Meet the loser in the oil war

US, WASHINGTON (ORDO NEWS) — The Crown Prince of Saudi Arabia involved the kingdom in a suicidal duel with a Russian bear, in which the monarchy subjects will suffer the main losses, writes journalist of the publication Al Araby on the consequences of the failure of the OPEC + agreement in March.

The author notes that after the OPEC + countries failed to agree on a reduction in oil production last month, the Saudis collapsed black gold prices to $ 30 per barrel, increasing production to 13 million barrels per day.

This created problems for all exporting countries, however, experts are trying to compare market leaders – Russia and Saudi Arabia by this indicator, writes Al Araby.

The publication reports that as a result of the failure of the agreement, the ruble fell, and the largest Russian companies suffered losses. At the same time, the author of the article emphasizes that Moscow is much less dependent on oil than Riyadh.

Thus, proceeds from the sale of oil accounted for two-thirds of the kingdom’s revenues in 2018, despite the fact that in recent years black gold has significantly lost value.

The share of taxes in the income of the monarchy over the past 18 years has grown from 4.4% to almost one third, and the budget surplus has been replaced by a deficit that reached 103% of GDP in 2015 and decreased to 33% in 2018.

“According to estimates, lower oil prices cost Saudi Arabia $ 400 million a day, or about 150 billion a year,” the author notes.

He adds that Riyadh was not competitive due to the structure of production. In addition, the authorities are not able to oppose anything to the depletion of the natural resources of the kingdom. All this leads to waste of the country’s reserves, which since 2014 have decreased by almost a quarter trillion dollars.

The journalist notes that the budget’s economy is the engine of the monarchy, and its deficit amid falling oil prices will significantly increase the burden on citizens of the kingdom and entail austerity measures.

“Saudi Arabia is an example of a rentier state that is vulnerable to external shocks,” the article says.

The publication predicts a serious economic crisis in Saudi Arabia, which will make it impossible to fulfill external obligations.


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