Austerity’s ill wind blows over the Gulf States

3 November 2015
Hamza Culin

Oil prices reached a six-year low of US$42.23 a barrel in August.

Plunging prices have created gaping holes in the oil-rich Gulf states’ budgets – this year’s deficits for Saudi Arabia and Kuwait are projected to be US$38.6 billion and US$27 billion respectively. This is hardly surprising, given that oil makes up about 80 percent of their exports.

The ruling classes of the Gulf states now are turning to austerity. They are attempting to fill the budget holes through spending cuts and by reducing subsidies. The diesel subsidy has been cut in Kuwait. In the oil-rich emirate of Abu Dhabi, utilities fees have been raised.

More serious attacks on the living standards of the working class are taking place in Oman. Last December, the Omani minister of finance, Darwish Al Balushi, declared , “[T]he salary increases for public servants promoted in 2010 will not be included in the 2015 budget due to the current situation regarding the oil prices”.

There are currently discussions about whether to reduce fuel and water subsidies. Subsidies for staple foods such as rice, flour and sugar, have already been reduced. Most of the food consumed in Oman is imported; many people now are finding it more difficult to buy staple foods.

“There is no positive change in regards to the [food] market prices, and the cost of living is increasing. When prices go up in our markets, they never come down”, said a working class person to the national newspaper, Oman Daily, in September.

The International Monetary Fund for some time has been pressing the country’s rulers to undertake more attacks. Ananthakrishnan Prasad, the IMF’s mission chief to Oman, warned the government in May: “The urgency for implementing fiscal reforms has increased”.

The same valuable advice was being shared with Saudi Arabia. In a 21 October Financial Times article, “Set out spending cuts, IMF tells Saudis”, Masood Ahmed, the IMF’s regional director, was quoted as saying: “There is a desire to start low so you get acceptance of the [sales] tax, but you need financing now”. Ahmed was guiding the Saudi government through implementation of the value-added tax (like the GST in Australia).

Academics and bourgeois economists were also called on to justify spending cuts and blame ordinary people for the state of government finances. Some of them went as far as blaming the Arab Spring for the budgetary problems, because it had made it hard for the poor Arab ruling classes to sustain their national economies while having to provide for all of those hordes of working class people.

Professor Martin Hvidt of Zayed University in Dubai is one who shares this point of view. “It has become quite a bit more expensive to be a state in the region following the Arab uprisings, calculated in the vicinity of 10 to 15 percent more costly following large [government] handouts”, Hvidt told Middle East Eye’s Paul Cochrane in April. “It will be hard to roll that back, but eventually that’s what will need to happen.”

The media in the Gulf states are ramping up the national unity rhetoric. Although nationalism is not new to state-owned TV channels in the Gulf, it has been taken to a whole new level recently. The news has special segments on the economic situation, in which a well-dressed guest economist spends no less than 10 minutes lecturing people on how to be real patriots in these difficult times and to expect to sacrifice for the good of the nation.

This is a textbook way to pass austerity by creating a sense of “we’re all in this together”.

But it is definitely not the case that rich and poor alike share the burden. While working class people are worried about whether they can pay their next electricity bill, the businessmen, sheikhs and monarchs of the Gulf continue enjoying their extravagant lifestyles.

Austerity in the Gulf, like everywhere else, is reserved only for the working class and the poor.

Read More

Red Flag
Red Flag is published by Socialist Alternative, a revolutionary socialist group with branches across Australia.
Find out more about us, get involved, or subscribe.

Original Red Flag content is subject to a Creative Commons licence and may be republished under the terms listed here.