IRAN'S LIFTED SANCTIONS HIT SAUDI ARABIA RIGHT WHERE IT HURTS.

Iran’s emergence from a decade of punitive international sanctions could not come at a more precarious time for Saudi Arabia.
Faced with plummeting global oil prices, the Saudis are in the midst of a deepening fiscal crisis at home. Those domestic woes will likely be prolonged or exacerbated now that the kingdom’s regional rival is able to flood the global oil market with its own ample supply of crude.
Tehran marked the end to its economic isolation on Monday by announcing it would immediately boost oil production by 500,000 barrels a day. That news alone sent international oil prices plunging to below $28 a barrel, their lowest point since 2003. Over the last 18 months crude prices have tumbled nearly 75 percent from a high of $115.

Despite dwindling profits, the world’s oil giants have thus far refused to curb supply. Few among them have felt the squeeze as much as Saudi Arabia, however. The world’s largest oil exporter, 80 percent of its government’s revenue comes from its oil and gas industry, meaning the low cost of crude has cast the kingdom into a fiscal free-fall.

“They can no longer control the oil market the way they once did, and the low price of oil is obviously killing them,” wrote Ken Pollack, a senior fellow at the Brookings Institute in Washington DC.
Saudi’s foreign reserves have already fallen by more than $100 billion, to roughly $640 billion, prompting the International Monetary Fund last October to warn that the kingdom could go broke within five years. Government ministries, long lavish spenders, are halting expenditures on cars, furniture and pet projects.
The kingdom’s austerity measures have also affected popular social welfare programs, including cuts to water, electricity and fuel subsidies. Long lines of cars formed at gas station pumps across Saudi Arabia before the New Year as drivers sought to beat price hikes scheduled for Jan. 1. A value-added tax of 5 percent on non-essential items, a first of its kind, is on the horizon.
“In more than 15 years, this is the first real fiscal challenge they’re facing,” Raza Agha, chief Middle East economist at VTB Capital in London, told Bloomberg Business on Monday. “Taking these measures is a big thing.”
Analysts said that Iran’s re-entry into the global oil market may add to Saudi Arabia’s domestic turmoil, and deepen a rivalry that’s embroiled much of the Middle East. The kingdom already blames Iran for the messy civil wars in Yemen and Syria, and for widening instability across a handful of other Arab nations.
Tensions between Saudi Arabia and Iran have only escalated since the kingdom executed prominent Shiite sheikh Nimr al-Nimr in early January. The execution was followed by violent protests, severed diplomatic ties and curtailed trade and travel between countries across the region.
Now Iran’s oil boost gives the Saudis just one more thing to fear, said David Weinberg, a Middle East scholar and senior fellow with the Foundation for Defense of Democracies.

“The Saudis believe they have found themselves in an unprecedented crisis environment,” Weinberg told Vocativ. “They feel like they are facing unprecedented challenges all at once.”