On April 25 2005, Crown Prince Abdullah visited George Bush to discuss a number of issues ranging from the Middle East peace process to fighting terrorism. However, the centerpiece of Abdullah’s visit was to present President Bush with a fresh proposal to boost Saudi oil production that would go some way towards easing pressure on the price of crude oil.
The visit was carefully scripted to coincide with Bush’s announcement of a new energy strategy to counter growing concerns amongst oil companies and ordinary Americans that the administration’s oil policy was faltering and hurting the US economy.
Criticism from oil companies has been fuelled by the lack of progress made in securing Iraq’s oil. Despite devoting $1.6 billion of Congressional aid to develop Iraqi oil infrastructure, Iraq is still producing 25 percent lower than levels in early 2003, before the U.S. invasion to topple Saddam Hussein. The popular Iraqi insurgency has reduced the flow of oil to a trickle. The sabotage of a pipeline to Turkey has restricted exports from Iraq’s northern fields, around Kirkuk, and violence has hampered efforts to modernize the larger southern fields. The result is that Iraq exported 1.43 million barrels of crude oil last month, down 30,000 barrels from March. This is nowhere near the 4 million barrels forecasted by some analysts in the aftermath of the war.
In addition, US oil executives have been further aggrieved by the neo-conservatives whom they blame for encouraging the insurgency through the privatization of Iraq’s oil industry as opposed to its re-nationalization. The plan to nationalize Iraqi oil, which was put forward by the US oil industry, was superseded at the last minute by a neo-conservative plan to privatize Iraq’s oil and destroy OPEC. In the ensuing chaos of the post Saddam era, the US oil companies were prevented from exploiting Iraq’s oil fields thereby hindering their efforts to increase Iraqi oil supply. Failure to work with Iraq’s oil fields was a huge blow to American oil companies. According to the United States Department of Energy the costs of bringing new production on line in Iraq are among the lowest in the world. As of yet only 15 of its 74 fields have been developed; known reserves are 112 billion barrels, but some predict it may turn out to exceed 300 billion barrels. With recovery rates of 50 per cent and reserves of 250 billion barrels, Iraqi oil could be worth more than $3 trillion.
On the domestic front, consumers have had to put up with soaring gas prices at the pump and blame Bush for much of America’s energy woes. A recent Associated Press-AOL poll found the publics giving the president low marks for his handling of energy problems, with 62 percent saying they disapproved. The democrats have seized on the poor approval ratings to drive home the point that the Bush administration has done next to nothing to rescue the beleaguered public from high oil prices. “Five years later, and Americans suffering under record-high gas prices are still waiting to see the president keep his promise to jawbone OPEC,” said Senator John Kerry.
The Bush administration faced with the growing tide of criticism has responded by removing influential neo-conservatives like Wolfowitz and Bolton away from policy making to policy execution. The administration has also asked the Saudi’s to come up with a plan that dramatically increases its oil production capacity. The plan outlined by Saudi Oil Minister Ali Naimi before Abdullah’s visit to Texas, proposes to spend $50 billion over a five–”year period to increase Saudi production capacity to 12.5 million barrels per day by 2009 from the current 11 million limit. If necessary, Saudi Arabia says it will eventually develop a capacity of 15 million barrels a day. US National Security Adviser Stephen Hadley described the Saudi plan as a major breakthrough. He said, “What really came was a plan for increasing production through substantial investment –” to the tune of about $50 billion over time. So it’s a major initiative that they’ve undertaken."
Notwithstanding this huge investment to supplement America’s economy, the Saudi’s also plans to give US energy companies a huge bonanza by inviting them to invest in Saudi Arabia’s other energy sectors. Addressing an audience of American businessmen organized by the Saudi-American Business Council (SABC) at the Fairmont Hotel, Prince Abdullah announced his intention to host a conference of the International Energy Forum (IEF) in the last quarter of 2005. He said, “We invite you to continue to cooperate with us in the mining and gas sectors which offer a number of investment opportunities. There are many opportunities and success is guaranteed, God willing. You can choose direct investment or establish joint projects.” Crown Prince Abdullah also plans to make it easier for American businessmen to take wealth out of the country by proposing to relax the laws protecting the fledging Saudi economy. Speaking about the economic reforms, Abdullah said, “We have enacted a clear and flexible taxation law, reorganized the financial market so that it matches international standards and have expedited the privatization process”.
Clearly the Americans will be the real beneficiaries of Abdullah’s plan.
Firstly, the Saudi’s will spend $50 billions to increase the production of crude oil only to flood the international oil market and have its price reduced. This will sharply diminish Saudi profits and significantly damage the country’s economy. On the other hand, cheap crude oil will be a godsend to the American economy, which at present is reeling from high oil prices.
Secondly, the Saudi’s will be paying American oil companies billions of dollars to carry out the necessary work to increase the capacity of oil production. It will neither result in transfer of technology nor create sufficient jobs to lessen Saudi Arabia’s burgeoning unemployment figures. At present, the unemployment rate is at 20% (the real figure could be as high as 30%). But this figure could increase even further, given that the Saudi population is going to double from 20 million to 40 million by 2020. Hence the outlook for Saudi’s seeking employment in the near future looks extremely bleak.
Thirdly, the privatization drive coupled with loose taxation laws will result in American ownership of some of Saudi Arabia’s vital assets like the Saudi Telecom Company. In addition, under the pretext of providing better public services, the American multinationals will charge higher prices and generate huge profits, very little of which will be ploughed back into the Saudi economy. Most of it will be repatriated back to the US, whilst some of it will end up in the foreign accounts of Saudi princes.
Fourthly, though the bilateral trade between Saudi Arabia and the US has increased from a measly sum of $160 million in 1970 to $26 billion in 2004, the Saudi people during this period have become increasingly poor. In 1999, the per capita GDP was less than it was in 1965, before the massive rise in oil prices. So by inviting the Americans to invest in other energy reserves, Abdullah is signing away the future of the Saudi people to American slavery.
Not surprisingly, the Bush administration embraced Abdullah’s plan and included it, as part of their revitalized energy strategy. This consists of turning military bases into oil refineries, exploring ways of tapping US oil reserves and exploring cleaner fuels.
Therefore, when Bush unveiled his rejuvenated energy policy, he succeeded in pushing down the price of crude oil. This explains the reason behind Abdullah’s visit to Texas and was confirmed by National Security Adviser Stephen Headley who said, "The problem in the oil market now is a perception that there is inadequate capacity." Reassurance that can be given to the market on available supply, he said, should "have a downward pressure on the price."
Hadley’s statement also alludes to the fickle nature of this reassurance. Much is dependent upon the Bush administration’s ability to overcome resistance from environmentalists and other pressure groups who are opposed to the drilling for oil in places like Alaska and also to the conversion of existing military bases into oil refineries.
In this respect, Bush’s energy strategy is a defensive one. Having failed in Iraq, the administration has been forced into exploring ways to boost the domestic output of US oil. With winter approaching and OPEC pumping oil to its maximum, the race is on in the White House to find ways to stymie the next crisis.
However, America’s current predicament presents an ideal opportunity for the Saudi’s to free their people from American hegemony. Had the House of Saud been sincere about this, they could have employed number of strategies to sever their dependency on the US.
The Saudi’s could have cut the supply of crude oil, de-coupled it from the dollar and sold it in currency like the Euro or the Yaun (Chinese currency). This would force the world to quickly sell the dollar in return for the Saudi’s preferred currency of exchange. A move like this would also force powers like Europe and especially China, a country that has sharp differences with the US to counter any US maneuvers against Saudi Arabia.
The Saudi’s could also barter some of their oil in exchange for technology and heavy industry thereby reducing dependency on foreign workers and creating new jobs. In this way the Saudi’s could steer their economy towards a path of self–”sufficiency and economic prosperity.
It is very unlikely that Abdullah and the House of Saud would opt for such radical ideas, as their very existence depends upon Anglo-American support.
These ideas can only be pursued in an environment that is free from Anglo-American surrogates who dominate the Saudi regime. Only the Caliphate can produce an environment where the Saudi’s can enjoy political independence and economic sovereignty free from foreign control.