Yemen Conflict And Falling Oil Prices Hit Saudi Arabia Hard

NEW DELHI: The Kingdom of Saudi Arabia is facing the crunch of falling oil prices, especially as the war in Yemen sees no end in sight. The economic repercussions of this are being felt at home, as 31,000 Saudi and other foreign workers have lodged complaints with the government’s labour ministry over unpaid wages, and big construction magnates have not been paid by the Saudi government for major construction projects.

As per the most recent developments in Yemen, the United Nations Security Council has appealed all parties involved to to immediately resume talks with the UN envoy for that country and to abide by the ceasefire imposed. In a press statement, the members of the Council “expressed their continued support for and commitment to the work of the Special Envoy of the Secretary-General for Yemen, Ismail Ould Cheikh Ahmed, in bringing the parties to negotiations with a view towards swiftly reaching a final and comprehensive agreement to end the conflict in Yemen.”

Yemen has been engulfed in violence for some years now. A confrontation between the country’s Houthis (Ansar Allah) and the Government of Yemen in early 2014 led to a Houthi advance on the country’s capital, Sana'a in 2014, and an ensuing conflict which has involved support from outside parties. Saudi Arabia has been leading the war against the Houthi rebels, pumping in millions and millions of dollars to fight the rebels.

Meanwhile, at home in the Kingdom, the country’s big construction magnates – including that of the Binladen group – have not been paid by the Saudi government for major construction projects. Further, a large portion of Indian, Pakistani, Sri Lankan and other workers have received no wages, some of them for up to seven months.

The crisis has prompted Indian and Pakistani embassies to approach the Saudi government on behalf of the workers. India in fact appealed to laid off workers to return home, having sent Minister of State for External Affairs General (retired) V K Singh to Saudi Arabia on a couple of occasions as over 10,000 Indian workers were laid off.

The scale of the crisis is evinced by the fact that Binladin Group, the kingdom’s largest construction company, has terminated the employment of fifty thousand foreign workers. Similarly, workers at United Seemac construction company are complaining they have not been paid for months – or even granted permission to leave the country.

The companies allege that the crisis is because of the cancellation of big contracts and unpaid bills at the hands of the Saudi government, which is reeling under the pressure of crashing oil prices. When King Salman took over last year, he inherited a kingdom in trouble. Saudi Arabia depends upon oil sales for over ninety percent of its revenue, as the population does not pay tax. As oil prices fells from 100 USD per barrel to 30 USD per barrel, oil revenues for the Kingdom collapsed. The Kingdom lost 390 billion USD in anticipated oil profits last year, bringing its budget deficit to 100 billion USD - much higher than it has been in recent memory. For the first time since 1991, Saudi Arabia had to turn to the world of private finance to raise 10 billion USD for a five year loan.

With the war in Yemen showing no end in sight, and oil prices still at a low -- Saudi Arabia’s domestic concerns will only grow.