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Page added on March 31, 2015

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Cost no barrier to Saudi Arabia’s Yemen intervention

Public Policy

Despite a record budget deficit caused by low oil prices, Saudi Arabia can easily afford its military intervention in Yemen and cost is unlikely to limit the duration or scale of its operations, military analysts believe.

The world’s biggest oil exporter is acting while it faces the heaviest pressure on its state finances for more than a decade. Because of the oil price plunge since last year, the government has projected a deficit of $38.7 billion for 2015, and it has started drawing down the country’s foreign reserves to cover the gap.

But the current and likely costs of the Yemen intervention, which may eventually run into hundreds of millions of dollars a month, are too small to add a significant extra burden to a budget that allocated $81 billion for defence and security last year.

The government has not disclosed details of the scale and cost of the Saudi-led air strikes in Yemen since last week, but Saudi-owned Al Arabiya television reported 100 Saudi planes were participating.

Giri Rajendran and Henry Boyd, research associates at the International Institute for Strategic Studies in London, noted that Britain’s Ministry of Defence estimated its six-month Libyan air campaign in 2011, which used about 30 planes, cost at least 212 million pounds ($315 million).

That figure, which includes operating costs and replacing munitions, implies Saudi Arabia might spend around $175 million on a month of air strikes using 100 planes.

Costs would be higher if some planes used bases far from the Yemeni border, requiring air-to-air refuelling, and any loss of aircraft would quickly push up the expense.

The Arab alliance conducting the strikes initially plans a month-long campaign, but it could last five or six months, a Gulf diplomatic official said. That suggests the air campaign might cost Riyadh more than $1 billion.

Such a figure would be insignificant compared to the $707 billion of net foreign assets held by Saudi Arabia’s central bank, which acts as a sovereign wealth fund.

“The oil-rich kingdom is likely to be able to afford current Yemeni operations, particularly given its low levels of public debt and large sovereign reserves,” the IISS analysts said.

Any ground incursion into Yemen, which Riyadh has not ruled out, would cost more. It might resemble France’s intervention in Mali since 2013, a relatively low-intensity conflict involving several thousand French troops in a remote location.

French officials have estimated that cost about $3 million per day, or $90 million a month. The figure implies that in addition to the cost of air operations, Riyadh might spend over $500 million on a small ground incursion lasting six months.

A protracted, large-scale seizure of territory would be many times more expensive, but still affordable.

How much it would cost depends on what sort of mission is needed and who will do the fighting. The United Nations is spending $8.5 billion to field 123,000 troops on peacekeeping missions around the world this year, or about $68,000 per soldier; the United States spent upwards of half a million dollars per soldier per year to keep its troops in Afghanistan and Iraq.

Even spending at the U.S. rate, a full-scale invasion and security operation by 30,000 troops would cost in the vicinity of $15 billion over a year, still affordable for Saudi Arabia.

Nicole Auger, international defence budgets analyst at U.S.-based consultants Forecast International, said Riyadh might spend hundreds of millions of dollars a month.

But because the Saudis feel some of their key security interests are at stake, “they will spare no expense on this operation”, she said

 

reuters



4 Comments on "Cost no barrier to Saudi Arabia’s Yemen intervention"

  1. Plantagenet on Tue, 31st Mar 2015 4:00 pm 

    Inshallah.

  2. Makati1 on Tue, 31st Mar 2015 7:12 pm 

    And the cost in lives? Oh, that’s right, there are those 70 young virgins waiting for the Muslim warriors on the other side….lol.

    Funny how this is NOT an “invasion” according to the West, but, Putin’s supposed “invasion” of Ukraine is. Seems the definition of invasion depends on what Washington wants to promote, not reality.

    Nothing good will come of this new war. Wait and see.

  3. Dr Z on Tue, 31st Mar 2015 7:15 pm 

    But what will they spend to maintain Egypt’s troops? Death by a thousand cuts. My money is on the Yemenis.

  4. rockman on Wed, 1st Apr 2015 7:24 am 

    “The world’s biggest oil exporter is acting while it faces the heaviest pressure on its state finances for more than a decade.” Hmm: “heaviest”. A yearly deficit of about $40 billion and the KSA has a cash reserve of around $700 billion so that deficit represents about 6% of the monies the KSA has socked away. One might expect the interest the KSA is drawing on those $700 billion in investments might cover most if not all of the deficit. Unless they have all the $700 billion stuck in the money market account at my credit union. LOL

    All of which ignores the fact that the KSA budget isn’t based upon needs but the availability of revenue from oil sales. Back when oil process boomed the KSA ran budget surpluses twice as large as the current so-called deficit because their budgets were based upon much lower expectations of oil sales revenue.

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