Saudi Arabia contagion triggers Gulf rout

Fears of sectarian uprisings in Bahrain and Saudi Arabia have set off the first serious wave of investor flight from the Gulf, compounding market turmoil as civil war in Libya pushes Brent crude over $116 a barrel.

Saudi Stock Tumbles

Saudi Arabia’s Tadawul stock index has tumbled 11pc in wild trading over the past two days, led by banks and insurers. Dubai’s bourse has hit a 7-year low.
The latest sell-off was triggered by the arrest of a Shi’ite cleric in the Kingdom’s Eastern Province after he called for democratic reforms and a constitutional monarchy. The province is home to Saudi Arabia’s aggrieved Shi’ite minority and also holds the country’s vast Ghawar oilfield, placing it at the epicentre of global crude supply.
“Unrest in this region can have fatal consequences for the world,” said JBC Energy. “The plunge on the Saudi stock exchange can be interpreted as a sign of waning trust.”
In Bahrain, the island nation’s Sunni elite holds sway over a Shi’ite majority that is denied key jobs and has a token political voice, making it a trial run for Saudi Arabia’s near-identical tensions in the Eastern Province.
Bahraini dissidents have so far been much bolder, prompting a bloody crackdown last month when at least seven people were shot by the military. The ruling family – under intense pressure from Washington to stop the killings – has since held out an olive branch to protesters and let the radical Haq leader Hassan Mushaima return from exile, yet the crisis is far from contained.
My Mushaima said on Wednesday that protesters have “the right to appeal for help from Iran” if Saudi military units interfere in the struggle. Tanks were seen crossing the 17-mile causeway from Saudi Arabia to Bahrain on Tuesday.
“These were supposed to be Bahrain’s tanks returning from Kuwait: that is not a credible story,” said Firas Abi Ali, a Gulf expert at the risk group Exclusive Analysis.
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He said the outcome in Bahrain will set the template for events across the border. “There is no good outcome from this for Saudi Arabia. If Bahrain offers concessions, the Saudi Shia will demand similar concessions. If they crack down, they risk an uprising. These people do not want to live under the House of Saud,” he said.
Saudi activists have called on Facebook for a “Day of Rage” on March 11, despite the penalty of lashing for street protest. A similar call to arms in Syria fizzled because people were frightened, and the security forces nipped it in the bud. “We will be watching closely to see how many people turn up, and how far their demands go,” said Mr Abi Ali.
Saudi King Abdullah has scant leeway. His own legitimacy stems from Wahabi clerics, who refuse any compromise with the Shia. He is 87 and in poor health, raising the prospect of an imminent succession struggle that favours the hard-line interior minister Prince Nayef. He would undoubtedly crush any protests. The monarchy has sought to gain time by spending an extra $36bn (£22bn) on welfare and salaries, but patronage politics may strike the wrong note at this stage.
Whatever the hopes in the West, Mr Abi Ali said the Mid-East is now in the vortex of multiple uprisings that will create turmoil for years and destabilise oil supply for a long time. “The Arab world is not going to start behaving like the Swiss,” he said.
Libya’s slide into civil war has already cut oil shipments by 1m barrels per day (bpd), slicing into the world’s safety margin. The International Energy Agency (IEA) said the Saudis had covered the short-fall, though Saudi heavy oil is a poor substitute for Libya’s “sweet” crude.