Saudi Arabia facing rough year amid regional security risks and a weak market for crude oil, analysis from RBC Capital Markets finds. Pictured, Ali Al-Naimi, Minister of Petroleum of Saudi Arabia. File photo by Ben Lando/UPI |
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TORONTO, Jan. 4 (UPI) -- This year could be challenging for a Saudi Arabia facing economic pressure from lower crude oil prices amid neighborhood security risks, analysis finds.
Lower crude oil prices, down more than 60 percent from mid-2014, are hurting economies from exporting nations like Saudi Arabia that depend heavily on crude oil prices. The Saudi Finance Ministry last week reported total revenue for fiscal year 2015 at $162 billion, an estimated 15 percent decline from budgeted revenues. Oil revenues were down 23 percent from the previous year.
Coupled with rare plans for a stimulus package, Helima Croft, the global head of commodity strategy for RBC Capital Markets, said in an emailed note 2016 could be a challenging one for Riyadh.
"The economic and security headwinds continue to mount for Saudi Arabia due to the low oil price environment and the multiple conflicts raging in the region," she said.
Saudi Arabia executed more than 40 people during the weekend on allegations of terrorism, sparking statements of condemnation from the United Nations and the United States.
"We are particularly concerned that the execution of prominent Shiite cleric and political activist Nimr al-Nimr risks exacerbating sectarian tensions at a time when they urgently need to be reduced," U.S. State Department spokesman John Kirby said in a statement.
The Consultative Assembly of Saudi Arabia issued a statement Monday saying it supported the government's decision to cut ties with Iran "after becoming impatient with Iran's polices in support of terrorism."
The Saudi embassy in Tehran was attacked during the weekend following the execution of the Shiite cleric.
Iran and Saudi Arabia are historical rivals in the region. Both members of the Organization of Petroleum Exporting Countries, the two governments have been at odds over oil production levels during the market downturn. Riyadh has defended its production levels, while Tehran said OPEC members should make room for its crude oil once sanctions pressures ease as a result of last year's nuclear agreement.
Despite the backlash against Iran, RBC's Croft said this year "could prove to be the year of living dangerously for Saudi Arabia with the Kingdom facing substantial economic and security headwinds."
