Taleb Says Saudi Arabia Is ‘Unstable’ Like Egypt

February 3, 2011



Saudi Arabia is ?perfectly unstable,? like Egypt, where 10-day protests are threatening the 30-year rule of President Hosni Mubarak, said Nassim Taleb, author of ?The Black Swan.?

Taleb, a principal at Universa Investments LP whose 2007 bestselling book argued that history is littered with rare events that can?t be predicted by trends, said today that countries such as Lebanon and Italy, which suffer recurring political crises, are safer for investors.

?A perfectly fragile country is a country, say like Egypt? before ?the recent events, where there is no variation and then ? puff ? you got a crisis and it?s mayhem,? Taleb, a New York University professor, told a conference in Moscow hosted by Troika Dialog. ?So Egypt is perfectly unstable, Saudi Arabia, countries like that.?

Supporters of Mubarak, who has been in power since 1981, clashed for the second day in Cairo?s Tahrir Square with demonstrators who have been demanding the 82-year-old leader?s resignation since Jan. 25.

The 86-year-old ruler of Saudi Arabia, King Abdullah, has backed the Egyptian government and condemned the protesters, while trying to address imbalances in the largest Arab economy.
The government announced in August a $385 billion, five-year spending plan as the kingdom tries to reduce a jobless rate of as high as 43 percent for Saudis between the ages of 20 and 24.

Pact with Clerics

Almost 40 percent of the 26 million-strong population in Saudi Arabia, the world?s largest oil exporter, is under 15. The country is ruled by the Al Saud family, which relies on support from the Sunni Muslim clerical establishment under a 1744 pact.

?There is pressure in Saudi Arabia and it is certainly building up, but the question is whether it will ever be a critical mass who will go out on the street and do something about it,? said Christopher Davidson, a member of the Middle East politics faculty at Durham University in the U.K.

?There are opponents in the Gulf states, but not this critical mass we?ve seen elsewhere in the Arab world,? he said.

?But when the rest of the Arab world changes, as hopefully it will, these opponents will perhaps become emboldened.?

The political turmoil that engulfed the Middle East, sparked by last month?s ouster of Tunisian leader Zine El Abidine Ben Ali, is continuing to spread, with protests now in Yemen. With high youth populations, countries in the region suffer from unemployment and dissatisfaction with corruption and long-entrenched leaders.

The cost of insuring Saudi Arabia?s sovereign debt has soared 56 percent since Jan. 27 to 117.4 basis points, according to CMA prices for credit-default swaps.