The recent spate of terrorist attacks and kidnappings in Saudi Arabia has elicited familiar hand-wringing about the kingdom's stability. On the June 10 edition of Marketplace, reporter Stephen Beard noted, "Saudi Arabia certainly has many of the prerequisites of revolution." On May 31, a columnist in Britain's Independent declared, "Saudi Arabia is in trouble. … All rational analysis leads to the conclusion that Saudi cannot survive."
I've heard this song before. When I was based in Riyadh in 1993-94, several visiting journalists assured me of the regime's pending demise. These days, predicting the fall of the House of Saud is a parlor sport among journalists and some Middle East specialists. The truth is: The al-Sauds are not in danger of falling to Islamic militants, and that's good news for us, the global economy, and the Islamic world.
While it may be hard to believe that the survival of a tribal dynasty that gives its people virtually no political rights, has funded radical Islamists around the world, and whose subjects made up 15 of the 19 World Trade Center hijackers can be good for anyone, consider the following nightmare scenario: Islamist militants take over the kingdom; oil prices shoot up to $100 per barrel, leading to a prolonged worldwide recession; U.S. forces invade Saudi Arabia's oil-rich Eastern Province to take control of the fields, sparking jihadists from around the world to open a new front against America; the most virulent strain of radical Wahabbism takes control of Islam's holiest sites and establishes a Taliban-style theocracy in Mecca, a city that is a lodestar for the Muslim world.
While such a doomsday scenario is unlikely, the prospect explains why the Pentagon already has sophisticated plans for occupying the Eastern Province's oil region. The Pentagon planning cuts to the core of why Saudi stability matters to us and the world: its oil.
Sitting on nearly a quarter of the world's proven oil reserves, Saudi Arabia alone can swing prices through production rises or falls. It has mostly acted as a responsible price stabilizer, often to the chagrin of some OPEC partners, and much to the relief of American SUV drivers. The current high prices are due to "a fear premium" based on Saudi and Iraqi instability, increased Chinese demand, and oil futures speculation. In early June, Saudi Arabia again stepped forward to raise production to bring prices down. Prices have dipped below $40 per barrel since then.
Through its sheer oil might and its power to determine prices, Saudi Arabia remains a key strategic ally of the United States. According to the Christian Science Monitor, nine out of the 10 post-World War II U.S. recessions have been preceded by sharp rises in oil prices.
While Washington should continue to urge political, social, and economic reform on the kingdom, its long-term vision for Middle East democracy must be reconciled with its short- and medium-term need for Saudi energy security. The two are, of course, not mutually exclusive. In fact, a gradual opening of the system to placate rising demands from middle-class Saudis should be viewed as essential to any energy security program.
With the world's spare oil capacity dwindling to razor thin margins, China's energy demands rising exponentially, India's energy thirst set to reach China-like levels in the next decade, and little sign that our own insatiable oil and gas hunger is on the decline or that alternative fuels will be produced on a mass scale, Saudi oil remains crucial. The Department of Energy estimates that Saudi production must increase from 10.2 million barrels per day to 23.8 million barrels per day by 2025 to keep up with rising global demand. A cutoff of the Saudi oil supply, even a short disruption, would be disastrous. What's more, the poorest nations will be hardest hit by a sustained hike in oil prices: We can survive $100 oil; Bangladesh cannot.
But the U.S.-Saudi relationship goes beyond oil. Saudi Arabian businessmen and members of the al-Saud family hold about $1 trillion on deposit in U.S. banks and another $1 trillion in the stock market, according to former CIA analyst Robert Baer. While bankers say a small Saudi capital exodus occurred after Sept. 11, it subsided over the past two years. If the money were withdrawn at once, Baer warns, it would have dire consequences on our economy. Saudi Arabia also has been one of the largest foreign buyers of U.S Treasury bills, which, in effect, helps finance our deficits.
From our side, we've done more than just provide Saudis with security from covetous neighbors. After all, Gulf War I was more about protecting the Saudi oil fields from Iraq than liberating Kuwait. According to Thomas W. Lippman, author of Inside the Mirage: America's Fragile Partnership With Saudi Arabia, "There is no aspect of contemporary Saudi life that has not been influenced by Americans." We've built roads, hospitals, ports, schools. We've introduced modern banking, medicine, science, and management. We've even contributed to Saudi obesity: Saudis are avid consumers of American fast food. In fact, the Mecca McDonald's is one of the busiest in the Middle East.