A quick message!
Saudi Arabia has just announced
On October 8, the Saudi government announced that it was discussing with several big banks to borrow $10 billion. The news was short, but it was like a stone smashed into an oil pan, which immediately exploded the global financial circle.
On October 8th, a piece of news hit the global financial circle like thunder: the Saudi government suddenly announced that it was negotiating loans with several major international banks, with a total amount of up to 10 billion US dollars.
As soon as the news was released, the market immediately exploded. The financial circles, energy circles, and investment circles all stared at the "old oil" in the Middle East.
You know, Saudi Arabia has always been synonymous with "rich and willful" in the eyes of many people, but this time, Big Brother actually asked to borrow money and talked to "top financial owners" such as Citigroup, Goldman Sachs, and JPMorgan Chase.
It's like the rich man who drives a Rolls-Royce and stays in a seven-star hotel every day in your impression, and suddenly goes to a bank loan to buy food money-it smells unusual no matter how you look at it.
What the hell is going on here?
According to relevant media reports, negotiations on the loan are already underway for $10 billion, and this is not the first time Saudi Arabia is asking for money.
Since this year, they have raised more than $20 billion through debt issuing, loans, etc., this time more than $10 billion, obviously not a temporary initiative, but a long-term intention.
Here comes the question: Why is Saudi Arabia suddenly so short of money? In fact, the most critical word behind this is: oil.
As one of the world’s largest crude oil exporters, Saudi Arabia’s national finances are heavily dependent on oil revenues, with roughly $6 out of every $10 earned by selling oil.
The price of Brent this year was just over $70, far below the $96.2 needed to balance the Saudi budget.
Oil does not sell, money does not come naturally.
According to fiscal data for 2024, Saudi Arabia's fiscal deficit has reached 115 billion rials, or about 2.8% of GDP, and its debt ratio has also soared to 29.8%.
The fiscal gap is growing, the sale of oil is already "not able to fill the hole", and borrowing money has become a step to go.
Some people may ask, doesn't Saudi Arabia also have an "Aramco"? This is one of the most profitable companies in the world. If there is really no money, wouldn't it be enough to take Amei's dividends?
The problem is that Aramec itself is tight, in the first quarter of 2024, Saudi Aramec’s net profit decreased by 14.5 percent, less profit, and the dividends paid to the government naturally also shrunk.
Coupled with the instability of the international market and weak demand, even oil majors are beginning to plan their lives.
The larger “black hole” is also in the “Vision 2030” program led by Saudi Prince Mohammed bin Salman (MBS).
To be honest, it is Saudi Arabia to get rid of its dependence on oil, transition to engage in high-tech, tourism, renewable energy, sounds pretty, but reality is very sensitive.
The most typical example is the "future city"-NEOM.
It was originally planned to build the world’s most advanced linear city, with a budget rising from $50 billion to $8.8 trillion, and as a result, not even 2.4 kilometers will be completed by 2025.
It’s like you borrowed a block of land, intended to build a villa, and the result was half the budget for building a toilet, and the financial pressure suddenly exploded.
Saudi Arabia’s $10 billion loan is not an isolated event, but a part of the entire “loan-for-day” strategy, according to IMF data, by 2025 Saudi Arabia’s financing needs will exceed $37 billion, and by the end of 2024 its total debt has reached R$1.22 trillion.
To put it bluntly, this is a "pit filling game": the money borrowed today is to plug the hole owed yesterday, but the hole is getting bigger and bigger, and the faster it is filled, the deeper it will be.
Some economists pointed out that the problem of Saudi Arabia is not the lack of resources, but too dependent on resources, relying on the sale of oil, but if the transition is not done, the longevity of borrowing money will be a problem sooner or later.
And don’t forget that the U.S. is quietly staring at this, that Saudi Arabia is at the heart of the “oil-dollar” system, and that the dollar’s position in global energy transactions could shake if even Saudi Arabia couldn’t stand it.
Therefore, the United States is looking closely, and the Wall Street does not dare to fall lightly.
From a Chinese perspective, Saudi Arabia’s loan occurred in the Middle East, but the impact was global.
As the world’s largest crude oil importer, China has a natural concern for the stability of oil prices.
Saudi Arabia's financial constraints are likely to push it to raise oil prices through "restricting production and guaranteeing prices," which will directly impact China's energy import costs.
In addition, China and Saudi Arabia have deepened cooperation in the fields of energy, security and investment in recent years, and Saudi finance is tight, which could affect the progress of some Chinese-invested participation projects and even trigger a second negotiation.
But from another perspective, this is also an opportunity for China companies to "go global."
If Saudi Arabia needs funding to support the transition, China’s capital, technology, and engineering capabilities can help, and as long as it cooperates properly, it’s not necessarily a “organic crisis” new situation.
The news that Saudi Arabia wants to borrow US$10 billion may appear to be a "rich country short of money", but it is actually a microcosm of "difficult oil addiction."
It uncovers not only a fiscal gap, but also the pain that the entire oil era has to face during the transition to the new energy era.
On the road to transformation, everyone wants to easily cross it, but the reality is often that the project will fall first before the money keeps up.
Saudi Arabia’s move may be a signal of a change in the global energy pattern: the days when food is dependent on oil are not so much better.
Not only Saudi Arabia, but every resource-based country should listen to the warning of this "borrowing bell". Future wealth is no longer oil buried underground, but new opportunities hidden in innovation, diversity and green.
Saudi Arabia has just announced
On October 8, the Saudi government announced that it was discussing with several big banks to borrow $10 billion. The news was short, but it was like a stone smashed into an oil pan, which immediately exploded the global financial circle.
On October 8th, a piece of news hit the global financial circle like thunder: the Saudi government suddenly announced that it was negotiating loans with several major international banks, with a total amount of up to 10 billion US dollars.
As soon as the news was released, the market immediately exploded. The financial circles, energy circles, and investment circles all stared at the "old oil" in the Middle East.
You know, Saudi Arabia has always been synonymous with "rich and willful" in the eyes of many people, but this time, Big Brother actually asked to borrow money and talked to "top financial owners" such as Citigroup, Goldman Sachs, and JPMorgan Chase.
It's like the rich man who drives a Rolls-Royce and stays in a seven-star hotel every day in your impression, and suddenly goes to a bank loan to buy food money-it smells unusual no matter how you look at it.
What the hell is going on here?
According to relevant media reports, negotiations on the loan are already underway for $10 billion, and this is not the first time Saudi Arabia is asking for money.
Since this year, they have raised more than $20 billion through debt issuing, loans, etc., this time more than $10 billion, obviously not a temporary initiative, but a long-term intention.
Here comes the question: Why is Saudi Arabia suddenly so short of money? In fact, the most critical word behind this is: oil.
As one of the world’s largest crude oil exporters, Saudi Arabia’s national finances are heavily dependent on oil revenues, with roughly $6 out of every $10 earned by selling oil.
The price of Brent this year was just over $70, far below the $96.2 needed to balance the Saudi budget.
Oil does not sell, money does not come naturally.
According to fiscal data for 2024, Saudi Arabia's fiscal deficit has reached 115 billion rials, or about 2.8% of GDP, and its debt ratio has also soared to 29.8%.
The fiscal gap is growing, the sale of oil is already "not able to fill the hole", and borrowing money has become a step to go.
Some people may ask, doesn't Saudi Arabia also have an "Aramco"? This is one of the most profitable companies in the world. If there is really no money, wouldn't it be enough to take Amei's dividends?
The problem is that Aramec itself is tight, in the first quarter of 2024, Saudi Aramec’s net profit decreased by 14.5 percent, less profit, and the dividends paid to the government naturally also shrunk.
Coupled with the instability of the international market and weak demand, even oil majors are beginning to plan their lives.
The larger “black hole” is also in the “Vision 2030” program led by Saudi Prince Mohammed bin Salman (MBS).
To be honest, it is Saudi Arabia to get rid of its dependence on oil, transition to engage in high-tech, tourism, renewable energy, sounds pretty, but reality is very sensitive.
The most typical example is the "future city"-NEOM.
It was originally planned to build the world’s most advanced linear city, with a budget rising from $50 billion to $8.8 trillion, and as a result, not even 2.4 kilometers will be completed by 2025.
It’s like you borrowed a block of land, intended to build a villa, and the result was half the budget for building a toilet, and the financial pressure suddenly exploded.
Saudi Arabia’s $10 billion loan is not an isolated event, but a part of the entire “loan-for-day” strategy, according to IMF data, by 2025 Saudi Arabia’s financing needs will exceed $37 billion, and by the end of 2024 its total debt has reached R$1.22 trillion.
To put it bluntly, this is a "pit filling game": the money borrowed today is to plug the hole owed yesterday, but the hole is getting bigger and bigger, and the faster it is filled, the deeper it will be.
Some economists pointed out that the problem of Saudi Arabia is not the lack of resources, but too dependent on resources, relying on the sale of oil, but if the transition is not done, the longevity of borrowing money will be a problem sooner or later.
And don’t forget that the U.S. is quietly staring at this, that Saudi Arabia is at the heart of the “oil-dollar” system, and that the dollar’s position in global energy transactions could shake if even Saudi Arabia couldn’t stand it.
Therefore, the United States is looking closely, and the Wall Street does not dare to fall lightly.
From a Chinese perspective, Saudi Arabia’s loan occurred in the Middle East, but the impact was global.
As the world’s largest crude oil importer, China has a natural concern for the stability of oil prices.
Saudi Arabia's financial constraints are likely to push it to raise oil prices through "restricting production and guaranteeing prices," which will directly impact China's energy import costs.
In addition, China and Saudi Arabia have deepened cooperation in the fields of energy, security and investment in recent years, and Saudi finance is tight, which could affect the progress of some Chinese-invested participation projects and even trigger a second negotiation.
But from another perspective, this is also an opportunity for China companies to "go global."
If Saudi Arabia needs funding to support the transition, China’s capital, technology, and engineering capabilities can help, and as long as it cooperates properly, it’s not necessarily a “organic crisis” new situation.
The news that Saudi Arabia wants to borrow US$10 billion may appear to be a "rich country short of money", but it is actually a microcosm of "difficult oil addiction."
It uncovers not only a fiscal gap, but also the pain that the entire oil era has to face during the transition to the new energy era.
On the road to transformation, everyone wants to easily cross it, but the reality is often that the project will fall first before the money keeps up.
Saudi Arabia’s move may be a signal of a change in the global energy pattern: the days when food is dependent on oil are not so much better.
Not only Saudi Arabia, but every resource-based country should listen to the warning of this "borrowing bell". Future wealth is no longer oil buried underground, but new opportunities hidden in innovation, diversity and green.