A view shows the construction of the King Abdullah Financial District in Riyadh, Saudi Arabia. (Faisal Al Nasser/Reuters)

Persistently low oil prices appear to be taking a heavy toll on Saudi Arabia, spurring rare labor unrest as the kingdom’s rulers pursue radical changes to stabilize the economy.

Companies in the oil-exporting country have been forced to shed tens of thousands of employees in recent months. The government, in turn, has imposed painful austerity measures on citizens, ripening conditions for Arab Spring-like turbulence, analysts say.

Late last month, construction workers torched buses during demonstrations in the holy city of Mecca because they had not been paid in months.

Adding to unease has been the meteoric rise of King Salman’s 30-year-old son, Mohammed bin Salman. He has taken charge of economic reform, but rival royals and religious elites appear rankled by his attempts to consolidate power.

“The conditions that produced the Arab Spring five years ago haven’t gone away, and they seem to be even more of a concern in Saudi now,” said Bruce Riedel, a former foreign policy adviser to President Obama and a senior analyst at the Brookings Institution. Saudi Arabia — with its generous oil-financed welfare system — managed to avoid significant unrest while the 2011 uprisings took hold in Egypt, Libya and Syria.

A crew works at the construction site of the King Abdullah Financial District in Riyadh, Saudi Arabia, on May 12. (Faisal Al Nasser/Reuters)
Good times, bad times

Saudi Arabia, a U.S. ally and the world’s biggest oil exporter, is still a wealthy country and has bounced back from times of low oil prices before. But even as crude has risen recently to nearly $50 a barrel from around $30 earlier this year, analysts do not foresee a return anywhere close to the sky-high prices of two years ago.

Rising international energy competition is partly to blame for the price collapse. So, too, is the Saudi policy of trying to bankrupt competitors in other countries by keeping oil production relatively high.

Still, Saudi officials appear to recognize the pressing need to reduce the country’s overwhelming reliance on oil sales, which account for an estimated 80 percent or more of government revenue. Last month, Prince Mohammed, the deputy crown prince and defense minister, announced a major economic restructuring dubbed Vision 2030. The plan intends to bring transparency to opaque government institutions and substantially boost income from non-oil-related industries.

The plan includes the partial privatization of the state oil company, Saudi Aramco, and envisions extensive job creation. Unemployment has become especially problematic for Saudis younger than 30, the majority of the kingdom’s 22 million citizens.

Economic growth has tapered off recently and budget deficits have grown, spurring the International Monetary Fund to warn last year that Saudi Arabia could run out of cash if it failed to make reforms.

Authorities have responded to the crisis by cutting subsidies for water, fuel and electricity, but financial experts say more is needed — possibly taxation, a hot-button issue for Saudis.

Some Saudis may be ready to accept the changes.

“They have to be gradual and accepted, but people understand that they are needed,” said Abdulaziz Sager, chairman of the Gulf Research Center, who lives in the coastal city of Jiddah.

But many doubt whether the necessary changes can be introduced fast enough in such a conservative society that is run by an absolute monarchy with little apparent desire for political reform.

A costly war in Yemen

Simon Henderson, an expert on Saudi Arabia at the Washington Institute for Near East Policy, said the powerful religious establishment has not responded to the Prince Mohammed plan, which suggests they disapprove of it.

“There’s nothing in the recent changes that would be a cause for joy among the religious establishment,” Henderson said.

Prince Mohammed, who also serves as the country’s defense chief, has unsettled many Saudis, including royals, by launching an expensive war in Yemen and aggressively confronting rival Iran throughout the region.

This month, King Salman reshuffled the government in yet another move interpreted as further paving the way for his son to eventually ascend the throne.

A more immediate issue appears to be an economy no longer flush with as much cash. This appears to be what led to demonstrations last month by employees of the Binladin Group who had been laid off without receiving pay. Video images of the protests show buses burning as sirens blare in the background.

The company, a construction giant run by Osama bin Laden’s brother, has let go of tens of thousands of mostly non-Saudi workers in recent months. The company has amassed an estimated $30 billion in debt, in part because the government, a major client, has not settled bills.

Saudi authorities had banned the company from bidding on new contracts after an accident last year at one of its construction sites in Mecca that killed 111 people.

A lack of business

But the primary issue facing the Binladin Group and other companies appears to be a lack of business and getting the government to pay up for work rendered, said Christopher Davidson, an expert on Persian Gulf countries at Durham University in Britain.

“This is a bigger issue that goes beyond the crane incident, because it’s not in Saudis’ interest to let its biggest construction company fail,” he said.

So far, most of those laid off have been foreigners, who form a large chunk of the labor force. But Davidson said he expects that companies will start letting large numbers of Saudi employees go, which would increase the chances for unrest.

“It’s the older generation — the retired Saudis who used to run things — who have questions about the pace of all this.”