The GPM Global Forecast is a bi-weekly, members-only article series for 2016. It provides analysis and short-term forecasting on key military, political, and economic events around the globe. 

Savaged by the Oil Glut, Saudi Arabia’s Credit Rating Takes a Hit

The Standard & Poor’s rating agency has cut Saudi Arabia’s credit rating by two notches, down to A- from its previous A+. The downgrade comes amid a considerable worsening of Saudi government finances due to the prolonged slump in global oil prices.

The Saudi government is in the unenviable position of being hugely dependent on the oil industry for its revenues and having large spending commitments, both domestic (subsidies, welfare programs, and a bloated and cushy government bureaucracy) and foreign (military spending and an expensive and thus far unsuccessful campaign against Houthi rebels in Yemen). The specifics of these sizable financial commitments have been outlined elsewhere on Geopoliticalmonitor.com.

These financial challenges – and the degree to which international ratings agencies take heed of them – are an important consideration in determining when the Saudi government might consider sacrificing a portion of its own global market share in order to shore up oil prices (as pointed out in another piece on Geopoliticalmonitor.com, the Doha production freeze deal does not apply).

Given the debt accumulation and painful government cuts we’re seeing in the Kingdom, it stands to reason that the OPEC-shale price war will be waning if not wrapping up completely by the first quarter of 2017. Recent indications from the IEA of a looming decline in US shale production were no doubt greeted with relief in many corners of Riyadh.

Kurdish Advances in Syria: a Nightmare for Turkey’s Erdogan Administration

The Syrian Democratic Forces (SDF) – an umbrella group fronted by the powerful Kurdish YPG militia among other Arab and Christian fighters – has been making considerable progress in eastern Syria over the past week. SDF fighters have been inching towards the key town of al-Shaddadi just 50 miles east of the Islamic State capital of Raqqa. They are reported to have already taken a key highway linking Raqqa to ISIS-held Mosul in northern Iraq.

According to a recent estimate from the Washington Post, the SDF now numbers over 40,000 fighters, 7,000 of which are Arabs.