Recent trends in Saudi Arabia’s Foreign Aid Policy

(paper presented by Louis Blin at the conference « Impact of Gulf States’ foreign aid on protracted crises », Florence, June 23, 2023)

This paper does not aim at giving a global overview of Saudi Arabia’s foreign aid policy. It rather tries to find out how it might evolve, through a record of its recent trends. According to the World Bank, Saudi Arabia’s GDP per capita in purchasing power parity stood at $48,711 in 2021, which placed the country 25th in the world, at the level of South Korea and far behind the record figures of Ireland ($105,355) or Qatar ($102,018). The myth of its unlimited wealth, however, has a hard life. It is a result of its oil exports in public opinion since the first oil shock in 1974. Its per capita income nevertheless fell beginning as soon as 1982 (Chart 1).

Saudi GDP per capita ($ constant 2015)

Source: World Bank.

This image of unlimited wealth among Saudi Arabia’s international partners also results from its foreign aid, which did not follow the fall of its oil revenues. For some forty years, Saudi Arabia has been one of the leading providers of public aid in the world (excluding private funds), far ahead of Western countries as a percentage of its gross domestic product (chart 2). Its foreign aid would have represented 1.9% of its GDP on average from 1975 to 2005[1], well above the objective set by the United Nations of 0.7%, and the average of 0.3% recorded over the same period by OECD countries. It would have amounted to 125 billion euros from 1975 to 2015[2], or to $86 billion from 1990 to 2019[3], the uncertainty on the figures being due to the lack of reliable statistics, i.e. around $3 billion per year. Saudi Arabia’s overseas development assistance (ODA) ranked tenth worldwide between 2005 and 2014[4]. It amounted to $2.1 billion in 2021, the latest figure published by the OECD, i.e. 0.3% of its gross domestic product, a percentage in sharp decline therefore[5]. Chart 2 shows that Saudi ODA fell as soon as King Salman came to power in 2015, before the launch of “Vision 2030” by his son Mohammed the following year. This decision has not been made public at that time, let alone been explained. It responded to various concerns, beginning with the drop in oil revenues that occurred that very year, which restricted the capacity for external financing (the share of oil in GDP dropped from 40.4% in 2014 to 23.6% in 2015). Second came the overall review of the functioning of the economy, prior to its structural adjustment and the launch of a new development strategy from 2016 onwards. It seems that intermediaries used to take their tithe on the disbursements of foreign aid. However, the fight against corruption was the king’s priority. The flows then remained below their pre-2015 level, except in 2018, probably due to Yemen, the main beneficiary of Saudi funds.

Source: OECD.

None of these figures include foreign residents’ remittances, which would increase many folds the total transfers and, if taken into account, would give a more accurate image of the amount of funds originating from Saudi Arabia to the receiving countries, most of them being manpower exporting ones, as well as beneficiaries of Saudi foreign aid. Foreigners counted for 41,6% of Saudi Arabia’s 32,2 million population, according to the 2022 census published by the Saudi General Authority for Statistics[6].

Source: OECD.

Foreign aid has been the main tool of Saudi diplomacy, even before religion, with the bulk of its aid being bilateral (chart 3). However, commentators often equate Saudi external financial flows with instruments for promoting Wahhabism, while the Saudi authorities have never included their aid in such a strategy. A 2016 French report, for example, estimates the credits allocated by Saudi Arabia to its religious diplomacy at $85 billion from 1975 to 2005[7]. Claiming that Saudi Arabia “used its petrodollars to propagate Wahhabism”, another author gives a range of $80 billion to $200 billion (no dates given)[8]. These unsourced figures no doubt correspond to its total aid, part of which is nevertheless allocated to multilateral organizations that it obviously does not control ($317.3 million in 2021 for example). Such a conviction comes from the record that Saudi Arabia directs its aid primarily to Muslims, but since most of them are poor or live in countries at war, we could also write to the poorest or the disaster victims. This therefore does not make it a religious aid. Should we consider as such the digging of a well in Niger because this country is fully Muslim? Moreover, even in the case of religious aid, for example the financing of the construction of a mosque, deducing that it is a question of Wahhabi proselytism turns out to be at the very least rapid, when one notes the modesty of the successes of Saudi Wahhabism for export. Many studies show that the progression of Wahhabism and more generally of Salafism in certain countries responds to indigenous dynamics. In 2020, only 4.8% of bilateral Saudi ODA went to NGOs, much of which we can assume was religious in nature[9].

Insisting on the diplomatic instrument represented by this aid, particularly in the context of competition between Arab and Muslim countries, turns out to be simplistic. First, Saudi Arabia’s aid has mostly responded to requests, internal or external, and not to a well-defined policy. On the other hand, its prodigality was a charitable work, which does not mean disinterested, as we know that gifts usually respond to a socio-political strategy, from the individual level to that of the States. If part of the Saudi aid may well be labelled as religious, it is above all because it went through religious channels, of which it represented one of the unacknowledged methods of financing, but the norm was rather to associate various close circles power to this end, there as in other sectors of economic and financial activity. Aid has often served internal purposes, in a country where proselytizing action in the broad sense was an important source of legitimization. It therefore resulted from the distribution of power and legitimacy between the ruling dynasty and the religious establishment, when it passed through it, in particular through the various channels of the Muslim World League[10]. It used to be one of the facets of the recycling of the oil rent in the loyalty of the Wahhabi establishment, as an interested intermediary. Such a strategy is no longer valid at the time of the de-Wahhabization process, which leads to the vanishing of the religious pillar in the legitimization process of the Saudi dynasty. The drastic reduction of subsidies to the religious establishment directly affects foreign aid that used its channel. The lack of interest of the rulers for proselytism and, more generally, their distrust of any overlapping of politics and religion, undermine the religiously grounded aid. The weakening of the religious establishment and the vanishing of the many hidden interests that used to surround it, on the one hand, the fight against corruption on the other, now keep the aid flows largely out of the Saudi political economy. The reduction in foreign aid is partly the result of this process, although it is not its main driver.

The growing taxation plays in the same direction, even if it is for the moment limited to indirect taxes. The fact that most of the Saudis have little say in the running of affairs, including on foreign aid, does not mean that their leaders ignore the critics from those who are reluctant to pay for foreign countries, at a time when their purchasing power is no longer progressing. Many Saudis now regret their past generosity. They would hardly understand why they should go on paying for others in such times. The rulers know that putting an end to religious legitimization confers an increased role on the welfare state, in a society where Badu anthropology exchanges allegiance for food and shelter.

Saudi aid has therefore lost its internal importance since Mohammed bin Salman took over in 2016. What about its external drive? Foreign aid also used to secure friends abroad, although with unequal results, given that its recipients were rarely accountable. This phenomenon has been recurrent, from the level of any small Muslim neighborhood association to that of state. The examples of Lebanon and Yemen clearly show how massive aid provided years along by Saudi Arabia did not throw any beneficiary in its net, since these two countries are currently in the hands of supporters of Iran. Between partial diversion by private interests and their elimination from political games, the influence of aid on the loyalty of recipients has proven to be mediocre. Its impact on the economy and the population of the beneficiary countries is moreover hard to assess, so much so that the internal dysfunctions of their aid have led the Saudis to disappointment and frustration. They even happened to face criticism from those who, in some European countries, accused them of interfering in their internal affairs via their funds, not to mention the Arab “brothers” who view Saudi money as a due and derive no gratitude for it. Al-Yahya and Fustier concluded in 2014 that although the extent of humanitarian assistance by Saudi Arabia would be the envy of any other country as a means of winning hearts and minds, it was a form of soft power that “the kingdom has not adequately realized, let alone full exploited, to its advantage[11].” Spendings on soft power have now switched to sport, leisure and culture, following the path traced by the Gulf Emirates.

The in-depth economic reform initiated through Vision 2030 in Saudi Arabia has not spared external aid (chart 4). Its centralization has led to the vanishing or change in nature of state-linked religious bodies involved in foreign aid, the way the powers of the religious police (Committee for the Promotion of Virtue and prevention of Vice) were cut in 2016. Humanitarian Aid (25.2% of the total in 2020) is now a monopole of the King Salman Humanitarian Aid and Relief Center (KSRelief), an organization set up in April 2015, three months after King Salman came to power, with a stated goal to enhance transparency. Development Aid (49.1% of the total) is channeled through the Saudi Fund for Development, and the rest by the Ministries of Finance, Foreign Affairs and Education. Neither the Ministry of Religious Affairs nor the Muslim World League and its branches, appeared on the list of external aid providers from that very year onwards[12]. The Saudi International Relief Organization (IIRO), which used to be the World’s largest Islamic charity in the nineties, has gradually disappeared from the landscape.

Source: OECD.

Vision 2030 subordinates the progress of Saudi Arabia to an objective of economic power, on the Chinese model, within a strict framework of national interest, a policy of ‘Saudi First’. In this regard, it gives priority to drastic structural adjustment and massive state investment, the bulk of which goes inwards. A non-negligible volume of public funds is nevertheless reserved abroad, according to a logic of short-term financial return or long-term economic profitability (investments in sectors linked with the Saudi economy). Saudi Arabia is, in a way, taking the path opened up for years by a country like Kuwait. One may consider some of these flows as aid, in the case of an agricultural investment in Sudan for instance, although it expect a return on investment, bearing in mind that these funds might been withdrawn as fast as possible if an investment turns out to be risky. This kind of aid no longer goes through charities. It is run by government-linked companies or by the Saudi Public Investment Fund, which is said to have invested $ 22 billion abroad in 2022, mainly in neighboring countries[13] (chart 5), ten times the volume of Saudi ODA in 2021, meaning that Saudi outward flows stay at a very high level, but now differ in kind. They will result in the years to come in an influence Saudi Arabia never managed to gain through its aid. This trend is also an outcome of the changes in the Saudi economic statecraft, under the rule of gifted American educated experts, who now apply the receipts they have learnt.

Source: OECD.

In addition to funding projects, Saudi Arabia comes along delivering humanitarian aid and funds directed at supporting the balance of payments of countries that it views as politically important, starting with Yemen and Palestine in the first case, Egypt, Pakistan and Lebanon in the second. Egypt, Yemen, Pakistan, Palestine and Lebanon were the top beneficiaries of its aid from 1990 to 2019, according to KSRelief data, and Yemen, Egypt and Jordan were the top recipients in 2020, according to OECD figures (chart 6). Saudi Arabia has provided an average of 3.7% of global humanitarian aid over the past ten years (2014-2023), making it one of the top providers worldwide[14]. Saudi humanitarian aid has not weakened over this period, contrary to the overall reduction witnessed. The same goes to balances of payments aid, a large part of which goes into deposits to central banks. These are loans and not grants, the repayment of which is although very hypothetical, given the financial needs of the beneficiaries. What is new is that Saudi Arabia now ties its disbursements to compliance with IMF conditionality. Finance minister Mohammed al-Jadaan told the World Economic Forum of Davos in January, 2023, that Saudi Arabia would, in the future, attach conditions to its foreign aid, confirming a switch in the country’s foreign aid policy from just supporting its geopolitics, to tying aid to responsible economic policies and reforms, in the line of the IMF. “We used to give direct grants and deposits without strings attached, and we are working with multilateral institutions to actually say, we need to see reform,” Mr. Al-Jadaan said.

Source: OECD.

This allows Saudi Arabia to meet the standards set by the Development Assistance Committee (DAC) of the OECD, in which it has participated since 2018, even though not being a member. The DAC has been weakened in recent years by the surge of aid from China, which is not a member. Saudi Arabia gains respectability in OECD countries and better assurance that its balance of payments aid is repaid (the grant share of Saudi ODA amounted to 66.6% in 2021). The repayment rate to Saudi Arabia in past years is unknown, but it is probably low, given the lack of conditionality and the dire state of public finances of its main recipients.

Saudi Arabia’s new course regarding religious matters and its economic strategy are both leading to a reduction in its foreign aid. The mixed political results the latter has achieved over the past forty years point in the same direction, but Saudi’s diplomacy, although less demanding of funds than in the past, works opposite. The past years have been witnessing a weakening of the stake represented by the Saudi leadership among the countries of the Arab League and of the Organization of Islamic Cooperation, two bodies that have grown marginal. Saudi Arabia finds less need to buy allies than in the past, for lack of competitors among its constituency. The diplomatic winter Egypt witnesses since 2011 seems irreversible in the medium term. Iran’s expansionism is at the very least suspended for several years, due to the introversion brought about by its internal difficulties and the advanced state of collapse of its clients, Syria, Lebanon, Yemen and Iraq, where the pursuit of its investment turns out to be beyond his means. Saudi Arabia’s rapprochement with Iran lessens the need to counter its action inside these countries through financing its opponents. Saudi appeasement with Turkey and Qatar seems to be everlasting. The growing hiatus with the United States since the conclusion of the JCPOA with Iran in 2015 plays in the same direction. Since the US declined to retaliate after Iran’s drone attacks on Abqaiq in 2019, the Saudis have been gradually shifting away from the American umbrella, which induces a new sense of confidence contradicting their past views of foreign aid as an inner security vehicle. The empowerment of Saudi Arabia in response to the weakening of American involvement in the Middle East, makes it less attentive to the recurring demands of Westerners to support their policy with financial commitments, as witnessed in Lebanon where Saudi Arabia has withdrawn despite multiple French and American pressures. It tends to redirect inwards the sums allocated to its security, through developing its defense industry. Last but not least, Saudi Arabia’s growing transactional policy and strategic autonomy may lead it to diverge from Western interests, particularly in the area of ​​relations with China and Russia.

In conclusion, the reduction in Saudi aid in recent years appears to be structural[15]. Westerners used for years to consider Saudi Arabia as a cash cow on which to count to make up for shortcomings and support their action. That era is over. Those who used to criticize its foreign flows are now complaining that it went down. Saudi Arabia tends to limit its bilateral aid to a few recipients it views important from a security perspective, mainly Yemen, Egypt, Pakistan and Bahrain. In these very countries, Saudi aid moreover became conditional. In general, it is on a long-term decline in the countries where the Saudis feel they have no crucial interests to defend. It nowadays remains directed towards countries and sectors matching the political priorities of Westerners, but that might not stay for long. Saudi Arabia is no more a charity. Its foreign aid is normalizing, according to its per capita income and along with its overall economic and social policy, which durably lessens its outflows. No wonder that its domestic matters drive its foreign policy, including its foreign aid. Those who used to point at Saudi Arabia’s conservatism during the last decades might regret nowadays its generosity of that elapsed time, which is part of its normalization under the ongoing global standards. In this context, Syria, Lebanon, Palestine or Egypt will face low flows of Saudi funds in the years to come. This is part of the normalization of Saudi Arabia along the trends of globalization, not only in the economic field.

Source: OECD.

[1] See Makki Hamid, Why the World needs partnership with Saudi Arabia: Saudi Arabia’s Global Humanitarian and Development Aid, Riyadh, King Faysal Center for Research and Islamic Studies, Special Report, January 2022; Yi Li, “Saudi Arabia’s Economic Diplomacy through Foreign Aid: Dynamics, Objectives and Mode, Asian Journal of Middle East and Islamic Studies, March 2019, http://infadm.shisu.edu.cn/_upload/article/files/61/ e8/16239ad1480ebbbe998d0a5de742/c42ea408-3dd8-4dfa-a7a1-bfd3828eb51c.pdf

[2] Jonathan Benthall, The Rise and Decline of Saudi Overseas Humanitarian Charities, Georgetown University Qatar, 2018, 41 p.

[3] Speech by King Salman to the UN General Assembly, September 23, 2020, sum divided between $65.41 billion in bilateral aid, $2.71 billion in multilateral contributions and $18.32 billion allocated to refugees in Saudi Arabia https:// /data.ksrelief.org/?ContinentID=

[4] A. Al-Ahmari and J. Dakamseh (2016), ‘UN: Saudi Arabia Major Donor of Humanitarian Aid’, Asharq Al Awsat, http://english.aawsat.com/2016/06/article55353069/u-n-saudi-arabia-major-donor-humanitarian-aid

[5]  The figures that follow in this article come from the OECD, whose Development Assistance Committee (DCA) is the main source of statistics on official development assistance. Saudi Arabia has been providing data to the DCA since 2018 https://www.oecd-ilibrary.org/sites/b2156c99-en/index.html?itemId=/content/component/b2156c99-en

[6] The results of the 2022 census may be found in Arabic at https://portal.saudicensus.sa/portal; see also https://thebitterlake.blog/2023/06/02/how-many-saudis-are-there/

[7] Hakim El Karoui, A French Islam is possible, Paris, Institut Montaigne, September 2016, 133 p. The author completed this report in his book Islam, a French religion, Paris, Gallimard, 2018, 304 p.

[8]  Nabil Mouline, “Saudi Arabia: a new religious diplomacy?” Foreign Policy, January 2020, p. 43-55.

[9] For a detailed review of this matter, see Jonathan Benthall, The Rise…, op. cit.

[10] See Louis Blin, The Islamic World League: Muslim Revival? Paris, Maisonneuve and Larose / Hémispheres, 2022, 188 p.

[11] Khalid Al-Yahya and Nathalie Fustier. “Saudi Arabia as a Global Humanitarian Donor”, in Gulf Charities and Islamic Philanthropy in the “Age of Terror” and Beyond, edited by Robert Lacey and Jonathan Benthall, 169–198. Berlin: Gerlach, 2014.

[12] For a detailed overview of the Saudi donors, see Sherine El Taraboulsi-McCarthy, A Kingdom of Humanity? Saudi Arabia’s values, systems and interests in humanitarian action, HPG Working Paper, September 2017.

[13] According to Taylor Luck https://news.yahoo.com/saudi-first-why-kingdom-bailouts-154239413.html?guccounter=1

[14] $9.2 billion, according to the United Nations Office for the Coordination of Humanitarian Affairs: https://fts.unocha.org/global-funding/overview

[15] See Yasmine Farouk, « Saudi Arabia: Aid as a Primary Foreign Policy Tool », in Michele Dunne (ed.), As Gulf Donors Shift Priorities, Arab States Search for Aid, Carnegie Endowment for International Peace, June 09, 2020.