Will Selling Its First Ever Bonds On The International Market Help Saudi Arabia?
KELLY MCEVERS, HOST:
Saudi Arabia made history yesterday. It sold its first ever bonds on the international market for a total of $17.5 billion. Saudi Arabia's economy is highly dependent on oil, and after one of the worst oil market crashes in a generation, the kingdom is raising cash in ways it hasn't before.
To find out whether changes in Saudi Arabia's economy could lead to political changes, I talked to Gregory Gause. He's head of international affairs at the Bush School of Government and Public Service at Texas A&M University. And I asked him if he thinks this bond sale is a good thing.
GREGORY GAUSE: Well, it all depends on what you use this borrowed money for. If this money is just used to sustain consumption levels, it's a bad sign. If it's actually used to help diversify the Saudi economy through investment in non-oil areas, then it might be a good thing for them.
MCEVERS: The Saudi government has said that it is scaling back on government spending. You know, construction projects have been put on hold. Government salaries have been reduced. Has this helped?
GAUSE: So far it's certainly helped but not enough to close the gap. The Saudis ran a budget deficit of about I think 13 percent of their GDP last year. And the changes in their subsidy policy - the increase of prices in for electricity and water and gasoline - gets you about 2 percent of GDP. So there's still a gap there.
MCEVERS: And has this changed the way people live in Saudi Arabia?
GAUSE: I don't think it's changed the way people live yet. I think it has led to a lot of grumbling. I mean people got much bigger electricity and water bills this year than they've had in the past. And that grumbling has shown up on Twitter, which is the way people express themselves in Saudi Arabia on politics.
MCEVERS: Right 'cause some analysts would argue that one way the royal family has maintained legitimacy over the decades is because of, you know, very high public spending. How could all this change the government's relationship to the people?
GAUSE: Well, the Saudis have been a classic oil state. They've provided their citizens with government jobs. And the vast majority of Saudis in the workforce work for the government. Now what the vision 2030 plan is, is to try to push Saudis into the private sector.
The problem with that is that the Saudi private sector, while it's been a job-creating machine - over a million jobs in the - probably in the last decade in the Saudi private sector - almost all of them have gone to foreign workers. Whether that business model can adapt to local labor, which you have to pay more to, is I think the biggest question mark in this policy of economic change right now.
MCEVERS: At the same time as we were seeing this report about the sale of the bonds, there was a report in The New York Times about Deputy Crown Prince Mohammed bin Salman purchasing a $550 million yacht from a Russian vodka tycoon in the south of France. What, if anything, does this say about the ruling family and how they see the future?
GAUSE: Well, I certainly think it says that it's good to be the deputy crown prince. Mohammed bin Salman is the driver of policy in Saudi Arabia right now. There's no question about that. And he has I think gotten some amount of support from that very nebulous thing called Saudi public opinion because he looks like he's actually doing something.
I think that there are more conservative people in the Saudi elite who wonder if what he's doing is going to lead to more problems, particularly along the lines of political mobilization. But the idea that a Saudi prince buys a yacht - that's been going on for a long time, and it hasn't led to political upheaval yet. It would take economic austerity of a much more severe amount to make Saudi say the purchasing of our senior officials are enough to get us in the street.
MCEVERS: Gregory Gause is head of international affairs at the Bush School of Government and Public Service at Texas A&M. Thank you.
GAUSE: My pleasure.
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