Welcome to AUSTERITY Saudi Arabia: Crashing oil prices sends economy into meltdown

[Daneshmand]

Welcome to AUSTERITY Saudi Arabia: Crashing oil prices sends economy into meltdown

SAUDI Arabia faces financial ruin if it fails to undergo severe austerity measures in the coming years, as the oil price crash continues to rage, according to the International Monetary Fund (IMF).

Saudia Arabia faces financial troubles in the coming years

The Saudi royal family may have to cut back on its luxury lifestyle, while workers may not be able to reap the benefits of low rates, if the country wants to have any sort of economic future.

The kingdom will have to raise taxes, slash resident perks and cut lavish spending to offset plunging oil profits, the fund has forecast.

The Arab country is the globe's largest crude oil producer in the world and heavily dependent upon the commodity after reaping in recent decades.

Oil riches have allowed the Saudi royal family to enjoy one of the most decadent lifestyles in the world, alongside paying for generous subsidies and low taxes for citizens.

But that is now set to change.

Over the past 18 months the price of oil has plunged by more than two thirds - seriously denting Saudi Arabia's income.

Some analysts have said prices could fall as low as $10 a barrel from more than $100 in June 2014.

At the end of last year, the kingdom unveiled its largest ever deficit and warned the population of raised taxes.

But the kingdom could have to go further and completely transform its economy to survive, according to Masood Ahmed, head of the Middle East department.

He said: "This will have to be part of a multi-year adjustment process.

"There will have to be a major transformation of the Saudi economy. It is necessary, and it is going to be difficult, but it is a challenge which I think the authorities have clearly laid out.”

The IMF thinks Riyadh will have to cut its generous electricity, water and oil subsidies for citizens.

Saudi Arabia's wealth is nealry all from oil

Mr Ahmed added: "Energy price reform is key. It has been part of the social contract but that will now need to change.”

Falling oil prices are pushing countries around the world into crisis.

The IMF and World Bank is set to bail out Azerbaijan, which relies on oil and gas for around 95 per cent of exports.

Nigeria has also reportedly asked for a loan.

And the fund is worried about Brazil and Venezuela's financial security.

At the same time, oil and gas firms are being force to cut jobs and make huge savings.

Analysts have predicted BP is set to announce a huge 70 per cent drop in profits tomorrow, after already axing thousands of jobs.

Worries are also gathering pace around America's shale industry, where companies built up large levels of debt in recent years to invest in production.

 

[Daneshmand]

Saudi Arabia struggles to cope with cheap oil

Saudi Arabia has managed to buy itself a couple of months.

The global rout of oil prices is taking its toll on the kingdom's bottom line. The country has been forced to cut government spending in its upcoming budget and increase production of crude oil—even though its hardly worth pulling it out of the ground.

Still, the world's largest producer of oil appears on a crash-course for bankruptcy as early as of 2018, according to a new Big Crunch analysis.

Many oil-dependent nations are having to dig deep to balance budgets, with crude oil fetching so little on the global market. Money-rich nations like Qatar and Kuwait look to be getting by, while poorer nations like Libya have descended further into strife and civil war. Oil would need to be selling for $269 a barrel for Libya to balance its budget, according to the IMF.

Saudi Arabia is somewhere in between: A stable nation with a sizable backup of reserve assets, somewhere around $624 billion as of December. But much of that stability is bought with government jobs and generous public spending and with falling oil prices, the country has had to dip into its reserve assets to make up the difference.

Of course, the analysis depends on no major economic changes or events effecting Saudi Arabia. It also assumes oil prices remain low, which experts consider likely for the time being.

CNBC looked at the country's finances back in August, when oil swung between $48 and $41 a barrel. It had fallen a long way from its highs of $65 a barrel a few months before, but our lower estimate for its direction was way off. At the time, CNBC estimated the Saudis would be broke in August of 2018, yet that was based on oil at $40 a barrel and before they cut public spending.

The 2016 Saudi budget includes a spending cut of 13.8 percent from 2015 levels, though projections from Barclays puts that cut closer to 5 percent. Even so, the country is expected to reach a budget deficit of 12.9 percent of GDP in 2016, according to the investment bank.

In addition to spending cuts, Saudi Arabia has increased production, to more than 10 million barrels a day as of October, the latest figures available from the Energy Information Administration (EIA).

While the increased production helps to add a bit to the Saudi's bottomline, it does nothing to alleviate the glut of oil on the global market. Global production is projected to be 95 million barrels a day in the first quarter of 2016, and consumption around 94 million, accordingto the EIA.

The economic slowdown in China is often blamed for much of the decreased demand. On the supply side, U.S. shale producers have proved more durable in the harsh economic climate than the Saudis expected. Iran, too, has entered the oil market in recent weeks as Western sanctions have been lifted. The Islamic Republic produces about 1.1 million barrels a day and has said it wouldn't consider slowing production until its grown to 1.5 million.

Earlier hopes of a deal between OPEC nations and Russia to cut production were dashed on Friday when an unnamed Iranian official told the Dow Jones news agency that the country would not participate.

Saudi Arabia has said before that it would agree to cut production if both OPEC members and non-OPEC nations would do the same.

 

[jetray]

Times are changing, Iran is going shopping & saudis are strapped for cash.
By the way would Iran lend some cash to saudis?

 

[Daneshmand]

Times are changing, Iran is going shopping & saudis are strapped for cash.
By the way would Iran lend some cash to saudis?

Saudi Arabia does not grow its own food. It has to import its food. With a population that has grown way out of proportion than which the land could feed, when Saudis go broke, loans will not save them. They will need food aid.

 

[jetray]

They will need chickpeas, rice and beans. In that scenario India would be a better candidate to help Saudis and avert a horrific and lethal famine.

Mate, Food supply is a very serious issue. India is currently self sufficient wrt food to large extent. But as the population increases that will be very much challenged. Even now occasionally there is spike in prices of food items like pulses or essentials like vegetables that sends shivers down the govt & politicians.

Any disruption in food supply to masses has only one definite outcome , La Revolución.

 

[Daneshmand]

Mate, Food supply is a very serious issue. India is currently self sufficient wrt food to large extent. But as the population increases that will be very much challenged. Even now occasionally there is spike in prices of food items like pulses or essentials like vegetables that sends shivers down the govt & politicians.

Any disruption in food supply to masses has only one definite outcome , La Revolución.

That is true. But in Saudi Arabia La Revolución would mean civil war! Such is their state of affairs. They never invested in their future. They only invested in hatred.

 

[somebozo]

Only in PressTV dreams and those of speculators who have a lot of vested intrested in Dollar crash...because if dollar crash..Oil goes up..speculators make a lot of money...

On any given day..Saudi economy is a lot heavier than Iranian one..

Sure Austerity is kicking in...gradual ending of energy and water subsidies..but then Saudi pledged 10 Years ago to gradually end the subsidy and oil fall provides that excuse..during 2014 - 2015 the Saudi non-oil industry was virtually at stand still due to rising cost of commodities and at the same time rising cost of labour...now industrial production is kicking in..

Saudi has made massive investment into crops in Pakistan and Africa to secure food supply..Saudi production cost is only like $3-4 USD and they can make a survival even at $10 by pumping more oil...High cost producers like Iran should worry as Saudi pumping glut can completely erode their market share...back in 90's Saudi pumping glut forced Iran and Russia to focus on sale of gas instead..Maximum industrial growth of Saudi occured during Fahd time when oil was $10/Bl or less..

Times are changing, Iran is going shopping & saudis are strapped for cash.
By the way would Iran lend some cash to saudis?

https://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

An Indian should double check before trolling...

Iran
93,950
Dec 31, 2015[5]

Saudi Arabia
660,100
Dec 31, 2015[5][6][7]

http://uk.reuters.com/article/uk-iran-reserves-idUKKCN0PY1AE20150724


The Iranian central bank's foreign reserves, obtained from the country's oil and gas exports, are around $90 billion to $100 billion, Minister of Industry, Mines and Trade Mohammad Reza Nematzadeh said at a business conference.

Expats remitted SR157bn in 2015

• 
  
  A Saudi woman shows Saudi riyal banknotes at a money exchange shop, in Riyadh, Saudi Arabia, in this January 20, 2016 photo. (Reuters)
  

ARAB NEWS

Published — Monday 1 February 2016

Last update 1 February 2016 9:47 am


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JEDDAH: Remittances by expatriates in the Kingdom reached an all-time high of SR156.9 billion in 2015, up 2.3 percent from a total of SR153.3 billion in remittances during 2014.
In all, SR1.5 trillion in remittances sent by expatriates in the Kingdom have been recorded over a 22-year period.
The increase in expatriate remittances coincides with the issuance of 1.8 million new work permits to expats from several foreign countries during the past Islamic calendar year, about 4.8 percent of which received government recommendations through contracts or endorsements.


Can Iran withstand that much money being shoveled out of its economy???

 

[The Sandman]

 

[Daneshmand]

Only in PressTV dreams and those of speculators who have a lot of vested intrested in Dollar crash...because if dollar crash..Oil goes up..speculators make a lot of money...

On any given day..Saudi economy is a lot heavier than Iranian one..

Sure Austerity is kicking in...gradual ending of energy and water subsidies..but then Saudi pledged 10 Years ago to gradually end the subsidy and oil fall provides that excuse..during 2014 - 2015 the Saudi non-oil industry was virtually at stand still due to rising cost of commodities and at the same time rising cost of labour...now industrial production is kicking in..

Saudi has made massive investment into crops in Pakistan and Africa to secure food supply..Saudi production cost is only like $3-4 USD and they can make a survival even at $10 by pumping more oil...High cost producers like Iran should worry as Saudi pumping glut can completely erode their market share...back in 90's Saudi pumping glut forced Iran and Russia to focus on sale of gas instead..Maximum industrial growth of Saudi occured during Fahd time when oil was $10/Bl or less..



https://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

An Indian should double check before trolling...

Iran
93,950
Dec 31, 2015[5]

Saudi Arabia
660,100
Dec 31, 2015[5][6][7]

http://uk.reuters.com/article/uk-iran-reserves-idUKKCN0PY1AE20150724

Wow. So much hurt. So much emotions. But no logic, whatsoever.

The articles are not PressTV, they are by Western outlets and they are quoting IMF. You know that IMF is not run by Iran, don't you?

As for your comparison with Iran, you are completely forgetting very crucial things. Iran grows its food and whatever variety of food Iran imports, it balances out with export of other foods. Iran also produces most of its own needs eg. cars etc. So it is not as dependent on foreign currency reserves as Saudi Arabia. Since Saudi Arabia has to import every single damn thing it consumes except oil and dates. And no nation in history, has been able to survive only on dates.

Besides, Iran and Saudi oil are pretty much the same in geological form and cost the same to recover. I guess you think Iran is in Americas and its oil is shale. Dude, you really need to look at a map and educate yourself.

Iran will survive. Do not worry about Iran. Iran survived sanctions and wars. In fact despite this low oil prices, Iran's economy will be growing fast according to IMF and World bank projections. In fact Iran plans to start exporting hundreds of thousands of cars per year in near future. What Saudis have to offer beside oil?

Saudi bankruptcy does not have the same meaning and implications as a bankruptcy for Iran or Pakistan or India. Saudis going bankrupt would mean famine.

As for oil at 10 dollar a barrel, you have to realize that 10 dollar in 1970's was worth much more than today. Not only that but Saudi population was also smaller back then.

JEDDAH: Remittances by expatriates in the Kingdom reached an all-time high of SR156.9 billion in 2015, up 2.3 percent from a total of SR153.3 billion in remittances during 2014.
In all, SR1.5 trillion in remittances sent by expatriates in the Kingdom have been recorded over a 22-year period.
The increase in expatriate remittances coincides with the issuance of 1.8 million new work permits to expats from several foreign countries during the past Islamic calendar year, about 4.8 percent of which received government recommendations through contracts or endorsements.


Can Iran withstand that much money being shoveled out of its economy???

Iran does not need to. Iranians work. It is Saudis who have to import every kind of worker from nannies to doctors to soldiers to maids for domestic abuse.

Besides the figures you have brought in are no case for jubilation. Those figures are a big drain on Saudi reserves which combined with low oil prices will mean, faster depletion of reserves and bankruptcy.

 

[jetray]

Only in PressTV dreams and those of speculators who have a lot of vested intrested in Dollar crash...because if dollar crash..Oil goes up..speculators make a lot of money...

On any given day..Saudi economy is a lot heavier than Iranian one..

Sure Austerity is kicking in...gradual ending of energy and water subsidies..but then Saudi pledged 10 Years ago to gradually end the subsidy and oil fall provides that excuse..during 2014 - 2015 the Saudi non-oil industry was virtually at stand still due to rising cost of commodities and at the same time rising cost of labour...now industrial production is kicking in..

Saudi has made massive investment into crops in Pakistan and Africa to secure food supply..Saudi production cost is only like $3-4 USD and they can make a survival even at $10 by pumping more oil...High cost producers like Iran should worry as Saudi pumping glut can completely erode their market share...back in 90's Saudi pumping glut forced Iran and Russia to focus on sale of gas instead..Maximum industrial growth of Saudi occured during Fahd time when oil was $10/Bl or less..



https://en.wikipedia.org/wiki/List_of_countries_by_foreign-exchange_reserves

An Indian should double check before trolling...

Iran
93,950
Dec 31, 2015[5]

Saudi Arabia
660,100
Dec 31, 2015[5][6][7]

http://uk.reuters.com/article/uk-iran-reserves-idUKKCN0PY1AE20150724


The Iranian central bank's foreign reserves, obtained from the country's oil and gas exports, are around $90 billion to $100 billion, Minister of Industry, Mines and Trade Mohammad Reza Nematzadeh said at a business conference.

Seems you have taken things too seriously. Iran does have $100 billion frozen assets and are poised to grow economically as the sanctions have been lifted. I would not be surprised if Iran beats India to become fastest growing economy in the coming years. With two giant economies (china & india) next door and central asian market to north it certainly is the power to watch for.

 

[somebozo]

Wow. So much hurt. So much emotions. But no logic, whatsoever.

The articles are not PressTV, they are by Western outlets and they are quoting IMF. You know that IMF is not run by Iran, don't you?

As for your comparison with Iran, you are completely forgetting very crucial things. Iran grows its food and whatever variety of food Iran imports, it balances out with export of other foods. Iran also produces most of its own needs eg. cars etc. So it is not as dependent on foreign currency reserves as Saudi Arabia. Since Saudi Arabia has to import every single damn thing it consumes except oil and dates. And no nation in history, has been able to survive only on dates.

Besides, Iran and Saudi oil are pretty much the same in geological form and cost the same to recover. I guess you think Iran is in Americas and its oil is shale. Dude, you really need to look at a map and educate yourself.

Iran will survive. Do not worry about Iran. Iran survived sanctions and wars. In fact despite this low oil prices, Iran's economy will be growing fast according to IMF and World bank projections. In fact Iran plans to start exporting hundreds of thousands of cars per year in near future. What Saudis have to offer beside oil?

Saudi bankruptcy does not have the same meaning and implications as a bankruptcy for Iran or Pakistan or India. Saudis going bankrupt would mean famine.

As for oil at 10 dollar a barrel, you have to realize that 10 dollar in 1970's was worth much more than today. Not only that but Saudi population was also smaller back then.

Dollar is releative to oil...
Oil goes up..dollar goes down...means $100 Is a big number but worthless.
Oil goes down...dollar goes up...mean $10 is a small number but worth a lot..

In post 9/11 world US printed a lot of currency to enable quantitative easing and plowing up some economies and war..now the Fed wants to contract all the currency spread...the news lately..that Dollar has been going up...Saudi built their reserves when dollar was devalued..their numbers will not change..but the Dollar will go very much up in value...


So called experts will not be earning elbow grease in journalism if they actually had any expertise..most of them are in competition to sell their news by creating sensationalism and hype...nothing else...I have been in Saudi since 30 Years...I feel I understand better than these experts sitting in London and New York...

http://www.arabnews.com/economy/news/873006

 

[Aepsilons]

And the mighty are humbled.

 

[somebozo]

Seems you have taken things too seriously. Iran does have $100 billion frozen assets and are poised to grow economically as the sanctions have been lifted. I would not be surprised if Iran beats India to become fastest growing economy in the coming years. With two giant economies (china & india) next door and central asian market to north it certainly is the power to watch for.

We are seeing Iran grow since 1979..With the sanctions off..more capital is likely to leave Iran and more brain drain..seriously..who wants to live under Mullahs?

 

[Daneshmand]

Dollar is releative to oil...
Oil goes up..dollar goes down...means $100 Is a big number but worthless.
Oil goes down...dollar goes up...mean $10 is a small number but worth a lot..

In post 9/11 world US printed a lot of currency to enable quantitative easing and plowing up some economies and war..now the Fed wants to contract all the currency spread...the news lately..that Dollar has been going up...Saudi built their reserves when dollar was devalued..their numbers will not change..but the Dollar will go very much up in value...

http://www.arabnews.com/economy/news/873006

According to who? According to you and arabnews?

Dollar has nothing to do here. It is the over-supply in the market that is causing the glut and the low prices. The oversupply caused by Saudis themselves.

Now Saudis are in a bend. If they lower their production, countries like Iran and Russia will not lower their production and will reap the benefits of a higher oil price at the cost of Saudis. And if Saudis keep over-supplying the market, they will go bankrupt themselves, while Iran will still grow economically (as per World Bank and IMF projections).

You see Saudis are really out of choice here. Whatever they do, Iran is the winner.

This is called a checkmate in chess.

We are seeing Iran grow since 1979..With the sanctions off..more capital is likely to leave Iran and more brain drain..seriously..who wants to live under Mullahs?

Blah, blah, blah. At least Iran has brains. Saudis by comparison only export Takfirism.

Under the same Mullahs, Iran has turned out to be the biggest nightmare for the Takfiris, keeping them awake all night.

This is the bottom line. IMF and World Bank are saying Iran will grow and Saudis will go bankrupt. Simple.

 

[KediKesenFare3]

Agriculture in Iran
TEHRAN — Iran’s agricultural exports in the previous Iranian calendar year, which ended on March 20, rose by 27 percent compared to its preceding year, according to the Iranian deputy agriculture minister Abdolmehdi Bakhshandeh. The country exported $6.6 billion of agricultural products in Iranian calendar year 1393 (March 2014-March 2015), a 27 percent rise year on year, the Mehr news agency reported on Wednesday. Meanwhile, agricultural imports amounted to $12 billion, a 9 percent fall compared to its preceding year. (...)
http://tehrantimes.com/PDF/12247/12247-4.pdf

Agriculture in Saudi Arabia
https://en.wikipedia.org/wiki/Agriculture_in_Saudi_Arabia
Over the past decade, the agriculture in the Kingdom of Saudi Arabia has drastically improved. Although Saudi Arabia is widely thought of as a desert, it has regions where the climate has favoured agriculture. The government in particular has aided with this process by converting large areas of desert into agricultural fields.[1] By implementing major irrigation projects and adopting large scale mechanization, this has progressed in developing agriculture in Saudi Arabia, adding previously barren areas to the stock of cultivatable land.[2]

Today, agriculture in Saudi Arabia is focused on the export of wheat, dates, dairy products, eggs, fish, poultry, fruits, vegetables and flowers to markets around the world.[1] The government of the nation is heavily involved in the agriculture industry, and the ministry of agriculture is primarily responsible for the agricultural policies in the nation. The private sector as well plays a role in the nation, as the government offers long-term interest free loans, along with low-cost water, fuel, electricity and duty-free imports of raw materials and machinery. Still, Saudi Arabia is dependent on imports to meet 70% of its food requirements.[1]
https://www.saudiembassy.net/about/...iculture_water/Agricultural_Achievements.aspx

And Turkey