Devising a saner marriage between Washington, Riyadh, David Ignatius

Opinion, July 2003, www.aljazeerah.info

Devising a saner marriage between Washington, Riyadh

David Ignatius

The Daily Star, 7/30/03

European Oil Companies Prepare to Invest in Saudi Arabia, as US Troops Prepare to Leave.
That imaginary headline summarizes two concurrent developments that are part of a subtle shift in the Gulf. The subject rated barely a mention this month, even in the financial press, which is unfortunate because we are seeing early hints of a new status quo for the region.
First, the details: The Saudis announced recently that their national oil company, Saudi Aramco, will form a joint venture with two European giants, Shell and Total, to look for gas in the desolate Empty Quarter in the southeast of the kingdom.
The companies will have a guaranteed Saudi market for any gas they find, and they’ll be allowed a 20 percent return on their investment before a punitive tax kicks in. The consortium had included an American partner, ConocoPhillips, but it withdrew late in the negotiations.
What makes this deal interesting is that it is the first time since the 1970s that Saudi Arabia has allowed foreign companies to make direct equity investments in the kingdom’s energy sector. This move is part of a broader process of Saudi perestroika, which has been gathering momentum under Crown Prince Abdullah.
The new Saudi stance isn’t anti-American, per se. Indeed, American oil giants are likely to be players in the next round of consortia that will bid to explore other tracts for gas. Rather, it’s a move away from the old Saudi strategy that combined almost exclusive dependence on American arms and energy expertise with simultaneous efforts to distance the kingdom publicly from its US protectors.
Because of this inherent hypocrisy, the old Saudi-American relationship was one of the classic bad marriages of international relations. The two countries couldn’t live with each other, but they also couldn’t live without each other. The operating premise was that threats to the kingdom were external. Saudi security required keeping a large US military garrison and equipping the Saudi military with expensive weapons bought mostly from none other than the US.
Both countries privately seethed at the old status quo. Despite American efforts to be sensitive, Saudis felt they were being occupied by an arrogant superpower that didn’t respect their Islamic traditions. And, as last week’s congressional report on the Sept. 11, 2001 attacks showed, Americans felt they were being manipulated by an oil-rich theocracy that had at least indirectly financed Osama bin Laden and otherwise obstructed US interests. In the aftermath of Sept. 11, the old status quo finally began to buckle at the seams. In their report last week, congressional investigators found frightening Saudi links to the suicide bombers. Inside the kingdom, meanwhile, the attacks forced the Saudis to realize that the status quo would eventually destroy them.
The Iraq war, by toppling Iraqi President Saddam Hussein, gave both America and Saudi Arabia a chance to junk this neurotic relationship and create something new. American troops have already begun leaving, now that the threat from the
former dictator is gone.
Pentagon commanders say that nearly all US troops
and air personnel will be gone by year’s end, leaving behind only two small training missions.
Uncle Sam won’t be far away the air operations at Prince Sultan Air Base have been shifted to Al-Udaid air base in the neighboring state of Qatar. But the military presence that caused trouble for both sides and in many ways made Saudi Arabia less secure rather than more will finally be gone.
The new status quo should be calmer for another reason: There should be so much new oil coming on the market that the world won’t need to be so hysterical about threats to Saudi stability.
The authoritative industry newsletter Middle East Economic Survey (MEES) just disclosed an ambitious Iraqi plan to boost production to 2.8 million barrels per day (bpd) by April 2004. Interestingly, this expansion is to be managed by the Iraqi Oil Ministry and existing state-owned companies, up to Iraq’s pre-1991 production level of 3.5 million bpd.
Foreign investors and joint ventures will be used only for later efforts to push daily production toward Iraq’s estimated production capability of 6 million bpd, according to MEES. All this assumes that the plague of looting and sabotage can be controlled.
Meanwhile, Kuwait is planning its own new initiative, known as Project Kuwait, which could eventually add another 900,000 bpd to their current production of a little over 2 million bpd. Like the new Saudi ventures, this will also involve foreign equity investment.
A different world seems to be taking shape in the Gulf once more open to foreign investment and less dependent on US military power. Iraq remains a wild card for regional stability. But it’s good to see America and Saudi Arabia changing their crazy marriage into something saner.

David Ignatius is a Paris-based syndicated columnist

Earth, a planet hungry for peace

The Israeli apartheid (security) wall around Palestinian population centers (Ran Cohen, pmc, 5/24/03).

The Israeli apartheid (security) wall around Palestinian population centers in the West Bank (Ran Cohen, pmc, 5/24/03).