Saudis told not to sweat changes in energy subsides

The Saudi Arabian government recently assured citizens that they will not be left behind when it comes to energy subsidies.

Citing subsidies now in place in the kingdom, the Saudi Ministry of Energy, Industry and Mineral Resources promoted something called a "Unified Citizen Account" that will take over aspects of subsidy management after initial disbursements are made in coming months.

The government is also notifying citizens about a registration portal that will open on Feb. 1.

A Saudi Fiscal Balance Program ensures that eligible beneficiaries will get the payments they are currently entitled to under subsidy practices, the ministry said, describing the intent of subsidies this way: “The purpose of the subsidy was to reduce the effect of the rise in prices and make them affordable to citizens, residents, companies, stores and factories.”

The ministry also said that eligibility under the Unified Citizen Account will extend to both public- and private-sector employees.

For more on the subsidies and their economic and political impact, the Gulf News Journal spoke with Mahfuz Meherzad, an adjunct professor of government and political affairs at Millersville University in Lancaster County, Pennsylvania.

“Economically, (subsidies) may not make a lot of sense in the near term,” he said. “But it’s part of an overall model of governance.”

Essentially, Meherzad said, what subsidies and government payments allow the Saudi leadership to do is control a populace that has many economic supports.

“They’re able to quell any sort of push for democracy.” he said, pointing out that even the American Revolution was, in part, based on economic issues around taxation.

Meherzad said subsidies and other giveaways help ensure the “durability” of the kingdom’s political order by staving off the cries for democracy that have been heard in so many other parts of the world.

“The Middle East is an outlier.” Meherzad said, suggesting that it’s precisely the economic support that has stunted any call for real representation and democratic progress in Saudi.

“Subsidies keep prices low for the citizens,” he said, adding that other incentives, like an abundant child credit, contribute to a sense of economic well-being among the Saudi rank and file.

Other analysts agree that any angst surrounding Saudi subsidies occurs in the context of profound economic support for citizens there.

“The ultimate goal is not to dismantle the welfare state, but to make it more durable through incremental reform over years," Matthew Reed, vice president of Foreign Reports Inc., a consulting firm with interests in Middle Eastern affairs, wrote in a January 2016 Fuse article. “The latest changes are not whiplash-inducing.”

Reed said Saudis still pay only about half of what Americans do to fill up their tanks, so there won’t be much hand-wringing about modest efforts to cut subsidies, which might also be linked to an effort to promote the use of renewable energies.

“Saudi Arabia’s deep pockets mean it can endure low oil prices for years,” Reed wrote, “but that doesn’t mean it can afford to do nothing and simply wait for prices to rebound. Saudi leaders have made that clear.”