IMPACT OF REDUCTION OF SAUDIS OF OIL PRICES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00364R000701260033-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 2
• Document Creation Date: December 20, 2016
• Document Release Date: February 1, 2008
• Sequence Number: 33
• Publication Date: January 14, 1983
• Content Type: MEMO

Approved For Release 2008/02/01: CIA-RDP85M00364R000701260033-3
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14 January 1983
SUBJECT: Impact of Reduction by Saudis of Oil Prices
In addition to the obvious squabbles that will take place among
and between the oil producing nations over such a price reduction
($3.75 to $5.00 a barrel), and the potential benefit to Western
economies (one-third of 1% for each 10% of price reduction), there
will be other ramifications:
1. Iraq's ability to fight the war against Iran --
Iraq, as you know, already leans heavily on its export of
oil for funds to fight the war but that has not been enough
and the Iraqis have turned to the Saudis for war capital--
so far in excess of .$25 billion. I believe it's doubtful
that the Saudis could sustain its present level of support
to the Iraqis with a price reduction.
2.. Jordan -- Jordan, as you know, relies almost completely
upon funds from the Baghdad Conference to sustain itself and
again the Saudis being the key supporter of subsidizing the
Jordanian economy. It is doubtful that Jordan could exist
for long without the Saudi underwriting.
3. With the lack of foreign capital flowing into the
oil producing nations, particularly those in the Mid-East,
a certain retrenchment in the economy would obviously take
place, i.e., reduction of development, etc., thus reducing
the need for foreign workers. That would impact heavily
on Egypt and Pakistan. Egypt acquires in excess of $1 billion
a year from its foreign workers while Pakistan is over $2 billion.
Egypt, of course, also would be hurt somewhat since it too is
an oil export nation, though marginally so.
4. Sudan will also pay a price and in fact wherever
Saudi dollars are expended there will be a reduction.
5. This may also be felt in the Afghan program.
6. Lebanon -- As you know, if we are ever able to secure
a Lebanon peace the rehabilitation and redevelopment of Lebanon
was to rely very heavily on Arab investment. This also would
fall victim to any price reduction.
John N. McMahon
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