Oil Wars Biting: Saudi Arabia to Start Issuing Bonds to Cover Deficit

Discussion in 'West Asia & Africa' started by pmaitra, Nov 12, 2015.

  1. pmaitra

    pmaitra Moderator Moderator

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    Oil Wars Biting: Saudi Arabia to Start Issuing Bonds to Cover Deficit
    Moreover with Riyadh becoming a buyer of credit itself it’s far less likely it can continue to provide credit to the US to finance its own deficit

    (Sputnik - Russian news agency) | Russia Insider

    [​IMG]

    MOSCOW (Sputnik) — Saudi authorities are likely to increase debt levels to up to 50 percent of the GDP within the next five years, the Financial Times reported Monday. According to previous forecasts, the 2016 debt level will not exceed 17.3 percent of the country’s GDP.

    The finalization of the bond program is expected to begin in January, the newspaper reported, citing an official source.

    As of September, Saudi foreign reserves had dropped to $647 billion, a three-year low, due to falling oil prices.

    The International Monetary Fund is likely to welcome the kingdom’s decision to issue bonds, the media outlet reported, adding that the financial regulator earlier called for Saudi Arabia to increase its debt level.

    Global oil prices have more than halved from summer 2014 levels, when the price of Brent crude stood at about $115 per barrel. Current oil prices are hovering just under $50 per barrel.
    ______________________________________
    Commentary: A debt that is 17.3% of GDP is not a major threat. The biggest threat is Saudi Arabia has nothing much else to export, unlike Russia, that sells high tech weapons.
     
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  3. Hari Sud

    Hari Sud Senior Member Senior Member

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    I am glad that oil prices are biting the Saudi Arabian financed. I am so glad that they would not be able to fund Islamic propaganda in a non Islamic world as money is short. To cut their deep pockets in half, I wish that their military involvement in Yemen, Syria and Iraq get doubled that their money is reduced still further.

    In the long run those 39 or so Islamic wars being fought all over the world get choked without funds. If you do not believe me then figure out that how did Afghan warriors have survived for 35 years. They did with direct, secret and indirect support of Saudi Arabia. Other examples exist but the reader will figure them out themselves.
     
  4. spikey360

    spikey360 Crusader Senior Member

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    Pretty soon these Bedouins will go bankrupt. Then, we will have to constrict them further with cheaper oil deals until they basically start giving oil for free.
     
  5. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    This is the perfect storming brewing

    Oil prices in decline
    High production
    Oil war with Russia
    Issuance of debt
    Continued wars with neighbors
    Yemen, Iraq and Syria

    Increased spending for weapons and internal
    Security and on going issues with Iran

    A recipe for disaster

    If Saudis do not buy US debt and Chinese don't buy a disaster for USA too


    Sent from my iPhone using Tapatalk
     
  6. pmaitra

    pmaitra Moderator Moderator

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    Saudi Arabia risks destroying Opec and feeding the Isil monster
    'Saudi Arabia is acting directly against the interests of half the cartel and is running Opec over a cliff,' says RBC
    [​IMG]
    P.S.: The comments on this article are interesting.
     
  7. Kshatriya87

    Kshatriya87 Senior Member Senior Member

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    http://www.thenation.com/article/the-saudis-are-stumbling-they-may-take-the-middle-east-with-them/

    For the past eight decades Saudi Arabia has been careful.Ad Policy Foreign Policy In Focus.

    Using its vast oil wealth, it’s quietly spread its ultra-conservative brand of Islam throughout the Muslim world, secretly undermined secular regimes in its region, and prudently kept to the shadows while others did the fighting and dying. It was Saudi money that fueled the Mujahedeen in Afghanistan, underwrote Saddam Hussein’s invasion of Iran, and bankrolled Islamic movements and terrorist groups from the Caucasus to the Hindu Kush.

    It wasn’t a modest foreign policy, but it was a discreet one.
    Today that circumspect diplomacy is in ruins, and the House of Saud looks more vulnerable than it has since the country was founded in 1926. Unraveling the reasons for the current train wreck is a study in how easily hubris, delusion, and old-fashioned ineptness can trump even bottomless wealth.

    Oil Slick

    The kingdom’s first stumble was a strategic decision last fall to undermine competitors by scaling up its oil production and thus lowering the global price.
    They figured that if the price of a barrel of oil dropped from over $100 to around $80, it would strangle competitors that relied on more expensive sources and new technologies, including the US fracking industry, companies exploring the Arctic, and emergent producers like Brazil. That, in turn, would allow Riyadh to reclaim its shrinking share of the energy market. There was also the added benefit that lower oil prices would damage oil-reliant countries that the Saudis didn’t like—including Russia, Venezuela, Ecuador, and Iran.
    In one sense it worked. The American fracking industry is scaling back, the exploitation of Canada’s tar sands has slowed, and many Arctic drillers have closed up shop. And indeed, countries like Venezuela, Ecuador, and Russia have taken serious economic hits.
    But it may have worked a little too well, particularly with China’s economic slowdown reducing demand and further depressing the price—a result that should have been entirely foreseeable but that the Saudis somehow missed.
    The price of oil dropped from $115 a barrel in June 2014 to around $44 today. While it costs less than $10 to produce a barrel of Saudi oil, the Saudis need a price between $95 and $105 to balance their budget. The country’s leaders, who figured that oil wouldn’t fall below $80 a barrel—and then only for a few months—are now burning through their foreign reserves to make up the difference.
    While oil prices will likely rise over the next five years, projections are that the price per barrel won’t top $65 for the foreseeable future. Saudi debt is on schedule to rise from 6.7 percent of GDP this year to 17.3 percent next year, and its 2015 budget deficit is $130 billion.
    The country is now spending $10 billion a month in foreign exchange reserves to pay the bills and has been forced to borrow money on the international financial market. Recently the International Monetary Fund’s regional director, Masood Ahmed, warned Riyadh that the country would deplete its financial reserves in five years unless it drastically cut its budget.
    Buying the Peace (While Funding War)
    But the kingdom can’t do that.
    When the Arab Spring broke out in 2011, Saudi Arabia headed it off by pumping $130 billion into the economy, raising wages, improving services, and providing jobs for its growing population. Saudi Arabia has one of the youngest populations in the Middle East, many of whom are unemployed and poorly educated. Some 25 percent of the population lives in poverty. Money keeps the lid on, but—even with the heavy-handed repression that characterizes Saudi political life—for how long?
    Meanwhile they’re racking up bills with ill-advised foreign interventions. In March, the kingdom intervened in Yemen’s civil conflict, launching an air war, a naval blockade, and partial ground campaign on the pretense that Iran was behind one of the war’s factions—a conclusion not even the Americans agree with.
    Again, the Saudis miscalculated, even though one of their major allies, Pakistan, warned them they were headed for trouble. In part, the kingdom’s hubris was fed by the illusion that US support would make it a short war. The Americans are arming the Saudis, supplying them with bombing targets, backing up the naval blockade, and refueling their warplanes in mid-air. .cta.primary.dbWSzeHOdo{ background: #5000b2 !important; color: #ffffff !important; } .cta.primary.dbWSzeHOdo a:hover { color: #5000b2 !important; background: #ffffff !important; } Sign Up
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    But six months down the line the conflict has turned into a stalemate. The war has killed 5,000 people (including over 500 children), flattened cities, and alienated much of the local population. It’s also generated a horrendous food and medical crisis and created opportunities for the Islamic State and Al Qaeda to seize territory in southern Yemen. Efforts by the UN to investigate the possibility of war crimes were blocked by Saudi Arabia and the United States.
    As the Saudis are finding out, war is a very expensive business—a burden they could meet under normal circumstances, but not when the price of the kingdom’s only commodity, oil, is plummeting.
    Nor is Yemen the only war that the Saudis are involved in. Riyadh, along with Qatar and the United Arab Emirates, are underwriting many of the groups trying to overthrow Syrian president Bashar al-Assad. When anti-government demonstrations broke out there in 2011, the Saudis—along with the Americans and the Turks—calculated that Assad could be toppled in a few months.
    But that was magical thinking. As bad as Assad is, a lot of Syrians—particularly minorities like Shiites, Christians, and Druze—were far more afraid of the Islamists from Al Qaeda and the Islamic State than they were of their own government. So the war has dragged on for four years and has now killed close to 250,000 people.
    Once again, the Saudis miscalculated, though in this case they were hardly alone. The Syrian government turned out to be more resilient than it appeared. And Riyadh’s bottom line that Assad had to go just ended up bringing Iran and Russia into the picture, checkmating any direct intervention by the anti-Assad coalition. Any attempt to establish a no-fly zone against Assad will now have to confront the Russian air force—not something that anyone other than certain US presidential aspirants are eager to do.
    The war has also generated a flood of refugees, deeply alarming the European Union, which finally seems to be listening to Moscow’s point about the consequences of overthrowing governments without a plan for who takes over. There’s nothing like millions of refugees headed in your direction to cause some serious re-thinking of strategic goals.Ad Policy
    The Saudis goal of isolating Iran, meanwhile, is rapidly collapsing. The P5+1—the United States, China, Russia, Great Britain, France, and Germany—successfully completed a nuclear agreement with Tehran, despite every effort by the Saudis and Israel to torpedo it. And at Moscow’s insistence, Washington has reversed its opposition to Iran being included in peace talks around Syria.
    Bills Coming Due
    Stymied in Syria, mired down in Yemen, and its finances increasingly fragile, the kingdom also faces internal unrest from its long marginalized Shia minority in the country’s east and south. To top it off, the Islamic State has called for the “liberation” of Mecca from the House of Saud and launched a bombing campaign aimed at the Kingdom’s Shiites.
    This fall’s Hajj disaster—a stampede that killed more than 2,100 pilgrims and provoked anger at the Saudi authorities for their foot dragging on investigating it—have added to the royal family’s woes. The Saudis claim just 769 people were killed, a figure that no other country in the world accepts. And there are persistent rumors that the deadly stampede was caused when police blocked off an area in order to allow high-ranking Saudis special access to the holy sites.
    Some of these missteps can be laid at the feet of the new king, Salman bin Abdulaziz Al Saud, and of a younger, more aggressive generation of Saudis he’s appointed to key positions. But Saudi Arabia’s troubles are also a reflection of a Middle East in transition. Exactly where it’s headed is by no means clear, but change is in the wind.
    Iran is breaking out of its isolation. With its large, well-educated population, strong industrial base, and plentiful energy resources, it’s poised to play a major regional, if not international, role. Turkey is in the midst of a political upheaval, and there’s growing opposition among Turks to Ankara’s meddling in the Syrian civil war.
    Saudi Arabia, on the other hand, is impaled on its own policies, both foreign and domestic. “The expensive social contract between the Royal family and Saudi citizens will get more difficult, and eventually impossible to sustain if oil prices don’t recover,” Meghan L. O’Sullivan, director of the Geopolitics of Energy project at Harvard, told The New York Times.
    However, the House of Saud has little choice but to keep pumping oil to pay for its wars and keep the internal peace. Yet more production drives down prices even further. And once the sanctions come off Iran, the oil glut will become worse.
    While it’s still immensely wealthy, there are lots of bills coming due. It’s not clear the kingdom has the capital or the ability to meet them.
     
  8. Srinivas_K

    Srinivas_K Senior Member Senior Member

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    Saudis economy is totally dependent on oil demand, countries all around the world are planning to migrate to green technologies like solar and electric technologies to power vehicles on a massive scale.
     
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  9. Kshatriya87

    Kshatriya87 Senior Member Senior Member

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    Exactly. Also like it says in the article, I hope sanctions are lifted off of Iran. They will compete and prices will go down again. And Iran should intensify houthi support to further crumble Saudi efforts to keep the Sunni leadership living.

    Sent from my HTC One_E8 dual sim using Tapatalk
     
  10. LordOfTheUnderworlds

    LordOfTheUnderworlds Regular Member

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    Crude Oil prices are sliding like crazy, on Friday it went near 40$. People are talking it will go to 35 $ in a week or two. Goldman Sachs even predicted it can go to 20$. Flow from Iraq has suddenly increased and they are selling it at discount. ISIS is selling oil in black market. On top of that, in some months Iranian oil is supposed to come to flood the markets. But then when everyone starts talking something like this in media, oil goes exactly in opposite direction.

    Can't understand who is playing whom?

    Is it usual Saudi and Americans conspiring to bankrupt Russians by making prices fall?
    Or is it Russians and Saudis who are trying to bankrupt American shell oil companies which are threat to both?
    Or is it US and Russians both pretending to play cold war and manipulating Saudis so that Saudis go bankrupt for some secret deal between US, Russia, Iran, Israel for new order in middle east?
    There is also talk of possible palace coup in Saudi Arabia.

    Anything seems possible at this moment. It like when Crude chart is going sideways and RSI is halfway somewhere in 40s-50s - totally unpredictable.
     
    Last edited: Nov 15, 2015
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  11. Dovahkiin

    Dovahkiin Regular Member

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    I'm waiting for the day, when tesla will take over, and the saudis will wipe their ass from sand. :truestory:
     
  12. Kshatriya87

    Kshatriya87 Senior Member Senior Member

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    Tesla CANNOT take over until and unless they find a way to manufacture cheap cars with minimum expected requirements of a car. Remember, less than 5% of the world population are able to afford Tesla. (I made that percentage up, but I'm sure its less than that).
     
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  13. Dovahkiin

    Dovahkiin Regular Member

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    sure it cannot as of now, since the price tag for research is too high plus the taxes imposed on Tesla manufactured cars plus oil company conspiracies, same trend is observed in every path breaking invention. say for example computers, phones, we have to wait till the technology becomes cheap, scientists and engineers find sustainable alternative, and this will happen soon ...
     
  14. Kshatriya87

    Kshatriya87 Senior Member Senior Member

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    Exactly. But then by that time maybe the Saudis will invent / manufacture similar cars. What then?

    Sent from my HTC One_E8 dual sim using Tapatalk
     
  15. Dovahkiin

    Dovahkiin Regular Member

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    no problem if they don't jeopardize the entire concept
     
  16. sabari

    sabari Regular Member

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    Tesla mighty need high cost but why should not we consider low cost steam engine powered by automatic coal loader
     
  17. Kshatriya87

    Kshatriya87 Senior Member Senior Member

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    Because it's bad for the environment?

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  18. aliyah

    aliyah Regular Member

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    17.3% debt is nothing..... japan have 300%+ debt.........its all useless stories created by some
     
  19. Kshatriya87

    Kshatriya87 Senior Member Senior Member

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    Yes but Japan has more to offer as well. Japan has higher employment rate. Saudis have just oil. If They drop further, what else do they have to pay the debts? Nothing.

    World bank would anytime prefer to give another loan to Japan instead of Saudi.

    It's not how much loan you have taken, it's what you have to offer in return and your future. That's what matters.

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  20. BATTLE FIELD

    BATTLE FIELD Battle Captain

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    yes let them fall
    they pay the terrorist and give aid to begger porkistan.
     
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  21. Indibomber

    Indibomber Regular Member

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    Not really, future of KSA depends on tourism currently KSA generates around $22 billion from tourism (Not religious). Hajj alone generated around $ 9 billion. This is only expected to grow if they dont mess up, even of they Islamic tourism will only help.
     

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