Saudi Arabia is leading a counter-revolution against the
sweeping political changes in the Middle East by using money, force and
religion.

Once restrictive of the Muslim clerics, King Abdullah offered money and new censorship powers for their loyalty as he doled out 500 billion riyals ($130 billion) nationally in housing grants and other sweeteners.

As popular movements for democracy toppled leaders in Egypt
and Tunisia and began threatening neighboring Bahrain and Yemen, Saudi Arabia’s
Al Saud royal family strengthened control over the Arab world’s biggest
economy. Once restrictive of the Muslim clerics, King Abdullah offered money
and new censorship powers for their loyalty as he doled out 500 billion riyals
($130 billion) nationally in housing grants and other sweeteners.

The Al Saud have “positioned themselves as the
guardians of the status quo,” Christopher Davidson, author of “Power
and Politics in the Persian Gulf Monarchies,” said in response to e-mailed
questions. “We are seeing a resistance to genuine reform by using a
mixture of carrots and sticks.”

Four months of political unrest have shaken the Middle East
as citizens demand civil rights, higher living standards and the ouster of
autocratic regimes. Yet Saudi Arabia, the self-proclaimed economic powerhouse
and leader of the Gulf states, is showing itself as unhindered by the events,
sending in troops to end protests in Bahrain and quelling smaller
demonstrations in its own Eastern Province.

In Riyadh yesterday, Finance Minister Ibrahim al-Assaf told
1,200 conference delegates, including officials from JPMorgan Chase & Co.,
Moody’s Investors Service and BNP Paribas SA, that the Saudi economy was on
track for stronger growth.

Growth, investment

“I’d like on this occasion to note that the financial
and economic situation in the kingdom is stable, thank God, and we have not
noticed any abnormal financial movements despite unprecedented events taking
place in the region,” he said.

The economy is forecast to expand 5.3 percent this year,
compared with 3.8 percent last year, National Commercial Bank said on May 15.
Egyptian growth may slow to about 1 percent this year, the International
Monetary Fund said on April 11.

U.S. companies are pursuing investments in the Saudi
kingdom. General Electric Co. (GE) announced contracts valued at more than $500
million this month. Saudi Basic Industries Corp. (SABIC) and Exxon Mobil Corp.
(XOM) were awarded contracts this month to develop a project in the eastern
coastal city of Jubail.

To quell the impact of the region’s unrest, Abdullah turned
to “the official religious establishment,” Christopher Boucek, an
analyst at the Carnegie Endowment for International Peace in Washington, said
in a telephone interview. “Other countries in the region don’t have the
ability or resources to do this.”

The senior religious scholars responded by issuing a
statement calling protests un-Islamic ahead of a so-called Day of Rage on March
11. Protesters stayed off the streets.

Dissidents

Saudi Arabia has arrested more than 160 dissidents since
February as part of the government’s crackdown on protests, Human Rights Watch
said in April.

Earlier in the year, Tunisia’s President Zine El Abidine Ben
Ali and Egypt’s Hosni Mubarak were toppled, the first leaders to go as
uprisings spread. Demonstrators and security forces are still facing off in
Syria and Yemen. In Libya, NATO forces are two months into a bombing campaign
against Muammar Qaddafi as he battles with rebels.

The allegiance from King Abdullah’s 110,000-man National
Guard and the Interior Ministry, controlled by Prince Nayef, wasn’t challenged
during the unrest.

Abdullah, who is 87 this year, dispatched soldiers to help
the fellow Sunni Muslim monarchy in Bahrain crush protests led mainly by Shi’a,
who make up the majority of the island’s population.

Council move

The Saudi-led Gulf Cooperation Council also may admit
Morocco and Jordan as the group seeks to counter “the wave of political
change in the region,” Ayham Kamel, an analyst with Washington-based
Eurasia Group, wrote on May 13.

Under a pact dating back to 1744 between the Al Saud ruling
family and Muhammad bin Abdul Wahhab, the kingdom has maintained an austere
brand of Islam, known as Wahhabism, in return for the Sunni hierarchy’s
acceptance of the crown.

The king renewed the alliance with clerical power at home
“to present a solid front against the events that are sweeping the
region,” Theodore Karasik, director of research at the Dubai-based
Institute for Near East and Gulf Military Analysis, said in a phone interview.

Political loyalties have their costs. Of the expenditure
announced by Abdullah in February and March, $67 billion went to funds for
housing, religious groups and the military, according to a royal decree issued
by the king.

“The state religious establishment was very well
compensated,” said Boucek at Carnegie Endowment.

Royal reaction

Abdullah issued a royal decree banning media services from
publishing anything that “violates” Islamic law, “harms the
reputation” of clerics, and threatens internal security, the official
Saudi Press Agency in Riyadh said on April 29.

“The kingdom is reacting to events and anticipating
things will get worse,” Simon Henderson, director of the Gulf and Energy
Policy Program at the Washington Institute for Near East Policy, said in
response to e-mailed questions.

To pay for the new spending, Saudi Arabia needs an oil price
of between $80 to $85 a barrel, according to Banque Saudi Fransi (BSFR) in
Riyadh, Jadwa Investment Co. and National Commercial Bank. That compares with
the original 2011 budget requirement of $65 a barrel, National Commercial Bank
said.

Crude oil for June delivery was $98.13 a barrel on the New
York Mercantile Exchange at 12:42 p.m. London time. Futures have risen 42
percent in the past year.

Petrodollars

“Saudi Arabia has saved a lot of money during this oil
price rise to get them through a potential period of an oil-price
decline,” Brad Bourland, chief economist at Riyadh-based Jadwa, said in an
interview today. “They aren’t fragile to the point that if they didn’t
meet their break-even price a fiscal crisis would occur.”

Oil revenue this year is expected at 828.2 billion riyals
and Saudi Arabia will record a budget surplus of 62.8 billion riyals, National
Commercial Bank said. Expenditures may exceed the initial 2011 budget by as
much as 15 percent, al-Assaf said yesterday. The government in August announced
a five-year, $384 billion economic development plan.

“Subsidies and expenditures are being increased across
the board in order to appease the religious establishment, the security
services and public sector workers,” said Davidson, who is at Durham
University in northern England. “This is in parallel to increasingly
repressive statements aimed at frightening people into staying at home.”

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