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Only Hard Times Ahead for Saudi Arabia

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25.03.2020

The revenue generated by state-owned Saudi oil company Saudi Aramco accounts for up to 80% of the kingdom’s fiscal budget. The company did not hide its losses, and officially reported a decrease of $22.9 billion in net income in 2019, and there have also been serious spending cuts on development, i.e. on maintaining and increasing production. The report correctly identifies the reasons for these losses, highlighting low oil prices and a reduction in production volumes.

If we analyze this data, it becomes fairly obvious that the Saudis are currently playing a risky game in global oil markets, offering their “black gold” at $25 per barrel. Given Saudi Arabia’s low oil production costs, Riyadh is in a position where it could well lower the selling price even further. But this drop in prices raises a number of very important questions: where will the money come from to bankroll the life of luxury that the Saudis have grown accustomed to? How will they maintain their huge state apparatus and, even more so, their repressive apparatus? And how will they fund the ambitious plans of kingdom’s current de facto ruler Crown Prince Mohammad bin Salman? Where will they get the money for their highly publicized Saudi Vision 2030, which is meant to catapult Saudi Arabia into the 21st century? Where will the money come from to support nearly 10 million foreign workers in the country? After all, if their wages are cut, they will return home overnight. And who will work the oil fields when they are gone? – The Saudis will not work there themselves, as everyone born in the kingdom is born with a silver spoon in their mouth.

The Saudis are already being confronted with all of these questions, and they are not so easy to answer. About a year ago, the Crown Prince detained several dozen princes and government officials in a purge, and “shook” more than $100 billion out of them. But this money has already been blown. And he will not be able to get away with pulling this stunt off again. As a result of these dictatorial measures, the level of dissatisfaction with the current........

© New Eastern Outlook