U.S. economy threatened by potential instability in kingdom

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Economic fate again in Saudi hands

U.S. economy threatened by potential instability in kingdom OPINION By Christopher Byron MSNBC CONTRIBUTOR

Oct. 24 — Plenty of attention is being paid these days to the prospects for the U.S. economy, which was heading into a recession even before the terrorist attacks of Sept. 11. But a far bigger economic threat to Americans is developing half way around the world in the repressive Persian Gulf kingdom of Saudi Arabia, which teeters at the edge of economic and political chaos, imperiling the economic and geopolitical interests of not just the United States but of the entire world.

THE 69-YEAR-OLD kingdom of Saudi Arabia is the wildcard in the U.S. war against terrorism, and how that card gets played is likely to determine the course of the world economy far more directly and lastingly than anything Washington does — or doesn’t do — regarding interest rates, fiscal stimulus or any other such measures.

Saudi Arabia, which is roughly one-fifth the size of the United States, sits atop 25 percent of all known oil reserves on Earth. It is currently pumping roughly 9.2 million barrels of crude per day, which account for about 10 percent of all oil consumed on the planet every day.

It isn’t an overstatement to say that the economic fate of the world revolves around the reliable and unimpeded flow of oil from the fields of Saudi Arabia. Indeed, that has been the case for more than 40 years.

The desert kingdom currently supplies only about 8 percent of the oil consumed domestically and directly by the United States. But other leading countries — all of them major U.S. trading partners — are much more dependent on Saudi supplies. Roughly 20 percent of Japanese oil needs are supplied by Saudi Arabia and much of Europe is in the same boat. Remove Saudi oil exports from world trade — or even temporarily disrupt its flow — and experts agree that the impact would be far greater and more destabilizing than any oil-related shocks yet experienced.

To prevent that from happening, every U.S. administration since Dwight Eisenhower’s has sought to maintain close and stable relations with the ruling House of Saud, beginning with King Abdul Aziz ibn Saud at the end of World War II, and thereafter with his sons.

But as time has passed, corruption has spread like a plague through the ruling family, fueling increasingly militant sentiments among the ultra-conservative Wahhabi sect of Sunni Muslims, who comprise the bulk of Saudi Arabia’s population. In 1979, armed Wahhabi zealots stormed and occupied the holy mosque of Mecca, demanding that the royal family expel all foreigners, surrender its wealth to the nation, establish an Islamic republic, sever ties with all Western nations and halt oil exports to the United States. A bloody, two-week pitched battle ensued before Saudi troops were able to regain control of the mosque.

Three years later, the current monarch, King Fahd, succeeded to the throne, beginning his reign in the shadow of not just the mosque uprising, but also of the assassination of Egypt’s moderate leader, Anwar Sadat, who was murdered only months earlier by Islamic fundamentalists opposed to Sadat’s peace agreement with Israel.


Fearful of meeting the same fate as Sadat, Fahd has clung to power since then by an increasingly difficult balancing act. He has tried to protect Saudi Arabia from external threats such as that presented by Iraq’s invasion of Kuwait by nurturing close ties to Washington. But to protect his own flanks domestically, he has increasingly surrendered de facto control over domestic affairs to Wahhabi fundamentalists. And to hold together the factionalized royal family itself, he has done nothing to root out corruption from within the government, which is dominated by various princes, of whom there are more than 6,000. The result is an unstable situation in a country that threatens to come apart at any time in much the way Iran crumbled 20 years ago. HUGE ARSENAL

Were that to happen, a huge arsenal of some of the most advanced military weaponry in the world could suddenly be up for grabs. In the years since Desert Storm, Washington and its NATO allies have armed Saudi Arabia with a staggering array of ultra-advanced weaponry. Data supplied for this story from the Stockholm International Peace Research Institute, which monitors the world arms trade, shows that as of today, the Saudi military is equipped with, among other things: 120 British-made, ultra advanced Tornado ground-attack fighter aircraft 108 U.S.-made F-15 Eagle air superiority fighters and fighter-bombers 3 U.S.-made C-130 Hercules troop transport aircraft 315 U.S.-made M-1A2 Abrams main battle tanks 150 U.S.-made M-60A3 Patton main battle tanks 48 Black Hawk and other combat helicopters 2,500-plus armored fighting and troop transport vehicles of various classes 8,500-plus anti-tank missiles 1,000-plus SAM surface-to-air missiles 2,500-plus air-to-air missiles 900-plus air-to-ground missiles 126 Exocet and Sea Eagle anti-ship missiles Substantial quantities of radar and other electronics systems

Nearly the whole of this buildup — which dwarfs anything that occurred in the region earlier, including the Iranian buildup that preceded the collapse of the shah — has taken place to enable Saudi Arabia to defend its own borders from Iraq. THREAT FROM WITHIN But Saudi Arabia now faces a far more menacing threat from within, as Islamic fundamentalists continue to feed upon discontent over royal opulence and corruption in the midst of an economy in deepening trouble.

Data published by Stratfor Forecasting LLC, the international political risk think tank, show that living standards in Saudi Arabia are in a steep and continuing decline. The per capita gross domestic product peaked at $28,600 in 1981, and has fallen since to less than $7,000 today. The decline is partly due to falling oil prices, which touched a stunning price of $53-plus per barrel during the Iran-Iraq war, then fell almost without letup to their current price of barely $21. But Saudi Arabia’s exploding population is also part of the problem. Data on the kingdom’s demographics are increasingly out of date and unreliable, but a recent CIA study puts the country’s population growth rate at 3.27 percent annually, making it perhaps the fastest-growing country of its size in the world.

Nearly half the country’s population is younger than 15. Public health services are poor, with the result that the nation’s infant mortality rate of 51 deaths per 1,000 live births is not much better than Iraq’s — 60 per 1,000 — and close to five times that of Kuwait.

Public education is a joke. Roughly a third of all females in the country cannot read. As for the rest, an astonishing Oct. 18th story by Neil MacFarquhar of The New York Times reports that all public high schools in Saudi Arabia teach mandatory classes in anti-Christian, anti-Western religious fundamentalism, with nearly 30 percent of all class time devoted to such instruction. MacFarquhar quotes a standard textbook as saying: “It is compulsory for the Muslims to be loyal to each other and consider the infidels their enemy.”

Not surprisingly, the country has become a breeding ground for terrorists. An estimated 50,000 boys leave high school every year only to find it impossible to land jobs. They become easy recruits for Osama bin Laden’s Saudi-dominated al-Qaida network. MacFarquhar quotes a humanities professor at King Saud University in Riyadh as saying of religious instruction as practiced in the nation’s high schools, “It looks innocent, they are just trying to teach religion, but in a subtle way it is a recruiting mechanism. If a pupil shows enthusiasm, he is recruited into their circles and then suddenly, bang! — he takes a gun and goes to Afghanistan to fight for Islam.” SAUDI ARABIA’S FINANCES IN A MESS The kingdom’s economy and finances are certainly a mess. But records are so out of date that no one can really be sure just how bad the situation actually is. Economic information on Saudi Arabia’s own official Web site is at least 5 years old. Several published sources put the country’s external debt at $22.4 billion in 1995, but it has certainly ballooned since then, and now stands at more than $140 billion, according to the Stratfor Forecasting group.

No one has any idea what the current inflation rate is. The last time the World Bank looked, it stood at 8.1 percent — but that was in 1999, and the bank hasn’t updated the number since then. Saudi Arabia’s own Web site offers nothing more recent than 1997. Over this situation presides the aging King Fahd, now 82 and in severely failing health.

The man set to succeed him, Crown Prince Abdullah, is himself 75. Abdullah is thought to have close ties to the religious right in Saudi Arabia, and no one really knows what palace intrigues will be unleashed when Fahd succumbs and various princes begin grabbing for power.

How that power struggle plays out and which faction winds up in control of Saudi Arabia will almost certainly be more important to the interests of the West than whether Osama bin Laden can survive the Afghan winter in a cave. By the time he re-emerges in the spring — assuming he survives through the winter — the whole shape of world politics could be unrecognizably altered. The ultimate winner in this struggle will not be who captures bin Laden; it will be who winds up in control of Saudi Arabia. Let us hope that individual is not bin Laden.


-- Martin Thompson (mthom1927@aol.com), October 25, 2001


With all that advanced weaponry you would think the Saudis would have no problem crushing dissent, in typical Islamic style.

-- Chance (fruitloops@hotmail.com), October 25, 2001.

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