What A Price We Must Pay... For Saudi Friendship & Saudi Oil

Saudi Officials Seek to Temper the Price of Oil

I have been reading a book (The American House of Saud by a long-time national security investigative journalist, Steven Emerson) regarding the Saudis and their manipulation of our policies in the Middle East, the direct and indirect lobbying of our political leaders in congress and the executive branch, and the pressures the Saudis put upon every major corporation and business having transactions with Saudi Arabia.

What is quite startling after reading this book is the number of long-time and notable US politicians that have contributed to the Saudi's manipulation and outright control over our foreign policies, business transactions and military decisions in the Middle East. The list below names just a few of the more prominent politicians that have had a hand in the Saudi's game:

Senator Frank Church - Normally an outspoken critic of political corruption in his day, as illustrated by his chairmanship of the Church Commission regarding warrantless spying in the 1970s and before, he figures prominently in Emerson's expose.

Senator Joseph Biden (who still holds the senior seat for Delaware and is considering a run for the White House in 2008), Senator Richard Lugar (who still holds the senior seat for Indiana), Senator Paul Sarbanes (who was a "good guy" in these matters), Senator George McGovern (former presidential candidate), and Senator Jacob Javits (another good guy) all had a role in blocking a major report on the role of the Saudi manipulation of our oil industry, big business and congressional votes. It is quite surprising who were the "good guys" and who were the "bad guys" in this monumental vote to keep information away from the public.

Senator David Boren and Senator John Melcher, both of whom opposed the AWACS sale to the Saudis right up until the Saudis pressured the oil companies and they, in turn, pressured the senators. Added to the failure of these two senators to stand up for true American interests was the actions of Senator Howell Heflin, who succumbed to the lobbying pressures of major businesses in Alabama having Saudi contracts. Then, too, Senator Roger Jepsen flip-flopped as well.

President Richard Nixon, who announced a project in response to the oil embargo of 1973 that doubled prices at the pump (and brought gas over a dollar for the first time in this century), but actually thwarted any efforts to counteract the interests of the oil companies and the Saudis in these matters.

Ronald Reagan, our most popular ultra-conservative President, who was pro-Israel in public, and pro-Saudi in the background, and pushed for the sale of AWACS and other military weaponry despite overwhelming opposition and the inability of the Saudis to genuinely absorb and use all that we sold them.

George Herbert Walker Bush, former CIA Director, Vice President, and President, an a man with a long family history of interests and profits from the oil industry, had a lot of direct and indirect exposure to the Saudi game of misrepresenting the Saudi cause and their various public relations campaigns, which resulted in the Reagan-Bush support for selling AWACS and additional F-15 armaments and equipment to the Saudis, despite overwhelming opposition by the citizens of the United States.

Howard Baker, former Senator, GOP Majority Leader, White House Chief of Staff for Reagan and Ambassador to Japan, who helped to manipulate the sale of AWACS and other matters that most of us were opposed to when it involved the Saudis and the majority of OPEC cartel members using oil as a weapon and tool of manipulation over the US.

Our 39th Vice President under Richard Nixon, Spiro T. Agnew, who resigned in disgrace after being exposed for bribery, money laundering and income tax evasion, was a player in the Saudi game of manipulation as well.

Ambassador John West, appointed as ambassador to Saudi Arabia by President Jimmy Carter, came back to the US and assisted many US interests to such an extent that he is given an entire chapter of Emerson's book.

Willis C. Armstrong, a former Assistant Secretary of State for Economic Affairs, who was hired by the Saudis and other Arab interests to assist in representing--or should I say lobbying--the Arab interests among his former colleagues and congress members at significantly more compensation than he received serving our nation.

Fred Dutton, who was a major power broker for the Democrats, an advisor for both JFK and RFK, but then found a wealth of power, money and influence by representing the Saudis and their interests by lobbying for Saudi initiatives. His influence brought opposition to Saudi efforts to their knees on many occasions.

Donald Rumsfeld, who has been in and out of the political arena several times, but always managed to land influential roles in major corporations having ties to Saudi interests when he left office.

George Schultz, who served in various capacities under GOP presidents, and as Secretary of State under Reagan, helped muscle through the sale of AWACS and other "missions" in favor of Saudi interests.

Senator Charles Percy, who led a charge of censorship against the PBS Frontline documentary, The Death of A Princess, which exposed the Saudis penchant for rather drastic and barbaric rules governing interpersonal conduct and the role of Islamic Sha'ria.

Since Emerson's book was written in 1985, the politicians cited are those with whom the oil embargo of 1973, the sale of the AWACS and F-15s, and other Saudi affairs took major turns in the late 1970s and 1980s. But the dynamics of Saudi manipulation have continued, especially (but not limited to) the times when the GOP was in control of the White House and the Congress.

To the mix of politicians that have manipulated us in favor of the Saudis, we have to add Mobil-Exxon, Aramco, Halliburton, Bechtel, Avco, Boeing, Caterpillar, John Deere, Heinz, Firestone, A&P Grocers, Texaco, Riceland Foods, Westinghouse, Whittaker, numerous banking houses and subsequent merged manifestations of these entities, not to mention hundreds more that remain in the shadows.

Now comes the Saudis saying they are our friends and are trying to mitigate the cost of crude petroleum so that it remains "around" $50 for every 33-gallon barrel of oil.
Who are the Saudis to make such promises in light of the past promises of OPEC influence and controlling the cost of oil that never happened... in part because the Saudis do not have the control over OPEC it once had (or thought it had), and in part because it could not deliver on its promises because of the technical difficulties occurring in its oil fields. Nothing has really changed in Saudi Arabia, not even after a couple of changes in the Royal Family hierarchy, changes in the players who have connections with Saudi oil and import businesses, and periods of waxing and waning in regard to the stringent religious rules imposed by the dominant Wahabbi Islamic clerics.

So we have to ask the question, what do the Saudis want in return for their generosity? We know about the lobbying of the Israelis and their friends in the US, but the motives of these folks are well known and fairly obvious. But when the Saudis move to manipulate us, there is always a back door approach and another shoe waiting to drop. I don't trust the motives of Israel because they will do anything in so-called defense of their right to exist, even breaking international laws and committing war crimes. But I don't trust the Saudi motives even more than I don't trust Israel. The problem is that we (the US) have been so accustomed to being manipulated by the powers in the Middle East that we don't know whether (or when) we're being kissed or sodomized. A bigger problem is that we don't know who is helping in the process, our own political leadership, our business leaders, our own major corporations, or our utter disregard for understanding the process and abuses we experience.

It might also be helpful to remember that the Saudis do not have their own house in order... proof of that is in the activities of Osama bin Laden and the number of Saudis that were involved in the terrorism of 9-11.

Saudi Arabia, which benefited immensely from record oil prices last year, has sent signals in the past two weeks that it is committed to keeping oil at around $50 a barrel — down $27 a barrel from the summer peak that shook consumers across the developed world.

The indications came in typically cryptic fashion for the oil-rich kingdom. In Tokyo last week, Ali al-Naimi, the Saudi oil minister, said Saudi Arabia’s policy was to maintain “moderate prices.” The previous week, on a stop in New Delhi, he effectively put his veto on an emergency meeting of the Organization of the Petroleum Exporting Countries to prop up prices after oil briefly dropped below $50 a barrel, the lowest level in nearly two years.

The events that propelled oil prices above $77 a barrel last July, then dragged them down again, were beyond the control of any single producer. Still, Saudi Arabia, which is by far the largest oil producer within OPEC and sets the cartel’s agenda, is seeking to avoid a repeat of the dramatic rise in prices while trying to put a floor beneath them.

Nowhere was last summer’s spike in oil prices felt more profoundly than in the United States. As gasoline rose above $3 a gallon, consumers cut their spending elsewhere, tamping down profits in retail, travel and other industries. United States automakers were devastated as consumers fled from large vehicles to smaller ones, which have historically been the specialty of the Japanese; on Thursday, Ford said that 2006 had been the worst year in its history.

The recent slide back to $50 a barrel for oil — which translates to about $2 for a gallon of gasoline — has eased the pressure on the domestic economy, quieting talk that oil prices and the declining housing market would lead to a recession.

The Saudis appear to be rediscovering that painfully high energy prices take a profound toll on the global economy, which in turn reduces demand for their oil. But other motives seem to be at work, too, including the Saudis’ desire to restrain Iran’s ambitions in the region.

How much influence the United States has exerted is an open question. Vice President Dick Cheney met with King Abdullah of Saudi Arabia in Riyadh in November, but his office would not say if oil was discussed. The White House has been supportive of Saudi energy policy, and President Bush and his father are close with Prince Bandar bin Sultan, the Saudi national security minister and former ambassador to Washington.

Although Saudi officials say their oil policy is based on market considerations and not political ones, the meeting in November led to renewed speculation that the kingdom might be tempted to dry out Iran’s ambitions by pushing oil prices down. Prices have already been falling because of mild weather and slowing demand.

Prices at $50 to $55 a barrel are just about right for the Saudis, according to Saudi energy officials — not too high to hurt the global economy, not too low to hurt their own economy. Last year’s record highs meant that the growth in global oil demand slowed to 1 percent in 2006, compared with a 4 percent increase at its peak in 2004.

But 2006 was not the first reminder for the Saudis that too-high prices can backfire. The oil shocks of the 1970s and 1980s also set off a scramble for gas-sipping cars and a brief push to wean the West from its oil dependency. In recent months, the higher prices have rekindled America’s quest for alternatives and propelled energy security to the top of the agenda in the United States and Europe.

Even President Bush, who began his presidency emphasizing the need to increase domestic oil production rather than cutting consumption, called for a reduction in gasoline use over the next decade in last week’s State of the Union address.

High prices have also emboldened rivals within OPEC, among them Iran and Venezuela, which have used their oil revenue to prop up their governments and export their more radical agendas. Saudi Arabia has worked cooperatively with Iran since the late 1990s, when oil producers were panicked by the decline of prices to around $10 a barrel. More recently, Iran has favored rising prices over the moderation that Saudi Arabia seeks. Venezuela also tends to favor higher prices but wields less political influence in the cartel.

“High prices are not in the interest of Saudi Arabia,” said Sadek Boussena, a former OPEC president from Algeria. “We’ve all seen what $70 does: it attracts alternatives, it reduces demand. On the other hand, I don’t think the Saudis want oil below $50. They need the revenue.”

The Bush administration has repeatedly acknowledged Saudi Arabia’s efforts in trying to moderate prices. “Buyers and sellers have a common interest in maintaining reasonable prices for oil,” Samuel Bodman, the energy secretary, said in October.

There is no set formula for setting oil prices. In the 1980s, the market settled on around $18 a barrel as a fair price. In the 1990s, it was ratcheted up to $22 to $25 a barrel. Recently, oil producers have realized they can charge twice that amount, although consuming nations complain that the price is too high.

Mr. Naimi, the Saudi oil minister, borrowing the manner of a careful central banker, is rarely explicit about his plans. His every word is dissected by legions of analysts for the slightest hint of an inflection in policy.

Sometimes, the uncertainty gives rise to more conspiratorial theories. Oil traders have been buzzing in recent weeks about whether Saudi Arabia was seeking to depress oil markets in hopes of crippling Iran’s economy, as a Saudi analyst — albeit not one from the government — suggested late last year in an opinion article in The Washington Post. The Saudis quickly dismissed the claim, but given the tensions in the Middle East, oil and politics remain closely linked.

“It is difficult to work out what the Saudis really want, since they never say things explicitly,” said Leo Drollas, the chief economist at the Center for Global Energy Studies, a London-based research group founded by Sheik Ahmed Zaki Yamani, a former Saudi oil minister. Sometimes, he said, “you have to read between the lines.”

The Saudi government does not disclose what oil price it uses when it builds its budget, but analysts at Samba Financial Group, a bank in Saudi Arabia, say they believe the price is $42 a barrel for 2007, with oil production at about 9 million barrels a day. With oil averaging $66 a barrel last year, the kingdom recorded a budget surplus of nearly $71 billion, Samba said, five times more than in 2005.

Saudi officials repeatedly point out that they do not set the price of oil on international commodity markets — they point the finger at hedge funds and other speculative traders for the heightened volatility in recent years. Nor, they say, do they run their oil industry with political considerations in mind.

Mr. Naimi has led the ascent of oil prices since 2000 and managed his various partners within OPEC toward better discipline within the cartel. Last fall, under Saudi stewardship, OPEC members twice agreed to cut their output to prevent prices from falling too steeply.

More than any specific target, the Saudis have always sought stability in oil prices. But stability may prove just as elusive this year as it did last year, given how vulnerable global oil supplies remain to the vagaries of the weather as well as political turmoil in the Middle East and Africa.

Although OPEC’s 12 members decide by unanimous votes whether to increase oil production — which lowers prices by making supply more plentiful — consumer pressures ultimately hold sway, and an extremely cold winter followed by a very hot summer could override whatever price goals the Saudis have set.

Not everyone is reading the Saudis’ recent public signals — scant as they are — in the same way. “The Saudi policy has not changed,” said Roger Diwan, an energy analyst at PFC Energy. The Saudis, he said, have “led the way in managing the market. They showed leadership in OPEC.”

But Amy Myers Jaffe, the associate director of Rice University’s energy program, said she thought that Saudi policy had shifted, backing away from a defense of higher prices.

“The debate in Saudi Arabia is about what is the right strategy, where demand is headed, and what is the right amount of investments,” she said. “And that’s a very tough question.”

Related web resources:

The Scandal of U.S.-Saudi Relations

Re-inventing Saudi Arabia: The View from Washington