Saudi Arabia Turns To Plan B As Low Oil Prices Rattle Economy
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This next story is about what the huge drop in oil prices means for the average person in Saudi Arabia. Oil has gone from more than $100 a barrel to less than $30 a barrel in the last year and a half. Almost all of Saudi Arabia's money comes from oil, and now it needs a plan B. Stacey Vanek Smith from our PLANET MONEY podcast has the story.
STACEY VANEK SMITH, BYLINE: Abdulaziz (ph) lives in Riyadh, Saudi Arabia. We're just using his first name because Saudis can get into serious trouble with the government for saying the wrong thing. In a lot ways, Abdulaziz's life seems very American. He works at a tech startup. He loves "Game Of Thrones." In a lot of ways, though, his life is very different.
How much do you pay in income tax?
SMITH: No income tax.
ABDULAZIZ: No, no income tax.
SMITH: Sales tax?
ABDULAZIZ: No sales tax.
SMITH: Property tax - do you pay property tax?
ABDULAZIZ: No, no any kind of tax.
SMITH: It's not just that Abdulaziz doesn't pay taxes. He gets all kinds of perks from the government. Electricity is so heavily subsidized it's basically free. People leave their air conditioners on when they go on vacation. Healthcare is free. Gas costs around 50 cents a gallon. And all of this is paid for with oil money. The Saudi government gets so much oil revenue that it spreads the wealth around in the form of subsidies and also jobs. Eighty percent of Saudis who work work for the government. Abdulaziz told me over Skype almost everyone he knows has a government job.
You know, the government jobs - are they hard? Are they serious jobs?
ABDULAZIZ: Definitely no. Definitely no. You should be seen in the office like once every 40 days.
SMITH: For some people that never go to work?
ABDULAZIZ: Yeah, and no one can fire you. They could just transfer you to other departments.
SMITH: That is starting to change. David Ottaway is with the Wilson Center in Washington, D.C. He says the Saudi economy has slowed to a crawl.
DAVID OTTAWAY: You see construction halting. You see the cranes no longer swinging in the air.
SMITH: Saudi Arabia doesn't really have other industries. Ottaway says the country's economy is addicted to oil.
OTTAWAY: It is so abundant and so easily available, the tendency, unfortunately, is to continue to depend on it.
SMITH: All of the country's money comes from one company - Saudi Aramco. It is almost unimaginably enormous. Estimates put it at around $4 trillion. To give you an idea of how big that is, take Apple, Google, Exxon, Walmart, Citibank and GE. Add them all together, and you are halfway there. And we know almost nothing about Aramco. It's controlled by the royal family, and it's notoriously secretive. But now that Saudi Arabia is desperate for new sources of money, it's floating the idea of selling shares of Aramco. David Ottaway says that would be tricky. If Aramco starts taking shareholders' money, those shareholders will start wanting to know things.
OTTAWAY: Transparency would be a real shock for Aramco. If they had to explain to the public how much money they're spending on building palaces and providing to princes - you know, there are probably 5,000, 6,000 princes.
SMITH: There are 6,000 princes? That's a lot of princes.
SMITH: In the meantime, the government has done something kind of amazing. A few weeks ago, it announced that it would be rolling back subsidies on electricity, water and gas. And for the first time, Saudis would pay taxes - a sales tax on some items. Abdulaziz, the tech worker in Riyadh, says it was shocking.
What did you think when he told you that?
ABDULAZIZ: I was a little bit scared.
SMITH: Why were you scared?
ABDULAZIZ: We don't have taxes anymore in Saudi Arabia.
SMITH: Abdulaziz was worried people would freak out. He says it's been OK, but everybody's nervous. Everything is getting more expensive, and their whole way of life is changing. Ultimately though, Abdulaziz thinks that could be a good thing. When the Saudi government was paying for everything, many people didn't feel like they had a right to weigh in on what the government did.
ABDULAZIZ: Because it's not their money the government's spending on us, so when they start paying, they will understand, like, we deserve this. This is our money.
SMITH: Now, the people are contributing money to the government. Abdulaziz thinks they might feel more entitled to contribute their opinion, too. Stacy Vanek Smith, NPR News. Transcript provided by NPR, Copyright NPR.