The deteriorating health of King Abdullah is casting a shadow over Saudi Arabia, where a growing dispute over succession is dividing the House of Saud and threatening to paralyze Riyadh at a time of mounting internal and external crises.

With 91-year-old Abdullah’s hospitalization with pneumonia Jan. 2, all eyes in Saudi Arabia immediately turned to Crown Prince Salman bin Abdulaziz, the defense minister and the king’s 79-year-old half-brother. [Editor's note: A previous version of this story misstated Prince Salman's position.]

Yet due to Salman’s own deteriorating health – those close to the palace say the crown prince is suffering from the early stages of dementia – a campaign is growing within Riyadh to bypass Salman and give the throne to Deputy Crown Prince Muqrin bin Abdulaziz, 69, another of the king’s half brothers, should Abdullah be deemed unfit to rule.

Both the crown prince and the deputy are seen as identical ideologically, and it is expected that their respected reigns would be short, as “place holders” for the next generation.

“Practically everyone in the state is in unanimous agreement that we will be going forward with either Prince Salman or Prince Muqrin on the throne in the future,” says a Saudi diplomat in Amman, who preferred to remain unnamed due to the sensitivity of the issue.

While there is a broad consensus in Riyadh over who should inherit the throne immediately after Abdullah, Saudi insiders and observers say the true intrigue and power struggle is emerging over the appointment of the next crown prince – and with it, the future of the Saudi monarchy.

The prospect of any period of instability is prompting concerns Saudi Arabia would be increasingly vulnerable to challenges from its regional rival, Iran, and from the region-wide conflict with the self-described Islamic State (IS), in which the US-allied monarchy plays a pivotal role. Internally, too, advocates for social change in Saudi Arabia fear instability would create a reflexively conservative political environment that would be inhospitable to their demands.

Game of Throne

As Salman and Muqrin represent some of the last eligible surviving sons of Abdulaziz, the founder of the modern Saudi monarchy who is also known as Ibn Saud, the position of crown prince in either’s reigns would likely go to the next generation of Ibn Saud descendents – a rare historical transition that has become the source of intense infighting.

“While the succession immediately after Abdullah is all but secure, the real intriguing and challenging question is who comes after that?” says Salman Shaikh, director of the Brookings Doha Center. “The next crown prince will be a passing of the torch to the next generation – to whom and how that torch is passed is the real controversy.”

Officially the process of choosing a monarch and a crown prince is in the hands of the so-called Allegiance Commission, a byzantine council of 35 princes formed by Abdullah in 2007 and empowered to act should the sitting monarch become incapacitated. Complicating matters is the fact that Abdullah himself has twice circumvented the commission in making appointments – the current crown prince and deputy – and the body has yet to exercise its authority.

Should both King Abdullah and Crown Prince Salman prove unfit to rule – a very real scenario ­– the council is authorized to temporarily assume control of the country and name both a new monarch and successor within seven days.

It is unsure how the council would vote. The body, headed by Prince Mishaal bin Abdulaziz, who himself is not in the line of succession, requires a three-fourths majority to approve any selection. Its membership is evenly distributed among Abdulaziz’s descendants in order to prevent one line from dominating the succession to the throne.

The next generation

Amid the dozens of Abdulaziz grandsons, Prince Mutaib bin Abdullah, Abdullah’s son, has emerged as the leading contender to become next-in-line to succession.

Currently serving as minister of the national guard, a position Abdullah specifically created for him in 2013, Mutaib has been playing an increasing role in public life as his father’s health deteriorated over the past year, standing in for his father in official functions and headlining several foreign delegations to neighboring Arab states and the West.

Saudi insiders say ascension by the 61-year-old Mutaib, steeped in his father’s more moderate social and political policies and with a 30-year military background, would provide the stability and continuity that the Saud family so often craves.

Yet Prince Mutaib is not alone in his candidacy. Prince Mohammed bin Nayyef, 59, has seen his stock rise since his appointment as defense minister in 2012. Having cultivated strong ties with officials in neighboring Gulf states and Washington, Prince Mohammed is seen by many as the “heir apparent” to assume the throne after Salman and Muqrin.

Saudi observers say Mohammed’s high-profile visit last December to Washington, where he met with CIA chief John Brennan, National Security Adviser Susan Rice, and Secretary of State John Kerry, further raised his stature within and outside Saudi Arabia. The trip was seen as an “official seal of approval” from the US, some insiders say.

Many of Prince Mohammed’s supporters within the Saudi royal family are in fact Mutaib detractors who accuse Abdullah of attempting to build a dynastic succession of his own descendents in direct violation of the Saudi Basic Law of Governance. The law limits the throne to “the sons of Abdulaziz and their sons,” with succession passing to the next eldest sibling in a generation. Opposition to Mutaib centers on his not being the oldest of his generation.

“Right now there are two camps within the royal family,” says another Saudi diplomat who declined to be named. “You are either for Prince Mutaib or Prince Mohammed. There is no middle ground.”

According to Simon Henderson, Arab Gulf specialist at the Washington Institute for Near East Policy (WINEP), the Allegiance Commission may yield yet a third, dark horse candidate for crown prince: Prince Ahmed bin Abdulaziz, the country’s former interior minister, who some believe was overlooked by Abdullah in his appointment of Salman as crown prince and should be the true heir to the throne.

Abdullah's red lines

No matter who and how the council selects, observers say Saudi Arabia is in for a prolonged “period of succession” as the torch is passed from one generation to the next – one that couldn’t come at a worse time.

“Whether it is the threat of the Islamic State or Iran, this period of instability comes at a very vulnerable time for the kingdom,” says Brookings’ Mr. Shaikh.

Saudi Arabia has become a growing target for the Islamic State, with IS suicide bombers allegedly killing three border patrolmen in the kingdom’s eastern frontier Jan. 5. With the Saudis a major player in the US-led coalition, any prolonged succession crisis would create a leadership void in a time of war.

Saudi activists also fear that the growing uncertainty over succession in Riyadh will lead to a rollback in freedoms at home, a setback to political and economic reformers.

“With Abdullah we knew where the red lines were and where we could operate,” says Yasmine, a Saudi women’s rights activist who refuses to be identified by her full name for security reasons.

“With the succession unclear, we fear the state will revert to its default stance: a crackdown on individual freedoms.”

Plunging oil prices

But perhaps the greatest threat to the Saudi royal family during the period of succession could come in the form of dollars and cents.

With international oil prices falling below $50 a barrel, Saudi Arabia reportedly is anticipating a tripling of their budget shortfall to $39 billion in 2015, delivering Riyadh what observers are calling a “crude awakening.”

Observers say the Saudis could be pressed to either cut back on domestic social welfare programs or freeze funding for proxies and allied states across the region.

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With the future of the Saudi monarchy hanging in the balance, insiders and observers say the Saudi royal family is likely to make selections that cause the least controversy, sacrificing clear leadership for the image of stability.

“From the point of view of the House of Saud, the priority is the smooth continuation of the line,” WINEP’s Mr. Henderson says. “But this does not necessarily make for the best oil policy or the best way to fight extremism.”