The Saudi trade balance runs almost entirely on oil.
Oil exports brought in around $212 billion last year, enough to cover roughly 84% of everything the kingdom imports.
Now the Houthis keep hitting Saudi energy sites, while Iran and the Houthis squeeze the kingdom’s export routes.
Riyadh can borrow or cut spending for a while, but a long squeeze leaves it with 2 bad options:
It could drop the riyal’s peg to the dollar and let imports become unaffordable, a political humiliation the government has vowed for years to avoid.
Or it can burn through its $465 billion in reserves to defend the peg and keep living standards intact, and that pile is already down from about $495 billion in June.
Around $142 billion of those reserves sit in U.S. Treasuries.
In a worst case where oil revenue dries up completely, the goods trade gap alone would hit roughly $78 billion every 6 months, putting Saudi selling within reach of Japan’s recent Treasury dump to defend the yen, which reportedly came in under $90 billion.
It gets worse if foreign lenders lose their nerve.
Saudi external debt has climbed to around $516 billion, more than the kingdom’s entire reserve stash, and if refinancing gets harder, those reserves would drain even faster.
The Houthis can’t reach Wall Street with missiles, but they might not need to.
Sources: GASTAT, WSJ, Bloomberg, Al Arabiya, Arab News, Saudi Gazette, Trading Economics, U.S. Treasury / Writer: Julie
