Saudi Arabia will help alleviate global financial stress by maintaining stable oil markets and boost its own economy by funding infrastructure projects, King Abdullah said today in Washington, in a statement after a five-hour summit with the Group of 20 leaders. Abdullah said. ``We will continue to fulfill our role in ensuring the stability of the oil market. We will continue the program for government investment in spending on basic projects and services”
Also this very significant statement. “Saudi Arabia has made many sacrifices, including maintaining costly additional productive capacity amounting to about 2 million barrels per day,''
It might now be relevant to look back in time…
In 1985 the Saudi Oil minister, who happened to be the big wheel in OPEC, announced to the world that Saudi Arabia would no longer limit production to support oil prices. (Apparently there had been intensive discussion with US interests before this announcement).
At that time and for decades, the Soviet Union had been kept financially afloat by its oil and gas exports. The Soviet Union’s economy had already been strained by an attempt to match it’s armaments and military spending with that of the USA. The coming of Reagan to the presidency with his ‘Star Wars’ and other initiatives had further increased the strain.
The fall in oil prices in 1985 started the Soviet economy on a rapid downhill path. Gorbachev tried to save things with his half baked reforms but the Soviet ship sank under him. The whole free world rejoiced at the end of the ‘Empire of Evil’ and the triumph of Capitalism.
With a fully democratic leader, Yeltsin, installed, the borders of Russia shrunk back to that of the early 1600’s. Under Yeltsin the pathetic economy struggled along with half the population unpaid and factories being dismantled and sold for scrap, or if they were lucky, being sold for a song to the new ‘Oligarchs’, the embodiment of Russian capitalism under Yeltsin. Crime and corruption flourished, with Russian Mafia expansion even making inroads into areas traditionally run by ‘the’ Mafia.
When the golden years of Yeltsin finally ended, some countries were unhappy; this increased to alarm as Putin brought in ‘authoritarian democracy’ and put the clamps on. In recent years a large part of the ‘covert budget’ of a certain country has reputedly been devoted to diminish Russian border influence, also to cut down to size the large Russian oil and gas industry.
Points arising from then and now…
1) Abdullah implies that his country hasn’t been remunerated properly for it’s many sacrifices. Does this cover past (1985 era) as well as recent years?
2) What events in 1985 or after, could have constituted remuneration for Saudi? (Might have been political, might have been military)
3) Is this an attempt to pressure the new administration; raise the ante?
4) What are the implications for OPEC if in future Saudi becomes less ready to increase production?
