Saudi Arabia seeks loans to meet expenses of war Cash shortage dims image of vast wealth WAR IN THE GULF


RIYADH, Saudi Arabia -- Often depicted as a country of almost infinite wealth, Saudi Arabia has exhausted its reserves of cash by spending tens of billions of dollars for the war against Iraq and is seeking to borrow money from foreign banks, diplomats here say.

Foreign financing is needed, they say, if the kingdom is to fill pledges of financial support made to the United States and other countries and to help Saudi Arabia manage serious war-related disruptions in its economy.

The kingdom finds itself in the unaccustomed position of being unable to live up to its Western image as a country somehow exempt from normal economic laws.

Saudi Arabia has not become poor but only short of ready cash in a time of unprecedented demands on its vast resources. "In the long term, this is a very rich country," one of the diplomats said. "In the short term, it's got some concerns."

The kingdom's financial squeeze could have enormous impact. If Arab or other Third World countries were counting on Saudi Arabia to pay for major development projects after the war, those countries are more likely to be disappointed. If the United States was depending on the kingdom to pay for a new regional defense force, financial support may have to come from elsewhere.

The lack of cash has already affected emergency efforts to contain the giant oil slick in the Persian Gulf, diplomats say.

Would-be suppliers of equipment or personnel for the cleanup have in some cases assumed that Saudi Arabia would reimburse their costs. To avoid embarrassment, the government has either asked for less than it needs or agreed to pick up expenses that will force the country to increase its borrowings, diplomats say.

Analysts say that Saudi Arabia's war-related costs total roughly $48 billion, about half of the kingdom's annual national income. Of those costs, $13.5 billion has been pledged to the United States to pay for a portion of Washington's military efforts against Iraq.

About $28 billion has been spent for military construction, equipment and ordnance, including the supply of fuel and other necessities at no cost to more than 600,000 foreign troops. The kingdom has also made substantial pledges of aid to Arab members of the U.S.-led coalition, including Egypt and Syria.

The cost of the oil cleanup is likely to increase the kingdom's expenses by tens of billions of dollars, although an exact accounting remains impossible.

When the tanker Exxon Valdez spilled part of its cargo of oil into Alaskan waters in 1989, the direct cleanup costs and economic losses totaled about $10 billion. But that spill involved less than one-tenth the amount of oil that has already poured into the gulf, most of it released deliberately when Iraq opened valves at storage tanks at an offshore complex in Kuwait.

According to bankers cited by news agencies, the government began the negotiations for loans about two weeks ago with a group of major foreign banks. Saudi Arabia is said to be seeking about $3.5 billion.

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