Saudi Arabia stock market drops 6.78 pct, minority cleric arrested

Saudi Arabia's stock market plunged 6.78 percent on Tuesday. For 2011, it is down more than 16 percent.

Although there haven't been any massive and violent protests against the government in Saudi Arabia, investors still fear the possibility of such an outburst.

Indeed, unrest has seemingly swept across the entire Arab world. Previously, some thought the richer Arab countries would escape it. However, after Bahrain and Oman were ensnared in the turmoil, that assumption is no longer valid.

One reason is that politically, these countries are dictatorships; Saudi Arabia and Oman, for example, are some of the few remaining absolute monarchies in the world.

On Tuesday, fears of unrest intensified in Saudi Arabia because authorities arrested a prominent Shiite cleric who called for political reforms and an end to discrimination in a sermon.

The Shiites are a religious minority in Saudi Arabia who have complained about discrimination in the past, so the fear is that this allegedly oppressed minority may rebel against the government.

As seen in Bahrain (which actually has more political freedom compared to Saudi Arabia), conflict between the ruling Sunnis and the subject Shiites can turn violent. (Ironically, in Bahrain, the downtrodden Shiites actually form an overwhelming majority of the population).

Nevertheless, the monarchy of Saudi Arabia have two things going for it.

One, it's able and willing to pacify unrest with generous economic handouts to the people. f economic discontent is addressed, it's less likely that a purely political protest (one not fueled by poverty, unemployment, and starvation) would gain much traction.

Two, Saudi Arabia is a close ally of United States and a key supply of oil to the superpower. Therefore, the US has a vested interest in ensuring stability in the country and in keeping the pro-US King Abdullah bin Abdul-Aziz in power.

Indeed, if the regime actually changes and oil production is interrupted in Saudi Arabia, the world's largest oil exporter, oil prices could easily soar to astronomical heights and cripple the global economy.

Email Hao Li at hao.li@ibtimes.com

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