WASHINGTON — The U.S.-Saudi relationship is again engulfed in controversy. Did a Saudi princess, and wife of the Saudi ambassador to the United States, give money to two of the 9/11 hijackers? Yet again, both governments are paying a high price for their unnatural friendship.
It seems implausible that a prominent Saudi royal would intentionally aid terrorists. But today Riyadh has little credibility since it is widely acknowledged that Saudi money has flowed into al-Qaeda’s coffers.
Washington cannot force Saudi Arabia to accept political or religious freedom. But it can insist that Riyadh turn off the financial spigot for terrorists. The U.S. must do so even if it means loosening the two governments’ friendly embrace.
America need not fear for its bases. U.S. troops should be withdrawn from Saudi Arabia. If Iraqi President Saddam Hussein is disarmed, Riyadh can defend itself; if Hussein is overthrown, there will be no Iraqi threat against which to defend.
Nor need the U.S. step gently because of oil, since the Saudis’ trump hand is surprisingly weak. Saudi Arabia has about one quarter of the world’s resources, but this figure vastly overstates the economic importance of its oil. Riyadh accounted for about 10.5 percent of production last year (and less so far this year).
Prices to the U.S. and other nations would rise substantially only if the Saudi government held oil off of the market, especially if the other Gulf states had collapsed. The result then would be severe economic pain in the short-term, though the U.S. Strategic Petroleum Reserve and similar stockpiles held by other countries would help moderate prices.
Even fundamentalist regimes prefer to sell oil, however. In fact, Iranian production has increased steadily since Tehran’s Islamic revolution.
If a new regime did halt sales, the primary beneficiaries would be other oil producers, who would likely increase exports in response to higher prices. A targeted boycott against the U.S. and allied states would be ineffective, since petroleum is a uniform product available around the world. In fact, the embargo of 1973-74 had little impact on production.
Riyadh could pump less oil in order to raise prices. Such a strategy would require international cooperation, yet the oil producers have long found it difficult to coordinate price hikes and limit cheating on agreed-upon quotas.
Even if effective, restricting sales would have only a limited impact. A decade ago, energy economist David Henderson, a professor at the Naval Postgraduate School, figured that the worst case of an Iraqi seizure of the Saudi oil fields would be about a 50 percent price increase, costing the U.S. economy one half of 1 percent of GDP. Today the price rise would fall on an economy more than one-quarter larger.
In any case, the economic impact would diminish over time. Countries like Kuwait, Iran, Nigeria, Russia, the United Arab Emirates and others could pump significantly more oil. A resolution of Iraq’s status would bring substantial new supplies on line; Baghdad produced 2.2 million barrels a day in 1990, before the Persian Gulf War and sanctions.
Sharply higher prices would generate new energy supplies elsewhere. Total proven world oil reserves were 660 billion barrels in 1980, 1,009 billion in 1990, and 1,046 billion at the end of 2000. Yet in the last decade alone the world’s people consumed 250 billion barrels of oil.
How could this be? A combination of new discoveries and technological advances increased the amount of economically recoverable oil. Reserves rose even as oil prices dropped.
America and other countries are dotted with high-cost wells that could be unplugged. America’s outer continental shelf alone is thought to contain more than 30 billion barrels of oil, greater than our current proven reserves. Barely 6,000 hectares of the 784,000 hectare Arctic National Wildlife Reserve could contain a similar amount of oil.
Moreover, energy companies are looking for new deposits around the world, including the Caspian Basin, Russia, South China Sea and West Africa. Estimates of as yet undiscovered potential recoverable petroleum range from 1 trillion to 6 trillion barrels.
In short, an unfriendly Saudi Arabia might hurt America’s and the West’s pocketbook; it would not threaten their survival. Thus, it is worth risking Saudi displeasure in order to try to starve al-Qaeda of funds. Anyway, Riyadh isn’t likely to turn hostile. It needs the money from selling oil as much as the West needs the oil.
Moreover, Washington need not treat the Saudis as enemies. Rather, the U.S. simply should accept a cooling of the relationship if that is the only way to halt terrorist funding.
America and the West’s most important foreign policy objective is defeating terrorism, and the most important contribution that Saudi Arabia can make is to cut off funding for al-Qaeda. That’s worth achieving even if it means cooler U.S.-Saudi ties.
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