News / Middle East

    Low Oil Price Dents Gulf Economies as Riyadh Seeks $8 Billion Loan

    Low Oil Price Dents Gulf Economies as Riyadh Seeks $8B Loani
    X
    March 16, 2016 4:39 AM
    Saudi Arabia is reported to be seeking a multibillion-dollar bank loan to shore up its finances as plunging world oil prices take their toll on the economy. But Saudi Arabia is not the only Gulf oil producer in trouble; others in the region are in a far more precarious position. More from Henry Ridgwell.
    Henry Ridgwell

    Saudi Arabia is reported to be seeking a multi-billion dollar bank loan to shore up its finances as plunging world oil prices take their toll on the economy. But it’s not the only Gulf state in trouble; other oil producers are in a far more precarious position.

    Speedboats whisk tourists across the warm waters of the Gulf to former pearl fishing grounds off Bahrain’s coastline. Before the discovery of oil in the 1930s, the economy was based almost entirely on pearl exports. Bahrain’s government is keen to show off its heritage – but there’s another plan, said Noura Al Sayeh, chief architect for the new Heritage Trail.

    "The idea behind the whole project is also to make pearling a sustainable economy for Bahrain once again," said Sayeh.

    Bahrain and other Gulf states urgently need to diversify their economies. Oil has plunged from $120 a barrel in 2014 to around $40 today. The ratings agency Moody’s has downgraded its outlook for Bahrain’s economy to ‘junk’ status. It’s not alone, said Jason Tuvey of London-based analysts Capital Economics.

    “Oman and Bahrain are where there’s going to have to be an enormous fiscal squeeze over the next couple of years. And growth there is going to be extremely weak. On top of that there are political concerns in both countries,” said Tuvey.

    Oil provides around 80% of Saudi Arabia’s total income. But that revenue has halved in the past two years. The government is running a deficit of 15% and is reported to be seeking a bank loan of $8 billion. But Tuvey said it is not in imminent danger.

    FILE - A Saudi Aramco oil installion known as "Pump 3" in the desert near the oil-rich area of Khouris, 160 km east of the Saudi capital Riyadh.
    FILE - A Saudi Aramco oil installion known as "Pump 3" in the desert near the oil-rich area of Khouris, 160 km east of the Saudi capital Riyadh.

    “The Saudi authorities built up their buffers over the past decade while oil prices were high. They paid down debt as well. So they’re now in a position of relative strength in order to cope with low oil prices, at least compared with other producers such as Russia and Nigeria,” he said.

    As a member of the OPEC cartel, Saudi Arabia has the power to cut production and boost oil prices. But that could in fact undermine Saudi’s economy.

    “That would just entice shale producers in the U.S. to ramp up production again and threaten Saudi Arabia’s long-term position in the market,” said Tuvey.

    With the United States less reliant on Gulf oil – and relations between Washington and Saudi rival Iran warming – there are questions over Riyadh’s geopolitical and economic future. But last month, Saudi’s Foreign Minister Adel Al-Jubeir described the U.S. alliance as "hugely valuable."

    “America is our ally. It has been our historic ally for more more than seven decades. America is our largest trading partner, it's the largest investor in the kingdom of Saudi Arabia,” said Jubeir.

    Riyadh is trying to reform its economy by cutting wages and encouraging more private sector employment. But in a country so accustomed to oil wealth, analysts say such changes will take years to implement.

    You May Like

    Self-doubt, Cultural Barriers Hinder Cambodian Women in Tech

    Longtime Cambodian tech observer Sok Sikieng says that although more women have joined profession in recent years, there remain significant factors hindering women from reaching tech potential

    Trans-Adriatic Pipeline to Boost European Energy Security

    $4.5 billion-pipeline will become operational in 2020 and will deliver gas from Azerbaijan’s Shah Deniz II field to southern Italy

    Video California Celebration Showcases Local Wines, Balloons

    Annual festival showcases the region's harvested agriculture, fine wines and offers opportunities to experience the gentle breeze in a hot air balloon flight

    This forum has been closed.
    Comment Sorting
    Comments
         
    by: Paul Pasternack from: United Kingdom
    March 16, 2016 1:17 PM
    This Dents in the Gulf economies could eventually become a giant hole as any look at the data confirms that the fundamentals are still hugely disconnected from the markets. The oil prices have not bottomed out as the IEA suggests and prices will continue to decline in the $20's.

    by: williweb from: Phoenix Arizona USA
    March 16, 2016 12:45 PM
    After selling oil to the entire world for seven decades the Saudi's certainly have stellar credit. 8 billion is chump change to them.

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Vietnamese-American Youth Optimistic About Obama's Visit to Vietnami
    X
    Elizabeth Lee
    May 22, 2016 6:04 AM
    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video Vietnamese-American Youth Optimistic About Obama's Visit to Vietnam

    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video First-generation, Afghan-American Student Sets Sights on Basketball Glory

    Their parents are immigrants to the United States. They are kids who live between two worlds -- their parents' homeland and the U.S. For many of them, they feel most "American" at school. It can be tricky balancing both worlds. In this report, produced by Beth Mendelson, Arash Arabasadi tells us about one Afghan-American student who seems to be coping -- one shot at a time.
    Video

    Video Newest US Citizens, Writing the Next Great Chapter

    While universities across the United States honor their newest graduates this Friday, many immigrants in downtown Manhattan are celebrating, too. One hundred of them, representing 31 countries across four continents, graduated as U.S. citizens, joining the ranks of 680,000 others every year in New York and cities around the country.
    Video

    Video Vietnam Sees Strong Economic Growth Despite Incomplete Reforms

    Vietnam has transformed its communist economy to become one of the world's fastest-growing nations. While the reforms are incomplete, multinational corporations see a profitable future in Vietnam and have made major investments -- as VOA's Jim Randle reports.
    Video

    Video Qatar Denies World Cup Corruption

    The head of Qatar’s organizing committee for the 2022 World Cup insists his country's bid to host the soccer tournament was completely clean, despite the corruption scandals that have rocked the sport’s governing body, FIFA. Hassan Al-Thawadi also said new laws would offer protection to migrants working on World Cup construction projects. VOA's Henry Ridgwell reports.
    Video

    Video Infrastructure Funding Puts Cambodia on Front Line of International Politics

    When leaders of the world’s seven most developed economies meet in Japan next week, demands for infrastructure investment world wide will be high on the agenda. Japanese Prime Minister Shinzo Abe’s push for “quality infrastructure investment” throughout Asia has been widely viewed as a counter to the rise of Chinese investment flooding into region.
    Video

    Video Democrats Fear Party Unity a Casualty in Clinton-Sanders Battle

    Democratic presidential front-runner Hillary Clinton claimed a narrow victory in Tuesday's Kentucky primary even as rival Bernie Sanders won in Oregon. Tensions between the two campaigns are rising, prompting fears that the party will have a difficult time unifying to face the presumptive Republican nominee, Donald Trump. VOA national correspondent Jim Malone has more from Washington.
    Video

    Video Portrait of a Transgender Marriage: Husband and Wife Navigate New Roles

    As controversy continues in North Carolina over the use of public bathrooms by transgender individuals, personal struggles with gender identity that were once secret are now coming to light. VOA’s Tina Trinh explored the ramifications for one couple as part of trans.formation, a series of stories on transgender issues.
    Video

    Video Amerikan Hero Flips Stereotype of Middle Eastern Character

    An Iranian American comedian is hoping to connect with American audiences through a film that inverts some of Hollywood's stereotypes about Middle Eastern characters. Sama Dizayee reports.
    Video

    Video Budding Young Inventors Tackle City's Problems with 3-D Printing

    Every city has problems, and local officials and politicians are often frustrated by their inability to solve them. But surprising solutions can come from unexpected places. Students in Baltimore. Maryland, took up the challenge to solve problems they identified in their city, and came up with projects and products to make a difference. VOA's June Soh has more on a digital fabrication competition primarily focused on 3-D design and printing. Carol Pearson narrates.

    Special Report

    Adrift The Invisible African Diaspora