With oil above $90 a barrel, it’s business as usual for Persian Gulf exporters regardless of the uprisings that are rocking other Arab nations.
From the time former Tunisian president Zine El Abidine Ben Ali fled his country and the mass demonstrations to oust Egyptian leader Hosni Mubarak started on Jan. 25, Saudi Arabia hosted former U.S. President Bill Clinton and former British Prime Minister Tony Blair. Executives from Alcoa Inc., Boeing Co. and UBS Global Asset Management were among those in the Saudi capital for a conference last month.
“It is different for Arab Gulf monarchies because they have financial wealth, no strong opposition and no real threat from within,” Khalid al-Dakhil, a Saudi sociologist and a former political science professor at King Saud University in Riyadh, said in a telephone interview.
While not immune to rising youth unemployment and higher food prices, Gulf countries are spending petrodollars to create jobs, grow business and attract investment in contrast to the strained government resources in Egypt, Jordan and Yemen, where prime ministers and presidents have agreed to step down.
Saudi Arabia allocated $785 billion, more than four times Egypt’s 2009 gross domestic product of $188 billion, through two five-year spending plans between 2009 and 2014 to help create five million jobs for nationals by 2030.
“Having all that money makes a huge difference,” Charles Dunbar, a professor of international relations at Boston University and a former U.S Ambassador to Qatar and Yemen, said in an interview. “Basically, I don’t see them getting out into the streets. They just don’t have the same dreary lives.”
Kuwait, holder of world’s sixth-largest oil reserves, plans to increase spending by about 10 percent in the fiscal year starting in April. Qatar, the world’s largest exporter of gas cooled to a liquid for transport by ship, expects a budget surplus of more than 9 billion riyals ($2.5 billion).
With the Saudi budget based on an average oil assumption of $58 a barrel, the government may record another budget surplus in 2011, according to Riyadh-based Banque Saudi Fransi. The Gulf is home to one fifth of the world’s oil.
“The Saudis have been the blueprint for reforms,” said Raad Alkadiri, a director at consulting firm PFC Energy in Washington. “They had the most serious economic and political problems in the mid-1990s, when they had to deal with a period of low oil prices. So they had to change.”
Concern over the unrest in North Africa spurred crude prices. Brent oil for March delivery advanced to $101.74 this week, the highest settlement since Sept. 26, 2008.
Anti-government protesters clashed in Cairo yesterday with supporters of Mubarak, 82, who said he will step down later this year. Presidential rival Mohamed ElBaradei, 68, called on the army to restore peace.
Although Gulf monarchies haven’t seen their citizens on the streets, they have expressed concern about the events unfolding across the Middle East.
Saudi King Abdullah said Jan. 29 that “some infiltrators, in the name of freedom of expression, have infiltrated into the brotherly people of Egypt, to destabilize its security and stability,” according to the Saudi Press Agency.
Kuwait’s Foreign Minister Sheikh Mohammed Al-Sabah also told the official Kuwait News Agency yesterday that Egypt’s stability is necessary as its regional role is more urgent than ever. President Barack Obama said an orderly transition in Egypt “must be meaningful, must be peaceful, and it must begin now.”
Egypt’s unrest may spread to other countries, including Algeria and Jordan, that have high unemployment and less leeway to boost public spending because of high debt and budget deficits, Standard & Poor’s said today.
Jordanian Prime Minister Samir Rifai resigned this week and King Abdullah asked Marouf Bakhit to form a new government after weekly street protests. Yemeni President Ali Abdullah Saleh told parliament yesterday that he won’t seek to extend his term when it expires in 2013.
The Gulf states “have much more basic-level legitimacy, even where there’s criticism of the government,” said Gerd Nonneman, Professor of Middle East politics at the Centre for Gulf Studies, University of Exeter in southwest England.
Higher oil prices benefit companies such as Saudi Basic Industries Co., the world’s largest petrochemical exporter, as access to discounted feedstock gives Middle East-based producers a competitive advantage over rivals, said Jarmo Kotilaine, chief economist at Jeddah-based National Commercial Bank.
After falling 6.4 percent on Jan. 29, the Saudi stock market, the largest in the Middle East, has recouped most of the losses with benchmark Tadawul stock index rising for a second day yesterday.
Egypt is a not a key trading partner for the Gulf Cooperation Council, said Paul Gamble, head of research at Jadwa Investment Co. in Riyadh. It accounted for 4 percent of Saudi non-oil exports in 2009, he said.
“I doubt the events in Egypt will have much impact on Saudi Arabia,” said Turki AlBallaa, general manager of the Saudi Investment Support Center, which helps companies set up in the country. “International businesses won’t stop seeking investments and opportunities here.”
In the Shiite areas of the Eastern Province of Saudi Arabia, there hasn’t been a reaction to the events in North Africa as they start to benefit from King Abdullah’s educational programs and government spending.
“If they want to rise up, it will be on their own agenda, not following the Egyptians,” said Ibrahim AlMugaiteeb, president of Human Rights First Society, a group based in Al Khobar, Saudi Arabia.
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