The Saudi royal family is running out of time
Reuters/Carlo Allegri
Geopolitical expert George Friedman says low oil prices could destabilize and possible topple Saudi Arabia’s ruling family long before it runs out of money. The result could radically change the once-dependable Middle East political order, with major implications for the entire world.
Speaking in a Mauldin Economics interview, Friedman says oil isn’t just important to the Saudi economy; oil is the Saudi economy. The Kingdom has no other reason to exist in its current form. Saudi Arabia prospered at $100 oil, was satisfied with $50 oil, but is in deep trouble with $30 oil.
Low oil prices make it impossible for the Saudis to keep all their commitments. At current prices, they can’t balance their government budget and can’t sustain payments to the vast royal family which forms the core of Saudi society.
Saudi’s Enemies Won’t Wait to Move
Friedman agrees the Saudis have enough cash reserves to probably last 3–4 years, depending how much they cut spending and what oil prices do, but money is not the real constraint.
The House of Saud has many enemies both within and outside its borders. If the perception takes hold that oil prices are at a permanently lower range, it will embolden these enemies to act against the regime.
Whether the Saudis actually are running out of money isn’t the decisive factor. If opponents come to believe the current order has an expiration date, they will act against it immediately.
Entire Region’s Future at Stake
Saudi Arabia is entering this danger zone at a particularly difficult time. Iraq and Syria effectively don’t exist as separate nations, leaving the Middle Eastern heartland in chaos.
Enemies can exploit the chaos to strike against the Saudi regime. Iran and Turkey are both potential rivals for regional domination. Saudi instability could also draw in outside powers, notably Russia and the United States, as the formerly stable region becomes unstable.
Most terrifying of all, a Saudi collapse could embolden ISIS and other jihadist groups to seize control of even more territory and possible capture oil fields and energy infrastructure. If that happens, it would be a game changer for the entire world’s economy. The stakes couldn’t be higher.
Watch the full interview (5:12) below:
http://www.youtube.com/embed/UoOoScPDG4E
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The article was excerpted from the report, Saudi Arabia—a Failing Kingdom.
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