Saudi Arabia Energy and Security

By | June 1, 2022


The Saudi economy is based on oil: the country is among the main producers and exporters of crude oil in the world. Oil exports make up 80-90% of state revenues, about half of the nation ‘s GDP and 85% of export earnings. Hence the importance reached by the Saudi government in OPEC, the cartel of oil producing states: thanks to these economic factors, the country is able to influence the organization’s policies, above all to enforce the production quotas of the participants and promote the stability of the oil market. Oil production is a fundamental determinant of Saudi economic growth but, at the same time, it is a source of uncertainty, given the volatility of the international price of the raw material. The price of oil, after having suffered a sharp contraction following the economic crisis of 2009, returned to rise sharply in 2011, due to the tensions created by the Arab Springs and the Iranian nuclear program. This resulted in record prices of over $ 120 a barrel and contributed to GDP growth. The Revenue surplus allowed the Saudi monarchy to stem internal dissent with a substantial increase in public spending (subsidies, salaries, new government jobs and housing programs), totaling $ 130 billion. However, the drop in oil prices since November 2014 could put the Saudi budget at risk of deficit, unless the government intervenes by reducing already planned spending based on estimates of oil revenues, especially in the public sector. From the point of view of the control of production activities, oil production is monopolized by the state which manages it mainly through Saudi Aramco, the country’s largest economic player. However, the executive is implementing privatization policies, as shown by the development of the private sector also in the energy field, flanked by measures to attract foreign investments. With this in mind, the monarchy has created a general authority for investments.

Since 2005, Saudi Arabia has been a member of the World Trade Organization (WTO), and today occupies the 82nd position in the World Bank’s global Doing Business ranking. The proceeds of oil exports are reinvested by the government also with the crucial objective of diversifying the economy and reducing the country’s dependence on oil, developing infrastructures and industries. These investments could allow an average GDP growth of 3.5% until 2018.

Energy and environment

According to indexdotcom, Saudi Arabia has the world’s largest oil reserves, which make up about 21% of the total (267 billion barrels), and can produce over 10 million barrels a day, the highest share among all OPEC members. Saudi Aramco is the main oil company in the country and one of the most important in the world; its short-term strategy is to expand oil refining capacity and develop into the natural gas sector. Saudi Arabia owns 4.2% of the world’s natural gas reserves and has recently discovered significant reserves of unconventional hydrocarbons (shale gas / oil). To achieve these objectives, the company has promoted joint ventures with private companies involved in the exploration of new gas fields and has planned annual investments in upstream for 40 billion dollars. The economic crisis of 2009 slowed down the process, and gas production for the moment remains oriented towards self-consumption rather than exports. Saudi domestic consumption consists solely of oil (66.9% of the total) and gas (33.1%). With the increase of the population (+ 40% in the last twenty years) and the development of the economy, the country has come to consume about a quarter of the oil it produces and, as mentioned, its entire gas production. In addition to trying to diversify its economic structure, the Saudi government is also trying to reduce dependence on oil in the energy field. To this end, Saudi Arabia has launched some projects for the development of nuclear energy for civil purposes and has intended to build some plants in cooperation with US and Japanese companies.

Defense and security

A recent priority of the Saudi monarchy is to invest in improving and expanding the war armament through autonomous production. Currently, military spending is around 10.8% of GDP and according to the International Institute for Strategic Studies, Saudi Arabia is fourth in the world for military spending. A rearmament race favored by the climate of growing political opposition that has arisen in the Gulf over the last 10/15 years. Although arms imports from France, the United Kingdom and the USA drastically decreased after 1999, in October 2010, after three years of negotiations, a contract for the sale of arms to Saudi Arabia by the United States was formalized.worth over 60 billion dollars, a record figure in the history of this sector. Deliveries will take place over the next 15-20 years and include the refueling of 70 Apache helicopters, an unknown number of Little Birds (ultralight helicopters designed for special operations), 72 Blackhawks, 84 F-15 fighters and the modernization of 70 Saudi F-15s, along with a wide range of missiles and a sophisticated radar warning system (Thaad). The agreement is part of one of the major US foreign policy designs, which have signed several arms export agreements with other strategically influential Sunni countries in the region, such as UAE., Bahrain, Qatar and Oman. The goal is to counter Iranian influence in the Gulf and make its allies able to respond more autonomously to external threats.

The provision of weapons and military equipment similar to those used by its own military will also allow the US Department of Defense to coordinate more efficiently with allied countries. The Saudi monarchy sees the recent purchase agreement as an investment to broaden its influence on the Middle Eastern chessboard and thus counterbalance Iranian foreign policy in the region. In addition, the new supplies should allow it to tackle al-Qaeda’s fight against terrorism more effectively. It is precisely the terrorist threat that has advanced from many sides the possibility of reviewing the national conscription, making it mandatory. However, the head of the national guard, Prince Miteb bin Abdullah, has so far dismissed the hypothesis of its introduction in the short term. Always with the aim of counterbalancing Iran’s influence in the Gulf, as well as for fear of a regional destabilization that could also involve Saudi Arabia, in March 2011, following the uprisings against the Bahraini regime, Riyadh sent troops in Bahrain. This operation, conducted under the aegis ofGCC and through its military apparatus – the Peninsula Shield Force – has confirmed the role of Saudi Arabia as the guardian of the existing equilibrium in the Gulf.

Saudi Arabia Energy