Impact of Falling Oil Prices on Saudi Arabia and the Gulf States

(Institute for National Security Studies) Yoel Guzansky and Shmuel Even - In August 2015 the price of oil averaged about $45 a barrel, compared to $100 a barrel at the same time last year. The drop in oil prices will make it difficult for Saudi Arabia and the Gulf states to maintain their development momentum and high standard of living. At present, almost all the Gulf states have budgetary deficits eating away at their reserves. Saudi Arabia is expected to end the year with a deficit of $150 billion, the largest in its history. It has already started cutting project budgets and even military acquisitions, while allocating $10 billion a month from foreign currency reserves to finance expenses. Yet its reserves are still large - $660 billion in June 2015. The less wealthy monarchies, such as Bahrain and Oman, are particularly at risk. The situation in the Gulf affects Egypt, Jordan, the Palestinian Authority, Syria, and Lebanon, all of which are experiencing severe economic difficulties. They are sustained by the money from their workers in the Gulf, investments and trade with the Gulf states, and outright aid. Yoel Guzansky, a research fellow at INSS, was formerly in charge of strategic issues at the National Security Council in the Prime Minister's Office. Col. (ret.) Dr. Shmuel Even, a senior research fellow at INSS, had a long career in the IDF's Intelligence Branch.

2015-09-09 00:00:00

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