Good day all. This story came out the other day. It seems that the oil kingdom of Saudi Arabia is running a little short of cash these days, and finds itself needing to take out a loan.
For decades, the rulers of Saudi Arabia, the House of Saud, have been using its oil money to buy off the population and maintain their hold on power. They’ve also used their oil money to spread Wahhabist version of Islam. Lately, the price of oil has plummeted from it’s $100+ a barrel price to about $25 a barrel currently. We can thank the American oil industry for this, since they’ve located and exploited huge oil fields in North America.
The Saudi’s have not ignored the American oil industry, and decided to try and drive the price of oil down in order to force the American oil producers to cap their wells. It hasn’t worked out as well as the Saudi’s had planned. Russia and Venezuela both need to sell oil to keep themselves afloat, as do many of the oil states in the Persian Gulf. Well, the Saudi’s appear to have finally run out of money. Here are the details on their bank loan from CNBC:
Saudi Arabia is raising $10bn from a consortium of global banks as the kingdom embarks on its first international debt issuance in 25 years to counter dwindling oil revenues and reserves. The landmark five-year loan, a signal of Riyadh’s newfound dependence on foreign capital, opens the way for Saudi to launch its first international bond issue. It comes as the sustained slump in crude encourages other Gulf governments, such as Abu Dhabi, Qatar and Oman, to tap international bond markets.
Can we have a great big “AWWW” for the Gulf states?
No? Oh well.
The oil-rich kingdom, which last weekend blocked a potential deal among oil producers to freeze output and bolster prices, has burnt through $150bn in financial reserves since late 2014 as its fiscal deficit is set to widen to 19 per cent of gross domestic product this year.
I can’t say for certain, but I suspect the reason the Saudi’s blocked the deal is that they need to keep pumping oil and selling it to keep some cash coming in. The attempts to crush the North American oil companies has pretty much failed. The drillers have long since become used to OPEC, led by the Saudi’s, playing games like this and have procedures in place to ride out their plans to destroy the industry.
In the meantime, Saudi Arabia has been shopping around for banks to loan them the $10 billion or so they need to keep the population from overthrowing them and chopping their heads off. It looks like they’re talking to some Asian banks, probably due to the Western banks not interested in bailing them out.
Strong interest in the loan, especially from Asian banks, came despite rating agency downgrades on Saudi creditworthiness since the oil price collapsed.
I don’t have details on who is loaning the Saudi’s the money, but I’ve read that China is interested in getting in on the deal. I can see their reasoning. They need oil, much the way we did 20 years ago, and loaning the Saudi’s a few billion gets their feet in the door. What I, and a number of others are wondering, do the Saudi’s know what they are getting themselves into with the Chinese?
The People’s Republic of China is NOT the United States of America. They don’t care if the Saudi’s like them. I have a sneaking suspicion that of the Saudi’s default on this loan, the Chinese will send their collectors out, in the guise of the People’s Liberation Army.
In the normal course of events, the United States could be counted on, actually expected to respond to the Chinese if they tried to occupy Saudi Arabia and take their oil. These days, since we now have provable reserves that far exceed the current Saudi oil reserves, we don’t need them any longer.
The views of people I’ve spoken with, some of whom have been in Saudi Arabia, is to sit back, open a beer and munch on some popcorn. The Red Chinese don’t particularly like Muslims, (They’ve been having issues with the Uyghurs in their western provinces), and the sight of the PLA debt collection service marching into Mecca just gives them a warm and cuddly feeling.
Thatisall
~The Angry Webmaster~
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