Saudi Wealth Said To Fade Amid Drop In World Oil Prices --- Nation's Reserves Reduced By Half Over 3 Years, According to Estimate
WASHINGTON -- With the collapse of the international oil cartel, Saudi Arabia is rapidly exhausting the wealth it accumulated during the 1970s and early 1980s, according to U.S. officials, international monetary officials and private analysts here.</br></br>The Saudis have been running down their international reserves for the past three years, spending roughly half of the nation's accumulated wealth, according to one estimate. Reserves are expected to continue to dwindle this year, as the nation suffers a double blow from lower oil prices, which cut oil export earnings, and lower interest rates, which reduce earnings on overseas investments.</br></br>Precise data on the decline in the international reserves of Saudi Arabia and other Middle Eastern oil-producing nations is closely guarded. "These are almost like family kingdoms, and they get surprised if you ask them about these things," says Vahan Zanoyan, director of the Middle East Economic Service run by Wharton Econometric Forecasting Associates. "They'll say, 'Do I ask you what you have in your savings account?'"</br></br>But estimates by Mr. Zanoyan suggest that Saudi Arabia's liquid and semiliquid assets at the end of last year had dropped to about $55 billion from about $110 billion in early 1983. And Mr. Zanoyan says the assets will fall an additional $15 billion this year.</br></br>"They are faced with a choice," said Robert Hormats, vice president for international finance at Goldman, Sachs & Co. "They can either eat into their reserves, or they can substantially cut back development and consumption. The effect will be quite substantial any way you look at it."