It is now clear that the era of King Salman bin Abdulaziz al-Saud is providing anything but the continuity promised at his accession in January.

The king’s government reshuffle on 29 April will reshape all key areas of government activity from foreign policy through to spending on projects.

And it is certain to have significant consequences for business in the kingdom, with tighter controls being placed on government spending and capital spending, if not operational spending on state salaries, is likely to be reined in.

The tone of the early period of Salman’s era has already been set by Riyadh’s uncharacteristic, high-profile military intervention in Yemen.

Asserting leadership

This pattern is likely to continue as Saudi Arabia continues to adopt a more assertive foreign policy stance than seen under Salman’s predecessor, his half-brother King Abdullah bin Abdulaziz al-Saud, using its financial and security muscle to exert its leadership over the Arab world, tackling Sunni extremists at home and across the region, and standing up robustly to what it sees as growing hostile Iranian influence on the Middle East.

Riyadh has stated that much of this has been forced upon the kingdom by the withdrawal of US leadership from the region. But nonetheless, it is a major change in direction for the country.

The reshuffle has swept aside the remnants of King Abdullah’s 20 years in power as king and Crown Prince and it also prepares the ground for the next generation of the House of Saud to rule the country.   

The most eye catching change was the removal of Crown Prince Muqrin bin Abdulaziz al-Saud, the youngest son of Saudi Arabia’s founder Ibn Saud.

While not unexpected, as Muqrin was a relatively isolated figure within the higher reaches of the al-Saud family, the removal of a Crown Prince is unprecedented and it means that the future king will be taken from the next generation of al-Sauds.

This is highly significant.

Next generation

In contrast to Saudi Arabia’s leaders throughout the twentieth century, the kingdom’s next generation have been shaped as much by the world outside the kingdom as by its conventions inside. The generational shift will introduce a fundamentally different mindset to the leadership of the country. But it will also raise new tensions within Saudi Arabia.

The two main beneficiaries of the Salman reshuffle are Interior Minister and Deputy Crown Prince Mohammed bin Nayef, aged 55, who becomes Crown Prince, and 34-year-old Defence Minister Mohammed bin Salman, the king’s favoured son, who rises to Deputy Crown Prince just four months after first being appointed to government. Mohammed bin Salman is also head of the Royal Diwan.

Together the two Mohammeds are running the country on behalf of the King, who at 79, is delegating much of the decision making to a tight group of insiders led by the two Mohammeds.

Spending review

From the outside, Mohammed bin Salman has become de facto Prime Minister, with each cabinet minister being required to do a presentation to a core group of the domestic policy committee he chairs. Mohammed bin Nayef meanwhile is focusing on security and regional relations.

But it is not only on foreign policy and security that King Salman is exerting his muscle. He is also introducing tighter control on government spending. As oil revenues decline due to lower oil prices, Salman is seeking to cut back on spending.

On 14 April, the King announced that all capital projects valued at over SAR300million (about $80m) had to be approved by his Royal Commission, and the expectation is that as well as slowing down spending decisions in the kingdom, several major projects could be cut back, deferred or event scrapped. Meanwhile, the Ministry of Finance is now reported to be focusing on auditing and financial control, with its role of managing spending being reduced.

Changes trickle down

In addition, King Salman announced a series of other significant cabinet changes. Long-serving and highly-respected Minister for Foreign Affairs Prince Saud al-Faisal steps aside after 40 years in post, to become a special envoy for the king. He is replaced by Riyadh’s ambassador to the US, Adel al-Jubeir, who is not from the al-Saud family, but who has good relations with Washington.

Another notable appointment is the promotion of Saudi Aramco CEO Khalid al-Faleh as Minister of Health, a move potentially paving the way for Saudi Arabia’s leading oil executive and one of the kingdom’s highest flyers to one day become oil minister.

For business, the move means that the coming 12-18 months will be tough. Shrinking government spending will reduce opportunities and increase competition. But companies in the kingdom should remain committed and focused.

A tightening of the purse string is sensible but Riyadh continues to face the same challenges as before and will continue to drive investment in diversification, job creation, infrastructure and energy projects.