Arab Gulf Economies Take Massive Hit with Oil Price Crash
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BAGHDAD (AP) — Iraq is planning painful cuts in social benefits relied on by millions of government workers. Saudi Arabia will likely have to delay mega-projects. Egypt and Lebanon face a blow as their workers in the Gulf send back less of the much-needed dollars that help keep their fragile economies afloat.
The historic crash in oil prices in the wake of the coronavirus pandemic is reverberating across the Middle East as crude-dependent countries scramble to offset losses from a key source of state revenue — and all this at a time when several of them already face explosive social unrest.
The economies of all the Arab Gulf oil exporters are expected to contract this year, as much as 5% in Iraq, according to the International Monetary Fund.
While some Gulf countries can rely on a cushion of foreign currency reserves, nowhere in the region are the circumstances more dire than in Iraq, where oil sales fund 90% of the state budget.
Iraq saw massive protests in the past months by a populace angry over the weak economy and rampant corruption — and the turmoil could erupt again. Cutbacks in spending will only add to the pain for a population struggling to get by under coronavirus restrictions. In the capital’s Tahrir Square, protesters are still camped out, determined not to let their movement die.
“Coming into summer the conditions are developing for a perfect storm for the government,” said Sajad Jiyad, an Iraq-based analyst.
Oil is currently trading at $20 per barrel, dipping even lower some days to levels not seen since 2001. Further constraints will be felt as an OPEC agreement to cut production levels by 23% to stabilize the oil market takes hold. May and June are expected to be particularly difficult as that is when oil storage space will be full, making it harder for countries to market oil, according to Robin Mills, CEO of Dubai-based Qamar Energy.
So far it’s early, and no one has reached a stage where the budget runs out, Mills said. “But that is inevitable — Iraq will probably hit first.”
In its draft 2020 budget, Iraq had been counting on revenues from oil prices at $56 a barrel to fund badly needed development projects and the bloated public sector, costing nearly $45 billion in compensation and pensions. Oil Minister Thamir Ghadhban said recently that revenue from crude exports has dropped by 50%.
Now officials are debating difficult salary cuts. One proposed idea would defer paying public sector workers part of their social benefits until the financial sector improves, according to three Iraqi officials. The question is how much to cut and from whom; one recommendation is that higher-end earners take a 50% cut. The officials spoke on condition of anonymity so as not to derail ongoing talks.
That would save Iraq hundreds of millions of dollars, but risks triggering unrest. Public sector workers receive a host of benefits that effectively add 50-70% to their take-home wages. They include family allowances and so-called danger pay benefits for security forces.
Still, experts said that won’t be enough if oil prices remain between $20-30 per barrel.
“Cuts need to be deeper to make a dent in payroll, and even then, if revenues are so low there comes a point where cuts are not enough,” Jiyad said .
On top of this, expected compliance with OPEC will require Iraq to cut over 1 million barrels per day from production in May and June.
Moreover, the country has been left without an effective executive to carry out reforms by an ongoing leadership vacuum since December, when Prime Minister Adel Abdul-Mahdi resigned under pressure from protesters. Prime Minister-designate Mustafa Kadhimi is due to present his proposed Cabinet to Parliament next week, but he faces opposition from key political blocs.
Until his government is in place, a 2020 budget is unlikely to be approved. This limits Iraq’s ability to borrow from international agencies for budgetary support.
Across the region, the drop in oil prices will derail future investment and development plans.
The region’s largest crude producer, Saudi Arabia, plans to cuts spending by 5%, or about $13.3 billion. Additional cuts and measures are expected as it digs into its roughly $500 billion in foreign reserves.
Target dates of Crown Prince Mohammed bin Salman’s plan for the completion of new cities and mega projects will likely be delayed as businesses suffer and foreign investment dips amid the pandemic.
Kuwait has ample reserves as well. But the island nation of Bahrain faces a debt estimated to be equal to 105% of its GDP, even after it received a $10 billion bailout from its neighbors to avoid defaulting on a $750 million Islamic bond repayment in 2018.
Other giant global oil producers will have to grapple with job losses and economic shocks.
U.S. producers and service companies have laid off thousands of employees, and greater job losses are expected as the pandemic drags on. Many shale producers were already struggling before the pandemic hit, and some have filed for bankruptcy, with more expected.
The price crash has dealt a blow to Russia at a time of partial economic shutdown. Russian officials say that the nation’s solid hard currency reserves can help sustain the shock and insist low production costs allow Russian oil companies to stay profitable.
The double shock of the pandemic and dropping oil prices is also expected to hit hard in Egypt, Jordan and Lebanon, which rely on a large diaspora and workers in oil-rich Arab Gulf countries who send foreign currency home.
In Lebanon, remittances once made up 12.5% of GDP; in Egypt, they account for 10% of GDP. Coupled with its own economic crisis and financial turmoil, the anticipated losses for Lebanon will be devastating.
“How are we expected to survive from now on? Hunger is knocking at the doors,” a Lebanese man told reporters this week, as he waited in a long line outside a money transfer shop in Beirut, on the last day he would be allowed to collect a wire transfer in dollars from his older brother in Qatar.
PRESIDENT of the UNITED STATES DONALD TRUMP: Pathological
liar, swindler, con man, huckster, golfing cheat, charity foundation fraudster,
tax evader, adulterer, porn whore chaser and servant of the Saudis dictators
Opinion: Trump And
Pompeo Have Enabled A Saudi Cover-Up Of The Khashoggi Killing
WHO IS FINANCING ALL THE TRUMP AND
SON-IN-LAW’S REFINANCING SCAMS???
FOLLOW THE MONEY!
"I doubt that Trump understands -- or cares about --
what message he's sending. Wealthy Saudis, including members of the extended
royal family, have been his patrons for years, buying his distressed properties
when he needed money. In the early 1990s, a Saudi prince purchased Trump's
flashy yacht so that the then-struggling businessman could come up with cash to
stave off personal bankruptcy, and later, the prince bought a share of the
Plaza Hotel, one of Trump's many business deals gone bad. Trump also sold an
entire floor of his landmark Trump Tower condominium to the Saudi government in
2001."
“The Wahhabis finance thousands of
madrassahs throughout the world where young boys are brainwashed into becoming
fanatical foot-soldiers for the petrodollar-flush Saudis and other emirs of the
Persian Gulf.” AMIL
IMANI
I recommend that Ignatius read Raymond
Ibrahim's outstanding book Sword and Scimitar, which contains accounts of dynastic
succession in the Muslim monarchies of the Middle East, where standard
operating procedure for a new monarch on the death of his father was to
strangle all his brothers. Yes, it's awful. But it has
been happening for a very long time. And it's not going to change
quickly, no matter how outraged we pretend to be. MONICA SHOWALTER
TRUMP AND THE
MURDERING 9-11 MUSLIM SAUDIS…
Why is the Swamp Keeper
and his family of parasites up their ar$es??
WHAT WILL TRUMP AND
HIS PARASITIC FAMILY DO FOR MONEY???
JUST ASK THE
SAUDIS!
JOHN DEAN: Not so far. This has been right by the letter of the special counsel’s
charter. He’s released the document. What I’m looking for is relief and
understanding that there’s no witting or unwitting likelihood that the
President is an agent of Russia. That’s when I’ll feel comfortable, and no
evidence even hints at that. We don’t have that yet. We’re still in the process
of unfolding the report to look at it. And its, as I say, if [Attornery General
William Barr] honors his word, we’ll know more soon.
WHAT WILL TRUMP AND
HIS PARASITIC FAMILY DO FOR MONEY???
JUST ASK THE
SAUDIS!
*
*
JOHN DEAN: Not
so far. This has been right by the letter of the special counsel’s charter.
He’s released the document. What I’m looking for is relief and
understanding that there’s no witting or unwitting likelihood that the
President is an agent of Russia. That’s when I’ll feel comfortable, and no
evidence even hints at that. We don’t have that yet. We’re still in the process
of unfolding the report to look at it. And its, as I say, if [Attornery General
William Barr] honors his word, we’ll know more soon.
“Our
entire crony capitalist system, Democrat and
Republican
alike, has become a kleptocracy
approaching
par with third-world hell-holes. This
is the
way a great country is raided by its elite.” ---
-
Karen McQuillan AMERICAN THINKER
PRESIDENT of the UNITED STATES DONALD TRUMP: Pathological
liar, swindler, con man, huckster, golfing cheat, charity foundation fraudster,
tax evader, adulterer, porn whore chaser and servant of the Saudis dictators
Opinion: Trump And
Pompeo Have Enabled A Saudi Cover-Up Of The Khashoggi Killing
In the weeks
following the death of Saudi journalist Jamal Khashoggi, President Trump spent
more time praising Saudi Arabia as a very important ally than he did
reacting to the killing.
Hasan Jamali/AP
Aaron David Miller (@aarondmiller2) is a senior fellow at the
Carnegie Endowment for International Peace and a former State Department Middle
East analyst, adviser and negotiator in Republican and Democratic
administrations. He is the author most recently of the End of
Greatness: Why America Can't Have (and Doesn't Want) Another Great President.
Richard Sokolsky, a nonresident senior fellow at the Carnegie
Endowment for International Peace, worked in the State Department for six
different administrations and was a member of the secretary of state's Office
of Policy Planning from 2005 to 2015.
It has been a year since Saudi journalist and Washington Post columnist
Jamal Khashoggi entered Saudi Arabia's Consulate in Istanbul where he was slain
and dismembered. There is still no objective or comprehensive Saudi or American
accounting of what occurred, let alone any real accountability.
The Saudi Crown Prince Mohammed bin Salman's admission in a
recent CBS interview that
he takes "full responsibility," while denying foreknowledge of the
killing or that he ordered it, sweeps under the rug the lengths to which the
Saudis have gone to obscure the truth about their involvement in the killing
and cover-up.
The Saudi campaign of obfuscation, denial and cover-up would never
have gotten off the ground had it not been for the Trump administration's
support over the past year. The president and Secretary of State Mike Pompeo
not only refused to distance themselves from the crown prince, known by his
initials MBS, but also actively worked to relegitimize him. The Saudis killed
Khashoggi but Trump acquiesced in the cover-up and worked hard to protect the
U.S.-Saudi relationship and soften the crown prince's pariah status. In short,
without Trump, the attempted makeover — such as it is — would not have been
possible.
The
Saudis killed Khashoggi but Trump acquiesced in the cover-up and worked hard to
protect the U.S.-Saudi relationship and soften the crown prince's pariah
status.
Weak administration response
The administration's weak and feckless
response to Khashoggi's killing was foreshadowed a year before it occurred. In
May 2017, in an unusual break with precedent, Trump visited Saudi Arabia on his
inaugural presidential trip; gave his son-in-law the authority to manage the
MBS file, which he did with the utmost secrecy; and made it unmistakably clear
that Saudi money, oil, arm purchases and support for the administration's
anti-Iranian and pro-Israeli policies would elevate the U.S.-Saudi
"special relationship" to a new level.
Predictably, therefore, the administration's reaction to
Khashoggi's killing was shaped by a desire to manage the damage and preserve
the relationship. In the weeks following Khashoggi's death, Trump spent
more time praising Saudi Arabia as a very important ally, especially as a
purchaser of U.S. weapons and goods, than he did
reacting to the killing. Trump vowed to get to the bottom of the
Khashoggi killing but focused more on defending the crown prince, saying this was another example of
being "guilty before being proven innocent."
Those pledges to investigate and impose accountability would
continue to remain hollow. Over the past year, Trump and Pompeo have neither
criticized nor repudiated Saudi actions that have harmed American interests in
the Middle East. Two months after Khashoggi's death, the administration, in what
Pompeo described as an "initial step," imposed sanctions on 17
Saudi individuals implicated in the killing. But no others have been
forthcoming, and the visa restrictions that were imposed are meaningless
because none of the sanctioned Saudis would
be foolish enough to seek entry into the United States.
What's more, the administration virtually ignored a congressional
resolution imposing sanctions on the Saudis for human rights abuses
and vetoed another bipartisan resolution that would have ended U.S. military
assistance to Saudi Arabia's inhumane military campaign in Yemen.
The Saudis opened a trial in January of 11 men implicated in the
killing, but the proceedings have been slow and secretive, leading the United
Nations' top human rights expert to declare that "the trial underway in
Saudi Arabia will not deliver credible accountability." Despite
accusations that the crown prince's key adviser Saud al-Qahtani was involved in
the killing, he's still advising MBS, has not stood trial and
will likely escape punishment. A year later, there are still no reports of
convictions or serious punishment.
Legitimizing Mohammed bin Salman
The Trump administration has not only given the crown prince a
pass on the Khashoggi killing, but it has also worked assiduously to remove his
pariah status and rehabilitate his global image. Barely two months after the
2018 slaying, Trump was exchanging pleasantries with the crown prince at the
Group of 20 summit in Buenos Aires and holding out prospects
of spending more time with him. Then this past June, at the G-20 in Osaka,
Japan, Trump sang his praises while dodging questions about the killing.
"It's an honor to be with the crown prince of Saudi Arabia, a friend of
mine, a man who has really done things in the last five years in terms of
opening up Saudi Arabia," Trump said.
And you can
bet that when Saudi Arabia hosts the G-20, scheduled to be held in its capital
of Riyadh in November 2020, the Trump administration will be smiling as its
rehab project takes another step in its desired direction.
What the U.S. should have done
Trump has failed to impose any serious costs or constraints on
Saudi Arabia for the killing of a U.S. newspaper columnist who resided in
Virginia or for the kingdom's aggressive policies, from Yemen to Qatar. In the
wake of the Khashoggi killing, the administration should have made it
unmistakably clear, both publicly and privately, that it expected a
comprehensive and credible accounting and investigation. It should have suspended
high-level contacts and arms sales with the kingdom for a period of time. And
to make the point, the administration should have supported at least one
congressional resolution taking the Saudis to task, in addition to triggering
the Magnitsky Act, which would have required a U.S. investigation; a report to
Congress; and sanctions if warranted.
Back to business as usual
The dark
stain of the crown prince's apparent involvement in Khashoggi's death will not
fade easily. But for Trump and Pompeo, it pales before the great expectations
they still maintain for the kingdom to confront and contain their common enemy,
Iran, as well as support the White House's plan for Middle East peace, defeat
jihadists in the region and keep the oil spigot open.
Most of
these goals are illusory. Saudi Arabia is a weak, fearful and unreliable ally.
The kingdom has introduced significant social and cultural reforms but has
imposed new levels of repression and authoritarianism. Its reckless policies
toward Yemen and Qatar have expanded, not contracted, opportunities for Iran,
while the Saudi military has demonstrated that, even after spending billions to
buy America's most sophisticated weapons, it still can't defend itself without
American help.
Meanwhile,
recent attacks on critical Saudi oil facilities that the U.S. blames on Iran
have helped rally more American and international support for the kingdom.
When it
comes to the U.S.-Saudi relationship and the kingdom's callous reaction to
Khashoggi's killing, the president and his secretary of state have been
derelict in their duty: They have not only failed to advance American strategic
interests but also undermined America's values in the process.
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