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No the thesis is not that the current budget deficit is a problem but the increasing costs of bribing and subduing the populace and the factions of the royal family turn into a bidding war, with increasingly expensive wars as the proxy war in Yemen escalates. The ownership of the assets overseas is somewhat complex too - there is little public documentation, but the country does not really own much, it is owned by individuals, as this is a traditional feudal monarchy, not a modern country, so there is no real "state". At some point with increasing factionalism this could be problematic for borrowing. If there were serious political issues, like the Saud's being kicked out, much of the money would go with them, and the credit rating would not last for long.

On the other hand people have been predicting the end of the House of Saud for decade now, and people have continued to support them and sell them unlimited weapons.

Would you think that House of Saud would venture into a price war if it felt vulnerable at home ?

One theory is that Saudi is keeping prices low to try and destroy the US shale industry.

Another is that OPEC is no longer operating as a cartel and Saudi couldn't persuade other governments to cut production to boost prices so they didn't want to lose their own market share.

Saudi may be in trouble, but we're more likely to see instability in other petro-states first, especially Venezuela.

I think it is similar to Germany's WWI 'gamble' of fighting a war on two fronts. Everyone knew this was a very bad idea, but it was thought that the gamble just might work if they could knock France out quickly. The house of saud knows they are sitting on a demographic time bomb in a world where renewables are getting cheaper every day. When you feel your options are limited you tend to take risks that are not wise.

Saudi reserves are now under $600 billion. They were $608 billion around January 1st [1], and they have been destroying $15 to $20 billion per month. Their deficit was $115b for 2015, and it's going to be drastically higher this year.

And that's pretending all $600 billion is available to be burned freely. Which is never the case in reality. They're so desperate at this point they're going to IPO Aramco and begin selling off state assets.

Their reserves will be completely gone in three years if oil stays at or below the $45-$50 range. That's assuming nothing else they're doing gets more expensive (bribing the populace, local war), and that they can actually use all of their reserves freely; both of which are dramatic assumptions.

The real problem is that they desperately need hundreds of billions of dollars on hand to bribe their domestic audience as necessary. Without that, risk of civil war or collapse goes up dramatically.

[1] http://www.bloomberg.com/news/articles/2016-01-28/russia-set...

I think you've missed the point - which is not that Saudi Arabia will collapse for financial reasons - but rather that the corrupt infrastructure which composes the system of organization (it could hardly be called government) of the House of Saud is getting more and more unstable, and less able to be kept together with mere funds alone - since there is already so much money in the empire, that the costs of the corruption are rising at a rapid rate.

Its like, Saudi Arabia has all the oil money it would need, but it doesn't have an ethical/non-criminal infrastructure strong enough to deal with the weight of the corruption at the very top, and also (the article points out): the very bottom. The society has a systemic corruption problem, and no society ever in the history of humanity has ever lasted beyond the tipping point of this corruption. The article warns that this may happen sooner rather than later.

My issue with the article is that it assumes that the Pentagon doesn't run this model, pretty much monthly, in its simulacra exercises. It seems we've forgotten that the Pentagon has an entire army divisions worth of resources alloted to just this task. This is too naive a point of view; more likely, then, is that this article is actually propaganda to mask the fact that the USA and its military partners, do in fact model for Saudi collapse, and are in fact actually prepared for it. That is an even more terrifying conclusion, given the state of the region today, and the degree to which American foreign policy has impacted the stability of the enemy states; where enemy=anyone the Sauds don't exercise corrupting control over, yet, in the region.

Yes I too find it unlikely that the pentagon is not running simulations of this outcome on a regular basis. I was under the impression that there is some public plan to sweep in and take over the eastern provinces if things get too chaotic.

Re: corruption I don't think the Saudis are any more corrupt than Western economies. The patronage networks are personalised and familial in a way that's (mostly) unfamiliar to the West. But it's naive to think that Western politics isn't any more bought and paid for - in its own way.

My understanding is that Saudi Arabia has been directing a large part of Western foreign policy since at least the oil shocks of the 1970s.

SA is a particularly nasty regime. Not only has it been politically and diplomatically untouchable even when clearly linked to anti-Western terrorism, but many US-led foreign interventions have been of obvious benefit to the Saudis and the US MIC, while making little sense at home.

So even if the Pentagon can game the Fall of the House of Saud militarily, that doesn't mean putting boots on the ground is a viable political solution.

At this point I don't think anyone knows what a viable political solution looks like in that part of the world.

Let it fall apart, and stay out of it, all the while boosting the society back home in order to solve dependence on fossil fuels.

Yeah, I know: its a dream.

>I don't think the Saudis are any more corrupt than Western economies.

Not.even.close. This level of hyperbole is just annoying.

Saudi Arabia, and the corresponding billions (trillions?) dollars of oil wealth is comoletely controlled by one unelected, corrupt, family. There is nothing anaologous to this in the modern world.

Your points don't disprove anything.

1) many shitty economies have low debt-to-GDP ratios. Russia, for instance.

2) 640B in reserves is not as much as you think. Around a year ago Russia spent $1B per day trying to stabilize their crashing currency. They eventually gave up.

3) oil reserves don't mean shit, because with the current price we got pretty close to self cost. If you have 10 trillion of oil, but it costs you 9.5 to get it, it doesn't look so cool anymore. You actually listed some examples yourself.

Article agrees: > Even accounting for today’s low oil prices, and even as Saudi officials step up arms purchases and military adventures in Yemen and elsewhere, Riyadh is hardly running out of funds.

Seems to be implying that less money for political loyalty may reveal tensions, and those tensions can undermine a political order we depend on.

> Has $10 trillion of proven oil reserves, even at today's oil prices

Money isn't the only concern when it comes to oil. Reduction of CO2 emissions is a goal that is becoming more important. Supply with oil is a huge concern for militaries. So the oil demand might drop down even further. Meanwhile you have countries like Venezuela or Nigeria that won't reduce their output.