Saudi Arabia in front of a war on three fronts


Saudi Arabia is currently facing a war on three fronts, with which it is difficult for its economy to take a breath in light of the devastating blow that the new Corona virus has directed to the tourism sector as a result of the suspension of Umrah trips to the holy Bekaa, as well as the collapse of the price of oil, which declined to $ 33.8 a barrel on March 13 / March 2020 due to the fierce oil war led by Riyadh against Moscow, and the outbreak of the Corona virus, which undermined oil demand in China and other Asian countries and cast a shadow over the growth prospects in the Kingdom, in addition to the second round of arrests led by Crown Prince Mohammed bin Salman, whose causes are inconsistent Between charges of treason and plot the coup and rumors swirling about the deterioration of the health of King Salman, the question that arises strongly: Is the Saudi economy can withstand these violent and successive strikes?

The first blow to the Saudi economy is the rapid spread of the Corona virus, which prompted the Kingdom to suspend the performance of Umrah for citizens and residents, and to prevent entry into tourist visas for those coming from countries from which the spread of the virus poses a threat since 4 March 2020 because the holy places that attract millions of pilgrims and pilgrims Each year a potential source of transmission of infection, and this will negatively affect the revenues of Hajj and Umrah, which is the second largest source of income in Saudi Arabia after oil and petrochemicals, as the two Islamic rituals play a very vital role in the flow of foreign cash Me and create jobs and improve the balance of payments in the Kingdom.

The two Saudi rituals also enable revenues to reach 12 billion dollars annually, including more than 6 billion dollars in the Hajj season only, and all these numbers will fall to the bottom due to the ghost of Corona, which hinders the delegation of large numbers of pilgrims who wish to perform Umrah during the month of Ramadan (24). April), as well as the Hajj season, which will take place at the end of July.

In any case, Saudi Arabia’s decision to stop Umrah is a decision to be praised in order to save the lives of its citizens and all of its expatriates, but losing its two most important seasons (Umrah and Hajj) throughout the year will result in massive financial losses for which the designers of the “Saudi Vision 2030” did not count any account.

The second blow that the Saudi economy will shrink in is the price of oil, which is deteriorating to its lowest levels due to the outbreak of corona in China, which is the most important source of energy demand in the world, as well as in many other countries, especially Asian ones, and this has led to the disruption of factories and reduced movement Travel and other activities have slowed, and thus caused a major contraction in global oil demand. Brent crude futures prices fell to $ 31.68 a barrel on March 9, 2020 to reach its lowest level since June 2017, while West Texas crude fell to $ 31.13 Per barrel, the lowest capacity It recorded since November 2014.

The hope of ending oil price declines has become very little, especially after OPEC + failed to reach an agreement on oil production cuts on March 4, 2020, as Saudi Arabia was unable to persuade the Russian bear to further reduce crude production to support prices. The reason for the rift between OPEC and Russia lies in Russian concerns about the specter of the collapse of its economy, which is in the interest of the United States and its President Trump, as the Russian bear is keen not to make any concessions to the American opponent.

In response to the Russian intransigence, Aramco announced its intention to raise its production capacity from 9.7 million barrels per day to 12 million barrels, and last week the CEO of the company Amin Al-Nasser announced that Aramco received a mandate from the Ministry of Energy to increase its oil production capacity to 13 million barrels from 12 million Barrels, up one million barrels per day. However, the Russian side is experienced in responding to the conflict, as it announced its intention to increase oil production by between 200 and 300 thousand barrels per day in the short term, and other Gulf countries could not Twitter outside the swarm, so the UAE announced its ability to increase its oil production by 4 Millions of barrels per day, as Kuwait decided to reduce the price of selling crude oil to Asian buyers, and the Kingdom will continue to swallow the bitterness of the losses.

For its part, the Russian bear confirmed its ability to adapt to the price of oil, estimated at $ 25 a barrel, for a period of up to a decade. While it is not known who will stand for a longer period, this fierce oil war between Muhammad bin Salman and Putin will ensure that oil prices do not recover and do not reach the extent that the Saudi budget is breathing a sigh of relief. The Kingdom will face great difficulty in achieving balance in its budgets because it has prepared its budget estimates based on a reference price of $ 50 per barrel in anticipation of the bad scenarios of the trade war between the United States and China. And the failure of the Kingdom to take precautionary measures that will inevitably impede it from moving forward with the success of the overly ambitious “Vision 2030” programs, which are not commensurate with the reality and condition of the factors affecting the income feeding that vision.

While the Saudi economy had not yet grasped the strength of the previous two strikes, Crown Prince Muhammad bin Salman dealt to him a third, heavier than ever before by carrying out a second campaign of arrests that included the most prominent members of the royal family on March 6, 2020. The pre-emptive step can be described as determined To strengthen and tighten his grip on government by displacing critics and silencing dissent at home and abroad. The news of the arrest of influential princes in the ruling family, such as the thunderbolt, fell on the Saudi Stock Exchange, which fell by more than 6.5 percent in the beginning of trading on Sunday, March 8, 2020, and Aramco’s share fell below the main offering price of 32 riyals, or $ 8.5 on December 11. 2019 to 31.7 riyals, or $ 8.2, on March 8, 2020. The most important thing that the foreign investor is searching for in the host country is the reliable, safe and stable investment environment, and this is what the Kingdom currently lacks, as the recent arrests of any investor, whether local or foreign, suggest that the Saudi investment climate is on the edge of a volcano, perhaps the most dangerous in the history of the Kingdom.

The bottom line is that these painful and consecutive strikes ruled the “Saudi Vision 2030” failure, and if the crown prince continues to pursue such policies deepens the uncertainty, destabilization and alienation of investors, and thus his economic plans aimed at making the Kingdom an investment destination will not make any sense.


Please enter your comment!
Please enter your name here