Saudi Arabia’s $600 billion promise to the U.S. needs oil prices to stay high—which will likely anger Trump

• The Kingdom of Saudi Arabia promised to invest 600 billion dollars in the United States During president Donald Trump’s trip there. But the Kingdom is currently managing a deficit, and enhances its spending at the promised levels will be very difficult unless the price of oil rises – which leads to the integration of Trump mathematics.

If one thing that President Donald Trump loves nearly large economic deals, they are low gas prices.

His current journey to the Gulf states is to bring these two goals in the conflict.

The administration described an investment from the Kingdom of Saudi Arabia described as a total of $ 600 billion or, in one case, a trillion dollars.

It is a huge number: at a price of $ 1 trillion, the investment will be equivalent to the full value of the sovereign wealth of the Kingdom of Saudi Arabia, or GDP in the country. In order for the nation to maintain this level of investing in the United States in the long run, it is likely to require long-distance walking currently low oil prices-a possibility of definitely anger Trump.

“The number is impressive, but its importance will eventually depend on the depth, timeline and oil price.” luck. “Unless oil revenues rise, financing such obligations will lead to a general financing unless they are wisely managed. “

Oil is currently about 60 % of the Kingdom’s revenues, according to Gulf News.

“These pledges should face reality because they are already big. luck In an email. “From our point of view, the opposite winds of public financial resources from low energy prices and focus on local vision priorities 2030 means that the declared pledges will not be achieved in part only during the time frame for a period of four years.” (Vision 2030 aims to diversify the Saudi economy through huge public business projects, which have been fixed to up to $ 1.5 trillion.)

In order to separate from spending, the state of the Kingdom of Saudi Arabia needs that the price of oil is at least $ 96 a barrel, according to Bloomberg estimates. (Other estimates put the number above $ 100 a barrel.)

Brent raw, the international standard, is currently about $ 65 a barrel. This price was $ 79 in January, when Trump took office – a number the president believed was very high.

“I will also ask the Kingdom of Saudi Arabia and OPEC to reduce the cost of oil,” Trump said. “This did not show much love.”

Perhaps this love was a few months late, but it arrived, as OPEC announced the increase in production for the month of May and June, which paid the price of oil. The Saudis’ move appears [an] The column writer in Reuters, Ron Boso, wrote that the prices of lower gasoline mean that Trump has already scored his great Saudi victory, “Trump scored his great Saudi victory.”

How long this price remains low to be seen.

Economic question No. 600 billion dollars

Many observers have suspected the $ 600 billion deal, describing it greatly. Fact newspaper provided by the White House investments, which total $ 282 billion, including $ 142 billion US weapons sales.

Paul Donovan, chief economist at UBS Global Wealth Management, wrote this week that the $ 600 billion plan has “a sensation of rotation, which does not necessarily change anything in reality. Declaration does not require economic expectations.”

When it comes to $ 1 trillion in spending that Trump sought this, Ziad Daoud, BloombergThe chief economist said emerging markets, ” New York Times It was “out of reach.”

As it is, $ 600 billion is about 60 % of GDP in the Kingdom of Saudi Arabia and about 40 % of its current foreign assets, according to Tim Calin, a visiting colleague at the Arab Gulf States Institute and the former International Monetary Fund official. Calin wrote earlier this year that this goal meeting would require the country to prove part of the foreign imports issued by the United States during the next four years. While “Saudi investment is likely to grow in the United States, the size of the commitment seems very large.”

The commitment is held is the 2030 vision, which is an ambitious program for public works and economic diversification, which is estimated at $ 1.3 trillion. These local demands prompted the Kingdom to spend on the deficit. Now add a decrease in the price of oil, and Saudi Arabia’s deficit may double at the end of this year to 70 billion dollars, Faro Soussa from Goldman Sachs said, CNBC.

Certainly, the Kingdom of Saudi Arabia can bear some short -term spending in the short term, but it is likely to look forward to bridging the gap, either by lowering projects, selling assets or raising taxes.

Huge numbers, small details

Trump claims that the Kingdom of Saudi Arabia bought $ 450 billion in American exports during his first term, which is that Calin, from the Arab Gulf States Institute, said that “anywhere near.”

Trump was not the first to be the first public employee to announce only a hateful public project for disappointment because of reality. Politicians love to describe their business into business, to the extent that exposing these claims has become a cottage industry.

“Let’s be honest, the ads are always in the end. I don’t think the actual effect is like a great title. But the mark is positive.” luck. Johnson suggested by Trump’s good executives by announcing development deals in the swing states, even if these promises later turned into “steam programs”.

During the first period of Trump, “there was a lot of promises that did not get fruits,” Johnson said. “But this is a kind of nature of work: if you are making big investments, it will not happen overnight.”

This story was originally shown on Fortune.com

2025-05-15 18:23:00