Saudi Arabia:  A Relationship in Transition?
By Hugh Renfro

I have had a 50-year relationship with Saudi Arabia. I worked with the Saudis in the 1950s-60s, before major modernization, and in the 1970s-80s during the boom times when they rebuilt the nation. I worked with labor, business, the government, military, the Bedouins, and the Royal Family.

I have been concerned about the bad press the Saudis have had over the past year. Last December, a good Saudi friend called from Jeddah and said, "….Hugh, you have to help us. They're killing us in the press, and you know us better than most." And I do.

My first exposure to Saudi Arabia was the company's Arabic language school in Sidon, Lebanon. While there, we were given lectures on Saudi customs and mores and were taught Arabic phrases, which were to help us in our new jobs in Saudi Arabia. A few months later, I was tracking a Saudi petroleum dealer, who was smuggling fuel from the Jordan refinery. In the late afternoon, I was close to the village of Qariyat Al-Ulya and thought that a visit to the Emir's mejalis would give me a chance to practice my basic Arabic. It is customary for the men of the village to visit with the Emir in the early evening before the sundown prayer. I entered the quiet, dark sitting room and saw a number of men sitting on cushions with their backs against the wall having tea and coffee. I gave the usual greeting, "salaam alaykum" (peace be unto you), and from the dark room came the response, "wa alaykum is-salaam" (and upon you peace)." I sat next to an old fellow and listened to the conversation. After a bit, I screwed up my courage to try to converse with the group and turned to the fellow next to me and said something inane about the weather. He looked at me, chuckled and said, "al-matriga taaht is-sayyarah," which means, the hammer is under the car. This was the first phrase we were taught at the language school…so he knew where I was from.

The U.S. has had a close, strong relationship with Saudi Arabia for 70 years. The Saudis have supported the U.S. politically and in business for that long. Many in the U.S. attribute the Saudi government's public announcement that under no conditions would they participate in the war against Iraq and the recent withdrawal of U.S. troops from the Kingdom, as proof of a change in the U.S.-Saudi political relationship. In spite of their public statements, the Saudi government acquiesced to U.S. use of bases for the conduct of the war against Iraq. The eventual removal of U.S. troops from Saudi Arabia was both the Saudi and U.S. governments' plan dating back to 1992.

However, the perceived change was not entirely unfounded, as the Saudi government could no longer ignore the very strong views of a large percentage of its population. A public resentment of the U.S. government has grown over the years due to the American government's obvious bias in the Palestinian issue, which has gone 54 years without a solution. The mid-May terrorist attacks in Riyadh have stopped the drift and have substantially strengthened the Saudi and U.S. governments' resolve to continue maximum joint efforts to eradicate the terrorist threat.

The May bombings in Riyadh have given the public a focal point other than the Israeli-Palestinian issue. I am certain that much of the public will have a feeling of increased security from a closer Saudi-U.S. alliance and will gain a determination to keep a lunatic fringe from destroying their domestic tranquility.

The Road Map proposed by President Bush parallels Crown Prince Abdullah's peace plan presented at the Arab League meeting in Beirut, Lebanon in March 2002. Abdullah's plan calls for recognition of the State of Israel upon the successful completion of peace negotiations resulting in the formation of a Palestinian homeland. This was the first such statement by an Arab leader of the countries, which are technically still in a state of war with Israel. As important as the statement itself, is the fact that it was subscribed to by all of the heads of the Arab states.

Fighting Terror

That 15 of the 19 September 11 terror

ists were Saudis has changed much of our public's view of Saudi Arabia. The U.S. government understands the reasons for the preponderance of Saudis involved in this terrible act, as they have worked closely with the Saudi government on terrorism issues since 1996, after the terrorist bombing of the Khobar Towers in which 19 U.S. servicemembers died. A large part of the American public has vilified Saudi Arabia and Islam as they have little or no knowledge of events and conditions that led to the 9/11 tragedies.

A Palestinian political activist, Dr. Abdullah Azzam, a professor at King Abdul Aziz University in Jeddah, radicalized a number of young Saudi students in the 1970s. Osama Bin Ladin was one of those students. Bin Ladin was further influenced by Ayman Al-Zawahiri, an Egyptian surgeon practicing in Jeddah. Zawahiri was involved with a number of outlawed activist organizations in Egypt and was the head of the Egyptian terrorist organization, Islamic Jihad. The Soviet invasion of Afghanistan in 1979 was a turning point for Bin Ladin. His long involvement in the war further radicalized him and led to the formation of his Al-Qa'ida organization. The Saudi government's decision to base U.S. troops in the Kingdom [Operation Desert Shield/Desert Storm], the Holy Ground of Islam, pushed him over the edge and resulted in his jihad against both the U.S. and the Saudi governments.

Osama Bin Ladin was raised in a life of wealth and privilege. He is the 7th of 17 sons. I have known the family for more than 40 years, and Osama just doesn't fit the family mold. They are pro-U.S., very religious and well known for their charity. The family's father, Mohammed, built one of the largest construction companies in the Middle East. Some of the brothers were educated in the U.S., some in England. At the time of 9/11, there were 30 young Bin Ladins in U.S. schools. At the request of the Saudi government, the State Department rounded them up and flew them home for safety.

The Bin Ladin family has businesses in the U.S. and for many years were one of Caterpillar Company's best customers, to the extent that Caterpillar kept one of their tech reps full time on Bin Ladin job sites. I came to know the father quite well when he was building the country's first cross-country highway system. As an oil company employee, I met with him frequently to collect for fuels and lubricants. Sheikh Mohammed was Saudi Arabia's first private pilot. He flew his airplanes to job sites throughout the Middle East. Upon his death in an airplane accident at age 45, his eldest son, Salem, was recalled from school in England and took over the family business empire at age 22. Because of his youth and the importance of the huge Bin Ladin operation, the Saudi government assigned 3 referees to the Bin Ladin Company. After only two years, the government recognized Salem's genius for business and withdrew the oversight group. Salem was a close friend, an international businessman, a jet pilot with thousands of hours at the controls, and a very talented man with a serious interest in cutting-edge communications technology. In 1988, Salem was visiting his aviation company in San Antonio and was killed while flying an ultra-light aircraft. Bakr Bin Ladin is now the eldest of the brothers and head of this very talented group. In spite of disowning Osama, the family understandably continues to be traumatized.

The media has featured a number of undeserved allegations during the past year - that the Saudis are not cooperating with the U.S. in the war against terrorism, that they are soft on Al-Qa'ida, that the Royal Family is financing terrorists, and that they are not really our friends. Some unpublicized facts and a review of our history with Saudi Arabia will illustrate the fact that the Saudis are our ally, good friend and partner.

It isn't reasonable to entertain the accusation that the Royal Family is funding terrorists. Much has been made of the Saudi Ambassador's wife having given money to two Saudis in the U.S., who asked her for financial assistance and who later were said to have had contact with persons connected to the 9/11 terrorist attacks. The Saudis are very well educated and are very independent thinkers. The Royal Family works hard to address the needs of their citizens and to maintain their position. With this analytical population, they are running for office constantly. It isn't sensible to think that they would self-destruct by knowingly funding the very terrorists whose aim it is to overthrow their government The Saudis have been actively pursuing extremist groups with terrorist potential for 25 years. In 1997, the U.S. and Saudi governments formed an anti-terrorism committee composed of law enforcement and intelligence specialists from both governments. They work together to track Al-Qa'ida and similar terrorist organizations, and their financial sources.

Saudi Arabia's actions are not publicized. The Saudis are not media driven. Even when faced with allegations appearing in the news and featured on talk shows, they very seldom defend themselves, as by nature they are a very private people. As the King is the keeper of two of the holiest shrines of Islam, Mecca and Medina, every action the Saudi government takes is subject to the scrutiny of more than one billion Muslims worldwide.

Dawn of a Special Relationship

U.S.-Saudi friendship goes back 70 years. In 1933, Standard Oil Company of California negotiated an oil concession with King Abdul Aziz. Saudi Arabia was poor. It was the middle of the Great Depression. The Kingdom's only source of income were the fees charged the pilgrims making the pilgrimage to Mecca and Medina. Because of the depression, the former stream of pilgrims was down to a trickle. In 1923, King Abdul Aziz had granted an oil concession to a Major Frank Holmes, representing a British consortium. The Al-Hasa, Eastern Province, concession price was 2,000 pounds annually, to be paid in gold. The group paid two years in advance, did no exploration work, and defaulted on further payments. The King cancelled their concession. In 1932, the King offered his oil to England. They thanked him for his consideration but replied that they had no interest.

The King wanted an interest-free loan of 100,000 pounds sterling against future oil royalties as a condition to granting the concession. The British Petroleum Company was competing against Standard of California for the concession, but as they already controlled the oil in Kuwait, Iraq, Qatar and the Trucial States, they were not interested in paying that much for an unproven situation in Saudi Arabia.

Negotiations dragged on for some time. Standard of California, then called CASOC (California Standard Oil Company) had found oil on Bahrain Island. They felt that the oil-bearing structure could extend into Eastern Saudi Arabia and so were seriously interested in the Saudi concession. CASOC finally negotiated a 60-year concession, made three interest-free loans over a period of five years, totaling 65,000 pounds, and agreed to an annual lease payment of 5,000 pounds. Royalty payments of four shillings per ton of crude oil produced were to begin when oil was discovered in commercial quantities.

In the 1940s and 1950s, the Saudis were paid 35 to 50 cents per barrel in oil royalties. As oil production levels were not high, they were still poor, and the Saudi government had to borrow against future oil royalties in order to run the government and their social programs. During those years, the four American companies, British Petroleum and Shell largely controlled world oil price, and they kept the price at about $2 per barrel for almost 20 years. This allowed the West to build an unheard of high standard of living based upon cheap oil. So, the Saudis paid their dues to the West a long time ago.

Building a Modern Society

At the start of the oil operation, the King notified the oil company that it could not recruit labor from the Western Province.  It was quite well developed from being the chief entry port for pilgrims, as well as for trade with East Africa and Europe, and Turkish influence for more than 100 years and British influence from the early 1900s. The oil company was also precluded from recruiting from the Central Province, as that was the seat of the government. They were asked to recruit from the Eastern Province, which was not well developed. There were two large towns in the East, mud brick and gypsum plaster and coral block and gypsum plaster, dating back to biblical times. There were no paved roads in the Eastern Province, and as a matter of fact, there were none in the Central Province either.

Some of the population lived in small agricultural communities, in oases. Many were Bedouins living in tent camps with their flocks of camels and goats. The oil company needed an educated work force and so built schools. The Saudi employees were the basic work force. They did the manual labor, drove the trucks, gauged the storage tanks, and twisted the valves. They worked four hours per day, went to school for four hours and were paid for eight hours. American supervisors checked report cards each two weeks. An employee falling behind in a subject was given special tutoring. If he couldn't improve his grade, he had to work eight hours each day and go to school on his own time, until he could bring his grade up. Exceptional students were sent on to prep schools and colleges. ARAMCO educated some 30,000 Saudi employees through elementary school and on into high school over a period of approximately 20 years.

In the1950s, modern buildings began replacing the largely adobe construction in the principal cities of the Kingdom. In late1953, King Saud instructed the Mayor of Riyadh to begin building a new capitol. At that time the capital city, Riyadh, was a large adobe community of some 300,000 people.

Two days later, I went to the vegetable market in the center of town and saw bulldozers tearing down mud buildings. I went to see the Mayor and asked what was happening. He said that I had advised him to begin the new road system right away and that it had been good advice as the King was pleased with the activity.

It became apparent to the King and his advisors that Nasser had serious designs on Saudi Arabia. During Nasser's last state visit to Saudi Arabia, King Saud and Nasser were visiting the major cities. I flew to Dhahran ahead of the King's plane and was standing on the tarmac with a thousand or more people as the King's plane arrived. When the King stepped out of the plane, the crowd clapped politely. When Nasser stepped out, the crowd went wild. You could see the alarm on the King's face. So, almost overnight all Egyptians were repatriated. This was a close call for Saudi Arabia.

As a result, Nasser was angry with King Saud. He supported Northern Yemen in the border clashes with Saudi Arabia. The Egyptian air force flew a few bombing missions and two purported gas attacks into the Nejran in South-Western Arabia.

The U.S. thought that this was a good time for a show of U.S. support for Saudi Arabia and planned to fly late model fighter-bombers to Dhahran, Riyadh and Jeddah. The U.S. Embassy notified the Saudi government of the visits and distributed flyers in Jeddah, but the word didn't get out to the public in Riyadh. Gamal Abdul Nasser's intelligence was pretty good, as the night before the U.S. Air force visit to Riyadh, in his nightly radio broadcast, Nasser warned the people of Riyadh to stay away from government buildings and the airport as Egypt would bomb Riyadh the next day. The next morning, U.S. jets buzzed the capital, rattling windows and creating panic in town. Everyone was sure that Egypt was bombing the capital.

By 1960, oil production levels were climbing and the government began sending hundreds of students to the U.S. and England. The increased income allowed them to begin modernizing the country. Schools, hospitals and new road systems were built.

The year 1961 was a banner year for Saudi Arabia. The Saudi oil minister, Abdullah Tariki, and his lawyer, Frank Hendrix, presented a paper at the World Oil Congress in Cairo stating that regardless of existing agreements, a nation had the right to control its own natural resources. That same year, ARAMCO began turning back large tracts of oil concession area, and the Saudi government began paying ARAMCO for the associated capital improvements.

Hendrix was an American lawyer formerly with Exxon in Venezuela. He was our neighbor in Jeddah. After the paper, Frank was a pariah to the ARAMCO community. About one month after the oil congress, Frank called and said that he and his wife Betty felt as if they had been in jail the past month and asked if they could come to the movie in the ARAMCO compound. We were one of the few groups with access to movies, and we showed them at night, out-of-doors on the company tennis court. Frank suggested that they might come in our back gate after the movie began. That worked, but when the lights went on, if looks could kill …….!

King Saud issued a Royal Decree in 1960 establishing formal education for women. Religious fundamentalist groups tried their best to shut down the new schools  but King Saud and Crown Prince Faisal persisted, and women's education was there to stay.

Saudi Arabia formed OPEC with Venezuela in 1961. Venezuela's oil minister, Alfonso Perez, was in Jeddah on the Red Sea, meeting with his Saudi counterpart. ARAMCO radioed me and asked me to invite Perez to dinner. I did, and his last meeting with the Saudi oil minister ended early. Minister Perez arrived at our home at three in the afternoon. My wife and I were painting the bathroom, and so Alfonso sat on the stool and had a couple of drinks before dinner. We explained that we were leaving the following week for vacation in the West Indies, where we were going to build a small cabin on a piece of land we owned on the island of St. Lucia. As we would be in the neighborhood, he invited us to be his houseguests in Caracas.

In the early 1970s, with oil income escalating, the Saudi government prepared a new development plan. A number of U.S. groups helped with the project - CitiBank, Stanford Research, Ford Foundation, and Bechtel. The plan incorporated new roads, water projects, medical facilities, industrialization, and social programs. By 1975, the plan was taking off. The country was awash with foreign contractors. It was my observation that in their haste, the Saudis were paying $2 for every dollar's worth of progress. I met with Ghazi Ghosaibi, the Minister of Industry, who was responsible for a large share of the plan. I explained my concern and suggested they slow down, get their money's worth and put their surplus cash into U.S. government bonds at 10%. He said that it was important to get all accomplished while their oil income was high, and that "time is money". 

By 1983, the entire development plan was completed. They had built super-highway systems, schools, including colleges and universities, state-of-the-art hospitals, large water desalination plants on both coasts with large diameter pipelines delivering water to communities hundreds of miles inland, and two large industrial centers, one on each coast. The major industrial projects in these centers were each in the billion-dollar range. These were joint ventures with the Saudi government. Many of the foreign participants were U.S. firms. The government financed one-half of the foreign participants' share of the initial capitalization of these large projects, plus the first year's operating and marketing costs. These were generally 10-year loans at 2% interest. As a result, they built steel mills, refineries, industrial gas plants, and chemical works. Private Saudi groups built large numbers of down-stream industries. Due to this industrialization, today, Saudi Arabia is the largest exporter in the Middle East, and oil is only 35% of its GDP. The social programs were outstanding - free education through university, free medical care and the home loan program was marvelous! If a homebuyer paid his mortgage payments on time for a year or two, the government excused the balance of the debt.

Strengths and Strains in the Relationship

During the long U.S.-Saudi friendship, I recall at least two occasions when the U.S. economy was in trouble. The