In an interview with the website of the Strategic Council on Foreign Relations, Ata Bahrami said that in order to analyze the effects of falling oil prices on Arab states, Saudi Arabia’s situation should be examined separately from other small Persian Gulf states. He said the tiny states in the Persian Gulf do not have much expense due to their small population and with hundreds of billions of dollars in oil revenues, this decline in prices will not harm them much.
Regarding the situation in Saudi Arabia following the fall in oil prices, he said: “Saudi Arabia has a population of about 20 million people and is spending a lot of money to show its power in the region.” Saudi Arabia will have a severe budget deficit and its financial markets will be affected, as we see today. On the other hand, the main financial providers of proxy wars in the region are the Persian Gulf states, especially Saudi Arabia.
Possibility of Social Unrest in Saudi Arabia
Bahrami stressed that the Arab states, especially Saudi Arabia, will not be able to buy many weapons due to cuts in their budgets. Saudi Arabia’s budget deficit is approaching 20 per cent, he said, adding that there is also a possibility of social unrest in Saudi Arabia because Riyadh needs a lot of oil money. They have become accustomed to their own lifestyle and spending, and have undertaken many projects, all of which will be disrupted. Thus, the American connection with the Arab states will also be interrupted, and this rhetoric luxury show, which they have had for almost a few decades, will practically be disrupted.
The analyst said the decline in oil prices was important in the power array in the region, adding that Americans had not been able to clearly disclose the expenses of their proxy wars in recent decades and get the necessary funding from the Congress. In fact, the US domestic system does not allow hundreds of billions of dollars are spent in Syria, for example, and such expenses are not covered. That is why they secured the funding by intervening in Syria, North Africa and Libya. In fact, the unofficial treasury of the Americans was the treasury of the Arab countries in the Persian Gulf.
The weakening of American-Led Front in Global Politics and the Middle East
Bahrami went on to say that this method of financing would be practically cut off with low oil prices, adding that the Arab states themselves had budget deficits and could not afford such expenses, so the US could be less effective. At the same time, the finished cost of American shale oil production which is over $45 and makes up for half of the country’s oil, is not economical and is virtually out of the market under the present conditions. The rest of the US oil has a high extraction cost; Of course, not as much as shale oil. That is why they are under pressure, and the front that the Americans themselves led in world politics and the Middle East is practically weakening.
“The Americans, who imported 10 million barrels of oil a day in the last 15 years, had become exporters late last year,” he explained. But with these price fluctuations, they cannot have energy independence. Those who put pressure on Venezuela by cutting off oil purchases from the country are forced to change their stance now. At the same time, their dependence on Saudi Arabia will return and the US influence on Riyadh will decline. Saudi Arabia has doubled its losses due to output cut and attraction of US support, preferred to have US support and not let Washington think that Saud Arabia is needless.
Russia’s Energy Policy
The political economist added that oil prices are expected to remain at around $30 to $35 for the next two or three years, adding that this figure would not go down to $20 and would even go up but not much. Russia’s energy policy is to lower oil prices. They preferred this to happen when they saw that they would be harmed by declining oil prices, but they would do more harm to the United States. On the other hand, they see that Saudi Arabia can be less active in the Middle East and that the US industry will be severely damaged and become dependent on the world’s energy industry again. As a result, its losses to Russia are less than those of its rivals.
Arab, American Interference in Syria Less Likely
“They can no longer easily spend billions of dollars in Syria, send Stinger missiles, and protect hundreds of thousands of terrorists for seven years. These figures are not a joke! Ever since Syria liberated vast areas from under the occupation of the terrorists and pushed them back, everyone thought that the price of the US dollar in Syria will go down but it became more expensive! Everyone just found out what dollars Saudi Arabia and the Arab countries were spending on Syria, and now that they can no longer come to these areas, the dollar’s exchange rate has risen from 550 liras to 1200 liras.
Disruption in Funding Terrorism in the Region
Bahrami went on to say that these issues showed how huge the expenses are. “With the fall in oil prices, the financing of terrorism in these countries will be disrupted and it will not be easy to push these costs forward.” At the same time, the Saudis are spending money on the war in Yemen, and they can no longer drop dozens of expensive bombs at one point. Overall, more calm is forecast for the Middle East as oil prices fall.