Like the opening of a cheap strip club in a neighbourhood of heroin addicts the NEOM project was announced last week at the World Economic Forum.
But this $500Bn Dollar project to build a entirely new 26,500 Square Mile mega city on the barren wastelands of the Saudi Arabian western coastline is not going to happen. And here’s why.
Saudi Arabia don’t have $500 Billion Dollars
That might be a surprise to hear. They have all that oil after all right? The richest family on earth and the biggest producer of oil on the planet aren’t they? $34Tn in oil and gas reserves right?
Sure. Plenty of cash coming in, but they are also the biggest spenders on the planet. They earn this title to the extent that last year things got so bad they even considered offering contractors IOU’s in lieu of payment in order to prevent the annual budget deficit exceeding $100Bn.
The reason why they had to that is that they only have $487Bn (2016) in cash reserves left, they also OWE about $200Bn to foreign investors, and at negative $100Bn budget deficit per year… Well, you can do the math.
There have also been moves to grab cash from anywhere they can and panic moves to appoint a strong hand to steady the ship, including the recent coup that was sold to the world as a simple change in the line of succession, are moves to that effect.
The recent threats to invade Qatar, which has $340 Billion in Cash and Gold, was another such overt grab at a cash pile that would have added much needed liquidity to the coffers. Arrests of billionaire family members is also a move in this direction with assets seized as part of the “anti-corruption” exercise. One of these Princes is a major shareholder in Twitter, which I’d bet is no coincidence either.
The direct repercussions of this country going bankrupt would be a major destabilisation of the entire region. War, another refugee crisis and thousands of angry men with their shoes off would follow.
Next, the economy would tank. 80% of the 12 million strong labour force are non nationals, so when the wage dries up you’ll have an exodus on a scale not seen since the Hebrews crossed the Red Sea from Egypt and started that whole Abrahamic religion thing. But this time, out of the country, and all the skills along with it.
Then with unemployment estimated at about 25%, a lot of people (that’s males only, so more like 75%) are dependent on the state feeding them. With no free food, electricity or WiFi after the music stops, that’s a lot of new ISIS recruits.
The financing of mosques across Europe would surely end pretty abruptly, which would be fairly interesting to watch unfold.
So getting back to NEOM. Why do that when you clearly can’t afford it? Well, for the same reason they are trying to sell a chunk of Saudi Aramco. They need investors to keep the lights on, so are literally going to sell their soul to Satan to get cash flowing into the country in order to plug the budget gap before it all falls apart.
But here’s the thing, I’m no international financier, and I can see that this is no more than a cheap light show to draw in drunkards and fools. Billionaires and trust funds aren’t going to be fooled too easily either.
In that case, it may already be too late.