The Saudis in decline?

Richard Fernandez:
By all accounts the Saudi economy is in decline. Low oil prices are forcing the Kingdom to live off savings, a process which can only last for so long. "The International Monetary Fund in January slashed its forecast for Saudi economic growth this year to 0.4 percent from 2 percent. ... Net foreign assets, though still above $500 billion, are shrinking as the government uses savings to plug a budget deficit that reached $79 billion last year -- $107 billion if delayed payments to contractors are included." The Saudi government has a six point plan aimed at tightening its belt and minimizing economic unrest at it tries to shift away from oil but it may be too little, too late to sustain it in the same old style.

The Citizen’s Account is a programme meant to soften the impact of austerity measures on low and middle-income Saudis ... The government began a multiyear programme of gradual reductions to fuel, water and electricity subsidies with a surprise announcement in late 2015, sending Saudis rushing to petrol stations to fill up. ... From July, the government will charge an unprecedented monthly fee for foreign workers with dependents in the kingdom.
Although Riyadh has tried to reinvent itself as an of "arsenal of Arabia" with an arms industry taking the place of oil, the Islamic Military Alliance whose arsenal it was to have been built around a Turkish-Saudi Army based in Riyadh has been less than impressive. Actions by the Trump administration to drive back Iran in Yemen and Syria may be aimed less at ensuring Saudi victory than a rear guard action against too swift a Russian and Iranian advance.

One person who understood the growing strategic weakness of the Saudi position was Rex Tillerson. Speaking in October 2016 as the chairman of Exxon Mobile, when a president Hillary was still universally anticipated, "Tillerson told Saudi Arabia's energy minister on Wednesday that fears of a new global oil supply crunch were exaggerated as the U.S. oil industry was adapting to the low price shock and was set to resume growth." The Saudis had cut oil prices in the belief that it would bankrupt American producers. Instead innovation turned North America into the big swing producer.
OPEC strategy in dealing with the frackers turned into a suicide pack.  The frackers responded by becoming more efficient and their cost are now lower than almost all OPEC countries who are burdened by government programs that drive up cost.  Cutting all the government subsidies makes the governments more vulnerable to unrest.  It is a real dilemma at a time when the Sunni countries are also under direct threat from an Iran bailed out by Obama's terrible deal.


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