An artist’s collage juxtaposes the real-life conditions Palestinian workers face in the occupied West Bank with Scarlett Johansson’s role as SodaStream spokesmodel. (Courtesy Electronic Intifada)
Outside the U.S. Embassy in Amman, Jordan, activists demonstrate against U.S. Secretary of State John Kerry and his peace proposal, Jan. 29, 2014. (Khalil Mazraawi/AFP/Getty Images)
A Jewish settler (unseen at left) places the Israeli flag on a road sign as Israeli troops encircle Palestinian villagers protesting the army’s cutting branches off olive trees on a road leading to the illegal Jewish settlement of Tekoa, south of Bethlehe
Dr. Eyad El Serraj at a 1993 press conference in East Jerusalem denouncing Israel’s use of torture. (Ruben Bittermann/Photofile)
U.N. and Arab League envoy for Syria Lakhdar Brahimi (l) and U.N. Secretary-General Ban Ki-moon at the Jan. 22 press conference closing the Geneva II peace talks on Syria. (Philippe Desmazes/AFP/Getty Images)
By John Thomas Haldane
Despite current budgetary problems arising from large financial contributions to the allied coalition forces in the Gulf war, and the costs of cleaning up the huge oil spill resulting from the fighting in Kuwait, Saudi Arabia is looking forward confidently to a prosperous economic future. Continued high oil production and increasing profits from domestic and overseas operations of Saudi Aramco and Saudi Basic Industries Corporation (SABIC) should ensure that the government's current account will return to its normal surplus position by the end of 1992.
Saudi contributions to coalition allies, plus war-related imports and expenses totaled an estimated $70 billion, while as much as $10 billion was allocated to the oil spill cleanup.
To cover its short-run money needs, Saudi Arabia arranged for a $4.5 billion loan with 20 international banks, led by New York's J.P. Morgan & Co. In addition, Saudi Aramco separately negotiated a $1 billion loan. International financial experts state that the Kingdom could also raise funds by drawing on an estimated $65 billion in reserves, or by borrowing on the domestic market by issuing government development bonds.
A Dramatic Rise in Exports
Saudi exports in 1990 rose a dramatic 56 percent over the previous year, according to the latest figures released by the Ministry of Finance and National Economy. This was the highest increase in the past eight years. The value of the Kingdom's total exports, oil and non-oil, rose to $44 billion from $28 billion in 1989. Non-oil exports increased to a value of approximately $4 billion in 1990, with transportation equipment, electrical equipment and cement the biggest gainers.
Foremost among Riyadh's plans to increase income is a $15 billion to $20 billion drilling program, designed to increase the state-owned Saudi Aramco's output to 10 million barrels per day (b/d) from the present 8.5 million b/d. Saudi Aramco is already the world's largest oil producing company.
Some OPEC officials doubt that Riyadh will agree to return to its pre-crisis quota of 5.4 million b/d when Kuwait and Iraq eventually are able to produce at their former levels. One international oil expert has predicted that a 3.8 million b/d hike in OPEC Gulf production will be needed by 1996.
Thus, given increasing world demand for oil, Saudi Arabia should be able to secure OPEC concurrence in raising its annual quota. Kingdom output currently accounts for more than one-third of the OPEC total, with Saudi oil accounting for well over one in every eight barrels of oil consumed in the world.
A 100 meter-tall debutanizing column towers over a new natural gas complex in Jubail.
Saudi Aramco is actively increasing its overseas activities. It signed an agreement with South Korea's Sang-yong Oil Refining Company for joint refinery ownership and operations last year. This new venture will eventually provide an outlet for 300,000 b/d of Saudi crude. In addition to being marketed in South Korea, the petroleum products manufactured by the new venture will be exported to other Pacific Rim nations.
Saudi Aramco signed a second agreement in September 1991 with a number of Japanese companies to build and operate oil refineries in both countries. This $4.3 billion project marks the first entry into Japan's refining sector by a Middle East oil producer. The Nippon Oil Company will be responsible for the marketing of petroleum products from the new Japanese refineries. The Saudi-Japanese project is expected to reduce sharply Japan's demand for petroleum products from Asian oil refineries. In addition to the two Japanese refineries, the group plans to build a 300,000 b/d refinery in Jubail.
Minister of Industry and Electricity Abdulaziz Al-Zamil announced recently that SABIC plans to increase petrochemical production, manufacture new products and establish advanced research and development facilities by 1995. The company's long-range goal is to become a key player in world petrochemical markets. An important part of this effort will be downstream ventures in the Far East and the Arab World.
SABIC recently established a marketing subsidiary in Hong Kong to serve the Far East region. It already has similar subsidiaries in Western Europe and the US.
The Five-Year Plan
The Saudi Arabian Five-Year Plan,1990-95, projects total government spending of $201 billion, with $133 billion to go to the civilian economy. Special emphasis is placed on the petrochemical and agricultural sectors. Building and construction service also are to receive larger amounts than in the past, reflecting the growing housing needs of the nation. A Planning Ministry official stressed that attention will be given to economic diversification, development of non-oil revenues, promotion of export and import substitution industries and more emphasis on balanced development throughout the Kingdom. The plan, he said, "includes several measures that aim at supporting the private sector and consolidating its participation in the promotion of the various development sectors."
Saudi Arabia is destined to remain a major player in world oil markets well into the next century. Its proven oil reserves total 253 billion barrels, one quarter of global reserves. Its natural gas reserves are the fifth largest in the world. The Kingdom is the largest exporter and third largest producer of crude oil and natural gas liquids. Given these natural riches, Saudi Arabia should easily be able to surmount short-run financial problems and look to the future with confidence.
US Ambassador to Saudi Arabia Charles Freeman Jr. shares this optimistic view. In a recent speech to the American businessmen's group in Jeddah, he said that Saudi Arabia's economy, led by the petroleum sector, is recovering from the double trauma of the Gulf war and heavy security expenditures.
"The Kingdom is secure and business is good, " he told his American listeners. "The capital flight which occurred in the aftermath of Saddam Hussain's invasion of Kuwait has gone into reverse gear and private Saudi investment funds held outside the Kingdom before the Gulf crisis have returned home. The net result of this, " the ambassador said, "is nothing less than an investment boom."