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JERUSALEM ISSUE BRIEF

Vol. 5, No. 4     18 September 2005


U.S.-Saudi Relations After Hurricane Katrina:
Increased Oil Dependency and the Vulnerability of Saudi Oil Installations

Mordechai Abir


  • America's trade deficit with the Saudi kingdom (due largely to the purchase of crude) is likely to amount to over $30 billion in 2005, up sharply from about $16 billion in 2004.

  • The conservative Abdallah has managed to win the support of the majority of Saudis in his battle against the domestic militants inside the Saudi kingdom who have targeted the Saudi regime.

  • Yet, sympathy and help for the mujahidin outside Saudi Arabia, who have traveled in droves from the kingdom to fight the infidel "crusaders" (Americans) and their abhorred Shi'a allies in Iraq, are still very much alive in Saudi Arabia. The Saudis continue to provide the ideological and even financial support for jihadi groups outside the Saudi kingdom, as documentary evidence of Saudi terrorist financing discloses. A senior U.S. official admitted in July 2005 that Saudi donors are a "significant" source of funding for the insurgency in Iraq.

  • In December 2004, bin Laden issued a call for attacks on the Persian Gulf oil industries, including Saudi Arabia's. Saudi al-Qaeda opted to murder Western oil technicians and experts in Yanbu, Jeddah, Riyadh, and al-Khobar.

  • On September 4, 2005, a three-day gun battle broke out between security forces and 12-15 al-Qaeda mujahidin in Dammam, about 10 km from Dhahran, capital of the Saudi oil industry. Five of the dead militants proved to be on Riyadh's list of 36 most wanted terrorists. They had counterfeit documents that would have enabled them to enter oil and security facilities. This operation foiled a carefully prepared attack on one or several Saudi oil facilities.

  • A major al-Qaeda operation against one or several Saudi oil installations could push oil prices to new heights, potentially damaging the world economy even more than $60-$70 oil.


Saudi Oil Income from U.S. Soars

In an interview with Der Spiegel (September 11, 2005), OPEC's acting secretary-general, Adnan Shihab ad-Din, disclosed that the oil cartel is to increase its quota by nearly two million bpd to about 30 million bpd at its September 19 meeting, with the biggest contribution coming from Saudi Arabia. This move, he said, is meant to offset the damage to the U.S. oil industry caused by Hurricane Katrina and to reduce "record oil prices."

In Washington on September 9, the U.S. and Saudi Arabia signed a bilateral trade agreement that would facilitate Riyadh's joining the WTO (ignoring criticism that Saudi Arabia is still a pillar of the Arab boycott against Israel). In addition to the political/energy ramifications of the agreement, it is estimated that America's trade deficit with the Saudi kingdom (due largely to the purchase of crude) is likely to amount to over $30 billion in 2005, up sharply from about $16 billion in 2004.

Earlier this month, President Bush received Prince Bandar bin-Sultan, Saudi Arabia's outgoing ambassador, at the White House and thanked him for 22 years of helping nurture the "friendship" between his country and America. Never before have relations between official Washington and the kingdom been as close as they are now. This is largely attributable to Saudi Arabia's key position in OPEC, its enormous oil and gas reserves, and the fact that it loyally upheld its strategic energy agreement with the U.S. as oil prices increased while idle production capacity thinned. Indeed, Washington no longer criticizes Riyadh for being an exporter of Wahhabi jihadism (even though 15 out of 19 participants in the September 11 attacks were Saudis). Moreover, it seems that the Bush administration even stopped "nagging" the Saudi regime about the need for political reform and advancing human rights in the kingdom.


King Abdallah Escalates the Assault Against Saudi Al-Qaeda

With the help of the establishment ulama's leadership, King Abdallah has escalated the assault against Saudi al-Qaeda, which he unleashed beginning in May 2003. The conservative Abdallah has managed to win the support of the majority of Saudis in his battle against the domestic militants who have targeted the Saudi regime, despite popular empathy in the kingdom for al-Qaeda resulting from Wahhabi jihadist doctrines disseminated by the ulama, who control the Saudi education system.

Yet, sympathy and help for the mujahidin, who have traveled in droves from the kingdom to fight the infidel "crusaders" (Americans) and their abhorred Shi'a allies in Iraq, elsewhere in the Middle East, and in the West, are still very much alive in Saudi Arabia. Thus, while the Saudis are cracking down on al-Qaeda inside Saudi Arabia, they continue to provide the ideological and even financial support for jihadi groups outside the Saudi kingdom, as documentary evidence of Saudi terrorist financing into early 2004 continues to disclose.1 Indeed, in mid-July 2005, Treasury Undersecretary Stuart Levey told the U.S. Senate Committee on Banking, Housing, and Urban Affairs, "Even today, we believe that Saudi donors may still be a significant source of terrorist financing, including for the insurgency in Iraq.2


Saudi Arabia in Denial

On September 7, Al-Watan, a leading Saudi daily, published "Saudi Arabia in Denial," a most revealing (and courageous) article by Jamal Khashoggi, a leading Saudi journalist. In it, Khashoggi takes to task the hypocritical Saudi ulama, whose Wahhabi jihadism is the source of global terrorism, which, since 2003, has been directed also against the Saud regime and its Western experts "who are essential for the country's oil economy." Yet, although the great majority of "preachers of hate" now fear openly attacking their rulers, they nevertheless continue to encourage and abet ignorant young Saudis in joining the international jihad beyond Saudi Arabia's borders. Indeed, according to most analyses, Saudis represent a plurality, if not a clear majority, of the foreign insurgents fighting the U.S. and coalition forces in Iraq.3

The ties between the different al-Qaeda "emirates" and the fact that oil has become a common target to all mujahidin are now apparent. In a recent recording posted on the Internet, Abu Mus'ab al-Zarqawi, al-Qaeda's leader in Iraq, denounced the Saudi rulers as despots who wage war against mujahidin and allow Westerners "to loot the riches of Islam's birthplace." Al-Zarqawi's remarks were provoked by the August killing of Salih al-Awfi, considered to be the head of the Saudi al-Qaeda.

In the 1990s, Osama bin Laden made oil facilities in the Muslim world off-limits to attack. However, following the successful anti-al-Qaeda campaign of Crown Prince Abdallah, which wiped out a good number of the terrorists' "Afghani" leaders (those who had fought against the Russians in Afghanistan), bin Laden in December 2004 issued a call for attacks on the Persian Gulf oil industries, including Saudi Arabia's. As operations against the heavily guarded oil infrastructure in the kingdom's Eastern Province (where most of Saudi Arabia's oil resides) proved difficult, Saudi al-Qaeda opted to murder Western oil technicians and experts in Yanbu, Jeddah, Riyadh, and al-Khobar (in Arabia's Eastern Province).


Saudi Security Forces Foiled Major Al-Qaeda Attack on Saudi Oil Facilities

In August 2005, Saudi security forces killed or incarcerated 41 mujahidin in simultaneous operations in al-Madinah, Riyadh, Arar (near the Iraqi border), and four other locations. On September 4, a gun battle broke out between security forces and al-Qaeda mujahidin in Dammam, a largely Shi'a coastal town in the kingdom's Eastern Province located only about 10 km from Dhahran, capital of the Saudi oil industry. For three days, Saudi security forces besieged a rented seaside villa and fought an estimated 12-15 mujahidin. The villa, rented two months earlier, was stocked with arms, explosives, communication devices, food, and counterfeit documents that would have enabled the militants to enter oil and security facilities. Once the Saudi forces moved in for the kill, those who did not die in the assault blew themselves up. Five of the dead militants proved to be on Riyadh's list of 36 most wanted terrorists (issued in June). It appears that this operation by the Saudi security forces foiled a carefully prepared attack on one or several oil facilities in the region.


Projected Oil Demand Revised Downward

In pre-Katrina reports it had been suggested that oil prices may have reached a watershed at $60-$70 a barrel. This seems to be vindicated by an IEA report this month (among others) that revised downward demand and economic growth projections for 2005 and 2006. The crucial factor somewhat restraining the sharp rise in oil prices and preventing an energy crisis was the Saudi-initiated OPEC "free-for-all" output policy, which hiked Riyadh's output to over 9.5 million bpd. This policy (coordinated with America) enabled the U.S. and the OECD in general to meaningfully increase inventories and fill its strategic petroleum reserves.

Yet, a major al-Qaeda operation against one or several Saudi oil installations could push oil prices to new heights, potentially damaging the world economy even more than $60-$70 oil. King Abdallah's success in dealing with Saudi Arabia's homegrown al-Qaeda cannot undo the ingrained Islamic extremism of the majority of the kingdom's population, which for many generations had been taught to follow Wahhabi principles. Simultaneously, the Sauds cannot continue to ignore the Saudi intelligentsia, middle class, and "moderate" ulama's increasing demand for political reform.

Not surprisingly, it seems that the U.S.-led OECD is now cognizant that it cannot rely forever on Saudi-led OPEC to supply its incremental oil demand and help deal with high oil prices. Consequently, it is now pressing oil companies to invest their huge windfall in oil exploration and substantially expanding their refining capacity, which is the energy industry's bottleneck. It is also encouraging investment in the development of technologies for greater energy efficiency and alternative power sources. Indeed, BMW's recent decision to join GE and Daimler-Chrysler's endeavors to develop hybrid engine technology and not fall behind Toyota and Honda is a step in the right direction.

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Notes

1. Lt. Col. Jonathan D. Halevi, "What Drives Saudi Arabia to Persist in Terrorist Financing? Al-Jihad bi-al-Mal - Financial Jihad Against the Infidels," Jerusalem Viewpoints #531, June 1, 2005; http://www.jcpa.org/jl/vp531.htm. Halevi refers to documentation captured by the Israel Defense Forces that the Saudi charity al-Haramain was transferring funds to Hamas fronts as late as February 2004.
2. "U.S. Government Calls Saudis 'Significant Source' of Terror Funds," AFX News, Forbes, July 14, 2005; http://www.forbes.com/finance/feeds/afx/2005/07/14/afx2138132.html
3. Lisa Myers, "Who Are the Foreign Fighters in Iraq? An NBC News Analysis Finds 55 Percent Hail from Saudi Arabia," June 20, 2005, http://www.msnbc.msn.com/id/8293410/. According to Reuven Paz, 61 percent are from Saudi Arabia; see "Arab Volunteers Killed in Iraq: An Analysis," PRISM Series of Global Jihad, no. 11/3, GLORIA Center, IDC Herzliya, March 2005.

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Mordechai Abir is a Fellow of the Jerusalem Center for Public Affairs and Professor (Emeritus) of Islamic and Middle Eastern Studies at the Hebrew University of Jerusalem. His books include Saudi Arabia: Society, Government and the Gulf Crises (1993) and Saudi Arabia in the Oil Era: Regime and Elites: Conflict and Collaboration (1988).


Dore Gold, Publisher; Yaakov Amidror, ICA Program Director; Mark Ami-El, Managing Editor. Jerusalem Center for Public Affairs (Registered Amuta), 13 Tel-Hai St., Jerusalem, Israel; Tel. 972-2-5619281, Fax. 972-2-5619112, Email: jcpa@netvision.net.il. In U.S.A.: Center for Jewish Community Studies, 5800 Park Heights Avenue, Baltimore, MD 21215 USA, Tel. (410) 664-5222; Fax. (410) 664-1228. Website: www.jcpa.org. © Copyright. The opinions expressed herein do not necessarily reflect those of the Board of Fellows of the Jerusalem Center for Public Affairs.

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