Falling Oil Prices, the Saudis, and the Soviets
31st January 2016
It’s hard to read about how Saudi Arabia’s rulers are handling the collapse of oil prices without recalling the end of the Soviet Union. Every petro-state has to ponder this precedent, but for the Saudis the parallels must be unnerving. Consider: Their economy is inefficient and undiversified, based on irrational pricing and vast subsidies. There’s no modern taxation system; money just sloshes around, Soviet-style, on the basis of insider connections. There are no mechanisms of meaningful political representation, and after years of senescent leadership a new generation is clamoring to take over. Growing ethnic divisions and the military’s huge share of the economy round out the picture. To all this, add a sharp drop in export earnings, and it’s no surprise that people worry about systemic failure.