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What happens when Saudi Arabia collapses? Does the royalty get the fuck out of town on their private jets with as many gold bars as they can carry?
by bob33212 7y ago
What happens when Saudi Arabia collapses? Does the royalty get the fuck out of town on their private jets with as many gold bars as they can carry?
- harikb 7y agoDictators/Kings can survive on a very tight budget btw. It takes a long long time for those structures to crack. The only reason they would leave town would be something related to the virus (like other western rich folks are doing now)
- DuskStar 7y agoIIRC Saudi Arabia is a massive welfare state with significantly subsidized food, power, water and more - all paid for by oil. People might be more willing to revolt because of that going away than they would have had it never been a thing in the first place.
- ptero 7y agoSurvive in a small enclave in a third country with a small group of servants, sure. Survive as dictators, I am not so sure -- it requires keeping troops and those in key positions happy, which is expensive. My 2c
- henrikschroder 7y agoRules for Rulers by CGP Grey is a fantastic lesson in how this works: https://www.youtube.com/watch?v=rStL7niR7gs https://www.youtube.com/watch?v=rStL7niR7gs
- yur3i__ 7y agoUAE and Saudi Arabia imo will be ok. They are trying to build themselves into big entertainment and tourism hubs with their ventures into sports and investment in tourism etc I think though they will definitely suffer they may be able to weather the storm. Kuwait and Qatar on the other hand I'm not so sure about
- DuskStar 7y agoSaudi Arabia is trying to build tourism? From where?
- pjc50 7y agoDubai is definitely a tourist destination for a small number of hyper-wealthy people. The tourists get to be in the part of the bubble that serves alcohol.
- clawedjird 7y agoThat is true, however Dubai is not in Saudi Arabia. It is part of the U.A.E.
- dageshi 7y agoDubai is certainly a tourist destination but it's not in Saudi Arabia.
- unexpected 7y agoDubai is definitely a tourist destination, and it's not just for hyper-wealthy people. They get a huge amount of middle class tourism from South Asia and China. There's a wide variety of hotels, from 2* to 7* and you can stay in a superb 5* hotel for $150/night. It feels like a destination for the hyper-wealthy to Americans because our tourist offerings here are so much better - but not everyone can come here. My best analogy for Dubai is that it's like Vegas without the gambling - and while that may suck for some people, it can definitely be done. Vegas is also done at every price point!
- NikolaeVarius 7y agohttps://www.nytimes.com/2019/12/25/business/saudi-arabia-tourism.html https://www.nytimes.com/2019/12/25/business/saudi-arabia-tou...
- kaybe 7y agoDidn't they just start to issue tourist visas last year? I have to say, from flying across in a research airplane that was not allowed to measure (so no work for the scientific crew = lots of time to move from window to window and observe) - it is a colourful country and very beautiful from above. There is black and white, and red and yellow, and the many patterns in the sand and the mountains are interesting. I didn't know they had (extinct) volcanoes either. If I wasn't a woman I might have even considered going.
- drcode 7y agoThis seems unlikely to me, given the low extraction costs they have for oil. I guess the biggest danger they would face is if they have to stop "paying off" their population, and this leads to an "arab spring" type of situation. But it seems even in that case they would unfortunately have the will and resources to use Syria-style brutal tactics to contain any uprising.
- toomuchtodo 7y agoSaudi Arabia’s extraction costs are about $3/barrel, their nation state budget require $80/barrel to break even. They are burning through reserves at these market prices. Edit: To your point, it’s going to get ugly locally if market conditions persist.
- unexpected 7y agoSaudi makes up shit when they say their extraction costs are $3/barrel. A lot of clever accounting in that one. Actual extraction costs are roughly $10-$15/barrel.
- boringg 7y agoStill far cheaper then almost everywhere else. $3 or $15
- chki 7y agoWhy do they or why would they make up extraction costs? (Genuinely interested)
- exhilaration 7y agoPosturing. They want to intimidate producers (and their investors) that have much higher extraction costs, like U.S. frackers and Canadian oil sands firms. "We can bring oil to $10/barrel and still be profitable," you can imagine them saying threateningly.
- deleted 7y ago
- fmajid 7y agoThe gold bars are already in the US, as part of the Nixon-Faisal agreements. That should not be a comfort to the Saud kleptocracy, as the Shah of Iran discovered.
- jdxcode 7y agotechnically wasn't the ayatollah that had to pay that price? You're talking about https://en.wikipedia.org/wiki/Iranian_frozen_assets https://en.wikipedia.org/wiki/Iranian_frozen_assets right?
- fmajid 7y agoYes. He thought he’d be able to live his exile in luxury, but what he thought of as his assets (really belonging to the Iranian people he looted, of course) were frozen by Carter.
- aspenmayer 7y agoNot just Carter, the Supreme Court too. After Congress made a law to specifically make the seizure legal, the bank challenged the constitutionality of changing laws to be interpreted against the bank only when applied to that bank’s seized Iranian linked account. The Court sided with the government 7-2. https://en.wikipedia.org/wiki/Bank_Markazi_v._Peterson https://en.wikipedia.org/wiki/Bank_Markazi_v._Peterson
- deleted 7y ago[deleted]
- lonelappde 7y agoDoes the Saudi kleptocracy have any reason to distrust the US klpetocracy? After 9/11/2001 the US was quite loyal in a difficulty time.
- fmajid 7y agoThe Saud were still in power. If they lost power, all bets are off. It’s certainly not their sterling moral character that gets them so many free passes today.
- RobRivera 7y agoThis is a rather naived perspective on the strategic thinking and planning of the Saudi Royal family. They are heavy investors in renewable energy tech.
- NortySpock 7y agoIn the last 5 years, sure, especially with MBS holding the reins. But you can't just move your entire country onto solar power in 5 years unless you have huge hydro or battery resources already.
- covidacct 7y ago> But you can't just move your entire country onto solar power If oil consumption enters extreme secular decline and SA doesn't transition to solar, then SA will be a horrendously poor country powered by oil. If oil consumption enters extreme secular decline and SA does transition to solar, then SA will be a horrendously poor country powered by solar.
- ccozan 7y agoAfter the WW2 House of Saud made an agreement [1] with USA that in exchange for the US Army support of Saud, they will pump any amount of oil that is needed. Now not sure how long this will last, since the current price war is directly affecting the US producers. Time will tell. [1] https://www.vox.com/2016/1/6/10719728/us-saudi-arabia-allies https://www.vox.com/2016/1/6/10719728/us-saudi-arabia-allies
- enkid 7y agoThe US is currently a net exporter of oil, or at least was until the recent price drop. Saudi Arabia's capacity of pumping oil is completely based on what they view as their best interest in making money while maintaining market share. That's why they tried to take US Shale oil out, and why they tried over producing recently to get Russia to come to the table for a production cut. They've also embargoed the US in the past. https://en.wikipedia.org/wiki/1973_oil_crisis https://en.wikipedia.org/wiki/1973_oil_crisis
- cgh 7y agoAt the end of the day, US shale companies going under could benefit Canadian oil most of all, especially now that Enbridge has US approval.
- protomyth 7y agoWell, Saudi started this mess when they decided to declare economic war on Russia and take out oil production in North America as a nice bonus. As long as Saudi can pay the people in Saudi they should be able to weather the storm they started. The huge demand drop for oil just makes it quite a bit nastier.
- wonderwonder 7y agoOne of those strange conflicts where both sides are the bad guy.
- hvis 7y agoAll sides, actually. https://edition.cnn.com/2020/02/18/politics/us-sanctions-venezuela-rosneft/index.html https://edition.cnn.com/2020/02/18/politics/us-sanctions-ven...
- at-fates-hands 7y agoThey've been talking about the House of Saud falling for decades now and it hasn't happened yet. Although I thought A few years ago the young prince was going to make a bunch of drastic moves away from oil in order to secure the economic future of the country? Beyond a few articles in 2017, I haven't seen much of an update on that, anybody know if it was all just bluster, or are real things happening that would soften this blow coming?
- unexpected 7y agoEvery Arab ruler has tried to do this for decades, but this is a HARD problem: 1) Their climate sucks 2) They have very little arable land and lack water 3) Production of electricity is expensive 4) A lot of interior cities - not a lot of port access So, from a geographical perspective, what is SA supposed to produce that gives them a comparative advantage against the rest of the world? Then you move into the political/religious aspects: 1) Uneducated workforce, despite offering scholarships to study abroad for every one of their citizens 2) They import most of their labor from other countries, ergo, their labor costs are higher with respect to the rest of the world. A factory in India will be cheaper than a factory in SA, all else being equal. These disadvantages make the only real route to a viable economy a service-based one. This is what Dubai has done - Dubai has done their damndest to establish free trade zones, a legal framework, and a tax regime to get companies to establish their MENA HQ's there (and they've done so accordingly). SA is WAY behind on this (I would argue irrecoverably behind).
- jcranmer 7y agoSaudi Arabia is in a good location for logistics and transshipment hubs (although this is something else they've probably lost to Dubai). There's also obvious tourism appeal, due to the historic sites in the Hejaz (probably already maxed out though, unless they want to open it up to non-Muslims). The other obvious choice for a commodities producer is to move up the value chain: go from selling crude oil to selling petroleum-based products instead. The biggest issue is the effect that the resource curse on the workforce, as you note. There is a small contingent of well-educated Saudis (largely found in Saudi Aramco), and the country has instead relied largely on giving their population sinecures in the government, which hasn't exactly done wonders for productivity.
- wonderwonder 7y agoI doubt they collapse, this is a war of attrition started by the Saudis and Russia. They are attempting to force all of their competition (primarily each other) out of business by continuing to flood the market with oil. They are betting that they can outlast the other. These are both nations that care very little for their citizenry outside of the elites so both are willing to go to lengths other democratic nations would not. Either side could likely stop this with the consequence only being loss of face.
- yaitsyaboi 7y agoInteresting. Russia is less oil dependent than SA, but the Saudi's have more oil per capita.
- causality0 7y agoThe Saudis also have a massive population of what are effectively indentured servants and the ability to get more or expel them at will, so that dependency comes with a degree of flexibility to modify their own economy.
- exhilaration 7y agoRussia is less oil dependent than SA... Are you sure? Everything I've read has said some variation of _Russia is heavily dependent on oil exports_ [1]. Russia has a massive cash reserve to weather this crisis but they're still being hurt just as badly as KSA. [1] https://www.npr.org/2020/03/12/814824039/how-russia-is-reacting-to-the-oil-price-war https://www.npr.org/2020/03/12/814824039/how-russia-is-react...
- gbear605 7y agoFrom their Wikipedia pages, 40% of SA's GDP is oil[1] versus 16% of Russia's[2], also 90% of SA's exports versus 70% of Russia's. Certainly both countries are disastrously hurt by a collapse in oil prices, but SA seems to be worse off. [1]: https://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia https://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia [2]: https://en.wikipedia.org/wiki/Economy_of_Russia https://en.wikipedia.org/wiki/Economy_of_Russia
- bluedino 7y ago"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Lamborghini, his son will drive a Lamborghini, but his son will ride a camel"
- umeshunni 7y agoActual quote was by the Sheikh of Dubai: "My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel" https://en.wikipedia.org/wiki/Rashid_bin_Saeed_Al_Maktoum https://en.wikipedia.org/wiki/Rashid_bin_Saeed_Al_Maktoum
- deleted 7y ago[deleted]
- slg 7y agoFor interesting context, the man who said that was born in 1912, his eldest son was born in 1943, and his eldest grandchild that I can find in 30 seconds of research was born in 1976. That is were the Wikipedia articles stop but the child predicted to ride a camel is certainly alive today and they might even already know how to drive.
- deleted 7y ago[deleted]
- paxys 7y agoPeople (justifiably) criticize the middle-eastern countries for a lot of things, but they are all aware that all the oil revenue is eventually going to dry up. Most of them have been hard at work transforming their economies for decades, not an easy thing to do when you're in the middle of a desert.
- jobu 7y agoSaudi Arabia still has the cheapest oil production costs in the world at $8.98/barrel (https://en.wikipedia.org/wiki/Price_of_oil#Comparative_cost_of_production https://en.wikipedia.org/wiki/Price_of_oil#Comparative_cost_...) They probably aren't making enough right now to pay for all of their commitments, but they definitely aren't losing money and they can likely borrow in the short term.
- koheripbal 7y agoNot to mention they just had an IPO on their state oil company and raised a shot load of money.
- deleted 7y ago[deleted]
- lozaning 7y agoI thought that had been called off no?
- beervirus 7y agoThey wound up doing a limited sale to local investors. It has been suggested that there was some "influence" applied to the investors to put the price where it needed to be instead of at the purely market price.
- chasd00 7y agoIt's not that they are losing money on production, the state budget is in the red with a price less than about $80/bbl https://www.reuters.com/article/us-saudi-economy-budget/saudi-arabia-has-asked-state-agencies-to-implement-big-budget-cuts-sources-idUSKBN20Y0QA https://www.reuters.com/article/us-saudi-economy-budget/saud...
- puranjay 7y agoOil in most countries pays the producers and some subsidies to farmers, truckers, etc. Oil in Saudi Arabia pays the entire country $8.98 might be the breakeven price for Saudi Aramco, but for the country, the breakeven point is, iirc, $80/barrel
- sparrc 7y agoThis is good for Saudi Arabia. Their oil is largely very easy to extract so they have the lowest production costs, meaning their losing the least amount of money compared to other producers.
- LatteLazy 7y agoYes, except they already took almost all the wealth out of the country so no need for gold bars rolling about on planes...
- asdfman123 7y agoWhy take gold bars on airplanes when you can hire accountants to create shell companies with foreign bank accounts?
- LatteLazy 7y agoWhy do either when you can just open an account in your own name in the USA and poor cash I to it? The minute Saudi starts to collapse, your allies have guaranteed you a visa so you can fly over, finally drop all this pious Muslim crap and spend your I'll gotten gains.
- vkou 7y agoWhatever hippy commune, theocracy, or warlord will arise to replace it, they will still keep pumping every drop of oil that they can out of the ground. In that sense, it doesn't matter one bit what the House of Saud does, the machine they built will keep going long after its gone.