By Ovunc Kutlu
ANKARA
As Salman bin Abdulaziz becomes the new king of Saudi Arabia, he is not expected to make any significant policy changes regarding falling oil prices, the economy and relations with other states in the Middle East, experts say.
"We actually predict King Salman to follow his predecessor," Jason Tuvey, a Middle East expert at London-based Capital Economics, told The Anadolu Agency. "King Salman has been the de facto leader in the past couple of years and he has not actually deviated significantly from King Abdullah’s past policies."
King Abdullah bin Abdulaziz Al Saud, whose reign lasted almost two decades, passed away on Friday, after being treated for pneumonia for three weeks.
His half-brother Salman bin Abdulaziz Al Saud, 79, succeeded him, after holding the post of defense minister since 2011.
"We expect the Saudi oil policy to remain consistent under King Salman," said Richard Mallinson, a geopolitical analyst at London-based energy market consultancy Energy Aspects. "While it would be within his power to make dramatic changes and reverse the current policy, there are no indications at present that he might do so."
Saudi Arabia, the biggest oil exporter in the world, is one of the most influential members of OPEC, which decided not to cut production on Nov. 27, 2014 amid falling oil prices.
Even though oil prices dipped below $50 per barrel in January 2015, marking record-low levels since 2008, Saudi Arabian Oil Minister Ali al-Naimi stated on Dec. 2, 2014 that the kingdom will continue to produce even if oil prices fall to $20 per barrel.
"Mr. Al-Naimi is retaining his job as part of King Salman keeping King Abdullah’s cabinet," said Tuvey. "We expect Mr. Al-Naimi to continue to keep oil production unchanged and the kingdom will continue to resist pressure from the rest of OPEC to cut oil output."
Saudi Arabia has one of the lowest oil production costs in the world, according to oil experts, which makes the kingdom more resistant to an oil price slump longer than its competitors in the market.
Economy
Oil experts add that Saudi Arabia is trying to regain its market share in the world oil market, against oil producers who have increased their output in the last decade, such as Russia and the U.S.
"Saudi Arabia is almost certain to remain focused on the long-term and its future position in the global oil market, even if this means lower oil revenues and slower GDP growth this year and potentially into 2016," Mallinson said.
Saudi GDP grew only 3.6 percent in 2014, the lowest since 2010, while the growth rate was 4 percent in 2013, and 5.8 percent in 2012, according to World Bank data, while revenues from oil sales make up almost 50 percent of the Saudi GDP.
"Our growth forecast remains as it is at 4.5 percent," said Florence Eid-Oakden, chief economist of Arabia Monitor, an economic research and strategy institution in London. "Government reserve funds worth over $256 billion could sustain the forecasted deficit of $39 billion, which is 5 percent of GDP, for multiple years, if the low oil price environment persists."
Saudi Arabia announced on Dec. 25, 2014 that the government expects spending of $229 billion and revenues of $190 billion, which brings the estimated budget deficit to $39 billion for 2015.
"We expect the government expenditure pipeline to be sustained through low oil prices, as well as through the political transition underway,” Eid-Oakden said.
Meanwhile, the International Monetary Fund expects the kingdom to grow 2.8 percent in 2015 and 2.7 percent in 2016, revising down its growth rates by 1.6 and 1.7 percent respectively from last October's predictions.
"Low oil prices have some impact, but, by no means is it pushing Saudi economy into a deep recession," said Tuvey. "The Saudi Arabian Monetary Agency has around $750 billion from oil sales."
The agency acts as the central bank of the kingdom and keeps oil revenues and gold reserves on behalf of the government.
Foreign policy
"We expect King Salman to continue with the same policies on Iraq, Syria and the rest of the region," said Tuvey, adding that Saudi kings always consult with other princes and all of the Saudi royal family on such issues.
Mallinson also said the kingdom will focus on reassuring its allies in the region and around the world, most notably the U.S.
"The areas worth tracking are how actively Saudi Arabia engages in the Gulf Coast, where there have been recent moves to mend ties with Qatar and the ongoing commitment to supporting Egypt and other post-Arab Spring states financially," he said.
Mallinson underlined that beyond the short-term focus on stability, the extent of King Salman making changes to ministers and other senior officials in the long run can give an indication of any adjustments he hopes to achieve in the kingdom’s policy direction.
