How Well Is Saudi Arabia's Oil Strategy Working? -- September 27, 2015

How's that strategy to flood the market with oil working out for Saudi Arabia? Financial Times is reporting:

Saudi Arabia has withdrawn tens of billions of dollars from global asset managers as the oil-rich kingdom seeks to cut its widening deficit and reduce exposure to volatile equities markets amid the sustained slump in oil prices.

The Saudi Arabian Monetary Agency’s foreign reserves have slumped by nearly $73bn since oil prices started to decline last year as the kingdom keeps spending to sustain the economy and fund its military campaign in Yemen.

The central bank is also turning to domestic banks to finance a bond programme to offset the rapid decline in reserves.

Of course, under Sharia borrowing / lending money is not allowed. Whatever. I assume if one buys a Saudi bond one will not be paid interest; rather one will get a pre-arranged "installment payment" at regular intervals.

Reminder (no links -- with one exception; previously reported):

• Saudi is losing about 10% of their cash reserves annually by giving away oil for $50/bbl (but the article above suggests it could be significantly more)
• Saudi apparently had an unsuccessful 5-year, $35 billion program to significantly hike crude oil production
• Saudi recently completed two new refineries
• Saudi has huge desalinization electricity demands -- and growing annually; oil used to produce electricity
• Saudi recently canceled huge solar energy projects
• Saudi put on hold all new capital-intensive projects in addition to aforementioned solar energy projects
• Saudi has been told explicitly by President Obama that the US has no responsibility to guarantee Saudi Arabia' security
• Saudi has major terrorist threat in Yemen
• Saudi has embarked on major weapons acquisition program to defend itself against regional neighbors
• sanctions on Iran recently lifted resulting in a) Mideast nuclear arms race; and, b) $100 billion in "new" money for Iran to pursue military objectives (I thought it was $156 billion but this article says $100 billion)

Disclaimer: I often make factual and typographical errors. It is hard to separate opinion from fact in this blog. If something does not seem right and/or is important to you, go to the source.