Saudi Oil Deal: A Landmark Agreement

By Blanche, Ed | The Middle East, October 2001 | Go to article overview

Saudi Oil Deal: A Landmark Agreement


Blanche, Ed, The Middle East


Saudi Arabia's landmark agreement to allow eight major western oil companies back into the kingdom to develop the natural gas sector -- with investment of up to US$50 billion -- marks a significant shift in Saudi economic policy and demonstrates how, even when political relations between Riyadh and Washington are seriously strained, as they are over the Israeli-Palestinian conflict, the Saudis are committed to maintaining strategic ties.

The agreement, described by Saudi foreign minister Prince Saud Al Faisal as an "important historic event" is expected to be finalised by the end of the year. The deal underlines how in this often ambivalent relationship, a cornerstone of America's Middle East policy, the mutual interest of the two states has again overcome mutual antagonism, as it has since US-Saudi relations were established over 50 years ago.

For their part, the Saudis have pledged they will not use the "oil weapon" again despite the current friction with the US and, to a lesser degree, Europe. Oil minister Ali Al Niami declared in July: "I want to assure you of one thing: the time of the oil weapon is past. We don't want to commit suicide. Our best weapon is money -- and we will only get money by selling oil." Within the Organisation of Petroleum Exporting Countries (OPEC), the balance of power rests primarily with Saudi Arabia, the world's largest producer -- with at least half the world's spare production capacity -- and to a lesser extent with the UAE and Kuwait.

The departure of the Clinton administration, viewed by many Arabs as the most pro-Israeli government for many years, has also eased friction between Saudi Arabia and the US over higher oil prices, the result of production cuts by OPEC and several key non-OPEC producers in early 1999. The cavalier actions last year of the Clinton administration's energy secretary, Bill Richardson, offended Riyadh mightily. In the run-up to the November 2000 presidential elections, seeking to strong-arm the Saudis and their Gulf allies into boosting production in order to push down prices, Richardson claimed high oil prices were seriously threatening the global economy.

These actions culminated in a startled Richardson getting a 10-minute tongue-lashing from the Saudi foreign minister, Prince Saud, on the private nature of the "special relationship" between the two countries, and a lecture on how neither should use the media to pressure the another, particularly on such sensitive and vital issues as world oil prices.

The Bush administration, with its array of former oilmen including the president himself, vice president Dick Cheney and other senior figures, has taken a totally different tack. OPEC's decision in July to trim production by one million barrels a day from 1 September, the third cutback this year, to push prices back to the $25 a barrel comfort zone -- equivalent to $28 for higher-quality US benchmark light crude -- was apparently quite acceptable to Washington. Following the bombing of the World Trade Centre and the Pentagon on 11 September shocked traders drove up crude prices by more than $3.50 per barrel to a nine month peak of $31.05 but prices are likely to stabilise at below $30 a barrel, providing the Americans do not launch retaliatory strikes in producer states.

Apart from securing supply, Bush's energy programme seeks to increase US domestic production and reasonably high prices will bolster that policy. Bush's energy secretary, Spencer Abraham, who is of Arab extraction, has already held behind-the-scenes consultations with Riyadh and been assured by Naimi that the Saudis will ensure price levels do not surge up to the $30 mark once more. "We will not be begging anybody for oil," Abraham said in July. "We intend to engage in quiet diplomacy with OPEC, not public diplomacy."

Amid mounting criticism of the US in the Arab world, most notably by Crown Prince Abdullah and other members of the powerful and traditionally pro-American Sudairi faction of the ruling Al Saud family, over Washington's failure to rein in the Israelis, Bush's father, highly regarded in the Gulf as a friend, intervened with a telephone call to Prince Abdullah in July, to assure him the new US president was striving to be even-handed and to end the Intifada bloodshed. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Saudi Oil Deal: A Landmark Agreement
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.