Saudi Arabia has experienced an unusual level of change over the past 24 months. The highly ambitious Deputy Crown Prince Mohammed bin Salman has launched his “Vision 2030” program in an attempt to reform the Kingdom’s ailing economy in the wake of tumbling oil prices and declining state revenues, while the Kingdom has found itself entrenched in a bitter war along its southern flank. In a land where the wisdom of age is prized over other virtues, can the ambitious young prince stabilize a nation facing multiple threats?

Saudi Arabia is facing a $87bn budget deficit for 2016, and its military campaign against a Zaidi-Shi’a Houthi rebellion in neighboring Yemen has proven far more costly than initially anticipated. The Saudi-led excursion was launched in 2015 in what appeared to be a display of the Kingdom’s muscular new approach to foreign policy under bin Salman, and as an attempt to counter the growing threat of Iranian influence that would eventually lead to the strategic encirclement of Saudi Arabia. After almost two years of fighting, progress in the war has stalled dramatically and the Iranian-backed Houthi rebels have maintained a significant level of operational success, regularly firing long-range missiles into central Saudi Arabia and retaining control over much of the strategic western Yemeni coastline. The conflict is likely to drag on for the foreseeable future, with Saudi Arabia unlikely to risk the credibility damage that would accompany an early withdrawal from the conflict, although a sustained ceasefire following the strategic exhaustion of the war’s participants may lead to a partition deal to divide the country in late 2017 or early 2018.

The crown succession plan within the House of Saud will likely remain under scrutiny throughout the coming year, with King Salman turning 81 on new year’s eve of 2016. The 31-year old Deputy Crown Prince Mohammed bin Salman has monopolized the political limelight in the Kingdom throughout 2016, while Crown Prince Mohammed bin Nayef (the direct successor) has maintained a low profile; reportedly on a prolonged vacation in Algeria. Despite this absence, bin Nayef made a surprising return to the political scene late this year in moves that many have suggested may be an announcement of his official return to succession maneuvering. Bin Nayef appeared as Saudi Arabia’s representative at the United Nations General Assembly in September, before traveling to Turkey later that month for negotiations on Syria and Iran with President Erdogan. It is now increasingly likely that bin Nayef will make further moves in this coming year to regain his position in the succession plan, with probable appearances at further state and diplomatic functions.

Despite this apparent blow to his ascension prospects, bin Salman remains an interesting figure and is likely to press on with his ambitious economic reforms with the support of King Salman. Mohammed al-Jadaan, a key ally of bin Salman, was appointed as the Kingdom’s new finance minister in late 2016, and the implementation of a 5% VAT is due for early 2018, indicating that next year will continue to see public sector and government spending reform.

The key challenge now for Riyadh will be balancing a pressing need for economic reform with the triplicate threats of an emboldened expansionist Iran, growing Sunni extremism and continuing Shi’a unrest.

Given the uncertainty that remains around the succession plan, and the opacity of the inner workings of the House of Saud, it is probable that diplomatic efforts to build relations with both succession contenders by foreign powers will continue through 2017. Foreign state visits should be watched keenly for diplomatic overtures to both bin Salman and bin Nayef, although it is unlikely that a favored candidate will be observable until succession looms as a more urgent issue.

Saudi Arabia’s wide-spanning rivalry with Iran is likely to continue to intensify in the coming year, with no end in sight in both the proxy-conflict in Yemen and startling influence gains by Iranian advisory forces in the Levant. Diplomatic relations between the two states were cut off early this year following the execution of a prominent Shi’a cleric in Saudi’s restive Eastern Province, and in December Saudi Arabia sentenced fifteen Shi’a Muslim citizens to death, and fifteen others to lengthy prison sentences, on charges of spying for Iran.

Domestically, the Kingdom will continue to experience growing unrest throughout the coming year. The disenfranchised Shi’a population of Saudi Arabia’s oil-rich and investment-poor Eastern Province will continue to resist the rule of the Sunni government of Riyadh, and sporadic acts of violence against Saudi security forces can be expected to continue in areas such as Qatif. Iran may seek to leverage this unrest by providing material or financial support to Shi’a opposition groups in the region should the rivalry with Saudi Arabia escalate.

In addition to Shi’a unrest, Sunni-Islamist violence has risen throughout the past 24 months across all provinces of Saudi Arabia, and is likely to continue on this trend through 2017, especially given the declining battlefield fortunes of the Islamic State in the Levant and the subsequent return to the Kingdom of many of the estimated 2,500 Saudi fighters fighting there. The reduction of government subsidies and social welfare programs as part of “Vision 2030” will also be an opportunity for the Wahabi clerical apparatus of Saudi Arabia to expand in influence, which in turn may lend itself to increasing radicalization and recruitment for extremist groups. Should the government press on with unpopular-but-necessary economic reforms, such extremist groups could easily seize the opportunity to further target the wealthy and much-criticized al Saud regime, leading to further destabilization risks.

The key challenge now for Riyadh will be balancing a pressing need for economic reform with the triplicate threats of an emboldened expansionist Iran, growing Sunni extremism and continuing Shi’a unrest. Given the Kingdom’s track record of leveraging its vast wealth to buy off such threats with cash subsidies, ambitious defense spending and generous state employment programs, the House of Saud will be forced to find more cost-efficient means of creating stability in these financially-tight times.

Given such uncertainty, the tradition-focused Kingdom must now choose between a continuation of the old guard through bin Nayef, or a radical new course through the young and unproven bin Salman. In a region where age is a major factor influencing respect, the young Prince will be hard-pressed to prove his capability to a regime that has grown accustomed to elderly leadership.

Lewis Tallon is a former British Army Intelligence Officer with several years experience working and living in the Middle East and North Africa region in geopolitical, armed conflict risk and threat intelligence roles. Lewis currently provides MENA-region geopolitical intelligence support to a leading U.S. investment bank.