Arab oil exporters profit as Ukraine crisis hits global economy

Abu Dhabi, United Arab Emirates: While the Ukraine crisis is wreaking havoc on the global economy, its impact on the Middle East has not been so dire.

The Gulf states, among the world’s largest hydrocarbon producers, are seeing billions of dollars added to their coffers following an oil price spike triggered by the Ukraine crisis. They are set to post their first budget surpluses after an eight-year oil crisis exacerbated by a pandemic-related decline.

According to a report published in February by Mitsubishi UFJ Financial Group (MUFG), the Gulf Cooperation Council (GCC) countries are expected to experience a 6.1% gain in GDP in 2022 due to higher oil prices, as well as than budget surpluses for the first time since 2014. Saudi Arabia, Oman, United Arab Emirates (UAE), Kuwait, Qatar and Bahrain make up the GCC.

“This will lead to an overall GCC fiscal surplus in 2022 of $27 billion,” MUFG said, adding that recently implemented austerity measures, as well as surging oil, will support balance sheets.

Oil prices fell during the outbreak due to oversupply and demand restriction. In March 2020, the benchmark price for Brent crude oil was $22 per barrel. By early March, it had hit a 14-year high, topping $130 a barrel as Russia’s war in Ukraine grew more violent.

Gulf governments that rely heavily on hydrocarbons for their revenue are used to oil booms and busts. They used to increase their rhetoric about diversifying income sources during recessions, but often failed to achieve the same aspirations during booms.

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Christi C. Elwood