The 19th annual meeting of the Gulf Cooperation Council (GCC), held in Abu Dhabi from December 7-9, was a far cry from the heady days of high oil prices when Arab monarchies were awash with petro-dollars. So badly have the oil producers been affected by declining oil prices that Saudi Arabia, the biggest producer, is running a budget deficit for the fifteenth consecutive year with no end in sight to its plight.
Projecting a deficit of US$15 billion - a whopping 11 percent of its gross domestic product (GDP) - the Saudis have gone to Abu Dhabi, their tiny neighbour, for a $5 billion aid package. This must be painful for the brash House of Saud which has squandered the kingdom’s wealth with gay abandon, to go to its tiny neighbour for a handout.
Last January, when the ailing and largely incapacitated king Fahd presented the country’s budget for the year 1998-99, he predicted a deficit of only $4.8 billion. With the price of crude oil now hovering around $10.42 per barrel, and with large Saudi discounts to retain their market share, they will get less than $9 per barrel. For every one dollar drop in the price of oil, the Saudis lose $2.5 billion.
This sorry state of affairs is the direct result of Saudi over-production at the behest of Uncle Sam, their true master. The Saudi policy defies all economic sense but then nothing in the kingdom under the House of Saud is based on logic.
Commenting on the predicament of Arab monarchies, the Financial Times of London (December 4, 1998) said that the bulk of their population has been employed in non-productive government jobs, given subsidised housing and free utilities. ‘In return, the subjects of these absolute monarchies are not expected to mind that they have no say in governance, that a tiny elite keeps wealth abroad equivalent to three or four times the region’s output, or that their governors spend tens of billions of dollars on dubious arms purchases which add to this private wealth through commissions.’
The mouth-piece of the British business community is conspicuously silent about the western beneficiaries of this arrangement. For instance, the hundreds of billions of dollars stashed abroad actually lie in western, primarily British and American, banks. The ‘tens of billions of dollars on dubious arms purchases’ have also gone primarily to Britain and the US, with France, Germany and Russia picking up crumbs. With Britain alone, the Saudis have entered into a ú40 billion Al-Yamama arms deal under which they must purchase, at inflated prices, British weapons.
Then there is the huge American armada in the Persian Gulf, ostensibly to protect these shaky monarchies from Saddam Husain of Iraq. The reality is that Saudi Arabia, Kuwait and others are required to pay for its costs. During last month’s stand-off with Saddam in which the US ordered additional bombers to the Persian Gulf in a show of force, the price tag was $1 billion. The Saudis and the Kuwaitis were called upon to cough up the money because the mobilization was allegedly to protect them.
Western newspapers are not likely to touch upon these subjects because it does not serve their interests. The reality staring these monarchies is that they never had political legitimacy; they are now financially bankrupt as well. They were created to serve western interests and to keep the Muslims divided. Nearly all of them have border disputes which can explode into fullscale war at any time.
In order to remain in power, they need outside protection. As long as the petro-dollars kept flowing in, they could buy the acquiescence of their populations by denying them a say in governance. With the money gone, in fact, many running huge deficits, there is restlessness among their peoples. Adding insult to injury, blatant US favouritism of Israel goes against their sense of fair play and decency, compounding their resentment of regimes which are seen as subservient to Washington.
As crude oil prices continue to slide and life begins to get difficult for the Arab monarchies, restlessness is likely to increase. With the US securing new frontiers for oil, such as in Central Asia and the Caspian Sea region, these regimes may be history sooner than later.
Muslimedia: December 16-31, 1998