Investors wanting to take out insurance on Saudi Arabia’s debt have to pay as much as they would for Portugal, a nation still saddled with a junk credit-rating five years after an international bailout.

The cost of insuring the kingdom’s debt more than doubled in the past 12 months to a 190 basis points, or $190,000 annually to insure $10 million of the country’s debt for five years, as of 4:14 p.m. in Riyadh, the highest since April 2009, according to CMA prices compiled by Bloomberg. That’s almost identical to contracts linked to debt from Portugal, whose rating is seven levels below Saudi Arabia’s Aa3 investment grade at Moody’s Investors Service.

Saudi Arabia’s finances are under pressure as it fights a war in Yemen at a time when crude prices are languishing at the lowest level in almost 12 years. The country, which counts on energy exports for 70 percent of government revenue, sold domestic bonds for the first time since 2007 last year to help fund a budget deficit that may have been the widest since 1991. Net foreign assets dropped for 10 straight months through November, the longest streak since at least 2006, to $627 billion.

David Fuller's view

Saudi Arabia faces a perfect storm of problems, many of their own creation.

The entire Middle East and parts of Northern Africa are similarly affected, as is Russia.  I do not think these problems will end quickly, although prices will not stay very long at levels which are in the process of bankrupting the primarily oil producing countries.  From a purely technical perspective, the lower Brent crude falls the more quickly it will rebound as one-way traffic reverses.  At $50 to $60 crude oil will be less of a crisis for producers, provided they are not holding out for a return to $100 to $125 region. 

Over the longer term, I maintain that the global economy will benefit considerably from lower energy prices.