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Total Chief Says Saudi Reforms Could Backfire
Total Chief Says Saudi Reforms Could Backfire

Total Chief Says Saudi Reforms Could Backfire

Total Chief Says Saudi Reforms Could Backfire

Saudi Arabia’s push for reforms could face a backlash from within and there is no guarantee the drive by Crown Prince Mohammed bin Salman will succeed, one of the biggest oil investors in the Middle East, France’s Total, said on Thursday.
“You don’t change into a secular regime just like that,” Total Chief Executive Patrick Pouyanne told an event in London, Reuters reported.
While most of Saudi Arabia’s young population, roughly 70% of the total, support the reforms, the older generation might be reluctant to accept such changes, he said.
”Do you remember what happened to (Mikhail) Gorbachev?” said Pouyanne when asked if Mohammed was a reformist like the last Soviet president, who was quickly stripped of power in 1991 in a coup led by Communist Party conservatives before being left jobless by the collapse of the Soviet Union later the same year.
”As you remember chaos came before stabilization happened,” said Pouyanne. “It is difficult to be optimistic or pessimistic at that stage about Saudi reform.”
Total is one of the most active and biggest investors in the Middle East. It has a major refining site in Saudi Arabia, large concessions with the UAE and Qatar and this year it signed a deal to develop part of Iran’s South Pars, the world’s largest gas field.
“Total is perceived in most of those countries as representing France. We benefit, even if we are a commercial company, from this position of France. Total has a nationality and that nationality is strength in the oil and gas business.”

Deficit Target Extended
Saudi Arabia’s government plans to push back the target date for eliminating a state budget deficit caused by low oil prices to 2023 from 2020, sources briefed by finance ministry officials told Reuters on Thursday.
Finance Minister Mohammed al-Jadaan disclosed the change at a seminar on the economy that was closed to the media, the sources said. A formal announcement will be made around the time of the release of the 2018 budget in late December, they said.
The 2020 target for abolishing the deficit, which totaled a record $98 billion in 2015, was part of a long-term fiscal plan that Riyadh released in December. Officials are now moving the target back three years to avoid slowing economic growth excessively and hurting the economy, Jadaan told the seminar.
Representatives of the finance ministry did not answer emails and telephone calls seeking comment.
Cuts in state spending and subsidies, plus efforts to raise new revenue from taxes and fees, have made considerable progress in reducing the deficit since 2015. Private economists think Riyadh may hit this year’s deficit target of $53 billion.

Economy Contracting
But the austerity measures have taken a heavy toll on the economy, which fell into recession in the second quarter of this year. Consumer prices are dropping and unemployment among Saudi citizens has been increasing.
The planned introduction of a 5% value-added tax in January will add more pressure to the economy, so officials have in recent weeks indicated next year’s budget will try to offset that by loosening the purse strings moderately.
Jadaan told the Financial Times last week that the 2018 budget was likely to project state spending of 928 billion riyals ($247 billion), up from this year’s original projection of 890 billion riyals.
Saudi Arabia’s economy contracted for two quarters in a row for the first time since the global financial crisis, as the kingdom grapples with low oil prices and its businesses struggle to cope with economic reforms.
The kingdom’s gross domestic product shrank 1% in the second quarter from the same period a year earlier, when it expanded 0.9%, according to official data released last month. The economy had contracted 0.5% in the first three months of 2017.
Now the authorities are considering a more expansionary budget than planned for 2018, Jadaan said recently, as authorities seek to support an economy severely struggling under the weight of austerity cutbacks.
Growth in non-oil industries was too slow to pick up the slack as Saudi Arabia struggles with the impact of spending cuts. The construction industry shrank 1.6% after contracting 3% in the first quarter.

 

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