A new Saudi Arabian lobby group was launched in the United States in a bid to nurture the existing ties and develop a better understanding between the two countries. The Saudi American Public Relation Affairs Committee (SAPRAC) opened in Washington DC as the first Saudi public affairs organisation in America and comes at an opportune time; days after the two countries entered a war of words over geopolitics. Its declared aim is Fostering understanding between the Saudis and the US.
In a statement released to local news platform of the Saudi owned and controlled Al Arabiya English, the organisation said it wanted to “fostering understanding between Saudi Arabis and the United States,” and that it would put together “a dream-team of analysts, researchers and media professionals from diverse fields and backgrounds”.
Meanwhile, life carrying on, “The IMF has warned that if government spending is not reined in, the Saudis will be bankrupt by 2020.” (the New York Times of Sunday, March 13, 2016. How Saudi Arabia Turned Its Greatest Weapon on Itself by Andrew Scott Cooper, The Author of “The Oil Kings: How the United States, Iran and Saudi Arabia Changed the Balance of Power in the Middle East.”)
That little nugget was buried almost at the end of the article. By 2020, in just 4 years? How is this possible?
Growing up in Houston, with a father who was an expatriate for a major oil company in Venezuela and his cousin who worked for Aramco in Saudi Arabia, I was accustomed to conversations about the prices of oil, drilling productions, exploration fields, and all the related jargon. Even with my father, ex-spouse, friends, neighbors…and not to mention, an entire community of Houston…who worked, breathed and lived in the oil business, I was rather a bit blasé about the whole industry. I must confess, I grew a deaf ear to most of it. But it always captivated my attention when I heard stories and reports about the Saudis’ wealth, affluence and bizarre customs. Ever since the oil embargo of 1973-74, I have had a healthy respect, as I do for sharks, for the Saudis.
A quick Google, I read recent writings on the subject of Saudi’s fiscal demise. According to Chriss W. Street, 22 Oct. 2015 article, IMF predicts Saudi Arabia Bankrupt by 2020.
Each October, the International Monetary Exchange issues its World Economic and Financial Regional Surveys. For the first time since the 1960s, the region set to suffer the worst financial agony over the next five years is the Middle East. Ground Zero for that pain is Saudi Arabia.
The reason for Saudi Arabia’s reluctance to balance its budget is that the 15,000 members of the six branches of the Saudi royal family buy national support through massive social welfare spending that requires a crude oil price of $103 a barrel to balance their budget.
The vast majority of the 30 million residents enjoy their standard of living due to government handouts. Saudi citizens tend to lack employable skills and are culturally not inclined to work. Of the 5.5 million that do have jobs, 3 million work directly for the government. The small private sector tends only to employ foreigners.
So how many foreigners benefit from work in Saudi? According to Wikipedia:
Saudi Arabia’s Central Department of Statistics & Information estimated the foreign population at the end of 2014 at 33% (10.1 million). The CIA Factbook estimated that as of 2013 [update] foreign nationals living in Saudi Arabia made up about 21% of the population. Other sources report differing estimates. Indian: 1.3 million, Pakistani: 1.5 million, Egyptian: 900,000, Yemeni: 800,000, Bangladeshi: 500,000, Filipino: 500,000, Jordanian/Palestinian: 260,000, Indonesian: 250,000, Sri Lankan: 350,000, Sudanese: 250,000, Syrian: 100,000 and Turkish: 100,000. There are around 100,000 Westerners in Saudi Arabia, most of whom live in compounds or gated communities.
As Saudi population grows and oil export revenues stagnate, pressure for “Saudization” (the replacement of foreign workers with Saudis) has grown, and the Saudi government hopes to decrease the number of foreign nationals in the country.
Despite years of trying to diversify its economy, Saudi Arabia is still a one-trick pony, with oil accounting for around 90% of export earnings, 80% of government revenues, and 40% of GDP. The vast majority of the country remains a lifeless desert where humans were really never meant to live. The Bedouins were nomadic for a reason; they needed to eat food and drink water.
So it is safe to say that without oil, much of Saudi Arabia’s population would probably flee to greener pastures. While the city of Jeddah, which is located on the Red Sea, as well as historical sites, like Mecca and Medina, would surely survive such a situation, but not other cities, such as for instance Riyadh as the Saudi capital that lays smack dab in the middle of a vast desert, would turn into ghost towns.
Okay, I have read too much dismal news about the Saudis. I say the best chance of making it out of this “oil weapon” induced implosion is by taking immediate drastic measures. Here are a few suggestions:
- The majority of demographics is Indian; therefore turn the government and controls to them. This will end the fighting between the Sunnis and Shiites.
- Move Bollywood right smack in the middle of Riyadh and bring the film and entertainment business there to bail out the one-trick pony industry.
- Employ all females (over 15 years old) as Uber drivers.
- Stop buying diamond encrusted Rolls Royces, solid gold faucets, fixtures, hardware, and ironmongery. Scrape and melt all the gold-lined pools and return it to the GDP funds. Place an embargo on the royals buying Hermes’ $25,000 purses and Cartier’ $500,000 wrist watches.
- Hint, cutting the educational spending by 12% is not one of them. Remember the pressure to “Saudization“.
Seriously, the Kingdom of Saudi Arabia has grappled with low state revenues as global oil prices dwindle, leading to reduced petrodollars for the country forcing its government to reportedly launching an austerity drive, which entails a 5% cut on contract spending. This austerity drive could further dampen economic growth, especially in the Saudi construction sector. Saudi Arabia ordered ministries to cut their spending on contracts by at least 5 % in a fresh austerity drive, according to reports.
The document, which has been circulated amongst ministries and state bodies by Saudi’s central government, “instructs them to reduce the value of their outstanding contracts” and construction contracts included in the 2016 Saudi budget, by “not less than 5% of remaining obligations”, The Guardian reported.
Citing Reuters, the UK daily said these measures were proposed by Saudi’s economy and planning minister so as to “rationalise spending and increase … efficiency”, and were approved by King Salman.
In the meantime, Saudi Arabia’s 1 km high Jeddah Tower, formerly known as Kingdom Tower, that upon its launch in 2018, will be the world’s tallest, is reportedly having completed more than 20% progress meaning, 37 floors of the tower have been built. This building tower, first presented to be 252 storey high at its inception, is now according to the Council on Tall Buildings and Urban Habitat (CTBUH) estimated to have 167 floors. Its owners have not formally announced the final total number of floors in the structure.