Saudi Arabia faces 'economic bomb' and hikes gas prices 50%

Robert Jordan of SMU's Tower Center for Political Studies talks to CNN about Saudi Arabia is running out of money and the possible consequences.

By Heather Long

While the world's attention is focused on Saudi Arabia's latest flare up with Iran, many Saudis are concerned about the "economic bomb" at home. The government is slashing a plethora of perks for its citizens.

The cash crunch is so dire that the Saudi government just hiked the price of gasoline by 50%. Saudis lined up at gas stations Monday to fill up before the higher prices kicked in.

"They have announced cutbacks in subsidies that will hurt every single Saudi in their pocketbook," says Robert Jordan, a former U.S. ambassador to Saudi Arabia and author of "Desert Diplomat: Inside Saudi Arabia Following 9/11."

Gas used to cost a mere 16 cents a liter in Saudi Arabia, one of the cheapest prices in the world. Many Saudis drive large SUVs and "have no concept of saving gas," says Jordan. . . 

The International Monetary Fund recently predicted that Saudi Arabia could run out of cash in five years or less if oil stays below $50 a barrel.

"The Saudis have used their economic power to buy off their population," says Jordan, who is currently serving as diplomat in residence at Southern Methodist University.

He predicts Saudi Arabia may even have to start collecting an income tax or sales tax.

"Part of the leverage the regime has had on their people is that they don't impose taxes and therefore people don't expect representation," Jordan says. "But once they pay taxes, you're likely to see an increase in political unrest."

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