Reports have surface during the last weak that pain a dark future for Saudi Arabia’s domestic economy. Russia has turned heads in the West by announcing the introduction of a Russian futures market for oil. Meanwhile Turkey is hit hard by capital flight and increased downward pressure for the country’s currency as Syria struggles for new sources of revenue to replace the oil and gas business in the short-term.
Written by Frank Jakob exclusively for SouthFront
McKinsey consulting firm sees bleak future for Saudi Arabia. McKinsey released a report in which it assesses Saudi Arabia’s future prospect regarding its domestic job market. The report with the title Saudi Arabia beyond oil deals particularly with the effect that the demographic development is having on the unemployment rate. The authors argue that at least 4.5 million new working-age Saudis are expected to enter the domestic labor market in fifteen years, however, the country lacks the resources to create so many jobs, which would result in a jobless rate of 20 percent by 2030. The fundamental reason blamed for the lack of funds of the Saudi state is the loss in revenue from the export of oil, the authors state. This goes in line with predictions by the IMF which foresee Saudi bankruptcy by 2020 should the spending policies not be changed drastically.
Russia to introduce own oil benchmark to end “Wetstern Dominance” on futures market. German business newspaper Finanzmarktwelt has released an article in which it deals with the newly announced Russian oil futures market. So far there are only two markets like this in the world, in News York and in London. Even though the United States is a minor oil exporter on the global market, its Brent index “virtually controls 70 percent of global oil trading”, the authors write. Russian-produced Urals and Espo oil has a much stronger presence on the oil market but no futures market free of Western meddling. “It is clear that Russia wants to get rid of the system which allows for oil prices to be set by London or Dubai,” is the conclusion of the article. The West has been repeatedly accused by members of the BRICS-states of manipulating the oil and gold markets to its advantage. Earlier this year China announced the formation of a gold bullion market to rival its counterpart in London and to stop the manipulation on the global market.
Turkey hit by massive capital flight. Investors seem to have lost hope for the Turkish economy and have continued to withdraw their investments from the country. As a result the Turkish Lira saw its biggest annual fall since the world economic crisis in 2008. So far investors have withdrawn $ 7.6 billion dollars from the country, $ 1.4 billion alone after Moscow and Ankara had a cool down of relations. Unlike Russia, Turkey is particularly vulnerable to shifts in investor feelings due to its enormous debt. Should the US Fed really decide to increase its rates in the near future then Turkey will face the next crisis. Meanwhile Per Hammarlund, chief emerging markets strategist at SEB in Stockholm predicts a continuation of the fall of the Lira in December by another 3.7 percent.
Syria to introduce tax hikes to finance reconstruction. The Syrian state has introduced several new taxes and increased already existing ones in a bid to counter losses of revenues from the oil and gas business. Sandwich tax, broadcast tax, electricity tax, lots of areas of daily life have been affected by the move. Meanwhile Moscow has offered Syria to replace Turkey as Russia’s main supplier for citrus fruit, which would include around 700.000 tons of mostly oranges, an offer that was happily received in Damascus.