International Monetary Fund warns Gulf states on fiscal deficits

For the first time since the 1960s, the region set to suffer the worst financial agony over the next five years is the Middle East. Ground Zero for that pain is Saudi Arabia. "Meanwhile, Saudi Arabia is losing its crown" because its selling prices in Asia haven't been attractive enough. War-torn countries are of course suffering the most, but even the financially strong are hurting.

As a result of increased tensions over Ukraine, European reprocessing plants have cut their purchases of Russian crude and started to replace it with oil from Saudi Arabia, setting the stage for increased competition between oil suppliers in their struggle for global market share. The remaining are having to find other means of replacing loss of revenue from the low price of oil, thus the warning from Moody's.

"Despite the pessimism engineered by the continued low level of oil prices and the regional geopolitical situation, the economic engines of leading GCC countries like the UAE and Saudi Arabia continue to move ahead". Not only are they going to have their fiscal positions weaken in 2015, but that should continue for the duration of 2016 as well.

The International Monetary Fund report says oil exporters in the Middle East and North Africa - which besides GCC countries include Iran, Iraq, Libya, Algeria and Yemen - will lose around $360 billion in oil revenues this year. In contrast, from 2010 to 2014 there was a surplus of close to 9 percent. It is sitting on foreign reserves of more than $650 billion and has plenty more firepower sitting in other public sector coffers.

Oil accounts for approximately 90 percent of revenue for the GCC states. The current price of Brent crude is around $48 a barrel, well short of the $115 a barrel it went for in June 2014.

Crude prices bear much of the responsibility: the April forecasts were based on $58.14 and $65.65 per barrel oil in 2015 and 2016 respectively, while the October projections are based $51.62 and $50.36 respectively. Opec's own basket price, representing the main export crudes of all member countries, is about 14% lower in 2015.

Russia's strategy in the Middle East and Iran's re-entry in the oil market could end Saudi Arabia's monopoly in Asia, according to suggestions of a few experts in the oil industry.

There is no doubt the need to issue more debt to meet the budget shortfalls will increase, and that will put increasing pressure on Saudi Arabia.

Sources told Reuters this week that Sinopec, the world's largest Iranian oil processor by company, is in advanced discussions to take control of the private firm.

A recent analysis by Resources for the Future, a nonpartisan D.C. think tank, argues that lifting the export ban will allow disparate grades of petroleum to reach the refineries that can most efficiently process them, and that this in turn might actually decrease the cost of gasoline.

This could turn into a more active shoving match between the world's two biggest oil exporters, which already are at odds over the Syrian conflict. "The composition of fiscal adjustment should be tilted toward curbing current spending, while preserving high-return public capital spending and essential social expenditures", the report adds.

British banking behemoth HSBC just reported that global GDP (gross domestic product) has fallen 3.4 percent so far this year, while global trade has cratered by 8.4 percent. But Saudi Arabia is also not about to come apart at the seams: Its economy is a long way from bankruptcy, and the kingdom is far better equipped to tackle the challenges of job creation, education, and diversification than it was in years past.