Saudi royal family is still spending in an age of austerity

Behind a tall perimeter wall, studded with surveillance cameras and guarded by Moroccan soldiers, a sprawling new palace for King Salman of Saudi Arabia rose on the Atlantic coast here last summer.

Even as the Saudi government canceled a quarter of a trillion dollars’ worth of projects back home as part of a fiscal austerity program, workers hustled to finish bright blue landing pads for helicopters at the vacation compound and to erect a tent the size of a circus big-top where the king could feast and entertain his enormous retinue.

The royal family’s fortune derives from the reserves of petroleum discovered during the reign of Salman’s father, King Abdulaziz ibn Saud, more than 75 years ago. The sale of oil provides billions of dollars in annual allowances, public-sector sinecures and perks for royals, the wealthiest of whom own French chateaus and Saudi palaces, stash money in Swiss bank accounts, wear couture dresses under their abayas and frolic on some of the world’s biggest yachts out of sight of commoners.

King Salman serves as chairman of the family business unofficially known as “Al Saud Inc.” Sustained low oil prices have strained the economy and forced questions about whether the family — with thousands of members and still growing — can simultaneously maintain its lavish lifestyle and its unchallenged grip on the country.

“The people have less money than before, but the royal family have the same,” said Prince Khalid bin Farhan al-Saud, a dissident member of the extended family living in Germany. “There is a lot of state money which is concealed from the budget, which is determined by the king alone.”

These are anxious times for the royals, led by an 80-year-old who has already had at least one stroke and is likely to be the last of six sons of the founding monarch to serve as sovereign. He must wrangle a band of relatives, from the merely well-off to billionaires, who are accustomed from birth to privilege and plenty.

In his two-year reign, King Salman has upended the traditions of succession, creating rifts after bypassing several brothers to position the next generation — a nephew and a favorite son — in line for the throne. He has ousted prominent members of other branches of the family from governorships and top ministry jobs, consolidating power but sowing some discontent in a family that demands unity.

While there are serious problems beyond the borders — a costly war in Yemen, violence in Iraq and Syria, an emboldened Iran — it is the country’s economic troubles that risk roiling ordinary citizens, if their own cradle-to-grave benefits are cut too much. Many royals are wary of any disclosures about their wealth that could provoke public criticism.

Revenues from the national oil company, Saudi Aramco, have long been the lifeblood of government spending. Some in the family have resisted a proposal by the king’s son Deputy Crown Prince Mohammed bin Salman to partly privatize it, since listing it on stock exchanges in New York or London would bring new audits of Aramco and possibly more insights into government funding, and in turn, money for the royals.

That concern has led some senior family members to quietly explore alternatives to the privatization plan, though Saudi officials said it remains on track.

Facing huge budget gaps, the government has cut public-sector pay along with subsidies, sending gasoline, electricity and even water bills higher. The kingdom has begun borrowing by the billions both at home and abroad. And hiring by the government — a large and sought after employer for Saudis — has been cut, instilling fear for the future in younger people who cannot find work.

Royals are sharing the pain, according to Anas al-Qusayer, the spokesman for the Ministry of Culture and Information, who said that their allowances had been reduced. At least some royals, though, have seen no decline in their stipends, according to several Saudis close to the family.

“Under Salman, princes again appear to enjoy a lot more material privileges, and the core allowance system has not been changed,” said Steffen Hertog, an associate professor at the London School of Economics who wrote a book on the political economy of Saudi Arabia, “Princes, Brokers and Bureaucrats.”

Some Saudi royals are still spending big. Dania Sinno, a real estate agent with Belles Demeures de France, said that multiple family members had been buying property in Paris in the last year. She recently sold a nearly 11,000-square-foot apartment on the exclusive Rue Octave-Feuillet for more than $30 million to a Saudi princess.

King Salman already had significant holdings in France. Property records there show that he owns a dozen apartments in the affluent 16th Arrondissement of Paris, worth an estimated $35 million. He also maintains a luxury chateau on the Côte d’Azur in France and a palace in Marbella on Spain’s Costa del Sol.

The king, of course, does not lack for options at home, with a network of marble-columned palaces and countryside retreats stretching from the Red Sea to the Persian Gulf. But the Tangier compound appears to be his current favorite getaway.

During his visit this summer, some hundred black Mercedes sedans and Range Rovers were waiting to chauffeur the royal party around town. The palace complex includes its own medical facilities and top-flight restaurant kitchens that turn out dishes with lobster, caviar and truffles flown in from France.

Many staff members had to leave their phones at the gate so photos did not leak out. But a Twitter gadfly working under the pseudonym Mujtahidd, who has successfully predicted some major royal news in the past, broadcast to his 1.7 million followers details about the construction, luxury cars and five-star hotels for the entourage. Mr. Qusayer, the spokesman, said in a written statement that the costs were covered from the king’s personal account, not by the government.

Some on the household staff, who did not want to be identified so they could continue working for the Saud family, said they received an unusual gratuity when they handed in their ID badges: a free trip for a pilgrimage to Mecca.

A Kingdom of Oil

From the beginning, the social contract between commoners and royals constituted a trade-off: a share of the country’s wealth in exchange for absolute rule by the Saud monarchs. A Life magazine correspondent visiting in 1943 described how, as King Abdulaziz waited on a roadside while a flat tire was fixed on his Packard, he gave a shepherd passing on camelback several gold pieces. In Riyadh, the king supported a soup kitchen for the poor, the correspondent wrote, with “an oven large enough for a camel.”

Salman bin Abdulaziz was born in 1935, just three years after his father proclaimed the new Kingdom of Saudi Arabia. The power and legitimacy of the new state rested on the twin pillars of the royal family and their allies in the ultraconservative Wahhabi religious leadership. Oil, discovered in the country’s east in 1938, provided a growing source of funding for both.

As a young prince, Salman recalled when the family still lived in tents part of the year, as he has recounted to Secretary of State John Kerry. He could not have assumed as a boy that he would someday rule his father’s dominion. King Abdulaziz entered into numerous marriages — with 17 known wives, producing at least 36 sons — to cement alliances with the many Arabian tribes.

Salman, believed to be the 25th son, had one advantage in this sprawling, competitive family, where royal succession does not always follow a straight line. His mother, Hassa al-Sudairi, was a favorite wife of the king, and Salman was one of seven full brothers, a powerful bloc known as the Sudairi Seven.

In contrast to the traditional robes and headdresses King Salman wears in public today, an early photo shows a dapper young man in a well-cut Western suit. In nearly half a century as governor of Riyadh, he presided over the explosion of a modest desert way station into a metropolis with millions of inhabitants, along with skyscrapers, multilane highways and palaces for the newly rich royals.

The global shock of the oil embargo in 1973 sent prices soaring and petrodollars flooding into the country. Despite imposing rigid adherence to a strict version of Islam on their subjects, some Saudi princes became fixtures at high-rolling pleasure capitals like Monte Carlo.

Through dozens of interviews with diplomats and money managers, economists, real-estate and travel agents, interior decorators and members of the House of Saud and by reviewing court records and real-estate documents, The New York Times has pieced together details of the family’s spending.

The scale of the clan’s fortune is a closely guarded secret. The money is divided among many relatives and spread across several continents, making a precise accounting difficult. The funding mechanisms are opaque by design. The share of the Saudi budget that ultimately makes its way into royal coffers is not disclosed. Even people who closely follow the Saudi royal family said they could not estimate its total assets.

While chinks in the wall of secrecy appear through legal cases and tabloid reports overseas, the royals have learned not to flaunt their wealth before the nation’s 30 million commoners. The family members have erected high walls around their palaces, bought overseas assets with shell companies, used intermediaries for large investments and demanded nondisclosure agreements from employees.

The so-called Panama Papers released in April revealed that King Salman was involved in offshore companies in Luxembourg and the British Virgin Islands. The records linked him to a yacht and multimillion-dollar properties in London — one a majestic home with a balustraded balcony near Hyde Park in the tony Mayfair district.

Saudi Arabia is not nearly as affluent on a per-capita basis as Qatar or Kuwait, which are also rich from oil and gas but support far fewer people than their large neighbor. (Both also have been hit hard by the low oil prices.) Despite a robust social safety net — including free education and health care — there are poor Saudis, and many in the middle class barely make ends meet.

Princes and princesses can take advantage of privileges like special hospital wings decorated like palaces with five-star hotel service, and royal airport terminals with enormous chandeliers, intricate tilework and rich carpets. But even among royals, there are big differences between direct heirs to the kings and cousins on the fringes. Some younger princes live in large, but not palatial, modernist homes outside Riyadh that would not be out of place in upscale California neighborhoods. They drive Range Rovers and boxy Mercedes S.U.V.s rather than the Lamborghini or Bugatti supercars their better-off cousins race around the Knightsbridge section of London.

And their ranks continue to swell. The founding king’s many children had many of their own — King Saud, the second king, alone had an estimated 53 sons. “Only a stadium suffices to hold the ever-expanding Al Saud clan,” an American diplomat wrote in a memorandum in 2009.

The relatives number in the thousands, but from there, estimates diverge, said Joseph A. Kechichian, who has studied the family for three decades and wrote a book, “Succession in Saudi Arabia.” He estimates that there are now 12,000 to 15,000 princes and about as many princesses. Princess Basmah bint Saud, a daughter of King Saud, five years ago put the number of royals at 15,000.

But the Saudi ministry spokesman, Mr. Qusayer, said there were no more than 5,000 members of the House of Saud. The difference may stem in part from whether or how one counts distant relatives and families who ruled back before the time of King Abdulaziz, the current king’s father.

At some point, the family could grow too large to support. “There has to be some decision about lopping off some of the branches,” said F. Gregory Gause III, a Middle East specialist at the Texas A&M University Bush School of Government and Public Service.

Dipping Into the Till

Members of the royal family rely on allowances, government jobs and positions in business, aided by the status and connections conferred by nobility. Exactly how benefits are parceled out beyond seniority and service is unknown, said Mr. Kechichian, who is a senior fellow at the King Faisal Center for Research and Islamic Studies in Riyadh.

“What we do know is that the monarch has, for lack of a better term, let’s say petty cash to distribute to various members of the family for their projects, for their businesses, for their life,” he said in an interview.

Perhaps the deepest look inside the royal family’s finances came when an official at the United States Embassy in Riyadh was granted unprecedented access to the Ministry of Finance Office of Decisions and Rules in 1996. The office, the American noted, was “bustling with servants picking up cash for their masters.”

The stipends then ranged from up to $270,000 a month for a son of the founding king to $8,000 a month for his great-great-grandchildren, the official reported. Bonuses of $1 million to $3 million were given to some royals as wedding gifts for palace construction. The official estimated in a memorandum, released with other documents by WikiLeaks five years ago, that the allowances, which included payments to other prominent families around the kingdom, accounted for roughly $2 billion of the government’s total $40 billion budget, or 5 percent of all public spending.

The Saudi spokesman, Mr. Qusayer, said that the current total for annual allowances did not exceed 10 billion riyals, or $2.7 billion. The largest share, he added, went to tribal and provincial leaders, not royals.

“Those who are familiar with the Saudi social hierarchy know very well that the thousands of tribes’ leaders and provinces’ notables spend directly and indirectly most of their allowances on hundreds of thousands of people they are responsible for,” he wrote.

The United States memo cited Prince Alwaleed bin Talal, the billionaire investor, as having told the American ambassador that revenue from one million barrels of oil per day went into off-budget programs under the control of the king and several top princes.

An adviser to several members of the family and a former senior American government official said that the off-budget programs still existed; it is unclear in what amounts. Both spoke only on the condition of anonymity, for fear of alienating the Saudi government. Mr. Qusayer said that “whatever is generated from Aramco is directed to the state’s public treasury.”

The line between family and state assets can be blurry. United States officials have described in multiple memorandums significant land transfers to sons and grandsons of the king, and even outright grabs, such as one prince who simply had the fence line around his property slowly expand outward to encompass another 30 square miles.

Prince Bandar bin Sultan, a longtime ambassador to the United States, and Prince Abdulaziz bin Fahd, a favored son of the late King Fahd, made hundreds of millions of dollars selling the land for a centrally planned megacity north of Jidda that is still under construction, according to an American diplomat in a 2007 memorandum. In an interview with PBS in 2001, Prince Bandar famously defended corruption in the kingdom.

“If you tell me that building this whole country, and spending $350 billion out of $400 billion, that we had misused or got corrupted with $50 billion, I’ll tell you, ‘Yes,’” he said. “But I’ll take that anytime.”

Many royals have succeeded in business by acting as the exclusive agents for foreign companies in the kingdom. Others are involved in enterprises that depend on government spending doled out by relatives or that thrive on heavy state subsidies.

“As long as the royal family views this country as ‘Al Saud Inc.,’ ever increasing numbers of princes and princesses will see it as their birthright to receive lavish dividend payments, and dip into the till from time to time, by sheer virtue of company ownership,” the American embassy official concluded.

As the size of the family and the general population have grown, some observers say, the balance of rewards has become harder to maintain.

“At the top level, they know that they have to leave something for the rest of the country; otherwise they’ll be out on their ear,” Jean-François Seznec, senior fellow at the Global Energy Center at the Atlantic Council, said of the royal family. “If you ask the population to make sacrifices in order for the state to get money, you can’t have one part of the society take advantage.”

A ‘Red Line’

When Salman’s half brother King Abdullah ascended to the throne in 2005, he tried to rein in some family excesses. Thousands of princes and princesses had free cellphones disconnected. Unlimited flights on the national airline, Saudia, were cut back so that large entourages no longer traveled gratis and blocks of tickets were no longer resold for profit.

Suites at hotels in Jidda, paid year-round by the government, were relinquished. King Abdullah also tried to reduce the practice of land-grabbing and the abuse of the visa system for guest workers. Some princes received block grants of visas and profited from selling them to the workers cooking, cleaning and building across the kingdom.

Among those who opposed King Abdullah in paring back privileges and entitlements, according to diplomatic cables, were Prince Salman and his brother Prince Nayef. The princes’ older full brother, Crown Prince Sultan, told them that challenging the king was a “red line.” If the family did not stick together, he warned, it would mean trouble for all of them.

Senior members of the House of Saud are keenly aware that they lost their previous kingdom in the 19th century because of family infighting. King Saud was deposed in 1964 and replaced by his brother King Faisal, who, in turn, was assassinated by a nephew.

As governor of Riyadh, Salman helped oversee the family, even maintaining a jail for young princes who ran amok. “When there was a problem in the family, misbehavior by one of the sons, the person invariably called upon to conciliate and solve the problem was Salman,” said the former United States ambassador Chas W. Freeman Jr., who knew him in Riyadh.

Salman’s sons included successful businessmen, government officials and even the first Muslim astronaut, who flew on the American space shuttle Discovery. One son, Prince Ahmed bin Salman, owned the thoroughbred War Emblem, a Kentucky Derby winner. He was also chairman of a major media company, Saudi Research and Marketing Group, which is used to protect the image of the royal family.

Tales of excess abroad, such as the princess who skipped out on $20 million in Paris shopping bills in 2009, typically would not reach the king’s subjects back in the Arabian Peninsula because the Saudi news media is strictly controlled by the family. Critical voices have been jailed or silenced.

When upheaval occurred in countries all around Saudi Arabia during the Arab Spring, King Abdullah’s response was to spend $130 billion on salaries and social programs — a version of his father’s gold coins on a grand scale.

Salman, who succeeded Abdullah in January 2015, bestowed an estimated $32 billion on his subjects, including bonuses of two months’ salary to government employees. Oil prices had begun their precipitous decline, but it was not yet clear how far they would fall.

The Next Generation

Three months later, the king promoted his nephew Prince Mohammed bin Nayef, now 57, as the first crown prince among the founding king’s grandsons, and his own son, Prince Mohammed bin Salman, now 31, as next in line. The king surprised his court by giving his son broad power, naming him defense minister, head of the economic council and ultimately responsible for Aramco. He also removed several sons of former kings from important positions.

“You have resentment in other branches of the family at their sudden disempowerment,” said Mr. Freeman, the former ambassador.

Last year, an anonymous letter by a nephew of the monarch was published online, calling on his uncles to remove their brother, King Salman. In a second letter a couple of weeks later, the prince claimed that $100 billion had been given to the new king’s sons, while the proceeds of two million barrels of oil a day were in the deputy crown prince’s hands.

Mr. Qusayer, the Saudi spokesman, said that information was wrong. He said that the prince’s “words were manipulated” and that a dissident in London had written the letter.

The Saud clan remains quietly at odds over how to proceed, with doubts about Prince Mohammed’s economic reform plans and his stewardship of the war in Yemen.

“The family always wants to be unified, so even if they are unhappy, they are trying to stay unified,” said a senior prince who is the son of a former king, speaking on the condition of anonymity for fear of repercussions from others in the family.

Indeed, criticizing the monarchy carries risks. Three princes who were living abroad and had spoken out against Saudi policy have disappeared from view since King Salman came to power. They are believed to be back in Saudi Arabia, where they cannot voice their disagreements. (The Saudi spokesman said they were not in jail or under house arrest.)

In October, the government announced that a low-ranking prince had been executed for murder. That was interpreted by some as a sign to commoners that no one was above the law; others described it as a signal to royals that they would not be protected from the consequences of their actions.

While members of the family have been investing overseas for decades, the pace of buying homes abroad has quickened in the last two years, according to Ardavan Amir-Aslani, a business lawyer who has advised Saudi princes on real estate acquisitions in France. “In the event the situation becomes dire for them, they want to have an option, and a place to go to live, a place to have assets,” he said.

“They’re not only securing their capital,” he added, “but also their future lives.”

After Ramadan ended in July, many royals traveled to the Mediterranean. Prince Abdulaziz, the son of the late King Fahd, rode a Jet Ski this past summer off the Spanish island of Formentera within sight of his nearly 500-foot yacht.

Nicole Pollard Bayme, the founder and chief executive of the LalaLuxe fashion styling firm in Los Angeles, said her Saudi royal clients last summer bought Hermès Himalayan Birkin bags made of crocodile skin with diamond and gold hardware and couture gowns for hundreds of thousands of dollars. The Saudi economy “is in some kind of a crisis, but they are still spending,” she said.

Prince Khalid, the exiled prince in Germany, said it would be difficult for the deputy crown prince, who has led the austerity drive, to squeeze his most important constituency if he wishes to reach the throne. “He won’t be king without the support of the royal family,” he said.

Predictions that divisions within the House of Saud could jeopardize its grip on power have come and gone for decades. Despite his advancing age, King Salman emerged this month for a tour of the Persian Gulf states, a reminder of who is in charge.

“This family has been figuring these things out amongst themselves for 30 years,” said Ford M. Fraker, a former United States ambassador to Saudi Arabia and now president of the Middle East Policy Council.

“Swim together or sink together,” he said, “is ingrained in their DNA.”

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