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Entire GCC Crumbles Like A Pack of Cards:

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Entire GCC Crumbles Like A Pack of Cards:

Old 8th Oct 2018, 09:19
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Entire GCC Crumbles Like A Pack of Cards:

This makes for interesting reading! Just a cut and paste, not my words.

Entire GCC Crumbles Like A Pack of Cards: 19 Banks Merge, Etihad Can't Pay Back Debt, Saudi Contractor Can't Pay Salaries, UAE/Saudi Halt 3 Projects of $243 Billion, $11 Billion Bail Out For Bahrain & Jordan: 19 Banks Merge, Etihad Can't Pay Back Debt, Saudi Contractor Can't Pay Salaries, UAE/Saudi Halt 3 Projects of $243 Billion, $11 Billion Bail Out For Bahrain & Jordan

We have been warning our clients and investors about the complete collapse of GCC since 2015.


Thousands of businessmen across GCC have gone into turmoil ever since, property prices have collapsed and thousands are in jail or have run away or are involved in multiple litigation while Govt's are not making payments leading to freezing of thousands of business.

Trump is openly humiliating and challenging Saudi, Etihad is at the verge of a slow death like collapse and bailouts of large corporations and entire countries are in full swing.

Last week, we elaborated how bad things were in the UAE.

Multi Billion Dollar Companies Continue Their Collapse In UAE: 3 More Banks To Merge
In all, at least 19 major banks have merged across GCC within the last 12 months approx.:

8 banks have announced mergers in the UAE alone (2 completed in 2017 and 6 shall merge in 2018).


3 merged in Qatar in Aug 2018.

2 merged in Kuwait-Bahrain in Aug 2018.

Now 2 oldest banks have merged in Saudi in Oct 2018.

Saudi banking mega merger reflects Kingdomís reform agenda
2 were merged in Oman in Aug 2018.
Merger of two Omani banks will form an entity with 25% share of loan market
Yesterday, 4 Oct 2018 was a terrible day across GCC.
2 more banks were merged in Oman.
Two Omani banks announce agreement to merge
Aside from banking mergers, sovereign fund closures/mergers, aluminium company mergers, the largest petrochemical companies in Saudi are also in trouble and are now being merged.
These companies are and were the heart of Saudi and UAE economy and they are almost all insolvent.
Saudi petrochemical firms sign $2.2bn merger deal
Early this week, a major USD 200b solar power project with Japan was also shut down despite being launched just in early 2018.
All these are signs of rapidly evaporating trust of foreign investors and fleeing of local assets and lack of any cash with the Saudi Govt to even save their own reputation, never mind their corporations.
Saudi shelves $200 billion SoftBank Solar project: WSJ
To prove that what we say is true, Govt of Saudi (until few years ago that was the richest country in the world) is taking loans. This is like blasphemy.
Saudi sovereign wealth fund takes on rare $11 billion loan
Never before a rich country has gone downhill so fast in just 3 years since 2015.
USD 11b is needed by Saudi every month as their deficit. This is just 1 month worth of borrowing. The public sector salaries and Govt spending on empty shell towers and mini cities and security are enormous and completely unsustainable.


Ejecting expats is not the solution because expats were paid the lowest while locals are paid the highest. How can Saudi Govt eject the locals?

However, Saudi Govt did the unthinkable when they arrested the top 2,000 princes, royals and elites and took way their financial and real assets worth trillion dollars or more.

This is a complicated subject because it is linked to Trump, petro dollar, US hegemony status, price of oil (which went above $60 after this event and broke our unbroken perfect record that oil will stay between $20-60 since Dec 2014) and is also linked to the US military over which Trump is now very upset, accepting yuan for oil and China, Russia etc.

In June 2018, Jordan was bailed out with USD 2.5 billion.

Yesterday, 4 Oct 2018, again Jordan was bailed out.

Saudi Arabia, Kuwait, UAE deposit over $1 bln in Jordan Central Bank

And by the afternoon of 4 Oct 2018, Bahrain also had to be bailed out (again!).

Gulf allies set to sign $10bn aid deal for Bahrain

On 4 Oct 2018 itself, Dubai announced that 2 multi billion dollar projects were halted and one major Abu Dhabi fund (despite a merger with IPIC recently) also went into a default (whose fancy word these days is "restructuring" since 2008).

With EXPO 2020 approaching, the collapse of Schon Properties who was building several towers in that area and now the shut down of expansion of Al Maktoum airport seems things are worsening every month for the over marketed EXPO 2020 project.

And we have not even talked about the high chance of increase of VAT from 5% to 10% by next year in the UAE and Saudi yet.

Dubai's $36 billion Al Maktoum airport expansion put on hold: sources

Sobha Group launched this new project last year and promised in April 2018 that they will do ground breaking by Oct and when October arrived, they shelved the massive project as well as put their future 2021 IPO on hold due to "financial consolidation".

Sobha Group halted a USD 6.8b development in RAK

Things are so bad on 4 Oct 2018 in Saudi that although the King of Saudi cancelled the plan for Aramco IPO last month (which also we had predicted that it will never happen) and now Aramco has no money to pay salaries.

What better proof than an actual video of police shooting on hundreds of Aramco employees on 3 Oct 2018 who were protesting over unpaid salaries.

Security Forces Clash with Striking Aramco Workers in Eastern Saudi Arabia (+Video)

EDIT: 7 Oct 2018:

It has just come to our attention that unpaid salaries are not by Saudi Aramco but some Saudi contracting company.

We apologise for the error due to the news release above by the Tasnim News article.

4 Oct 2018: Saudi police fires at angry workers protesting over unpaid salaries

Another author wrote about Saudi as a failed state where ISIS and Al Qaeda are taking hold, also on 4 Oct 2018. This is mostly due to the economic collapse that will allow the unemployed and the disenfranchised to join the militants instead of getting to work.

Well, we have predicted this since 2015 and it is now building up, so no surprise to us.

Is Saudi Arabia the Middle Eastís Next Failed State?

For multiple reasons, GCC have been forcing expats to leave in millions that has created a massive problem for all sorts of businesses from banks to retailers to hotels and Govt services.

Yesterday, 4 Oct 2018, FT opined on this matter which we have said since many years that if expats leave, it will not bring back the good ones. While locals can fill the gap but barely 10-20%. Which leaves a massive gap of 80% plus due to which service levels, business levels and investment levels will plunge to such pathetic levels that it will be beyond alarming.

All we can do is wish good luck to all the businesses and customers operating or residing in the Gulf because they will never find good employees (due to tensions/missiles/wars in the region and lowest wages being paid over the last 5-6 years) and will also never find good employers (since employers don't get paid by their customers or the Govt hence they cannot pay exorbitant rents and hefty business costs and decent salaries causing them to run away, go to jail or simply collapse).

Ask anyone in the Gulf and they will all say the same thing - there is absolutely no business (except a little bit in online e-commerce or a bit of tourism). But shhhh, there are laws in the Gulf to arrest and give multi million fines for anyone who speaks of the harsh reality.

Skills gap prompts Bahrain to shift focus to schools
"Businesses complain of a mismatch between their needs and young workersí abilities"

Meanwhile, Etihad is in terrible shape.

They shut down their business and first class lounge in the world's most important city for travellers being London this week.

They will close many more lounges every week in the weeks ahead.

They have turned into a budget airline where one needs to pay for food, are closing exclusive lounges, have shut several destinations, sold 20 plus planes, shut limo services in almost all countries except UAE, reduced several meal types as well as many amenities on board.

STRUGGLING ETIHAD AIRWAYS CLOSE FIRST & BUSINESS CLASS LOUNGE IN LONDON

The investors in Etihad are fearing a collapse and just today, 5 Oct 2018, they have written a letter to Etihad and Dept of Finance (and most likely copied to the Ruling Family of Abu Dhabi) to help them get their billions back.

It will wise for Abu Dhabi to bail out Etihad investors but the million dollar question is, how can they do so if they simply don't have enough cash?

And if they pay 1 bond, then the second bond holders will come forward who were defaulted last year. They are doomed if they pay and doomed if they don't!

Etihad bankrupted Air Berlin and Alitalia last year and could not pay off that bond, therefore, chances are very low that they can help Etihad bond investors who are demanding USD 1.2b in 2 bonds while the next interest payment date of 29 Dec 2018 is coming closer every day. The bond is now trading at USD 57 level today which is at severe distress levels.
There are almost no solutions to the problems of the GCC because they are so acute and almost all are self created. They cannot print money nor borrow more and don't have much cash to pay for all their margin calls either.


The house of cards is crumbling down faster and faster in 2018 across GCC and proving us correct in our prediction for every year about the GCC since 2015.

We can only warn everyone that the worst is yet to come.

Be safe!
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puff m'call is offline  
Old 8th Oct 2018, 12:14
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Cut and paste from where, source?
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Old 8th Oct 2018, 12:34
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Re the GCC, it was once said that if you put a clock in the middle of the conference table at a summit meeting, they wouldn't agree the time.
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Old 8th Oct 2018, 13:00
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Many things have been covered up. I recommend anyone in the GCC contact their personal banker and ask some very
ointed questions. I did and was shocked. Bye bye Dubai
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Old 8th Oct 2018, 13:29
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Is it really that bad, fatbus?
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Old 8th Oct 2018, 13:57
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Originally Posted by SOPS View Post
Is it really that bad, fatbus?
Saudi Government debt to GDP is currently 17%, 19% of UK debt, 15% of US debt. Oil prices rising. Saudiisation, historically, fairly pragmatic. ISIS remain very isolated. I don't think that it's time to panic yet. I think that we should panic more about Brexit carrying the British debt level into the bankruptcy zone.
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Old 8th Oct 2018, 20:02
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No wonder UAE had blocked this site..link please especially the one about the increase of VAT in 2019. KSA extracts oil breaking even at approx 15usd a barrel. It is all about how expensive they want their budget to be. And having a back of US president by replacing the Iranian oil and budget getting balanced with oil around 70...they will still be around for quite some time. Liked the flashy bolded text though. Being careful is of course always a good strategy, being paranoid maybe not

Last edited by bud light; 9th Oct 2018 at 00:44.
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Old 9th Oct 2018, 01:05
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Originally Posted by bud light View Post
No wonder UAE had blocked this site..link please especially the one about the increase of VAT in 2019. KSA extracts oil breaking even at approx 15usd a barrel. It is all about how expensive they want their budget to be. And having a back of US president by replacing the Iranian oil and budget getting balanced with oil around 70...they will still be around for quite some time. Liked the flashy bolded text though. Being careful is of course always a good strategy, being paranoid maybe not
Just did a google search of the title, it's from "voice of the markets" blog.

I cant post links until I reach 10 posts.
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Old 9th Oct 2018, 08:09
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Turmoil in the Middle East is nothing new but this does look a bit worrying. The Saudis were always thought of as having bottomless pockets but that doesn’t seem to be the case anymore. Oil prices are at recent highs but can’t really go up that much more as shale oil then becomes economically viable.

Whilst the cost of extracting the oil and pumping it into a supertanker is well below its selling price, the national budgets are based on a the expectation of a certain level of revenue and when this isn’t achieved the coffers have to be raided. This cannot go on indefinitely, then the family silver has to go ie ARAMCO gets sold. Eventually there is no more money left to buy off the population and they get restive.

Perhaps everyone will learn to live together peacefully, defence budgets can be cut and new income sources besides oil can be found. Iran can agreed to western demands and have sanctions removed, certain states can stop sponsoring terrorism. I wouldn’t put money on it though.
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Old 9th Oct 2018, 08:59
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IMF view of UAE economy dated 30.09.2018

https://www.imf.org/en/News/Articles/2018/10/01/pr18369-imf-staff-completes-2018-article-iv-mission-to-the-united-arab-emirates
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Old 10th Oct 2018, 08:06
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The article has a lot of one sided opinions but also a lot of truths in it. I operate a business out of there which is a captive manufacturer & supplier to a consumer facing operation. Sales are down almost 60% in the last 18 months & we have taken a decision to wind down the business as the cost advantage of manufacturing vs importing is removed due to economies of scale. To understand why my consumer lost so much sales especially when my customer was was almost in a space that usually gets impacted late in a downturn we reviewed the entire story & the picture emerged is that of several holes of the swiss cheese lining up. UAE is a consumption driven economy in the non petroleum sector. It benefited from investments, banking, trading & in no small way aviation.

In the past few years stricter regulation meant that money laundering that was happening openly has come to a stand still. This cut the earnings of not only the middle men, but also commission agents especially in the Defence space. Secondly with employment climbing in the west, taxes in the US reducing & cost of living in the west becoming cheaper than UAE, a lot of western expats have decided to move back home, pilots, bankers & the like, all which tend to be high paying jobs as well as people who also end up consuming locally. While there might be 3 million expats in the UAE the number who are consumers is far lower & this number has seen an alarming dip of in excess of 30% leaving the UAE. This has dropped consumption in the UAE & therefore the non oil GDP. VAT is too new to show the impact of this drop but in a years time a YoY collection of VAT will show this. Thirdly the entire Qatar fiasco has resulted in a softer real estate market with less income to the locals who in turn have curbed some of their spending. Last but not the least EK which for many was the sole choice for Westbound traffic from South Asia has not only out priced them selves but the European airlines are offering a better product & a quicker service with premium economy offerings & a far better FF program. (Take this from me who has dropped from Platinum to gold & soon to silver on EK). This has reduced the thru put of traffic of spending consumers & various incentives are being now offered in a bid to regain the frequent spending tourist & transient traveller. Effectively higher oil prices will help them but in reality with a push towards cleaner & greener living, they need to move to a consumption based economy with robust on shore manufacturing & the consumption needs to be inclusive & not geared to just the high end. The indigenous population is too small to consume the amount needed & by slowly having expats who spend leave they will have to come out with some incentive in the near future that is sustainable to the region. Saudi meanwhile has a population & has started the move to manufacturing & Oman is on a drive to skill development. In the case of Bahrain & UAE they will ultimately suffer as they have gotten used to the good life without having a back up plan. Over dependence on Saudi will hurt these 2 countries huge. The Rest of the GCC will pull thru in the long run especially as they have kept their expenses more reasonable.
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Old 10th Oct 2018, 08:37
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https://www.forbes.com/sites/chriswr.../#4f54a59b4b90

. It came within a whisker of sovereign default at the end of 2009 - and, even if there was no technical default, still plenty were burned by the debt restructuring that followed in 2010 - while towers were left unfinished and expats abandoned their sports cars at Dubai Airport in order to get out of the country rather than suffer the consequences of being a bad debtor in the United Arab Emirates.
As humanity is notoriously bad at seeing the next crisis coming,other than by looking in the rear vision mirror, one might be inclined to ask is the UAE insulated for the yet to emerge crisis that history shows us, people never see?
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Old 10th Oct 2018, 09:53
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Old 12th Oct 2018, 16:16
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Having been here for almost 18 years, I have to say Wannabe Flyer has summed it up very eloquently. It's alarming how many "To Let" signs are on villas and I know of several friends including myself that have had their rent reduced at renewal time without even asking. Never seen that before, even after the financial crisis in 08.
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Old 16th Oct 2018, 05:17
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We just moved villas. Last expat tenant paid 175k for the year and left because landlord didnít want to drop the rent. We are now paying 25k less than that and moved in 2 weeks after they moved out... thatís a 15% drop in rent in 1 year..
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Old 16th Oct 2018, 05:48
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Many moons ago Saudi was said to be down to its last $500,000,000 then along came a Middle Eastern war, the price of oil jumped and Saudi was back in the 'pink' again.
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Old 16th Oct 2018, 06:22
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Originally Posted by transport jock View Post
We just moved villas. Last expat tenant paid 175k for the year and left because landlord didnít want to drop the rent. We are now paying 25k less than that and moved in 2 weeks after they moved out... thatís a 15% drop in rent in 1 year..
Undoubtedly true - so many examples of this. However that is not directly related to the state of the economy. Post 2008 and post 2013 slumps, there was undoubtedly a shortage of decent affordable housing and the market was overblown, and now we have the response to those conditions coming online and there's a downward rental price as a result. However, in my opinion, this is unlike UK/US housing drops in that so much of the housing stock from 2008/2013 is owned outright, and if the landlord leaves it empty (like a muppet) then the economy doesn't actually suffer. There are undoubtedly a lot of people still under water from the 2008 off-plan buying boom, whose properties simply don't exist and most likely never will. But to equate a dropping price of housing market, aligned with stupid landlords, doesn't automatically mean the economy is in trouble.

One could easily argue that the UAE is gradually shedding its excesses, in terms of salaries, inefficient organisations and value for money issues - which means less people doing more work, but for the same output. And the new stock of housing (largely funded by mortgages, which need to be repaid) is starting to match up with the reality of what people are willing to pay while the older housing, dominated by fully owed/no mortgage properties is dominated by people who still think its 2007 and are willing to leave the property empty.
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