Saudi politics harming economy: Daily

January 6, 2015 1:33 am 

TEHRAN, Jan. 5 — An English-language newspaper on Monday believes that the oil-rich kingdom of Saudi Arabia will not surrender its security and political interests, even though it may harm its economic development.

Elucidating on the issue, 'Iran Daily' noted that economists believe the country has about USD 700 billion in forex reserve.

Despite the fact that Saudis are obliged to use the fund for infrastructure development, all countries in the Persian Gulf consider political and security issues as their main priorities, noted the paper in its Opinion column (pg 4)

Joining the West to weaken the economies of Iran and Russia, containing non-OPEC oil producers and increasing the costs of renewable energies for customers in the Middle East are among major policies pursued by Saudis to safeguard their long-term political and security interests, underscored the paper.

Saudis believe they can achieve their strategic security objectives by using the 700-billion-dollar reserve despite the 39-billion-dollar budget deficit. However, this policy will harm the country’s economic development and cause public dissatisfaction, it said.

Saudi Arabia, with proven oil reserves of 267 billion barrels, has almost one-fourth of the entire crude reserves in the world and exports over 10b barrels of oil per day.

The country’s officials claim that they can increase oil output to 15 mbpd and continue this trend for at least 50 years.

Oil exports account for nearly 80 percent of the Saudi revenues, despite efforts to reduce the country’s dependency on petrodollars. Therefore, oil price fluctuations have a huge impact on the Saudi economy, it noted.

In June 2014, Saudi officials decided to set up a fund to deposit hundreds of billion dollars of surplus oil revenues. Before the formation of its first National Reserve Fund, the central bank was used the extra petrodollars by buying government bonds mostly in the United States.

A huge rise in Saudi currency reserves — about US$ 323 billion — in the past three years due to a rise in oil prices compelled Riyadh to manage this money inside the country. Nevertheless, today the situation has changed with oil prices plunging to their lowest level since 2009, noted the paper.

On Dec. 25, Saudi Arabia’s cabinet endorsed a 2015 budget that projects a slight increase in spending and a significant drop in revenues due to the sliding oil prices, resulting in a nearly US$ 39b deficit. This projected budget deficit is the biggest one since 2011.

According to economic analysts, if the oil prices stabilize (at about US$ 60 per a barrel), Riyadh will lose about half of its oil revenues. In order to compensate the budget deficit, Saudi King Abdullah has allowed the finance ministry to use its currency reserves and release government bonds.

According to Saudi regulations, the withdrawal of government deposits is forbidden, except for safeguarding national interests and through a royal decree.

Saudi officials plan to use petrodollar reserves for developing the private sector, reducing government debts, expanding educational facilities, preparing the ground for foreign investments and increasing defense spending, apart from extending subsidies to Saudi nationals, the paper said. (PNA/IRNA)

RMA/CDN

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