Mr. Green Car: Saudi Arabia and the U.S.–a marriage of convenience
By Allen Penticoff
In this episode of Mr. Green Car, we’ll take a look at the long “marriage of convenience” the United States has had with its social opposite, Saudi Arabia.
When Standard Oil employees Americans Krug Henry, Bert Miller and Karl Twitchell arrived in eastern Saudi Arabia in 1933, they may as well have arrived on another planet. Only recently a vast region of tribes united as a country by King Abdul Aziz ibn Saud—it was the arid land of a pre-industrial society. As seen in the classic 1962 movie Lawrence of Arabia, the Bedouin tribal people were as unfamiliar with airplanes as we would be with alien spaceships—probably more so. Miller and Henry would search for and discover oil in eastern Saudi Arabia. Twitchell would ingratiate himself and the American company he worked for by searching the vast country for water and minerals.
It was not until March 3, 1938, that oil was found. It was the height of the Depression in the United States. But foreseeing the potential for the quick wealth he needed to build a nation, King Abdul Aziz ibn Saud reached an agreement for them to develop oil fields. The Saudi monarch had seen what British imperialism and colonialism had done to his neighbor countries and wanted no part of dealing with the British. The people of the Arabian peninsula had a long, proud tradition of independence and were not willing to abdicate any power to foreigners. The king felt faith in offering the company, Standard Oil of California, an exclusive concession to explore and extract oil from an area larger than Texas. Besides, he thought the British would be slow in developing the oil resources of Saudi Arabia, while he was convinced the Americans were ready to go—and he needed the money.
In an awkward meeting with U.S. President Franklin D. Roosevelt aboard the U.S.S. Quincy in Egypt’s Great Bitter Lake on Feb. 14, 1945, King Abdul Aziz ibn Saud wished to bring his own live goats to eat and sleep in tents on the deck rather than in cabins. Despite their vast social differences, the two leaders found common ground, and a bond was cast to bind the nations together for 65 years. Our pact was that they would provide access to their oil—we would provide weapons, construction and skilled labor to build a nation. Oil production would not begin until 1946—full operation came in 1949, just in time for our great post-war car-buying spree.
Actually, the king’s affinity for the United States had roots in a humanitarian act. In 1911, 10 of his soldiers received medical treatment at a mission hospital of the Reformed Church in America located in nearby Bahrain. The soldiers reported back for duty with tales of the great care and compassion they received at the hands of the Americans. This experience would pay off for the United States in so many ways in years to come.
And so, for decades we have provided arms and defense to Saudi Arabia, and they have let us extract their oil. The company evolved to become the U.S.-controlled Arabian American Oil Company (Aramco) in 1944. Over time, the Saudis bought more and more of the company until taking complete control in 1980 and changing the name to Saudi Arabian Oil Company. From 1951 to 2006, we sold them $80 billion in military hardware as well as their defense from invasion by Iraq in the first Gulf War of 1990 to 1991. This October 2010, we contracted to sell Saudi Arabia $60.5 billion in advanced armaments.
This oil wealth represents 90 percent of Saudi exports—45 percent of their gross domestic product and 75 percent of the government’s income. This has created a lot of wealth in a country where only 2 percent of the land is arable. And that wealth has created a welfare state. While the government is still an Islamic absolute monarchy, they see the writing on the wall and have been wise enough to begin diversifying their sources of revenue, building six new industrial cities and providing educations in the sciences and engineering. No longer a people living in tents, they have all the modern conveniences and technology that we in the West have. The entire country is computerized. Even many formerly state-run utilities are now being privatized.
But they are not Americans, and despite admiring us a great deal, do not want to be “just like us.” They revere their religious tradition and its role in all aspects of their lives. While you may be dining in a McDonald’s in Medina or shopping at Saks Fifth Avenue in Riyadh, when the calls to prayer start, people are shooed out and the businesses close. In many ways, it is a very closed, conservative and repressive society—and they like it that way. Sadly, it is a small group of Saudis who use their wealth to fund terrorism against other nations, because our history together has been one of cooperation despite our vast social differences. For a long time, we needed them, and they needed us.
The Saudis have been reporting the same 260-billion barrel oil reserves since 1980, except for 1987 and 1988, when they reported a 100-billion barrel increase of reserves. Analysts believe this is a fabrication to allow their production to remain high, as OPEC sets production limits based on a nation’s oil reserves. Already, the Saudis are using water to force oil from wells, a sure sign of depletion, and all potential reserves have long ago been discovered and explored. I can understand why they need all the cash they can get to keep their society going, but the false impression that their oil reserves are limitless poses a great risk to the entire world—the Saudis, after all, have one-fifth of the world’s oil beneath their parched sand and produce more of it than any other nation.
The U.S. imports from Saudi Arabia for 1994 to 2008 averaged 40 million to 50 million barrels per month. Because of our soft economy and a shift in import alliances, since February 2009, the averages have been in the 20 million to mid-30 million barrels per month range. This also reflects that we are obtaining more oil from our Canadian neighbors and their oil sands, while the Saudis have turned to selling their oil to fast-growing Asia. But what is their real depletion rate? When the Saudis run out of oil, their burgeoning population and ours will be faced with hard choices.
If you don’t mind a lot of numbers, but in a nice table format, do an Internet search on “U.S. oil imports by country of origin,” then click on the U.S. Energy Information Administration’s link for this amazing information. Bear in mind, total U.S. oil production is about 167 million barrels per month, with total imports amounting to 354 million barrels per month (521 million total—September 2010). While the U.S. has made a conscious shift away from Middle Eastern oil resources, they still represent a considerable portion of our imports—think about every gallon you use, who gets your money and what they do with it.
From the Dec. 15-21, 2010 issue