According to forecasts of the International monetary Fund, oil revenues of the Arab countries of the Persian Gulf had to run out in 2034, but the crisis of the pandemic coronavirus has accelerated this process.
Western reports have begun to highlight the need for States of the Persian Gulf stringent measures to rationalize expenses, particularly Saudi Arabia, which, as experts expect, will begin to reduce the amount of military deals to fill the widening budget deficit due to the collapse in oil prices.
Military spending
According to the report published 18 may in the British newspaper The Guardian, Saudi Arabia may have to refuse new contracts for the supply of weapons and postpone already planned transaction by the financial crisis that it faced at the present time.
Correspondent Stephanie Kirchgaessner (WA) and Dan Sabbagh (London) note that the expected delay of new deals on the purchase of weapons can have long-term political consequences for the Kingdom.
Saudi Arabia faces unprecedented budget crisis due to the collapse of the oil market and global economic turmoil, pandemic coronavirus. As you know, Saudi supplies have been reduced from 750 to 500 billion dollars over the past five years.
As stated on 11 may, the Minister of Finance Saudi Arabia Muhammad al-Jadaan, the Kingdom needs 220 billion rials (58,6 billion dollars) to cover the difference between the current revenues and expenditures.
“I have no doubt that this is the end of an era… the End of an era, when the Persian Gulf was so rich,” commented Bruce Riedel of the Brookings institution in Washington, a CIA expert who has worked in this Department for 30 years.
Saudi Arabia has spent about 62 billion dollars on buying weapons last year, making it the fifth largest importer of arms in the world.
Although this figure is lower than in 2018, it still is about 8% of GDP. This means that the Kingdom spent on weapons, even more than the United States. According to research by the Stockholm Institute for peace studies, the amount of purchased weapons by the Americans amounted to 3.4% of GDP, while China spent on arms 1.9% of GDP, Russia — 3.9%, India — 2.4 per cent.
According to The Guardian, for decades, a huge expenditure was aimed at strengthening the political influence of Saudi Arabia.
Andrew Feinstein, an expert on the issue of corruption and the international arms trade, in an interview with the British newspaper noted that one of the consequences of buying weapons is that the country is buying relationship.
In light of the current crisis, according to riddle and others, the government of Saudi Arabia has no choice but to reduce military spending. According to the expert, oil prices should stay at 85 dollars per barrel to Saudi Arabia have kept the budget balance.
An activist in the fight against arms trade’s Andrew Smith said that officials in the Kingdom can in the short term to postpone the conclusion of some major transactions such as the purchase of a new group of combat aircraft. Britain has long been leading the negotiations on this deal.
According to a former U.S. Ambassador to Yemen Gerald Firestein, the Saudis postpone or cancel new contracts on arms supplies, but likely to keep maintenance contracts to maintain combat readiness of its armed forces.
“In the past, Saudi Arabia tried to revise the schedules of payments for weapons and to postpone payments for a longer period,” added the American diplomat.
He explained: “Remember, when Mohammed bin Salman visited the White house, President Donald trump signed a deal on the sale of weapons to Saudi Arabia in the amount of $ 100 billion. The majority of these transactions took place, and they were not signed. It was only words.”
If you win Joe Biden
In November, Joe Biden, the prospective Democratic candidate for President of the United States might win, since the effect of trump’s weakened because of the crisis around the pandemic.
Biden said he will restrict the sale of American weapons to Saudi Arabia.
So Christina Fontenot, former Director of Persian Gulf Affairs at the national security Council during the administration of the tramp, says that perhaps the Saudis want to wait for the results of the American elections. If Biden wins, the Democrats will reduce the number of transactions, and then the Kingdom can pretend to reluctantly accept this decision.
“This will allow them to avoid the political implications and to retain some of their influence on the private sector,” — said the expert.
However, not all analysts agree that the Saudis are planning to reduce their military spending because of the multitude of challenges in the area of security.
According to Christian Ulriksen, a member of the Institute for public policy the Baker, the Saudis may seek to double their defence spending, despite the current economic pressure, because I doubt that the United States continues to guarantee the security of Saudi Arabia.
In parallel, the us media reported that the inspector General of the Department of state Stephen LINIK began to investigate the participation of Saudi Arabia and the UAE in arms deals worth $ 8 billion. However, trump has decided to dismiss the inspector until the completion of this investigation, although it was in the final stage.
New investments
Last week, the Sovereign wealth Fund of Saudi Arabia has increased its investment in the shares of the 24 U.S. companies, the volume of which reached $ 9.8 billion. Of these investments 713,7 million dollars were invested in shares of Boeing, another 522 million in Citigroup, the same in Facebook, 495,8 million in Disney and 487,6 million in Bank of America.
In addition, the Sovereign Fund acquired the shares of Marriott Group of 514 million dollars and shares worth 827,7 million dollars in oil company BP.
Analysts still don’t know when these investments will bring a profit in light of the protracted economic downturn as a result of the pandemic coronavirus.
In February of this year, German experts have called the Sovereign investment Fund of Saudi Arabia a waste of monetary resources of the Kingdom.
In 2018, the Director of the Japanese holding company SoftBank Masayoshi Sleep told how he convinced Mohammed bin Salman to invest 45 billion euros in a technology Fund Vision. In a television interview he said: “If I say I convinced him for one hour, then it will be true. It took me 45 minutes to convince him to invest 45 billion dollars.”
Sovereign Fund Saudi Arabia intends to buy English football club Newcastle for 445 million dollars. The architect of this deal is said to be an American by the name of Carla Dibello, who has no wide experience in financial Affairs.
According to reports in the media, the role Dibello limited to the friendship that binds her and the head of the Sovereign Fund Yasser al-Rumana. This friendship allowed her to play the role of mediator and help Riyadh to conclude a number of transactions.
