Saudi seen on top of crisis

By Andrew Hammond and Souhail Karam

RIYADH (Reuters) - Saudi Arabia's government could step in to buy collapsing stock on the local bourse and the central bank will keep banks liquid if necessary, but the global financial crisis should have a limited effect on the oil giant.

Barring surprises such as the sudden bank collapses that hit other major economies, analysts predict Saudi Arabia's status as the world's largest oil exporter offers it at least short-term protection even though falling oil prices will cut its earnings.

"They have a cushion because of the oil money in the treasury and if anyone's going to be in a safe position it's Saudi Arabia," one Western diplomat said, reflecting the general view in the Riyadh diplomatic community.

But the worldwide falls in stock markets have raised questions about financial transparency in the kingdom, which holds foreign securities worth hundreds of billions of dollars and declines to give details about its investments.

Saudi Arabia's economic profile has witnessed a stunning turnaround in the last decade, while the government -- dominated by the Saudi royal family -- has retained a closed political culture that keeps the disenfranchised public in the dark.

Back in 1998 when King Abdullah, as crown prince, told Saudis bluntly the oil boom was over and the country would have to tighten its belt, gross domestic product was $144 billion and oil was hovering around $10 a barrel. Last year GDP was $446 billion while oil rose to nearly $100 a barrel.

The 2008 budget assumes a modest oil price of $50 a barrel.

"Oil-producing countries have excellent financial cover so they are the least affected by the world crisis. The fear is that U.S. and British oil firms could reduce energy investment in the Middle East," said analyst Aqeel al-Inezi.