Hot Air in the Saudi Desert: a Kingdom in Descent?

By Paul Cochrane and cross-posted from Counterpunch.org

The Kingdom of Saudi Arabia (KSA) is in financial dire straits. Since the plunge in oil prices, the kingdom has been hemorrhaging money left, right and center. It has provided billions of dollars to shore up counter-revolutionary governments around the Middle East, especially Egypt, it is heavily involved in the Syrian conflict, and is burning through some $6 billion a month waging war on impoverished Yemen. The country needs oil to be $104.6 a barrel, according to the Institute of International Finance, for its budget to break-even; the current price is around $45.

Finances have become so tight that from being the second largest importer of armaments worldwide in 2010–14, deputy Crown Prince Mohammed bin Salman (MbS) has said the kingdom aims at sourcing up to 50 percent of arms from local producers to help diversify the economy. It is as much of a pie-in-the-sky idea as turning KSA over the next several years into a knowledge-based economy.

What is also indicative of the financial difficulties ahead is that commercial banks have tightened lending to anyone outside of the government, with the state the primary borrower, according to a senior financial officer in Riyadh. “There is a liquidity crunch at the banks, and it is the government that is borrowing, so companies are suffering,” he said.

Stories abound across the Middle East – the whole region’s economies are intrinsically linked to Gulf petro-dollars – of salaries and contracts not being honored due to cash-flow problems within the KSA government and at major companies. Indeed, Saudi construction firm Binladin Group laid off over 12,000 Saudi employees this week, and a further 77,000 foreign workers were given the given the boot

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