JUBAIL, SAUDI ARABIA, AUG. 20 -- The Saudi government plans to spend at least $8 billion to $11 billion to cover expenses arising from Iraq's invasion of Kuwait, a senior Saudi official said today.
The official also gave what appeared to be his government's best assessment of the threat Iraq poses to Saudi Arabia's eastern oil fields, saying he thought a missile strike or hit-and-run attack were now more likely than an invasion.
The first rough estimate of the Persian Gulf crisis's financial impact on Saudi Arabia included outlays for housing of 200,000 mostly Kuwaiti refugees, military and civil defense preparations, airfare home for thousands of Asian workers fleeing Kuwait, and various forms of assistance to the U.S.-led multinational military force assembling here.
"It will wipe out almost all of our liquid reserves," the official said, explaining that much of the money will be spent in the next two to three months.
Iraq's Aug. 2 invasion of Kuwait and the resulting military standoff on the Arabian Peninsula also have resulted in the delay of approximately $10 billion in expected new foreign investment here over the next three years, the official said. He added that 10 of 12 major groups of investors had canceled plans to visit the kingdom over the next two months.
The official, a leading economic figure in the kingdom who asked to remain anonymous, agreed that the Iraqi invasion had been a disaster for business throughout the gulf and caused potential investors to postpone many major projects here and elsewhere in the region.
He did not discuss the potential benefits to the Saudi economy of higher oil prices and increased production resulting from the sudden withdrawal from the world market of 4 million barrels a day of Iraqi and Kuwaiti oil. Oil prices have risen from $18 a barrel before Iraq's invasion of Kuwait to more than $27.
Saudi Oil Minister Hisham Nizer said Saturday that his nation will increase its daily oil production by 2 million barrels unless the Organization of Petroleum Exporting Countries moves quickly to make up for the shortfall caused by an international embargo on Iraqi and Kuwaiti oil. The Saudis have been unable to muster enough support among OPEC members to convene a special meeting of the group to discuss production increases, OPEC's news agency reported today.
Even if oil prices dropped back to around $20 a barrel, Saudi Arabia could earn an additional $14.6 billion a year from the 2 million-barrel-a-day increase -- more than enough revenue to offset the initial costs of its war preparations and refugee burden. It had anticipated earning $31.5 billion in oil income this year before the crisis.
The official was speaking to a group of foreign correspondents visiting the Middle East's most important petrochemical facility here. Saudi officials claim it is the largest in the world.
Should Iraqi President Saddam Hussein move against the many oil installations and industrial plants here in the Eastern Province, the official said he considered a hit-and-run attack or missile strike more likely than a ground invasion. Terrorist sabotage, threatened publicly by Iraq's radical Palestinian allies, is unlikely to succeed, he said.
Noting that pro-Iranian terrorists never blew up a single Saudi installation during the eight-year Iran-Iraq war, the official said he thought it would be "very difficult" for pro-Iraqi groups to infiltrate Saudi Arabia for a significant length of time without being detected.
Jubail, a potential major target if war breaks out between Iraq and Saudi Arabia, is the government's industrial pride and joy. It was built from scratch starting in 1975 at a cost to the Saudi government of about $10 billion. It houses 12 major industries, including six petrochemical plants.
The sprawling city of sleek, super-high-tech plants, with a major port and naval base adjacent to it, is about 125 miles from the Kuwaiti border.
Saudi officials, following a policy of "planning for the worst but hoping for the best," are busy preparing for an Iraqi attack on the Jubail industrial park, building emergency escape roads into the desert, reducing stockpiles of dangerous chemicals, updating procedures for shutting plants down quickly and preparing for a poison-gas attack.
U.S. Marines are being lodged in vacant workers' houses in part of the industrial park. As reporters arrived, they passed a long convoy of troops, armored personnel carriers and flat-bed trucks filled with war materiel heading for new quarters nearby.