western airliners, at least one of which was foiled by a Saudi double agent who had penetrated the group.

The Houthis are only a threat to the U.S. insofar as they appear to have effected the ouster of the U.S.-backed Hadi and left a collapsed state in his wake. “We were banking on a guy who was very pro-American, but had far less support in his country than we thought,” says Whitley Bruner, a former CIA Baghdad station chief who previously served in Yemen and has worked as a security consultant there in recent years.

The Saudis dislike both the Houthis and AQAP, which dispatched al Asiri’s brother in a suicide attack that nearly killed the Saudi Interior Minister in 2009. But the kingdom has little chance of putting its neighbor back together again: with Yemen’s history of sectarian, tribal and ideological violence, “it’s going to get worse,” says Bruner. AFP reported late Thursday that “four provinces of Yemen’s formerly independent south, including its main city Aden, say they will defy all military orders from Sanaa” now that the capital has fallen to the Houthis.

TIME Saudi Arabia

Who Is Saudi Arabia’s New King?

Meet King Salman

King Salman is now ruler of Saudi Arabia after his elder half-brother, King Abdullah, died early Friday at age 90.

Salman bin Abdulaziz, who was named crown prince in June 2012, was Abdullah’s third heir to the throne after two elder brothers died in late 2011 and mid-2012. As the new King of Saudi Arabia, home to 28 million people, he will also serve as Prime Minister and Defense Minister.

A longtime governor of the capital, Riyadh, Salman has a reputation as a progressive and practical prince similar in bearing to his late brother. The transition is expected to be a smooth one, with little instability and no long-term policy changes. But the 79-year-old has reportedly been in poor health in recent years, and is perhaps unlikely to rule for as long as his elder sibling.

Unlike European monarchies that are handed down by generations, the Saudi throne has passed between the sons of King Abdulaziz, who founded modern-day Saudi Arabia in 1932. His sons Saud, Faisal, Khalid and Fahd each became king in the 20th century; Abdullah took the throne when Fahd died in 2005.

King Salman’s crown prince will be his younger brother Prince Muqrin, the youngest surviving son of King Abdulaziz, who was named deputy crown prince last year when the kingdom acted to set in stone its structure for the future. Muqrin is said, like the new King, to be committed to cautious reforms.

It was decreed by the King in 2006 that when the last of Abdulaziz’s sons passes away, a new King will be chosen from among his grandsons by a council of senior Saudi princes. Prince Muhammad bin Nayef, the son of a crown prince who died, is considered a leading contender after being appointed Interior Minister in 2012.

But the kingdom has never transitioned from one generation to another, and no one quite knows what will happen when it does.

Read next: King Abdullah’s ‘Special Relationship’ With the U.S.

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