Besieged by High War Costs, Saudis Are Short of Cash, Diplomats Say : Finances: The nation is reportedly borrowing heavily from private banks--and hoping for a swift end to the conflict.

Oil-rich Saudi Arabia is facing short-term financial problems after spending billions of dollars bankrolling the Persian Gulf War and now wishes for a swift end to the costly fighting, a Western diplomat said Tuesday.

Much of the world continues to view the desert kingdom as being awash in money, and perhaps even profiting during wartime, as a result of increases in oil production and prices.

But there are now some indications to the contrary.

Saudi Arabia is borrowing heavily, if quietly, from private banks, and will have to borrow vastly more cash if the war drags on, according to the diplomat.

For further evidence, one can look to the so-far ineffectual efforts mounted by the Saudis to cope with the huge, damaging Gulf oil spill.

“The Saudis do not have the money to deal with that. But they are reluctant to admit that. The international community believes they have money. And it’s not something you want to talk about if you’re out borrowing money--that you’re out of money,” the diplomat said. He added that “every offer of assistance (from other nations) comes with the expectation that the Saudis will pay.”

Meanwhile, the Saudis face the permanent loss of the Gulf shrimp fishery as a result of the colossal spill. “You can write that industry off,” the diplomat said.

Another recent hint of Saudi financial problems came with a visit to the war zone Monday by British Foreign Secretary Douglas Hurd, who obtained a pledge from the Kuwaiti government-in-exile to provide $1.2 billion in additional aid to British forces. But Hurd received no specific figure of support from the Saudi government.

“This financial bind is a reason for the Saudis to wish the war will be over soon,” the diplomat said.

According to this expert, Saudi Arabia has spent $48 billion on the war--half the country’s annual national income. And, the diplomat said, “the burden increases as the war extends.”

Included in this figure is direct aid to the United States and other coalition countries supplying armies for the war, plus military construction, aid to other countries in the region and assistance to Kuwaiti refugees. For the first quarter of this calendar year, the Saudis have pledged, but not yet paid, $13.5 billion.

“I think the Saudis hope the war will be over before the next $13.5 billion is asked for,” the diplomat said.

This expert said that Saudi Arabia has taken in only $12 billion to $15 billion in extra profits from wartime increases in oil production and the winter upswing in oil prices. This figure is lower than estimates from some experts in the United States.

Saudi Arabia is traditionally close-mouthed about its finances, and the statements by the Western diplomat could be interpreted as a proxy voice. It offers a view from this region in the continuing political debate in coalition countries over the burden-sharing of the soldiering and financing of the Gulf War.

“There certainly is a widely spread feeling here that the Japanese, the Germans--not just Germans, but Europeans generally--have not made contributions proportional to their interests at stake,” said the diplomat.

All discussion of financial problems here is cast in temporary terms. With Saudi Arabia holding a quarter of the world’s known oil reserves, there has not been any suggestion that the nation faces anything but abundance and prosperity over the long term--provided that oil prices and demand stay near present levels.

The Saudi government, experts note, has been running deficits since 1984, when the world price of oil collapsed.

Chris Iggo, a London-based economist for Chase Manhattan Bank, said the government has been steadily drawing down its foreign assets in recent years, and the rate has accelerated in recent months. Iggo said the country’s budget deficit for 1990 probably was about $15 billion, or more than twice what it would have been without the war expenses.

Ibrahim Oweiss, an economics professor with the Georgetown University Center for Contemporary Arab Studies, said the harshest effects of the budget concerns may be felt not by Saudis but by neighboring countries, whose economies are heavily dependent on remittances sent back by workers who have gone to Saudi Arabia to work on big public works projects.

But Oweiss said that, for political reasons, Saudi King Fahd may find it difficult to cut back on the big projects, including a mammoth project to refurbish and improve facilities for pilgrims in the Muslim holy cities of Mecca and Medina.

While Saudis are unlikely to experience real economic hardship, economists said the ability of the country to balance its budget and resume its accustomed level of spending will depend much on postwar oil prices.

Times staff writer Scot J. Paltrow in New York contributed to this report.