Lounsbury: Saudi Arabia: Mea culpa, Mea Culpa

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May 30, 2004

Saudi Arabia: Mea culpa, Mea Culpa

I thought I would take the occasion of yet further instability and attacks in Saudi Arabia to acknowledge my analysis of the Saudi situation in the past year was wrong.

While I can point to the perniciously negative effects of the Iraq situation, which in conjunction with the seemingly unbounded and pointless bloodymindedness of the Sharon Administration and the spineless acquisence of the Bush Administration, as new drivers to radicalism, my analysis was wrong.

I have written in the past year that that Saudi system was unlikely to be in danger, confidently stating that the tribal relations and patronage networks the Ibn Saud have installed in the KSA would keep things in place.

Given the sustained and bloody operations in KSA, which is something of a tribal police state, I confess I may have seriously misestimated the degree to which current radicalism is placing the old Ibn Saud networks in question, rendering fluid otherwise solid bounds.

There is a direct and serious implication, I may add, for the rest of the world. Given that militants continue to be able to operate with great impunity in the KSA despite Ibn Saud efforts to crack down, one has to lower the discount factor on the possibility of a truly serious incident in the country with the potential to cripple oil production. Given current market circumstances, that would have very, very serious effects.

I already expect the risk premium on oil to rise another couple of percentage points, an actual attack on the infrastructure (the hard production infrastructure, the present attacks are on the soft human infrastructure, more easily replaced) will cause that to leap. Very serious risk factor with very large unknowns (known and unknown unknowns, to use Rumsfeld's much maligned but actually quite astute phrase).

So, there it is, I believe it likely that I misread the circumstances and have to revise my estimation of Saudi stability from high to moderate, with a clear potential for catastrophic incidents.

May 30, 2004

Saudi Arabia: Mea culpa, Mea Culpa

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