By Constantine Vergos *
Friday 08 April 2016.
When the deputy prince of Saudi Arabia Mohammed bin Salman announced that Saudi princes will sell all their participation in the country’s oil and will become … fund managers, many laughed or felt that it was just another ambitious project statement of the powerful Saudis. It is not an investment, but an escape from a sinking ship!
The truth is not sweet, it is very bitter. And not only for Saudi Arabia. Bankruptcy is coming to dozens of countries, and Saudi Arabia will just be the icing on the cake!
Saudi Arabia has a double problem. First, it s a junta-state ruled by a royal family where not only women are oppressed but also corruption reigns. A parody of a State, where political opponents are executed on squares summarily and which now undertakes subcontracted interventions into more democratic neighboring countries, such as Yemen or (with the support of Islamo-kanibals) in Syria, and, with unbearable costs. $70 billion. was the defense expenditure of the country in 2015. It surpassed, in military spending, Russia, and it is third in military spending worldwide! Secondly, 60% of its revenue is from oil, which has “hit bottom” in prices.
The once rich Saudi Arabia , has already has come to rounding funds from bonds worth over 25 billion USD to finance its debt and its cash reserves decrease by 2.5 billion every month ( ! ) and will be depleted in 35 months . A country simply on the verge of bankruptcy. The Saudi princes, like rats , ” deliver the keys ” of their oil wells to the Americans ant take off for “sustainable development” by investing in equity investments before the bankruptcy of the country ! But they are not the only ones !
Rich oil businessmen in Angola moved towards the privatization of their companies in a Memorandum with Portugal two years ago. However, Angola, a country of which 95 % of its exports are oil, following the fall in oil prices appears that will be the next victim of the IMF. The Angolan government, has in fact sent a letter, just yesterday, to the IMF asking over $ 1.5 billion of a loan !
The Government of Venezuela, the country with the largest oil reserves in the world, which has 20% of the world’s reserves, just today decided to set Friday as a public holiday for the next nine weeks …! The country does this to save on energy! This is because 50% of the country’s energy needs come from hydropower and it is currently facing a drought problem, while the drop in oil prices has made it even more crucial for the country to export all of its oil production because its foreign currency reserves are being dramatically depleted !
It is clearly a matter of months, if not months, for the country to turn to the IMF for a loan since bankruptcy is only a matter of time.
These three countries are just the tips of the iceberg of what dawns in 2016 for the world economy. It goes to show how the risk of bankruptcies have dramatically changed. After Angola, another oil producing country, as powerful as Nigeria will follow. But I would not be surprised to see other countries to go bust. Countries not rich, such as Canada, but also in metals, such as Australia. Remember Forbes prediction of the imminent risk of default in these countries.
Country defaults will be accompanied by a collapse of foreign markets, their currencies will crumble and bank failures both in these countries and in their neighbors as well as other major Western countries.
The tsunami is not local, it is global! The news of bankruptcy for three important medium sized countries (zombie-countries) is an alarm sounding that the worst is still to come much sooner than expected. The global economy deteriorates rapidly and we are not discussing the outlook for the stock markets …
* Mr . Konstantinos Vergos is Professor of Finance , University of Portsmouth, England .
This article reflects the personal views of the writer. It is not a guide or a recommendation for any form of investment to anyone in a financial product or derivative thereof.