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C O N F I D E N T I A L SECTION 01 OF 03 RIYADH 000408
SIPDIS
DEPARTMENT FOR M U/S PKENNEDY, DOE FOR DAS WBRYAN, CENTCOM
FOR POLAD
E.O. 12958: DECL: 03/11/2014
TAGS: ECON ENRG EPET IR IZ MARR MCAP MOPS OVP PGOV
PK, PREL, PTER, SA, YM
SUBJECT: SAG-USG COUNTER-TERRORISM PARTNERSHIP
REF: A. A:07 RIYADH 1778
¶B. B: RIYADH 272
¶C. C: RIYADH 268
¶D. D: RIYADH 326
Classified By: Deputy Chief of Mission David Rundell
for reasons 1.4 (B) and (D)
¶1. (C) SUMMARY. The SAG’s MOI-hosted Security Conference in
Riyadh and the meeting between CENTCOM DCOM LtGen John Allen
with Asst. Minister for National Security Affairs Prince
Mohammed bin Naif (MbN) highlight the SAG’s commitment to
counter-terrorist activity in the Kingdom by partnering with
the USG in protecting its critical infrastructure, especially
its energy production sites. MbN reconfirmed the SAG’s
commitment to pay all critical infrastructure protection
costs of the Office of Program Management-Ministry of
Interior (OPM-MOI), including USG employee salaries. He
concurred any changes necessary in the Technical Cooperation
Agreement (TCA) be made to allow such payments, but remarked
hopefully the lawyers would not be problematic. Regarding
the Saudi deradicalization program, he considered it a
success in generating Saudi public anger at radical
extremists and was unconcerned by those who escaped the
program to rejoin Al Qaeda (AQ), noting they actually serve
the SAG’s purpose because they delegitimize extremism by
rebuffing the chance for rehabilitation and a new life,
further alienating violent radicals from the populace. MbN
did express concern that some ARAMCO employees posed a threat
of internal sabotage to oil facilities due to extremist
sympathies. END SUMMARY.
OPM-MOI NOW OPERATIONAL
———————-
¶2. (SBU) OPM-MOI, a DOS-led interagency security assistance
organization including DOE and DOD, established by the formal
TCA signed by the Secretary and Minister of Interior HRH
Prince Naif bin Abdulaziz Al Saud in May 2008 to partner with
the Saudi MOI in protecting the Kingdom’s critical
infrastructure with full SAG funding (Reftel A), is now
operational in Saudi Arabia. In the March 9 meeting between
LtGen Allen and MbN, LtGen Allen introduced the senior U.S.
military officer assigned to assist the MOI in training its
Facilities Security Force (FSF). Likewise, we informed MbN
of the arrival of the senior DOS officer in Riyadh on March
10 to serve as OPM-MOI’s Program Manager and overall leader.
These officers, along with the senior DOE Liaison and
associated CENTCOM and Embassy Riyadh personnel, now serve as
the core of OPM-MOI who will begin assisting the Saudis in
enhancing the protection of their critical infrastructure,
with initial focus on Saudi oil facilities.
¶3. (C) LtGen Allen reaffirmed to MbN the USG’s full
commitment to the protection of Saudi critical
infrastructure, emphasizing that CENTCOM Commander GEN David
Petraeus guarantees CENTCOM’s full support to this program.
Both concurred on the importance to the global economy of
preventing terrorists from attacking Saudi oil facilities.
MbN asserted the goal is to prevent attacks from ever being
carried out, recommending OPM-MOI include intelligence links
in its operational plans. LtGen Allen commended MOI’s
success in dealing with internal terrorist threats in the
Kingdom, and its successful rehabilitation program with Saudi
Guantanamo returnees and extremists captured in Saudi Arabia.
RIYADH 00000408 002 OF 003
¶4. (SBU) MbN was informed that the initial OPM-MOI work
contracts, consisting of the DOE Project Specific Agreement
(PSA) to conduct vulnerability assessments of oil sites and
the DOD Letter of Offer and Acceptance (LOA) to implement
urgent needs training of FSF troops, have been submitted to
MOI staff for approval and signature. MbN was grateful for
USG efforts and assured us full funding would soon follow the
signing of these documents, and reconfirmed the SAG’s
commitment to pay all OPM-MOI costs. He also agreed to fund
all USG employee costs, concurring with any necessary TCA
changes to allow such payments, commenting that “hopefully
the lawyers will not cause us any problems.”
¶5. (SBU) MbN had previously acknowledged to the Ambassador
the MOI’s lack of technical capacity in effectively working
with OPM-MOI. To rectify this problem, OPM-MOI has begun
coordination with the Saudis for SAG-funded English language
and management training in the U.S. for mid-level MOI
officers who will be our future interlocutors. In the
interim, OPM-MOI is drafting a plan for MOI to contract and
fund bilingual Americans experienced in USG contracting and
Foreign Military Sales to work in MOI assisting in PSA, LOA,
and related OPM-MOI projects.
DEFUSING THE INTERNAL SAUDI THREAT
———————————-
¶6. (SBU) MOI sponsored the second annual Riyadh Security
Conference from March 2-5, which included such notables as
FBI Director Robert Mueller and former Attorney General Edwin
Meese. Other participants were U.S., British and Saudi
security officials, academics, and the U.S. and U.K
Ambassadors to the Kingdom. The theme of this well-received
conference was how to deradicalize extremists. This topic
was noteworthy as several Saudi Guantanamo returnees had
recently disappeared, with two resurfacing in Yemen as AQ
members (Reftels B, C and D).
¶7. (C) In private discussions with us, MbN observed it was
unfortunate these individuals had escaped and some had
rejoined AQ, but stated the Saudi deradicalization
rehabilitation program was nonetheless a success and was
unconcerned by these individuals. He explained while these
Guantanamo returnees rejoining AQ in Yemen was embarrassing
to the SAG, the program itself was achieving the true goal of
turning the Saudi populace against extremist radicals. These
individuals were being denounced by the Saudi public, and
even by their immediate families. The SAG was offering these
individuals employment and marriage opportunities to allow
new, peaceful and productive lives. MbN shared that if the
Saudi people saw that the SAG had offered these extremists a
helping hand which they slapped away, instead of a clenched
fist used against them, then their families, tribes and the
Saudi nation as a whole would view the SAG as “the
benefactor” and these unrepentant extremists as “deviants.”
According to MbN, in Arab culture this is an extremely
powerful and advantageous position for the SAG as it cuts off
the necessary public support extremists need to operate.
THREATS - YEMEN, IRAN AND FROM WITHIN
————————————-
¶8. (C) In response to his views on the current threat, MbN
listed three:
— Yemen was “a dangerous, failed state” similar to
Afghanistan by allowing AQ to regroup and become its
RIYADH 00000408 003 OF 003
operational base. He mentioned the SAG was using its funds
to gain Yemeni tribal cooperation through public works
programs, especially as a way to curb the lawlessness along
the Saudi-Yemeni border. MbN offered that while Yemeni
President Saleh was not the best leader, after 30 years in
power, his removal, either through natural causes or
rebellion, would leave a vacuum that would further weaken
Yemen. He opined that overtures to the Taliban in
Afghanistan were useful, as it would make Al Qaeda leaders
there nervous and unsure if they would be betrayed, but this
would also make them more likely to seek “safe haven” in
Yemen. LtGen Allen informed that U.S. Special Forces and
U.S. Navy trainers were stepping cooperation with Yemeni
forces to counter border and maritime threats.
— Iran, according to MbN, was a greater threat from its
destabilizing actions than from its nuclear program. He
added Iran currently has many weaknesses due to its
deteriorating economy. USG overtures for talks with Iran
would exploit those weaknesses and further undermine the
mullahs.

— Regarding the internal Saudi threat, MbN stated AQ was
beaten down in the Kingdom, but he was concerned of “insiders
in ARAMCO” and that ARAMCO employees with full access to its
facilities were extremists or extremist/Hezbollah
sympathizers, using their authorized access and/or technical
knowledge to commit sabotage. Again, he then emphasized the
importance of OPM-MOI to provide rapid training of the FSF
and detailed assessments of the vulnerabilities of Saudi oil
facilities.
¶9. (C) COMMENT. The SAG has worked to counter terrorism
within the Kingdom, achieving significant success. Both
through its kinetic operations against AQ, to its soft power
deradicalization rehabilitation program where it has turned
the Saudi public against AQ and violent extremism. Bilateral
cooperation on the protection of Saudi critical
infrastructure, as previously reported, is of immense
importance to ensure adequate energy supplies are available
to the global economy. OPM-MOI offers a tremendous venue to
strengthen the U.S.-Saudi bilateral relationship which then
allows a broadening of Saudi support on a host of issues.
END COMMENT.
FRAKER

Around 160 women gathered in front of the Labour office in the Khobar, one of Saudi Arabia’s main industrial cities. The women raised banners called for an end to their long standing suffering in MENA, a business service company.

The female protestors are all employed by MENA, a business service company , which deals with Saudi Aramco.

The protestors were fed up with the corruption inside the company and being ignored by the company management, and hence decided to demonstrate outside the Labour Office in Khobar.

Lamya al-Baddah said that she was inspired by the words of King Abdullah who wanted an end to administrative corruption. Lamya said: “We want everyone to know that we have suffered from injustice in this company, we trust the government officials and are sure that our rights will be quickly restored.”

The company has approximately 100 Saudi employees, 40 of which are female workers. The important positions of the company are operated by expatriates who work illegally inside the country.

Another protestor complained and said that some of the employees salaries were paid in cash and that their health insurance in changed every year.

Fatema Hussein, another protestor said that the company would conceal documents during official inspections by the Labour Office. She said:” the head of  human resources in the company is an Arab who doesn’t have a work permit, as is the case with the rest of the foreigners in our company. Our salaries are not paid on time, sometimes we have to wait for  3 weeks and once we receive them they’re incomplete, which is contrary to Article 89 of the Labor Law.”

Saudi Arabia, the oil rich kingdom that is the birthplace and former home of Osama bin Laden, has staved off the widespread popular protests that have swept across the region since January. The country’s oil-rich Eastern Province, bordering Bahrain, has witnessed protests from the minority Shia Muslim population. In March, Saudi Arabia sent troops to Bahrain to support its royal family after a month of protests. We speak with Toby Jones, author of Desert Kingdom: How Oil and Water Forged Modern Saudi Arabia, on the role of Saudi Arabia in suppressing the Bahrain uprising, as well as its own. “We shouldn’t assume that there is a lack of interest on the part of Saudi citizens in achieving some sort of democratic or political reform. There are deep frustrations in Saudi society,” says Jones.

JUAN GONZALEZ: We turn now to Saudi Arabia, the oil-rich kingdom that is the birthplace and former home of Osama bin Laden. On Thursday, a senior extremist linked to al-Qaeda surrendered to Saudi authorities. Khaled Hathal al-Qahtani is thought to be the first operative to turn himself in after U.S. Special Forces killed Osama bin Laden on Sunday in Pakistan.

In recent months, Saudi Arabia has staved off the widespread popular protests that have swept across the region since January. The country’s oil-rich Eastern Province, bordering Bahrain, has witnessed some protests from the minority Shia Muslim population. In March, Saudi Arabia sent troops to Bahrain to support its royal family after a month of protests.

Seventy percent of Saudi Arabia’s almost 19 million people are under the age of 30, and last year unemployment was at 10 percent. In a bid to pacify Saudi citizens, King Abdullah, the 87-year-old head of state, has distributed over $100 billion in social handouts since February.
Municipal elections are planned for September. Women will not be able to run for seats or vote in the elections, and there have been some protests organized by women to end the Kingdom’s discriminatory laws. Saudi Arabia has no political parties.

To discuss the situation there, we’re joined by Toby Jones, assistant professor of history at Rutgers University. He was previously Persian Gulf analyst for the International Crisis Group. He’s the author of Desert Kingdom: How Oil and Water Forged Modern Saudi Arabia and is working on a new book project, America’s Oil Wars.

Welcome to Democracy Now!

TOBY JONES: Thanks for having me.

JUAN GONZALEZ: Well, why has Saudi Arabia escaped the widespread popular movements that have swept through the Middle East and the Arab world?

TOBY JONES: Well, for a number of reasons. The first is that it possesses the incredible ability to police its own population, which is not dissimilar from other autocratic regimes in the region. But it also has oil wealth and an almost unlimited ability to pay out, and to co-opt potential dissidence, which we saw the King and the royal family attempt to do in early and mid-March by passing out, as you noted, over $100 billion in inducements to encourage people not to take to the streets.

But we shouldn’t assume that there is a lack of interest on the part of Saudi citizens in achieving some sort of democratic or political reform, that there is absent in Saudi Arabia the political will for precisely the kind of thing that happened in Egypt or Tunisia, Yemen, Syria or Bahrain. There are deep frustrations in Saudi society. There are anxieties about the ailing nature of the political system, corruption within the royal family, and a deep desire to see fundamental change.

AMY GOODMAN: Can you talk about how Saudi Arabia has repressed its own protests as well as moved into Bahrain to support the government in the fierce repression of the pro-democracy movement there?

TOBY JONES: Well, in addition to using financial and other kinds of social inducements to convince its citizens not to take to the streets, at least not for now, the Saudis have also rolled out a series of other measures, some security-based, initially responding to the possibility of a popular uprising in mid-March. The Kingdom blanketed its streets with heavy security presence, discouraging people from gathering publicly.

But they’ve also done another thing, which is very important and has not totally escaped notice but is important to keep in mind, particularly in light of the demise of Osama bin Laden and the continuing concern about the global war on terror: Saudi Arabia has also renewed a set of relationships with the religious establishment, empowering Islamists, as part of this wave of responding to popular mobilization, using the religious clergy and religious scholars to attempt to delegitimize popular protest and also to basically encourage citizens to remain quiescent. The reestablishment or the re-empowerment of the religious clergy is a new thing under King Abdullah. When he came to power in 2005, he actually took fairly serious measures to roll back the authority of the religious establishment, which he saw both as a source of embarrassment but also as a potential threat to Saudi power, to the power of the royal family. So the fact that some of his early efforts or some of his most recent efforts are being systematically undone and that the clergy are enjoying a kind renaissance, if you will, should be a source of concern.

The decision to intervene in Bahrain is linked directly to anxieties on the part of the Saudis about the potential for a democratic demonstration effect. They worry that if there were popular uprisings or if there was a successful regime change in Bahrain, that that might somehow sweep across the Saudi borders and encourage Saudi citizens to pursue a similar path. But there’s also another element, and that is something that is perhaps particular to the Saudis and the Bahrainis. There is a deep sense of anti-Shiism and sectarianism in the Kingdom. So, the specter of Shia political power in Bahrain, so soon after Iraqi Shias came to enjoy predominance and power in Saudi Arabia’s most powerful northern neighbor, was too much for the Saudis to bear. And so, they preemptively intervened, militarily occupied Bahrain, in order to stamp out the possibility of Shia empowerment there.

JUAN GONZALEZ: And the issue of the U.S. relations, especially in view of the fact that the continuing total lack of rights for women in Saudi Arabia, that our government never mentions a word about or talks about that—how is the Kingdom able in this age, with all the modern communications that we have, to continue to suppress the rights of women and yet receive virtually no condemnation anywhere in the rest of the world?

TOBY JONES: Well, they certainly don’t receive political condemnation from the powers that be here in the United States or elsewhere. And it has to do with the Kingdom’s ability to supply the quintessential industrial resource—right, its role—and not only just providing oil, but in being the most important global producer of oil on the planet. It has the ability to shape markets, to make up for shortfalls, to exceed capacity, everywhere, makes it more vital than lots of other places. And this has long been most important and the single most important political priority for American policymakers, and for Western policymakers more broadly. Women’s rights, in the grand scheme of things, then, from the perspective of the State Department or the White House, they almost hardly matter.

AMY GOODMAN: Can you talk about Osama bin Laden and Saudi Arabia? You were talking about the empowerment of the clergy. Talk about his history. He is from Saudi Arabia.

TOBY JONES: Right. Well, his citizenship is contested by the Saudis, who claim that he’s actually Yemeni in origin. But his father was an important contractor in Saudi Arabia, ran a major construction business. He first came of age working for Aramco, the Arabian American Oil Company, in Saudi Arabia, but then became a main contractor to the Saudi state. And bin Laden was one of his many children and sort of came of age in the Saudi political system and education system, grew up in the 1970s and in the 1980s, in a moment when Saudi Arabia was renewing its Islamic credentials, partly in response to a crisis in late ’70s, re-empowering the religious establishment and encouraging a certain interpretation of Islam, a particularly kind of virulent one. Bin Laden took note, traveled from Saudi Arabia to Afghanistan to participate in the anti-Soviet jihad there, or at least to provide services, and was radicalized in the context of the Afghan jihad, returned to Saudi Arabia shortly after the conclusion of that war. In 1990 and 1991, actually offered his services and the services of the Mujahideen to the Saudi royal family to defend the Kingdom from Saddam Hussein, who had just invaded Kuwait. He was politely rebuffed, and then left the Kingdom and went to Sudan, eventually on his way to Afghanistan, where he formed al-Qaeda and began fighting the global crusade against—the global war against the United States.

AMY GOODMAN: And talk about the U.S. support for the Mujahideen and Osama bin Laden, when they were fighting the Soviets in Afghanistan, and then, of course, they set their sights back on the United States.

TOBY JONES: That’s right. I mean, al-Qaeda, bin Laden and the phenomenon of global terrorism and global jihad is the direct outgrowth of the Afghan jihad. So the United States made a strategic decision in the late 1970s under the Carter administration, and then a set of policies that was accelerated under Reagan, to equip and aid the Mujahideen in rolling back the Soviets and pushing them back out of Central Asia, for lots of reasons, but most importantly, as Carter articulated in 1980, because they were too close to the Persian Gulf. That was the site of our vital interests, and we were willing to do whatever necessary to protect them. So the decision to support the jihad and the Arab Afghans, as well as the Afghani Mujahideen, is the context from which al-Qaeda and bin Laden emerged, along with a whole host of other folks.

That first generation of al-Qaeda jihadis, beyond 9/11, who began carrying out attacks in Saudi Arabia and Morocco and elsewhere, were trained on the battlefields in Afghanistan and in the camps there. It would be—it’s not entirely right that the United States directly armed bin Laden. They armed lots of other bad guys who had relationships with bin Laden. It is entirely appropriate to see bin Laden—to understand both his credibility, his legitimacy and the sources of his radicalization as being a product of American policy in Afghanistan in the 1980s.

JUAN GONZALEZ: I want to go back to Saudi Arabia for one moment to talk about this whole issue of the government’s attempt to rehabilitate former fighters. Basically, it provides enormous leniency to those who turn in their weapons and agree to reintegrate into Saudi society. Could you talk about that, especially the numbers who have come from—those who have been released from Guantánamo that Saudi Arabia has accepted back and put into these reeducation programs?

TOBY JONES: Well, it’s remarkable. The Saudis, on the one hand, do in fact have—they fear the power of al-Qaeda to do harm, and they were confronted with al-Qaeda in the Arabian Peninsula in 2003, 2004 and 2005, began a campaign inside Saudi Arabia. AQAP now continues to exist in Yemen and would like very much to do harm to the Saudis. So the Saudis are nervous about the power of terrorists to continue to do damage inside the Kingdom, both to threaten the royal family but also to potentially undermine its economy.

But it’s taken the path of dealing with these forces and these individuals by—precisely by rehabilitating them, by putting them in facilities that attempt to indoctrinate them. They bring in established clergy to essentially reeducate these folks, rehabilitate them. They’re provided with various subsidies and services, and then they’re reintegrated into family life, and into social life more broadly. So it’s a kind of catch-and-release program for suspected or for real terrorists.

One of the interesting paradoxes here is that when the Saudi state arrests liberals—not terrorists, but folks who demand things like constitutional monarchy, the creation of a constitutional monarchy, women’s rights, an end to corruption—those folks are imprisoned, and they’re left to stay there.

AMY GOODMAN: Finally, what Saudi Arabia is doing now? In the piece you wrote, “Counterrevolution in the Gulf,” you talk about it pursuing policies that could destabilize the whole Persian Gulf.

TOBY JONES: Right. Well, the intervention in Bahrain has got to be one of the most deeply troubling things that the Saudis—and they’ve done a lot of troubling things, right? But the decision to intervene, to militarily occupy Bahrain, has been justified. Although there are lots of different motives, it’s been justified as a response to what the Saudis claim is Iranian meddling. Much of the assumption—many Gulf Arabs assume, as do many American policymakers, that there are preternatural connections between Shias in the Arab world, whether they’re in Iraq, Bahrain or Iran, that because they’re co-religionists, they share a single political objective, and because we view Iran as the single most important bogeyman in the region, this matters. The Saudis have used this precisely to frame their intervention in Bahrain, that we’re taking out—we’re checking the possibility of Iran to establish either a fifth column or a front line so close to Saudi Arabia’s oil-producing region in the Eastern Province. So, by framing things both in sectarian terms and as a response to Iranian power, for which there is no evidence, the Saudis are in fact escalating and provoking a potential regional crisis.

AMY GOODMAN: Toby Jones, I want to thank you for being with us, assistant professor of history at Rutgers University, previously with the International Crisis Group, a political analyst of the Persian Gulf, author of Desert Kingdom: How Oil and Water Forged Modern Saudi Arabia.

Saudi Arabia, shaken by the loss of a key ally in Egyptian President Hosni Mubarak, must now worry that protests in neighbouring ally Bahrain may embolden its own Shi’ite population to push for reform.

Thousands of overwhelmingly Shi’ite protesters, inspired by uprisings in Egypt and Tunisia, took to Bahrain’s streets this week demanding more say in the Gulf Arab kingdom where a Sunni Muslim family rules over a majority Shi’ite population.

Bahraini police stormed a protest camp in the island state’s capital early on Thursday, killing three people. Soldiers in armoured vehicles then fanned out across Manama.

Risks of instability in Saudi Arabia, where Shi’ites make up about 15 percent of the population, would soar if the opposition in Bahrain toppled the ruling al-Khalifa family, analysts said.

“(Saudi) Shi’ites will seek greater social, economic, and religious equality,” said Ayham Kamel, an analyst at Washington-based Eurasia Group. “This will present serious long-term challenges to the (Saudi) royal family, particularly as they prepare for a generational transition of power.”

Bahrain was to host a meeting of Gulf foreign ministers on Thursday, showing the region’s alarm that popular unrest rocking other Arab states could spread even to Gulf oil producers.

Most of Saudi Arabia’s Shi’ites live in the Eastern province, home to most of the kingdom’s oil wealth.

Regional heavyweight Saudi Arabia and the United States, which bases its Fifth Fleet in Manama, both view Bahrain and the al-Khalifa family as a bulwark against Shi’ite Iran.

“We would expect Saudi Arabia to provide logistical and military support to the Bahraini monarchy if needed,” said Farouk Soussa, Middle East chief economist at Citi in Dubai.

BAHRAIN REGIME CHANGE UNLIKELY

He said Bahrain could see prolonged confrontation but regime change was highly unlikely because of Saudi backing for the ruling family in a close neighbour in which it has key interests.

“Economically, Saudi has enormous leverage as it is custodian of most of Bahrain’s oil production, which is derived from the shared Abu Saafa oil field,” Soussa said, of the offshore oil produced by Saudi Aramco and shared with Bahrain’s refiner.

The U.S. naval base in Manama is vital for Riyadh, providing U.S. military protection of Saudi oil installations and the Gulf waterways on which its oil exports depend, without any Western troops present on the soil of the kingdom, Islam’s birthplace.

Saudi Arabia is unlikely to move quickly and will wait to see how Bahrain, accustomed to low-level unrest, handles the latest protests. Bahraini security forces have clashed sporadically with young Shi’ite protesters since the mid-1990s.

“Beneath it all, they are likely to be giving the Bahrain monarchy any support that it needs,” said Gala Riani, senior Middle East analyst with IHS Global Insight in London.

“Should it become clear that the regime is in danger, the Saudis will step in.”

The two states, linked by a 15-mile causeway, have close political and economic ties and the kingdom is Bahrain’s largest financial backer. Many Shi’ites in Saudi Arabia’s Eastern province have family ties with Bahraini co-religionists.

“Saudis consider themselves the godfather of the Bahraini regime,” said Ibtisam al-Qitbi, a UAE-based political analyst.

“There are seeds for disturbance (in Saudi) but you have that security apparatus which is very strong, and the political environment is very, very tight.

Cable dated:2007-12-10T05:54:00C O N F I D E N T I A L SECTION 01 OF 03 RIYADH 002441SIPDISSIPDISDHAHRAN SENDS DEPT OF ENERGY PASS TO MWILLIAMSON, GPERSON, AHEGBURG, AND JHART CIA PASS TO TCOYNEE.O. 12958: DECL: 12/10/2017 TAGS: EPET ENRG ECON SA

¶1. (C) SUMMARY: On November 20, 2007, CG and Econoff met with Dr. Sadad al-Husseini, former Executive Vice President for Exploration and Production at Saudi Aramco. Al-Husseini, who maintains close ties to Aramco executives, believes that the Saudi oil company has oversold its ability to increase production and will be unable to reach the stated goal of 12.5 million b/d of sustainable capacity by 2009. While stating that he does not subscribe to the theory of “peak oil,” the former Aramco board member does believe that a global output plateau will be reached in the next 5 to 10 years and will last some 15 years, until world oil production begins to decline. Additionally, al-Husseini expressed the view that the recent surge in oil prices reflects the underlying reality that global demand has met supply, and is not due to artificial market distortions. END SUMMARY.

——————————————— ——-
SAUDI ARABIA WILL BE UNABLE TO MEET PRODUCTION GOALS ——————————————— ——-

¶2. (C) Dr. Sadad al-Husseini met with CG and EconOff on November 20 to discuss current trends in the international energy market, as well as his thoughts on the Saudi energy sector. Al-Husseini served as Executive Vice President for Exploration and Production from 1992 until his retirement in 2004. He also served as a member of the Aramco Board of Directors from 1996 to retirement. (COMMENT: Al-Husseini retired in the midst of an executive dispute, supposedly caused when he unsuccessfully attempted to engineer his ascension to the position of CEO. Although he continues to live at Aramco’s main camp and has close interpersonal relationships with key Aramco executives, many of al-Husseini’s views on Aramco are shaped by the perception that the company would be better off if he were running it. END COMMENT). It is al-Husseini’s belief that while Aramco can reach 12 million b/d within the next 10 years, it will be unable to meet the goal of 12.5 million b/d by 2009. The former EVP added that sustaining 12 million b/d output will only be possible for a limited period of time, and even then, only with a massive investment program.

¶3. (C) According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described and the timeline for their production not as unrestrained as Aramco executives and energy optimists would like to portray. In a December 1 presentation at an Aramco Drilling Symposium, Abdallah al-Saif, current Aramco Senior Vice President for Exploration and Production, reported that Aramco has 716 billion barrels (bbls) of total reserves, of which 51 percent are recoverable. He then offered the promising forecast - based on historical trends - that in 20 years, Aramco will have over 900 billion barrels of total reserves, and future technology will allow for 70 percent recovery.

¶4. (C) Al-Husseini disagrees with this analysis, as he believes that Aramco’s reserves are overstated by as much as 300 billion bbls of “speculative resources.” He instead focuses on original proven reserves, oil that has already been produced or which is available for exploitation based on current technology. All parties estimate this amount to be approximately 360 billion bbls. In al-Husseini’s view, once 50 percent depletion of original proven reserves has been reached and the 180 billion bbls threshold crossed, a slow but steady output decline will ensue and no amount of effort will be able to stop it. By al-Husseini’s calculations, approximately 116 billion barrels of oil have been produced by Saudi Arabia, meaning only 64 billion barrels remain before reaching this crucial point of inflection. At 12 million b/d production, this inflection point will arrive in 14 years. Thus, while Aramco will likely be able to surpass 12 million b/d in the next decade, soon after reaching that threshold the company will have to expend maximum effort to simply fend off impending output declines. Al-Husseini believes that what will result is a plateau in total output that will last approximately 15 years, followed by decreasing output.

¶5. (C) Al-Husseini elaborated that oil field depletion rates also play a significant role in determining the Aramco - and

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global - production timeline. Increasing output is not simply a function of adding new capacity to already existing operations. Instead, due to depletion rates, new reserves must be brought online to both replace depleted production and satisfy growth in consumption. The International Energy Agency (IEA) has estimated global depletion rates at 4 percent, while a 2006 Aramco statement has estimated Saudi Arabia’s overall depletion rate at 2 percent. Al-Husseini estimates that moving forward, satisfying increases in global demand will require bringing online annually at least 6 million b/d of worldwide output, 2 million to satisfy increased demand and 4 million to compensate for declining production in existing fields.

¶6. (C) The second issue that will limit any proposed Aramco output expansion can be broadly defined as a lack of supporting resources. For example, in al-Husseini’s estimation, it is not the amount of oil available that will prevent Aramco from reaching 12.5 million b/d by 2009, but rather issues such as a lack of available skilled engineers, a shortage of experienced construction companies, insufficient refining capacity, underdeveloped industrial infrastructure, and a need for production management (if too much oil is extracted from a well without proper planning and technique, a well’s potential output will be significantly damaged). As previously reported by post (Reftel), the Eastern Province economy is facing severe industrial expansion limits, and despite Aramco’s willingness to invest up to 50 billion USD to achieve the 2009 goal, availability of labor, materials and housing may end up as determinative factors.

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GLOBAL OIL PRICES: DEMAND HAS MET SUPPLY —————————————-

¶7. (C) Considering the rapidly growing global demand for energy - led by China, India and internal growth in oil-exporting countries - and in light of the above mentioned constraints on expanding current capacity, al-Husseini believes that the recent oil price increases are not market distortions but instead reflect the underlying reality that demand has met supply (global energy supply having remained relatively stagnant over the past years at approximately 85 million barrels/day). He estimates that the current floor price of oil, removing all geopolitical instability and financial speculation, is approximately 70 - 75 USD/barrel. Due to the longer-term constraints on expanding global output, al-Husseini judges that demand will continue to outpace supply and that for every million b/d shortfall that exists between demand and supply, the floor price of oil will increase 12 USD. Al-Husseini added that new oil discoveries are insufficient relative to the decline of the super-fields, such as Ghawar, that have long been the lynchpin of the global market.

¶8. (C) COMMENT: While al-Husseini believes that Saudi officials overstate capabilities in the interest of spurring foreign investment, he is also critical of international expectations. He stated that the IEA’s expectation that Saudi Arabia and the Middle East will lead the market in reaching global output levels of over 100 million barrels/day is unrealistic, and it is incumbent upon political leaders to begin understanding and preparing for this “inconvenient truth.” Al-Husseini was clear to add that he does not view himself as part of the “peak oil camp,” and does not agree with analysts such as Matthew Simmons. He considers himself optimistic about the future of energy, but pragmatic with regards to what resources are available and what level of production is possible. While he fundamentally contradicts the Aramco company line, al-Husseini is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered. END COMMENT.

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BIOGRAPHICAL DATA
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¶9. (U) Dr. Sadad Ibrahim al-Husseini was born in Syria but raised in Saudi Arabia, his father a Saudi government official. He received a BS in Geology from the American University of Beirut in 1968, as well as an MS and Ph.D. in geological sciences from Brown University in 1970 and 1972, respectively. Al-Husseini also attended a Professional Management Program at Harvard Business School in 1982.

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Joining Aramco in 1972, al-Husseini quickly advanced, becoming Senior Vice President for Exploration and Production in 1986. He was given the title Executive Vice President in 1992. Al-Husseini served on Aramco’s Management Committee from 1986 until 2004, and sat on the Aramco Board of Directors from 1996 - 2004. He retired on March 1, 2004. XXXXXXXXXXXX
(APPROVED: KINCANNON) FRAKER

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Reference ID: 07RIYADH2441
Created: 2007-12-10 05:05

The US fears that Saudi Arabia, the world’s largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom’s crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.

The revelation comes as the oil price has soared in recent weeks to more than $100 a barrel on global demand and tensions in the Middle East. Many analysts expect that the Saudis and their Opec cartel partners would pump more oil if rising prices threatened to choke off demand.

However, Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, met the US consul general in Riyadh in November 2007 and told the US diplomat that Aramco’s 12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached.

According to the cables, which date between 2007-09, Husseini said Saudi Arabia might reach an output of 12m barrels a day in 10 years but before then – possibly as early as 2012 – global oil production would have hit its highest point. This crunch point is known as “peak oil”.

Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment. He argued that Aramco had badly underestimated the time needed to bring new oil on tap.

One cable said: “According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described, and the timeline for their production not as unrestrained as Aramco and energy optimists would like to portray.”

It went on: “In a presentation, Abdallah al-Saif, current Aramco senior vice-president for exploration, reported that Aramco has 716bn barrels of total reserves, of which 51% are recoverable, and that in 20 years Aramco will have 900bn barrels of reserves.

“Al-Husseini disagrees with this analysis, believing Aramco’s reserves are overstated by as much as 300bn barrels. In his view once 50% of original proven reserves has been reached … a steady output in decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a plateau in total output that will last approximately 15 years followed by decreasing output.”

The US consul then told Washington: “While al-Husseini fundamentally contradicts the Aramco company line, he is no doomsday theorist. His pedigree, experience and outlook demand that his predictions be thoughtfully considered.”

Seven months later, the US embassy in Riyadh went further in two more cables. “Our mission now questions how much the Saudis can now substantively influence the crude markets over the long term. Clearly they can drive prices up, but we question whether they any longer have the power to drive prices down for a prolonged period.”

A fourth cable, in October 2009, claimed that escalating electricity demand by Saudi Arabia may further constrain Saudi oil exports. “Demand [for electricity] is expected to grow 10% a year over the next decade as a result of population and economic growth. As a result it will need to double its generation capacity to 68,000MW in 2018,” it said.

It also reported major project delays and accidents as “evidence that the Saudi Aramco is having to run harder to stay in place – to replace the decline in existing production.” While fears of premature “peak oil” and Saudi production problems had been expressed before, no US official has come close to saying this in public.

In the last two years, other senior energy analysts have backed Husseini. Fatih Birol, chief economist to the International Energy Agency, told the Guardian last year that conventional crude output could plateau in 2020, a development that was “not good news” for a world still heavily dependent on petroleum.

Jeremy Leggett, convenor of the UK Industry Taskforce on Peak Oil and Energy Security, said: “We are asleep at the wheel here: choosing to ignore a threat to the global economy that is quite as bad as the credit crunch, quite possibly worse.”