The economic consequences could be dire for the Gulf Cooperation Council (GCC) countries if the US fails to finales a deal on the lifting of its government's debt ceiling, economists in the Gulf region have warned.
The oil-rich GCC countries have massive investments in the US, the currencies of most of them are pegged to the dollar, and a debt crisis in the US would likely have a disastrous impact on the world oil market, The Peninsula newspaper reported.
"A continuing debt ceiling crisis in the US would hit China hard, and this would have a cascading effect on the rising Asian economies," financial expert Abdullah Al Khater told the newspaper.
Since the GCC countries depend on revenues from oil and gas, the impact on Asian economies would mean that GCC oil and gas exports would suffer hugely, Al Khater said.
Recalling the days of oil embargo in 1973, he said the GCC economies suffered immensely then as they posted huge budget deficits.
"If the US fails to lift the debt ceiling, we would be entering a phase of uncertainties and immense difficulties," he was quoted as saying.
Al Khater said that the Washington Post estimate that puts the GCC's exposure to the US at $257.7 billion is very conservative.
The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
A Saudi economist has also raised doubts that the GCC exposure to the US could be as low as $257.7 billion.
Mohamed Al Omran was quoted by Kuwait's Al Sabah newspaper as saying that Saudi Arabia has huge cash reserves, much of which were invested in the US bonds.
"The GCC economies are, thus, going to be hugely affected should the debt ceiling crisis linger in the US. They would suffer immense losses," Al Omran said.
Media reports said if the value of the bonds went down due to the lingering crisis, the GCC states would lose several billions of dollars in one go.
