Fahd bin Abdul Aziz
Sultan Bin Abdul Aziz
Naef Bin Abdul Aziz
Salman Bin Abdul Aziz
Ahmad Bin Abdul Aziz
Gulf Roils, But US Buys Oil Elsewhere Friendly Venezuela, not Saudi Arabia, is largest US supplier; it's doubling output, Christian Science Monitor, February 9, 1998
So far, leaders in Saudi Arabia have refused to agree to let United States
forces use bases in their country to strike an obstinate Iraq to preserve the political
stability of the oil-rich Persian Gulf.
Meanwhile, just across a much closer gulf - the Gulf of Mexico - oil companies in
Venezuela are scrambling to pump more oil to feed a fuel-hungry US.
While the Middle East prepares for military conflict, Latin America is assaulting the
Persian Gulf's share of the world's largest oil consumer - the US.
In 1996, Venezuela overtook Saudi Arabia to become the biggest exporter of oil to the US.
It's a change that illustrates how much less reliant the US has become on Persian Gulf oil
since the 1991 Gulf War.
Two decades ago, the US imported 32 percent of its oil from the Middle East. Today that's
down to less than 20 percent.
Venezuela alone has grabbed about 20 percent of the US market; Saudi Arabia now has about
15 percent, down from 21 percent in 1979.
The gap is likely to widen in the next decade. Venezuela has announced plans to double
production and defiantly ignore its quota as set by the Organization of Petroleum
Exporting Countries, a group it helped found. Overproduction by Venezuela is already
contributing to the drop in world oil prices, analysts say.
That's good news for American consumers: Gasoline prices have fallen an average of 17.8
cents since the end of August.
Increasingly, US officials have touted the importance of the shifting reliance as a way of
ensuring the stability of oil coming into the US.
"Is the Middle East any more stable today that it was in 1973, 1978, 1991?"
asked Sen. Frank Murkowski, chairman of the Energy and Natural Resources Committee, at an
energy conference last month in Caracas. "The latest moves by Saddam Hussein
certainly show that it is not. We must continue to explore avenues for further cooperation
in the Western Hemisphere to ensure stability of supply."
Some wonder whether the shift will cause the US to lessen its peacekeeping commitment in
the Middle East. "A great deal of our oil is coming from other places," says
Jason Feer, president of Target Research, a Washington-based consulting firm specializing
in Latin America. "The consensus in the US that we should protect the Middle East
could break down. It could be potentially difficult to convince people that we get a lot
out of this."
Julius Katz, a former deputy US trade representative, says that would never happen.
"There is a single world oil market that is affected by a disruption anywhere,"
says Mr. Katz, who worked for the Bush administration and now is an international
consultant. "We just can't divorce ourselves from {protection of} the Middle East or
any major supply. It's not possible for the Western Hemisphere to supply all of the oil
the world needs."
More stable than the Middle East
Nevertheless, the push is on throughout Latin America to find new oil. Colombia, Ecuador,
Brazil, and Argentina are all opening up parts of their oil sectors to private companies.
Mexico, which still has a closed market, is also trying to boost production. Argentina and
Brazil are forging regional integration projects that could speed economic development.
US oil imports from the region increased almost 10 percent in 1997 and are expected to
grow another 10 percent this year, Mr. Feer says.
Since the 1991 Gulf War, the US has been steadily shifting away from using Mideast oil.
Iran and Iraq were completely cut off after 1991.
Meanwhile, under the leadership of Luis Giusti, Venezuela's state oil company opened up to
foreign firms in the early 1990s and decided to bust its OPEC quota. (See story, below.)
Foreign investment is helping to boost production and has created a furor in the industry.
Multinationals have rushed in to explore for oil in the region's most oil-rich nation -
despite tough terms that will make it difficult to turn a profit.
"Geologically, this is a very prolific oil corridor that runs from the lesser
Antilles of the Caribbean down through South America," says Tom Nicewarner, president
of Conoco Venezuela, which plans to spend $2 billion in Venezuela over the next five
years. "It is an unexplored region with a lot of potential."
Venezuela has 65 billion barrels of oil reserves, the sixth-highest amount in the world.
But it is also sitting on an estimated 1.2 trillion barrels of extra-heavy crude oil,
which, if recovered, would make Venezuela at least the equal of Saudi Arabia.
While Venezuela suffers from some of the worst government inefficiency and corruption in
South America, the country's well-established democracy and proximity to the US - just
across the Gulf of Mexico - gives US officials peace of mind. The friendship between the
two nations dates to World War II, when Venezuela provided an estimated 60 percent of the
petroleum used by the Allied forces.
Today, the US imports about half of its oil from the Western Hemisphere - Venezuela,
Canada, and Mexico are the leading suppliers.
'Integrating' the Americas
At a conference last month in Caracas, energy ministers discussed "integrating"
the Western Hemisphere's energy markets by the year 2005. Integration would entail opening
markets and physically connecting energy networks between countries with pipelines and
other infrastructure.
US Secretary of Energy Federico Pea said such an integration would also increase national security in the hemisphere by reducing the region's reliance on energy sources in "unstable parts of the world."
But there are also warning signs that the US might decrease its reliance on imported oil, which hit a record 53 percent last year. That could spell trouble for countries such as Venezuela that are deeply committed to the US market.
Recently developed fuel cells could lead to cars that would be twice as fuel
efficient as today's models, Feer says. In 1997, personal vehicles accounted for 34
percent of US oil consumption.
US exploration for oil in the Gulf of Mexico is improving thanks to advances in seismic
technology. That could lead to more domestic reserves. "This year the estimate was
that you would see US oil production rise for the first time since the Gulf War,"
Feer says. "It didn't happen, but the slide in US production is slowing, which is
somewhat worrisome to Venezuela."
U.S. to Avoid Strikes From Saudi Bases, The Washington Post - Bradley Graham, February 9, 1998
JIDDAH, Saudi Arabia, Feb. 8 – Confronted by Saudi Arabia's reluctance to back airstrikes against Iraq, Defense Secretary William S. Cohen said today that the United States would avoid flying strike aircraft out of Saudi territory in the event military action is necessary but would expect to use U.S. support aircraft based in this desert kingdom.
The decision not to press for greater cooperation from America's biggest, richest ally in the Persian Gulf region came after Saudi authorities recently indicated their aversion to a U.S. attack on Iraq unless it was aimed at eliminating its leader, Saddam Hussein.
Cohen said the United States has sufficient bombers and fighter jets situated in neighboring Gulf states, on aircraft carriers and on an Indian Ocean island to carry out an assault on Iraq. But U.S. officials also had hoped to stage some air strikes from Saudi territory. Saudi Arabia hosts nearly one-third of the U.S. aircraft currently in the region and controls a large portion of the available airspace and airfields near Iraq.
Cohen disclosed the U.S. decision while en route to the Gulf states for several days of talks with Arab leaders about American battle plans. Asked if he would be seeking approval to use Saudi bases for offensive military operations, Cohen said: "We have not made such a request, and ... it is not my intent to make such a request because we don't think it's necessary."
U.S. sources said terms of the arrangement with the Saudis were discussed in a telephone conversation Saturday between President Clinton and Saudi King Fahd. Upon landing in the Red Sea port city of Jiddah this evening, Cohen went into a 20-minute meeting with Fahd, then held talks with Prince Sultan, the defense minister, who earlier in the day was quoted reiterating his government's reservations about military action aimed at Iraq.
"As you know, we do not favor a strike against Iraq as a people and as a nation," Sultan told reporters, according to the official SPA news agency. At the same time, the minister called on Saddam Hussein to abide by the U.N. resolutions imposed at the end of the 1991 Persian Gulf War requiring unconditional access by international inspectors to suspected weapons sites.
Cohen said he still expects the Saudis to allow use of their territory for support missions, which aides said would include refueling, radar-jamming and AWACS air traffic control aircraft. The Saudis "are hosting some of the support aircraft. ... We would hope that would continue," the secretary said.
About 50 strike aircraft and another 50 military support planes are usually housed at Prince Sultan Air Base, a remote site south of Riyadh, to enforce a ban on Iraqi military flights over southern Iraq imposed at the end of the Gulf War. The use of these planes in an air assault would have afforded additional flexibility in what is sure to be a complex, fast-paced operation.
But anticipating that strike missions from Saudi Arabia might be ruled out for political reasons, the Pentagon has amassed a considerable amount of firepower elsewhere in the region since November when the current crisis erupted over U.N. weapons inspections. The United States has F-117 stealth aircraft and A-10 fighter jets at Kuwait's Jabir Air Base, B-1 bombers and F-16 and F-15 fighter jets at Bahrain's Sheik Isa Airfield, F-14 and F-18 fighter jets on two carriers, cruise missiles on a number of other ships and B-52 bombers on the British island of Diego Garcia. A third U.S. carrier that had been in the Gulf since October, the USS Nimitz, departed today for Norfolk, Va., after last week's arrival of its replacement, the USS Independence.
Cohen also left open the possibility that some of the F-15s and F-16s now in Saudi Arabia would be moved to other Gulf states for use in the operation. "I don't think that determination has been made," he said, adding that he would be discussing the option with the Saudis.
In addition to the operational advantages that would have come from attacking from Saudi Arabia, U.S. officials had looked for a diplomatic boost. Permission to use Saudi territory would have sent a powerful signal of allied unity in the face of Iraqi efforts to split the international coalition that fought the Gulf War. Instead, the United States can count on tangible Gulf backing for offensive operations from only two tiny emirates – Kuwait and Bahrain.
"If we had pushed, the Saudis most likely would have agreed, but it would have been hard for them to say yes," a senior defense official said, explaining the decision to structure a military operation that avoided having to ask the question.
Cohen's visit comes a week after Secretary of State Madeleine K. Albright held an inconclusive seven hours of talks in this country with Crown Prince Abdullah, who has taken on much of the authority of his ailing half-brother, the king. Albright elicited only ambiguous responses when she sought assurances about the kind of support the Saudis would provide during a military operation against Iraq, according to U.S. officials.
One reason the Saudi government is reluctant to assume a role in air strikes, according to area specialists, is its sensitivity to the view, widely held in the Arab world, that the United States already has excessively penalized the Iraqi people.
Even so, the Saudis have told U.S. and other Western officials that they would have no problem with using force against Iraq as long as any attack were not merely symbolic but really hurt Saddam Hussein, whom they regard as a menace. But they worry that even the substantial air campaign being planned by the United States and Britain is not likely to finish off the Iraqi dictator, leaving him vengeful toward any Gulf states that support the action.
Asked about these concerns, Cohen said he would reassure the Saudis that any air attack would seriously damage Iraq's ability to make or deliver weapons of mass destruction, and might be followed by a tightening of existing sanctions "in some respects."
But he noted the improbability of removing Saddam Hussein with the assault, adding: "He's very difficult to locate, in terms of his forces. We have a policy against assassinations."
Cohen plans to spend the next three days in the Gulf region, discussing military plans and various diplomatic initiatives involving Iraq with leaders of Kuwait, Bahrain, Oman, Qatar and the United Arab Emirates, in addition to Saudi Arabia.
To reinforce the point that the current U.S. approach to Iraq has strong bipartisan backing in Congress, Cohen has brought along two senior members of the Senate Armed Services Committee, on which he formerly served as a Republican member from Maine – Sens. John W. Warner (R-Va.) and Carl M. Levin (D-Mich.).
Before departing Germany today, where he attended a weekend conference on European strategic issues, Cohen conferred with Israeli Defense Minister Yitzhak Mordechai for about 75 minutes. Cohen said the discussion centered on "various types of requests" that Israel has made for American security assistance, but declined to elaborate.
Many Israelis fear that a U.S. attack on Iraq could trigger some kind of Iraqi retaliation against them.
Cohen said he and Mordechai agreed to stay in "close consultation" throughout the current crisis.
Meanwhile, Albright said the United States' final decision whether to attack Iraq would probably be made "in weeks."
"I've been asked whether it's days or weeks or months," Albright said on the CBS television program "Face the Nation."
"It's not days, and it's not months. So it's in the weeks category. We want to make sure that we have explored all the diplomatic options," Albright said.
She would not say whether Saddam Hussein would be targeted personally in bombing runs, but she added that, in general, "we look forward to dealing with the post-Saddam regime."
Albright and national security adviser Samuel R. "Sandy" Berger voiced confidence that the Saudis would go along with military strikes as a last resort.
"I have confidence and trust that the Saudi government will support us if force is necessary," she said, citing her talks last week with Crown Prince Abdullah.
Berger, on the ABC's "This Week," said he, too, is confident of getting "the cooperation that we need if military action is necessary."
Rolls Royce in firing line on Saudi deal, The Guardian, February 2, 1998
- British company faces legal action to hand over millions in hidden commission on pounds 20 billion Al Yamamah defence contract.
SECRET negotiations between Rolls Royce and the favourite in-laws of King
Fahd of Saudi Arabia have broken down over a politically embarrassing dispute
concerning millions of pounds of commission payments under the pounds 20
billion Al Yamamah defence deal.
A Panamanian company controlled by members of the Al Ibrahim family
yesterday reissued a writ in the High Court claiming Rolls Royce had reneged on
an agreement to pay 15 per cent commission on engines for nearly 200 British
Aerospace Tornado and Hawk aircraft delivered over the past 10 years.
The legal move exposing enormous hidden payments comes at a time when the
future of the contract - supporting 50,000 British jobs - is under threat and
MPs are pressing for the details to be made more transparent.
The Al Ibrahims are nine brothers; their sister is the mother of the 75-year-
old King Fahd's preferred son, Abdul Aziz.
Through Aerospace Engineering Design Corporation of Panama, the family had
expected to make up to pounds 90 million on the pounds 600 million deal but
they claim Rolls Royce has only acknowledged commissions of pounds 23 million
for an unspecified number of engines at a rate of 8 per cent.
The company first issued its writ on December 12, causing ill-disguised
panic in the boardrooms of Rolls Royce and BAe, which is the prime contractor
for the deal. Successive British defence ministers have denied that commissions
were paid on the government-to-government contract signed in 1985 and paid for
in oil.
Last month the writ was withdrawn as negotiations took place between two
heavyweight London law firms, Freshfields for Rolls Royce and Davis Arnold
Cooper for AEDC. Yesterday's amended writ specifically excluded the
commercially sensitive price of each engine at the request of Rolls Royce.
The bulk of Al Yamamah is already winding down. The final aircraft are due
to be delivered by the end of this year, but important provision of ongoing
ancillary services was expected. Although BAe hopes for more orders, Saudi
watchers believe that the Saudi royal family, squeezed for cash because of the
drop in oil prices, wants to diversify its annual $15 billion defence spending
to other countries.
"There is a growing belief in Saudia Arabia that at present it makes
no
military, strategic, or tactical sense," said a source with first-hand
knowledge of Saudi opinion.
Political pressure to address Britain's relations with Saudi Arabia is
also
mounting on the Foreign Secretary, Robin Cook. In 1994 he called for a public
inquiry into Al Yamamah following allegations that Mark Thatcher had received
millions in commissions.
An early-day motion signed by 38 MPs, including the chairman of the
parliamentary Labour party, Clive Soley, is now calling for a National Audit
Office report on Al Yamamah, suppressed in 1992, to be published.
Mr Cook has signally failed to include Saudi Arabia in his ethical foreign
policy remarks, despite a report from the parliamentary human rights group last
month which detailed allegations of abuse, including torture, in the kingdom.
Since coming to power, Labour has adopted an ambiguous response in answer
to
MPs' questions on Al Yamamah commissions. John Spellar, the defence minister,
repeated last year that the Government had not employed agents or paid
commissions. He said: "Any use of agents by companies associated with Al
Yamamah is a matter for those companies, but British Aerospace has assured us
that it operates in accordance with laws and regulations of Saudi Arabia."
But the Guardian has learnt that British companies seeking to do business
in
Saudi Arabia are advised by the Department of Trade and Industry that under a
1978 Royal Decree agents are "not permitted in armaments contracts and related
services". Where agents are appointed - for all other public sector contracts -
their fees must not exceed 5 per cent.
According to a senior DTI source commissions vary between 2 per cent and
10
per cent. "But people will get what they can," he added.
In the past two years evidence has come to light about commissions of
between 15 and 26 per cent paid by a number of Al Yamamah sub-contractors,
including Vosper Thorneycroft, Royal Ordnance and Thorn-EMI. Now that Rolls
Royce has joined the list it is only a matter of time before BAe's own role
starts tumbling out.
The Al Ibrahims are part of an inner circle of princes and associates who
have benefited from Al Yamamah to the tune of at least pounds 2 billion.
A spokesman for Rolls Royce said yesterday: "The writ will be defended."