After an unprecedented price war that led to the oil prices plummeting to zero, Saudi Arabia might be on a brink of collapse.
It all started when Russia rejected the proposal tabled by Saudi Arabia to its OPEC+ members to cut the oil prices. “We have made this decision because no consensus has been found of how all the 24 countries should simultaneously react to the current situation.
So as from April 1, we are starting to work without minding the quotas or reductions which were in place earlier but this does not mean that each country would not monitor and analyse market developments,” said Alexander Novak, Russian Energy Minister.
Saudi Armco retaliated Russia’s move by offering discounts to refiners in Asia, Europe and the US to use Saudi crude. President Trump threatened to impose tariffs on oil imports to protect its domestic oil producers who had already started facing enormous losses.
As reported earlier by EurAsian Times, Washington plans to remove four Patriot missile batteries and dozens of troops which were stationed in the Kingdom after the drone strike on Aramco facilities in September 2019.
Such relocation of troops leaves Saudi Arabia vulnerable to Iran. The kingdom would be paralysed in an event of Iran attacking the Aramco oil facilities in Saudi Arabia. However, Pentagon officials explained that the changes are because Iran is no longer “an immediate threat to American strategic interests.”
Unlike Russia, the government of Saudi Arabia depends solely on the sale of oil as its source of income. As reported by Reuters, Saudi Arabia’s central bank foreign reserves fell in March at their fastest rate in at least 20 years and to their lowest since 2011, while the Kingdom slipped into a $9 billion budget deficit in the first quarter as oil revenues collapsed.
“The kingdom has the financial ability to overcome this crisis … we will get over this in a strong position, the kingdom has gone through and seen other, deeper crises in the past and survived them,” said Mohammed al-Jadaan, Saudi Minister of Finance. He added that he expects the non-oil private sector part of the economy to contract this year for the first time.
Saudi Arabia ignored the basic principle of the economic principle of demand and supply. Now the onus of reviving the economy falls on the Crown Prince Mohammad Bin Salman. The pandemic and the mismanagement of Saudi Arabia has landed it in a situation where the possibility of bankruptcy has started looking real.