Saudi Arabia Budget 2016 Shocks World

By: Azhar Azam

Economic Highlights of 2015 and 2016

Saudi Arabia, the largest crude oil exporter, shocked the world as it announced the budget for Fiscal Year 1437/38 (2016) where the Kingdom estimates to slash revenues from SR 608 billion in 2015 to SR 513.8 billion in 2016, over 15% swallow revenue target.

The government spending is estimated at SR 840 billion in 2016 from SR 975 billion in 2015, posing a fiscal deficit of SR 326.2 billion ($ 87 bn, £59 bn, €89 bn) in 2016 from SR 367 billion ($98 bn, £66 bn, €80 bn) in 2015. The total spending in 2015 has already been reduced to SR 975 as compared to SR 1,140 billion in 2014, by 14.5%.

Public debt also is expected to reach 5.8% of GDP, SR 142 billion, by the end of 2015 as compared to 2% of GDP, SR 44 billion, in 2014. The budget deficit is proposed to be covered through borrowing from domestic and international markets.

Oil Dependency
The plummeting oil prices in the international market have been trouncing the state’s revenues whilst ongoing conflict in Yemen has overburdened the economy on account of military expenditure.

This would mean that the government is expecting the oil prices to continue sliding down in the coming year too as the average rate of oil for 2015 has declined by 45% from the average of 2014.

Saudi Arabia economy is highly oil-dependent where oil revenues have been thrashed by 23% in 2015 as compared to 2014 and fell to SR 444.5 billion, 73% of total revenue. Non-oil revenue however has increased by SR 36.7 billion from SR 126.8 billion in 2014 to SR 163.5 billion in 2015, 29% increase.

Economy Structural Reforms
Ministry of Finance, Kingdom of Saudi Arabia while announcing Recent Economic Developments and Highlights of the Fiscal Years 1436/37 (2015) and 1437/38 (2016) on Monday, the 28-Decembe-2015 also proclaimed to a series of structural reforms in the state’s economy and to reduce its dependency on oil starting from fiscal year 1437/38 (2015) including:

• privatizing a range of sectors and economic activities
• reviewing current levels of fees and fines, introducing new fees, and completing the necessary arrangements for the application of VAT
• reviewing government support, including revision of energy, water, and electricity prices gradually over the next five years

Gross Domestic Product
Saudi Arabia GDP for the fiscal year 1436/37 (2015), in current prices, has decreased by 13.35% to SR 2.450 billion as compared to fiscal year 1435/36 (2014) where the oil sector is further expected to decline by nearly 43%. The GDP at constant prices have however is expected to rise by 3.35 in 2015 with oil sector to grow by 3%.

Saudi Arabian exports for the year 2015 are estimated to be SR 767.2 billion, a decline of 40% from the year 2014. The non-petroleum commodity exports, 22.9% of total merchandize exports, have also declined by SR 176.3, 18.8% from previous year.

Imports are expected to reach SR 531.9 billion in 2015 showing 10.5% decline from last year.
Saudi Arabia Monetary Agency also points to achieving a trade balance of SR 235.2 billion in 2015, 65.9% decline from last years as a result of the marked decrease in oil exports despite decline in imports.

The balance of payments account is expected to suffer a deficit of SR 154.9 billion in 2015 as compared to a surplus of SR 288.4 billion in 2014.

Saudi Arabia Stance
Saudi Arabia for last one year or so has been pushing up the crude oil production to rule out their rivals, the shale producers in North America and to secure their market share.

Brent traded crude oil at $36.85 a barrel on Tuesday which is a drastic decline from $115 in June last year when OPEC stinted its oil production stint.

Khalid Al-Falih who the chairman of “Aramco”, Saudi Arabian National Petroleum and Natural Gas company said in a news conference "We see the market balancing sometime in 2016, we see demand ultimately exceeding supply and soaking up a lot of the excess inventory and prices in due course will respond regardless of when and by how much”.

“Saudi Arabia is better equipped to wait out currently oil prices than other producers”, Al-Falih who is also the Health Minister. He further clarified that “Our production policy has been very clear; we will meet our customers’ demand and will not leave our customers short of energy.”

Hussain Haqqani Trying to Influence U.S. Over Pakistan

By: Azhar Azam

Hussain Haqqani in Civil Nuclear Cooperation with Pakistan: Prospects and Consequences appeared to be much more conscious, worried and troubled (even more than the U.S. itself) over the media reports that “elements in the current US administration think they can secure change in Pakistan’s policies by offering it a nuclear accord along the lines offered to India in 2005”.

Citing a couple of articles published in Washington Post and New York Times, the ladle lobbyist continued to be in some sort of unhinge and covetous on a supposed civil nuclear deal with Pakistan in return to restrict the nuclear arsenal of the country.

The former “Pakistan ambassador” to the United States during 2008-2011 annulled the U.S. approach to limit the nuclear arsenal of Pakistan while kept reminding the Pakistan military and economic indebtedness to U.S gratitude during 1980s proxy war in Afghanistan and post 9/11 era of war on terror.

The absconder from the courts of Pakistan failed to realize the historical facts that at both times of 1980s and 9/11; it was the U.S. who appealed Pakistan to fight its self imposed cold war and war on terror and repeatedly remained grateful for the level of incessant, unending support and cooperation across disciplines to Pakistan.

It is responding Farid Zakaria and Kevin Hulbert, arms industry or U.S. cost of wars, all of these reflect the hardcore ground realities and importance and cooperation of Pakistan with the U.S. over the decades. The world is changing and redefining new blocks and such people are living through 1980s.

Do the Math: Global War on Terror has killed 4-million Muslims or more reveals some horrible body count including Iraq, Afghanistan and Pakistan and the just the cumulative direct war appropriation/spending of the U.S. in Iraq and Afghanistan has been nearly 4260% and 3716% respectively as compared to Pakistan.

The paid plotter then lashes onto Pakistan for being a smaller in size and economy to India and grouse Pakistan army’s dominance in all areas so suggesting no smaller nation has the right to exist, defend or be sovereign.

Today India is propelled as it could challenge China’s outgrowth with 1/3rd in size, 2.5 times lesser in GDP (PPP), 5 times more population below poverty line and about 1/7th of exports but one of the largest arms buyer in the world. Whereas arms industry is criterion of the dominance of the armies around the globe but the biased eyes and brain could see and think just of Pakistan’s.

“Jihadi proxies” in Afghanistan, Kashmir and India is yet another wicked notion to malign and pound on army of Pakistan. Again he deliberately masked the specifics as U.S. herself engaged proxies in Afghanistan, Kashmir is always a disputed area and is occupied by India so as the sleeper cells and Indian proxies like BLA in Pakistan. How a former ambassador and director for south and central Asia is trying to make Congress a dupe.

Referring Musharraf, considered the most trusted ally of the U.S. in Pakistan for years, he draws attention to his interview where he allegedly admitted to supporting Taliban even after 9/11 due to concern on close relations between India and Afghanistan. Thus, from 2001 to 2008, the U.S. was effectively arming a country that was, in turn, arming insurgents fighting and killing American troops in Afghanistan.

Comical and outrageous, the interview was taken in February where the Musharraf admitted to support Taliban but the whole world didn’t weigh this billion dollar confession including the U.S. Nine months later, an intellectual named Hussian Huqqani diverted the whole world attention to this classic revelation.

How simply he undermined the intelligence capability of the United States in the region with all the military, communicational and technological resources. He should rather be hired by the U.S. military and immediately deputed to Afghanistan to take control of the action in the region. Even more, when the entire world is appreciating the efforts of Pakistan and its armed forces to fight terrorism, he is the one who ponders otherwise.

The wisdom of exploiting American weapons against India is yet another silly, outlandish argument as if you are given a weapon to counter terrorism but you should not bring into play if you are facing a life threat from anyone else!

Haqqani meaningfully praised General Raheel Sharif “By all accounts Gen Sharif is a good man but such expectations were also voiced about his predecessor, General Kayani and his predecessor General Musharraf. Like with his predecessors the US sees General Sharif as representing a new beginning: He is non-political, opposes terrorism and is pro-Western. Ironically, all these qualities were also attributed to his predecessors.”

“The recent Pakistani announcement about an ‘India-centric’ tactical nuclear program indicates that despite serious threats to Pakistan’s security by Jihadi extremists, India — an American friend — remains the principal enemy in the eyes of Pakistan’s leaders.”

Therefore in his spectacle, it doesn’t count to what extent Pakistan especially Pakistan Army has provided support to the U.S. at the cost of economy or casualties; they stay unreliable, capricious to the United States and their friend, India.

Plainly, along these lines, his focal point is neither the United States nor its strategic interests but to slander Pakistan and architecting vagueness and disparity between the U.S. and Pakistan to safeguard his new master “India”!

Barring Turkey Could Bury Russia Deeper

By: Azhar Azam

As Russia chases the United States footsteps of employing military power in Middle East to plunge its vicious economic crisis prompted by falling oil prices and western sanctions, the recent conflict with Turkey could deepen the graveyard of its economy.

A sudden deployment of military jets to patronize Asad’s regime and chuck out ISIS or IS in Syria took the world by surprise. At the same time, Russia didn’t even bother to listen into instinctive stark reaction of Turkey, one of its strongest trade partners and a NATO member.

The stage was all set for intense conflict and downing of Russian fighter jet by Turkey defense forces on November 24 and latter shooting of a Russian SU-24 bomber for violating its territorial integrity ballooned in the strife.

Russia Sanctions on Turkey
Russia repeatedly threatening Turkey for dire consequences eventually responded with raft of economic sanctions including fruits and vegetables such as tomatoes, cucumbers and apples, poultry products and salt with effect from January 1, 2016.

The decree further suspends chartered flights to Turkey spoiling the business of Russian tour operators who generally used to milk high revenues in ongoing long winter season by providing middle class Russians seeking some sort of lull in Turkey. In 2014, it was about 4.4 million Russian, including 3.3 million tourists who visited Turkey. Then there is the elimination of visa waiver facility for Turkish transport companies enforcing them to apply for formal requests.

Bilateral Trade and Alternative Options for Turkey
The annual bilateral trade between the two countries is app. $31.23 billion where Russia is the largest import partner of Turkey with $25.29 billion, 10.4% of total imports whereas Turkey’s exports to Russia are just $ 5.94 billion, 3.8% of total exports. The ratio of Russia and Turkey bilateral trade is 81:19 so what Russia would be thumped by four times than of Turkey in case of entire trade ties are delinked.

The imposition of these sanctions may force Turkey to search for alternative sources to replace Russian gas and LPG. Remember, Turkey is one of the largest natural gas consuming countries and ranked 8th in the world, about 49 billion cubic meters as of 2014. (World Factbook)

According to EIA, Turkey imported 13% of the Russian total natural gas exports in 2014, second largest after Germany’s 19%. Furthermore, Turkey is ideally placed to supply Russian natural gas to Europe and any kind of restriction in supply of gas to Turkey could blot Russian ambitions to reach Europe while Turkey can fill its LPG shortfall through Middle East, Algeria, Georgia and United States.

Though Russian officials are denying any sort of interruption in the contracts of the gas supply but Turkey is already taking precautionary measures for smooth, continual gas supply through its allies in Middle East.

Qatar, a biggest exporter of liquefied natural gas (LNG) and one of the close allies of Turkey is expected to push the gas supply to meet the shortfall. In September 2014, both the countries signed an accord where Qatar will provide 1.2 billion cubic meters of LNG to Turkey through tankers. Qatar who exported 76.8 million ton of LNG in 2014 certainly encompass the capacity to fill the space if set free by Russia. Algeria and Nigeria could also be the beneficiaries in eventuality of such turmoil.

On the other hand, natural gas traders from United States are eying the situation and may increase their share in Turkey from 6% to 12-14% in 2016, according to Reuters. The report further exposed that 21% of Russian global LPG exports of 5.2 million tons was supplied to Turkey, 1.1 million tons that is.

European nations too will extending full support to Turkey and announced a grant of $3.2 billion in aid in return of Ankara’s cooperation in stemming the flow of refugees from Syria.

But the question arises, will Russia be able to survive such economic drain while already packed in by western sanctions over its Crimea annexation coupled with interference in Ukraine and falling oil prices internationally?

Russian Economy – Past, Current and Future
Russian economy though had averaged 7% growth from 1998 to 2008 mainly due to rise in oil prices, has shrunk to 3.4% in 2012, 1.3% in 2013 and just 0.6% in 2014. In the second half of 2014, ruble lost almost half of its value whereas the economy is expected to contract by 3% in 2015.

The foreign exchange and gold reserves have fallen to $385 billion in 2014 from $509 billion in 2013; exports have reduced to $497 billion in 2014 from $523 billion in 2013; inflation has inflated to 7.8% in 2014 from 6.8% in 2013 and unemployment rate has escalated to 5.5% in 2014 from 5.2% in 2013. (World Factbook)

Year 2015 hasn’t either rolled the dice impeccably for Russia since ruble has collapsed to 67/dollar from 33/dollar on 03-December-2015 in two years; primary budget registered a deficit of 0.6% during January – September 2015 compared to 2.9% surplus a year ago and foreign reserves have curtailed to $370 billion in early October. Finance Minister Anton Siluanov has said that the budget deficit may exceed 3% next year as oil prices are expected to fall below $40/barrel.

Under the given circumstances, it would not be undemanding and practical for Russia to either stick to the sanctions imposed or enlarge them on Turkey as it would hurt Russia much more than it would hurt Turkey and similarly Turkey is no short of number of allies to fulfill its energy and other needs whereas Russia would off course!