October 21, 2001

The High, Hidden Cost of Saudi Arabian Oil
By NEELA BANERJEE

DURING his presidential campaign, George W. Bush warned that the nation faced an oil crisis. He was right, but not in the way he foresaw. The crisis that came has nothing to do with prices at the gas pump, or environmental obstacles to drilling in the Arctic National Wildlife Refuge in Alaska.

Rather, it has to do with the political and military price the United States must pay for its dependence on oil from the Persian Gulf.

The terms of that dependence have been glaringly obvious since the attacks on New York and Washington. Immediately after Sept. 11, the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, assured the United States that it would keep oil supplies stable.

In turn, the Bush administration has refrained from criticizing Saudi silence over the American-led counterattacks against Osama bin Laden and the Taliban, nor has it spoken out about evidence that Saudi citizens finance Osama bin Laden's Al Qaeda network and other radical Islamic organizations.

Moreover, although the Federal Bureau of Investigation identified most of the hijackers in the Sept. 11 attacks as Saudis, Saudi Arabia has refused to provide passenger lists of flights to the United States, an act the Bush administration has been unwilling to criticize.

"The stark truth is that we're dependent on this country that directly or indirectly finances people who are a direct threat to you and me as individuals," said Edward L. Morse, former deputy assistant secretary of state for international energy policy under President Ronald Reagan.

"They won't give us information, won't help track people down, and won't let us use our bases that are there to protect them," Mr. Morse added.

A major reason for that reticence is oil. Five percent of the world's population lives in the United States, but it burns about 19 million barrels of oil a day, or 25 percent of the global daily consumption of 76 million barrels. American cars and sport-utility vehicles alone consume 10 percent of that.

The United States has been angling for influence in the Arabian peninsula since oil was discovered there 70 years ago. American oil companies helped create Saudi Aramco, the state oil company. They were kicked out during the 1973 Arab oil embargo, but the United States and Saudi Arabia quickly reconciled. Several groups of Western oil companies, led by ExxonMobil, will soon develop Saudi Arabia's huge natural gas fields.

Saudi Arabia has all along made certain it was the largest supplier of oil to the United States, oil traders, diplomats and economists said. Saudi Arabia could make more money selling oil to east Asia, but has preferred to sell oil to the United States at lower prices in order to retain its coveted role.

Over the decades, the Saudis' pursuit of American money and military protection melded perfectly with America's ever-growing oil appetite to turn the two nations into reflexive allies. Saudi Arabia and the United States worked together for years to shape the balance of power in the Middle East and Central Asia.

From 1980 to 1988, the United States and Saudi Arabia armed Saddam Hussein in his war against Iran. In 1979 , after the Soviet Union invaded Afghanistan, the Saudis were part of an alliance formed by the United States to drive them out.

"We collaborated in the war in Afghanistan: the Saudis, the U.S. and Pakistan," said Gregory Gause, director of Middle Eastern studies at the University of Vermont. "The Saudis had the money, the Pakistanis had the bases and we had the political oomph to get it together."

Because its interests were so densely intertwined with Saudi Arabia, the United States turned a blind eye to its ally's unsavory foreign liaisons and brewing domestic trouble.

THE United States looked the other way, for instance, as the Saudi government and individuals sent money to the Taliban. Starting in 1999 and extending at least into mid-2000, Saudi Arabia exported 150,000 barrels of oil a day, gratis, to Pakistan and Afghanistan as foreign aid, according to Petroleum Intelligence Weekly, a trade publication. Among oil traders, it is widely believed that the shipments exceeded war-ravaged Afghanistan's needs, and that oil may have been resold to arm the Taliban.

Saudi Arabia's aid to the Taliban points up the balancing act the ruling al-Saud family has to perform between its foreign and domestic interests. The Saudis consider themselves allies of the United States. But the glue that holds their kingdom together is a puritanical strain of Islam called Wahhabism. By supporting the Taliban and other Muslim groups, the al-Saud dynasty is able to retain the goodwill of the country's clerics. Already, in response to the tacit Saudi backing of the American antiterrorism campaign, a powerful mainstream mullah in Saudi Arabia has issued a fatwa excommunicating the royal family. Fearful of protests, the Saudis have not tried to arrest him.

In fact, fear of losing power has led the Saudis to pay off just about everyone, which makes oil revenues so crucial. There is the welfare state to coddle the citizenry; the toleration of extremist clerics so that they do not stir up the masses; and the payoffs to other regimes, including a Pakistan with nuclear capability, to keep them friendly.

But that protection money has not stemmed a growing domestic restiveness, as many Saudis have become fed up with a sprawling ruling family they believe is insatiably corrupt.

"For many of the princes," said one former cabinet secretary in Washington, "the advantages of getting money exceed the advantages of keeping internal unrest down."

Many people in Saudi Arabia and the Middle East loathe the United States because they see it as the protector of a degraded regime in Riyadh. This has put pressure on the Bush administration, intent upon preserving the stability of its largest oil supplier and the appearance of Middle Eastern approval for its fight against terrorism, to toughen its stance on Israel. Prior to the assassination of an Israeli cabinet minister, some kind of shift had been expected by many, including the Israelis.

"To a certain extent," said Philip K. Verleger, an independent economist and a senior adviser in the Carter administration, "we let U.S. foreign policy be dictated to us by the house of Saud."

IT is unclear what the United States can do to loosen its ties to the Saudi regime, so long as it remains reliant on its oil. Mr. Bush urged the Senate last week to get to work on a comprehensive energy policy. But the White House and most Republicans want to focus on developing domestic oil supplies. Given the fact that the United States has only 3 percent of the world's known reserves, increased drilling will do little in the long run to decrease dependence on the Middle East.

"Sept. 11 should be an alarm bell that we need a balanced, comprehensive energy policy that addresses things we don't like to do: mandating more fuel-efficient vehicles, more domestic oil and gas drilling, becoming more energy efficient as a nation, " said Bill Richardson, energy secretary under President Bill Clinton.

That, in turn, could give Washington a bit more leeway in its relations with Saudi Arabia, freeing it to press for a reduction in official corruption or for reining in radical Islamic groups.

Some people, like Dan W. Reicher, former assistant secretary of energy under Mr. Clinton, think that changes that reduce American dependence on petroleum are possible without Americans having to sacrifice the kinds of cars they drive or how they live.

The question now, Mr. Reicher said, is whether Washington can find the political will to act before an oil crisis explodes.

"Will patriotism mean more than raising the flag?" he said. "Will it mean raising fuel economy?"