(Bloomberg News) Saudi Arabia will spend $43 billion on its poorer citizens and religious institutions. Kuwaitis are getting free food for a year. Civil servants in Algeria received a 34 percent pay rise. Desert cities in the United Arab Emirates may soon enjoy uninterrupted electricity.
Organization of Petroleum Exporting Countries members are poised to earn an unprecedented $1 trillion this year, according to the U.S. Energy Department, as the group's benchmark oil measure exceeded $100 a barrel for the longest period ever. They are promising to plow record amounts into public and social programs after pro-democracy movements overthrew rulers in Tunisia, Egypt and Libya and spread to Yemen and Syria.
Unlike past booms, when Abu Dhabi bought English soccer club Manchester City and Qatar acquired a stake in luxury carmaker Porsche SE, Gulf nations pledged $150 billion in additional spending this year on their citizens. They will need to keep U.S. benchmark West Texas Intermediate crude oil at more than $80 a barrel to afford their promises, according to Bank of America Corp.
"A sharp increase in spending to accommodate social pressures has averted potential disquiet over governance in most countries, though in the longer-term economic reforms will be needed to buoy private-sector growth and job creation," Jean- Michel Saliba, a London-based economist at Bank of America, said in an e-mail Sept. 8. "Without the social spending, Gulf protests would possibly move the nations toward constitutional monarchy."
Arab Spring
OPEC's basket of crudes, a weighted average of the group's main export grades, has been trading at above $100 since Feb. 21. The basket price was $108.68 a barrel yesterday, while WTI on the New York Mercantile Exchange closed at $85.70. WTI gained 0.5 percent to $86.15 a barrel as of 10:03 a.m. in London.
Tunisia's ouster of President Zine El Abidine Ben Ali in January set up the so-called Arab Spring, as protests led to the end of Hosni Mubarak's 30-year reign in Egypt and threatened the Assad family's hold on Syria.
Libya's rebel council met Sept. 19 to form a cabinet after seven months of fighting to end Muammar Qaddafi's 42-year rule. Yemeni President Ali Abdullah Saleh is under pressure to step down after 33 years running the Arab world's poorest country. Unemployment is at 11 percent in the Middle East and North Africa and as high as 22 percent in Algeria, according to the United Nations Development Program.
Religious Funding
Across Yemen's northern border, in Saudi Arabia, OPEC's biggest member is funding housing, salary increases and the creation of 60,000 new jobs at the interior ministry, according to royal decrees announced on March 18. At least 1 billion riyals ($267 million) has been allocated to the Saudi Ministry of Islamic affairs and The Commission for the Promotion of Virtue and Prevention of Vice after clerics backed a ban on domestic protests.
The religious establishment's new funds include 500 million riyals to restore mosques and 300 million riyals to support Islamic call and guidance offices, according to the decrees. Money is being spent on installing devices in public squares, markets and schools to deliver audio and video broadcasts with "advice and moral lessons," the Commission's President Muhammad al-Eidy said in May.