1. Heavy Dependence on Oil
Saudi Arabia’s oil wealth is also its biggest curse, as it renders the country’s fate wholly dependent on the fortunes of one single commodity. Various diversification programs have been tried since the 1970s, including attempts at developing a petrochemical industry, but oil still accounts for 80% of budget revenues, 45% of GDP, and 90% of export earnings (see more economic statistics).
In fact, “easy” oil money poses the biggest disincentive for investment into private sector-led growth. Oil generates steady government revenue, but doesn’t creates many jobs for the locals. The result is a bloated public sector that acts as a social safety net for jobless citizens, while 80% of the workforce in the private sector comes from abroad. This situation is simply unsustainable in the long-term, even for a country with such vast mineral wealth.
2. Youth Unemployment
Every fourth Saudi under 30 is unemployed, a rate twice that of the world average, reports Wall Street Journal. Anger over youth unemployment was a major factor in the outbreak of pro-democracy protests in the Middle East in 2011, and with half of Saudi Arabia’s 20 million citizens under the age of 18, the Saudi rulers face a mounting challenge in offering their youth a stake in the future of the country.The problem is compounded by traditional reliance on foreign workers for both highly skilled and menial jobs. A conservative education system is failing the Saudi youth who can’t compete with better-skilled foreign workers (while often refusing to take on jobs they see as beneath them). There are fears that if government funds start drying up, young Saudis will no longer keep quiet about politics, and some might turn to religious extremism.
3. Resistance to Reform
Saudi Arabia is governed by a rigid authoritarian system where executive and legislative power rests with a narrow group of senior royals. The system has worked well in good times, but there's s no guarantee that the new generations will be as acquiescent as their parents, and no degree of rigorous censorship can isolate Saudi youth from dramatic events in the region.
One way to preempt a social explosion would be to give citizens greater say in the political system, such as the introduction of an elected parliament. However, calls for reform are regularly quashed by conservative members of the royal family, and opposed by the Wahabi state clergy on ostensibly religious ground. This inflexibility makes the system vulnerable to a sudden shock, such as a collapse in oil prices or eruption of mass protest.
4. Uncertainty Over Royal Succession
Saudi Arabia has been ruled by sons of the kingdom’s founder, Abdul Aziz al-Saud, for the past six decades, but the grand old generation is slowly reaching the end of its line. When King Abdullah bin Abdul Aziz Al-Saud dies, the power will pass to his eldest siblings, and along that line eventually reach the younger generation of Saudi princes.
However, there are hundreds of younger princes to choose from and various family branches will lay rival claims to the throne. With no established institutional mechanism for the generational shift, Saudi Arabia faces intense jockeying for power that could threaten the unity of the royal family.Read more on the royal succession issue in Saudi Arabia.
5. Restive Shiite Minority
Saudi Shiites represent about 10% of the population in the majority Sunni country. Concentrated in the oil-rich Eastern Province, Shiites have complained for decades over religious discrimination and economic marginalization. Eastern Province is a site of ongoing peaceful protest to which the Saudi government consistently responds primarily with repression, as documented in US diplomatic cables released by Wikileaks.
Toby Mathiessen, an expert on Saudi Arabia, argues that repression of the Shiites constitutes a "fundamental part of Saudi political legitimacy”, in an article posted on Foreign Policy website. The state uses the protests to scare the majority Sunni population into believing that Shiites intend to take over Saudi oil fields with the help of Iran.
Saudi Arabia’s Shiite policy will generate constant tension in the Eastern Province, a region adjacent to Bahrain which is also trying to put down Shiite protests. This will create fertile ground for future opposition movements, and possibly exacerbate Sunni-Shiite tension in the wider region.Read more on the Cold War Between Saudi Arabia and Iran.