RIYADH, Aug 27 (Reuters) - Saudi Arabia, which has a fifth of global oil reserves, holds large dollar assets and has the biggest Arab stock exchange. It is a linchpin of U.S. security policy in the Middle East and wields influence over the world's 1.6 billion Muslims through its guardianship of Islam's holiest sites in Mecca and Medina.
Here are some political risks facing the kingdom:
SUCCESSION
The death of Crown Prince Nayef in June meant King Abdullah, 89, had to choose an heir for the second time in eight months.
The new one is Crown Prince Salman, 76. Prince Ahmed, 71, the new interior minister, is seen as a likely candidate for crown prince when Abdullah dies and Salman becomes king.
The succession will become more complicated when the line of brothers born to the kingdom's founder Ibn Saud, which include all previous kings, Crown Prince Salman and Prince Ahmed, is exhausted and power has to move to the next generation.
What to watch:
- Health of top royals and any reshuffle of posts among them
- Any signs of generational shift in succession
DOMESTIC WORRIES
King Abdullah has pushed some economic and social reforms to address youth unemployment, corruption and a lack of housing. In 2011 he promised $130 billion in social spending that helped avert protests, but offered no significant political reform.
Tensions exist between those who want more social change, such as bringing more women into the workplace, and powerful conservatives who condemn such reforms as un-Islamic.
What to watch:
- Any demands for reform, or counter-moves by clerics
- Government steps to accelerate economic reforms
REGIONAL TENSIONS
The aftermath of last year's Arab uprisings has undermined old Saudi allies and destabilised the region against a backdrop of Riyadh's overarching rivalry with Shi'ite Muslim power Iran.
Saudi Arabia has joined regional Sunni powers to aid rebels in Syria, an ally of Iran, but fears Tehran is stirring unrest in Shi'ite-majority Bahrain whose rulers are close to Riyadh.
What to watch:
- Saudi policy towards Syrian rebels and Iran
- New moves to bolster Bahrain's ruling family
SHI'ITE MINORITY
Anti-government protests among minority Saudi Shi'ites have resulted in the deaths of 10 demonstrators and one policeman in shooting incidents in Qatif district since November. Shi'ites complain of entrenched discrimination, which Riyadh denies.
Older, more moderate Shi'ite leaders say they fear violence may radicalise youths and dissuade the path of dialogue.
What to watch:
- Renewed protests, government accusations implicating Iran
- Attacks on security forces in Shi'ite areas
ISLAMIST MILITANCY
Al Qaeda remains a significant security concern. The Saudis crushed a violent militant campaign in 2003-06, but many al Qaeda operatives then joined their counterparts in Yemen.
Riyadh fears turbulence in Yemen may allow al Qaeda to flourish there. The goals of Yemen-based Al Qaeda in the Arabian Peninsula (AQAP) include ousting the Saudi royal family.
What to watch:
- Trials of alleged Islamists in Saudi Arabia; AQAP activity
- Fate of kidnapped Saudi diplomat held in Yemen (Reporting by Angus McDowall; Editing by Alistair Lyon)