As U.S. President Barack Obama seeks to reinvigorate his administration’s policy in the Middle East, he will have to contend with several issues where U.S. influence is less than overwhelming.

Chief among them, according to Middle East analysts, is the growing assertiveness of Saudi Arabia as it confronts Iranian influence in the region and tilts away from its historic bargain with the U.S.: oil for security.

In recent months, the Saudis have essentially taken the gloves off — sending troops into Bahrain to prop up the island’s Sunni monarchy against a rebellious Shiite majority; consolidating their relationship with Pakistan as a regional counterweight to Iran; and expanding the Gulf Cooperation Council (GCC) to reinforce the club of Sunni monarchies.

Through the GCC Saudi Arabia has also moved to resolve the crisis in Yemen, its neighbor to the south, where al Qaeda is establishing a foothold and where the Saudis suspect Iranian meddling.

Their core mission, says Ian Bremmer, president of the Eurasia Group, “is to ensure stability in their neighborhood.” Bremmer believes “the single most important long-term implication of the Arab Spring may be a consolidated GCC that is tacking away from the West.”

At the same time, the Saudi kingdom’s relations with the United States have deteriorated — in part over the Obama administration’s support for pro-democracy movements in the Arab world. On two occasions in recent months, according to well-placed sources in the Gulf, King Abdullah of Saudi Arabia even refused to meet senior U.S. officials.

Earlier this week, Saudi grievances were laid out in a Washington Post op-ed by Nawaf Obaid, a consummate insider and a senior fellow at the King Faisal Center for Research and Islamic Studies. Describing a “tectonic shift” in the Saudi-U.S. relationship, he complained of an “ill-conceived response to the Arab protest movements and an unconscionable refusal to hold Israel accountable” for its settlement-building in Palestinian territories. On the latter issue, he said the U.S. “had lost all credibility.”

Obaid also echoed some of the criticisms made last year by Prince Turki al Faisal, a former ambassador to the United States who said that “negligence, ignorance and arrogance” had cost America the “moral high ground” it held after 9/11.

Saudi alienation from Washington predates the Obama administration. Riyadh saw the invasion of Iraq as a disaster because it unleashed Shiite influence in a country traditionally dominated by its Sunni minority. Several Saudi officials have described Iraqi Prime Minister Nuri al Maliki — who leads a Shia-dominated government — as an “Iranian agent.”

The Saudis also complained that the Bush administration had “dropped the ball” on the Israel-Palestinian peace process by not endorsing King Abdullah’s plan for a two-state solution, with east Jerusalem as the Palestinian capital. That, they argued, had only strengthened more radical forces in the region, such as Hamas and Hezbollah.

Above all, the Saudi establishment has long been anxious that the threat it perceives from Iran is not adequately acknowledged in Washington.

U.S. diplomatic cables obtained by WikiLeaks and published last year showed growing Saudi impatience with U.S. caution toward Iran’s nuclear program, with King Abdullah quoted as urging Gen. David Petraeus to “cut off the head of the snake” during a meeting in April 2008. A year later, the King is quoted as telling President Obama’s counterterrorism adviser, John Brennan, that he hoped the U.S. would review its Iran policy and “come to the right conclusion.”

So now, Obaid writes, “Riyadh intends to pursue a much more assertive foreign policy, at times conflicting with American interests.”

One long-time observer of Saudi policy says the kingdom is preparing to use its wealth and economic growth (forecast at nearly 6% this year, thanks to the rising price of crude oil) to lead an expanded bloc as old certainties wither away.

The Saudis plan to spend $100 billion to modernize their armed forces, buy a new generation of combat aircraft and add 60,000 Interior Ministry troops. Like other Gulf states, Saudi Arabia also plans to expand its special forces.

Beyond its borders the kingdom wants to expand the six-member Gulf Cooperation Council, until now a club of wealthy monarchies, by inviting Jordan and Morocco to join. They might not have much money, but they, too, are ruled by Sunni monarchs and have — by regional standards — cohesive and well-trained armies.

In return, Gulf largesse would help support their weak economies. Amid recriminations and confusion in the Arab League — whose planned Baghdad summit has just been postponed for a whole year — the Saudis see the GCC as the institutional antidote to the upheavals of the Arab Spring.

Saudi Arabia has already created a $20 billion fund to assist Bahrain and Oman. And the dispatch of some 1,000 troops to Bahrain in March served notice to Tehran that Saudi Arabia would not tolerate a Shiite-dominated state a few miles off its coast.

“Sending a force to Bahrain was a necessary evil for the GCC in order to protect the monarchy in Bahrain,” says Theodore Karasik of the Institute of Near East and Gulf Military Analysis. “If a monarchy falls in the region, this might create a domino effect.”

It was also a slap in the face to U.S. policy in the region, which was focused on coaxing dialogue in Bahrain. Just days before the Saudi intervention, U.S. Defense Secretary Robert Gates was in Bahrain urging King Hamad to take more than “baby steps” towards reform.

That followed alarm in Riyadh over the Obama administration’s desertion of long-time ally Hosni Mubarak, who had cultivated close ties with the Gulf states and who was regarded by the Saudis as another Arab bulwark against “Iranian expansionism.” The U.S. eventually told Mubarak it was time to go, but the Saudi royal family supported him to the end, even offering to make up for any cut in U.S. aid.

Bremmer of the Eurasia Group says the United States does hold important cards — through multi-billion-dollar arms contracts and long-established relationships in the oil industry. And regional analysts say that ultimately Saudi Arabia would likely appeal for and get U.S. help in any showdown with Iran.

Bremmer says that much in the Gulf revolves around personal relationships and loyalties, and he says the Obama administration needs to invest more in that, starting at the top. By contrast, senior executives in U.S. oil companies — by and large no fans of the president’s energy policy — do talk with the Saudis.

In the longer-term, a Saudi tilt to the East may simply reflect new economic realities. Some 55% of Saudi oil now flows to Asia, compared with about 10% that flows to the United States. The Saudi state oil firm has built refineries in China, and trade between the two countries was worth $40 billion in 2010.

As relations with the West fray, Bremmer concludes that “a far-reaching Saudi-China strategic partnership could well result alongside expanded Chinese contracts to buy long-term access to Saudi oil and Chinese investment in developing Saudi infrastructure.”

On Wednesday morning, King Hamad bin Isa al-Khalifa boarded a plane to pay his respects to King Abdullah of neighboring Saudi Arabia, who had returned home after months abroad for medical treatments.

It was a trip that underscored the extent of Saudi Arabia’s sway over the teardrop-shaped island off its eastern shore, as well the prospect that the turbulence still whirling in tiny Bahrain could have outsize repercussions in its giant neighbor.

A day after tens of thousands of protesters turned out in Bahrain’s capital, the king is still under pressure from demonstrators who are demanding that he make democratic concessions or step aside. The Shiite-led protesters in Bahrain are demanding that the Sunni royal family grant them equal rights and an equal voice, and majority-Sunni Saudi Arabia is worried that their campaign might give ideas to its own large Shiite minority.

In a sign of its own concerns, the Saudi government announced Wednesday that it will pump $10.7 billion into a fund that gives interest-free loans to citizens and that government workers will receive a 15 percent wage increase, among other measures. Bahrain also gave cash to households just before protests erupted last week.

“Saudi Arabia fears a constitutional monarchy in Bahrain,” said Kristin Smith Diwan, an assistant professor at American University who studies Islamic movements in the Persian Gulf. “It’s about empowerment of the Shia and what that might mean for Shia in the eastern province” of Saudi Arabia, she said, in addition to fears about Iran’s influence, which she deemed largely unjustified.

“In this current crisis, none of the solutions look good for Saudi Arabia,” Diwan said. “A crackdown in Bahrain would be destabilizing. A reform itself would be destabilizing, unless Saudi Arabia was willing to make some reforms.”

The two countries are taking a cautious stance. Saudi Arabia controls large sectors of Bahrain’s economy, both through outright gifts of oil and through investment in Bahraini banks, businesses and real estate. And its military is just a 16-mile drive away over the King Fahd Causeway, which was built at least in part for precisely that strategic reason, observers say. In a sign of Bahraini fears, rumors constantly swirl on Manama’s streets about Saudi troop movements and an imminent invasion.

“Although we are friends, the [Bahraini] leadership is afraid of the Saudis,” said one Bahraini observer with close ties to government security officials. “The Bahrainis don’t want to do like what happened between Syria and Lebanon. When Syria went into Lebanon, they did not leave.”

Hamad is likely to tell Abdullah that “we still don’t need” Saudi military assistance, said the Bahraini observer, who requested anonymity because he was not authorized to speak on behalf of the government. “He will tell them we are coping.”

But Bahrain’s business-friendly, Western orientation - which, unlike in much of the gulf, allows women to walk with bare arms and alcohol to be readily available in restaurants - also serves as an escape valve for Saudis seeking a break from their country’s stricter rules, analysts said. The Bahraini government has also tried in recent years to clamp down on prostitution, another booming trade on the island.

In recent years, an expanded American military presence has provided a counterweight to Saudi influence. The U.S. Navy’s 5th Fleet is docked just south of Manama, somewhat easing Bahraini fears of a Saudi invasion, Bahraini observers said.

“Bahrain’s survival really depends on two countries, the United States of America and Saudi Arabia,” said Mansoor al-Jamri, a leading Shiite opposition figure who is editor in chief of the independent Bahraini newspaper al-Wasat.

And in the current situation, Jamri said, the possibility of military intervention is unlikely, given the events of last week, when the army and police fired on protesters, killing seven people.

Anti-government demonstrators continued to camp in Manama’s Pearl Square on Wednesday, their ranks swelled by thousands of people welcoming prisoners whom Hamad had released in a bid to facilitate negotiations.

Among those released were 23 prisoners who had been held since August, accused of plotting to overthrow the king and engaging in terrorist activities. Many of the former detainees alleged that they had been tortured and beaten while in prison.

U.S. efforts to stabilize Bahrain, another key Arab ally roiled in popular uprising, is being threatened on several fronts—including apparent splits in Bahrain’s royal family and a sense of disengagement by Saudi Arabia, the region’s biggest power.

Whether the U.S. can halt the unrest in Bahrain is viewed as critical to stabilizing the Persian Gulf and checking Iran’s influence. But there is growing uncertainty in Washington over who in the tiny Middle East sheikdom’s royal family ordered the use of increasing force against unarmed protesters, according to officials briefed on the diplomacy.

Successive U.S. administrations have cultivated closed relations with Bahrain’s King Hamad bin Isa al-Khalifa and his son, the crown prince, both of whom are viewed as modernizers. But the island-state’s security forces are under control of the king’s uncle, Prince Khalifa bin Salman al-Khalifa, who also serves as prime minister.

Previous U.S. administrations have sought to convince King Hamad to remove his 76-year-old relative, according to former U.S. officials, following charges of corruption and his opposition to political liberalization. These officials said there is a growing likelihood Prince Khalifa is overseeing the crackdown, with the king and crown prince relegated to the sidelines.

“Our influence is largely with one part of the ruling family, and not with the prime minister,” said an American official in close contact with Bahrain’s government.

The situation in Bahrain is complicated by U.S. uncertainty over Saudi Arabia’s position on the growing regional turmoil. Riyadh has enormous influence over Bahrain’s royal family due to the financial and energy aid it provides. Riyadh has in the past sent its own security forces into Bahrain to quell unrest, concerned that Bahrain’s Shiite majority could fuel instability inside Saudi Arabia.

Still, Saudi Arabia’s King Abdullah and many of his closest advisers have been in Morocco in recent weeks as the Saudi monarch recovers from surgery. That has been seen as limiting the ability of other Saudi royals to make decisions. Other leading members of the Saudi royal family are also said to be in decline physically, particularly the second-in-line, Crown Prince Sultan, who is believed to be suffering from Alzheimer’s disease.

A spokesman for the Saudi Embassy in Washington didn’t respond to requests for comment.

Saudi officials voiced disapproval of the Obama administration’s handling of Egypt, in particular its decision to pull its support for President Hosni Mubarak, according to Arab diplomats. There has been little high-level contact between the U.S. and Saudi Arabia in recent weeks, U.S. officials said.

“There’s a leadership vacuum in Saudi Arabia, which is clouding the decision-making process,” said Simon Henderson, who tracks Saudi politics at the Washington Institute for Near East Policy.

Washington’s strategic alliance with Saudi Arabia has faltered in other theaters in the Middle East as well this year.

Last month, the militant Lebanese group Hezbollah overthrew the U.S.- and Saudi-backed government in Beirut, greatly enhancing Iran’s and Syria’s influence in the Mediterranean nation. Successive U.S. administrations had since 2005 worked with Riyadh to try and bolster former Lebanese Prime Minister Saad Hariri as a counterweight to Hezbollah’s backers in Tehran and Damascus. But Saudi Arabia ultimately pulled out of mediating efforts on behalf of Mr. Hariri, as Hezbollah threatened to sow unrest.

The fate of Bahrain, as Egypt before it, is crucial to U.S. strategic interests, and the unrest is showing up the administration’s inability to influence the course of events. Bahrain has been a crucial partner in Washington’s efforts to combat nearby Iran as well as al Qaeda. It sits in a key strategic position in the Persian Gulf and hosts the headquarters of the U.S. Fifth Fleet—a home to 3,000 military personnel who oversee the 30 naval ships and some 30,000 sailors.

“If the U.S. loses Bahrain, they risk losing the Persian Gulf,” said a senior Arab diplomat Friday.

President Barack Obama made his strongest call Friday for an end to the violence in Bahrain, urging the government “to show restraint in responding to peaceful protests, and to respect the rights of their people.”

King Khalifa announced Friday he had appointed his son, Crown Prince Salman bin Hamad al-Khalifa, to engage in a dialogue with the opposition once calm had returned. U.S. officials in Washington acknowledged this likely wouldn’t quell the protesters.

Officials wouldn’t comment on whether the Obama administration was directly seeking the removal of Prime Minister Khalifa. But the official said the prime minister “is hated by the majority in Bahrain.”

The prime minister, on his website, says he has supported the king’s reforms, specifically his press reforms.

Sen. Patrick Leahy (D., Vt.), chairman of a Senate panel that oversees foreign aid, has asked Secretary of State Hillary Clinton to review whether units of the Bahrain’s security forces used lethal force against civilians in violation of U.S. law, a finding that could prompt the U.S. to freeze assistance to those units.

The law, known as the Leahy Amendment, requires the U.S. to cut off aid to foreign security forces that are found to have committed gross human rights violations, and could provide a point of leverage for the Obama administration.

Cable dated:2008-06-03T15:39:00C O N F I D E N T I A L SECTION 01 OF 04 RIYADH 000868SIPDISNEA FOR DAS GGRAY DEPT OF ENERGY PASS TO A/S KKOLEVAR, DAS AHEGBERG, AND MWILLIAMSON TREASURY PASS TO A/S CLOWERY, DAS BAUKOL AND CMORAVEC DHS PASS TO TWARRICK AND DGRANT CIA PASS TO TCOYNEE.O. 12958: DECL: 06/03/2018 TAGS: EPET ENERG EFIN SA

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Summary
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¶1. (C) Minister Naimi’s offer of an additional 300,000 barrels per day (bpd) in the wake of President Bush’s visit had minimal impact on crude prices; some analysts stated 500,000 bpd-plus would be needed to impact crude prices near $128/barrel. Market analysts in Riyadh point out widespread petrol subsidies in China, India, and the Middle East ensure price feedback mechanisms are broken; they therefore predict crude demand will continue to rise there. Governments are abandoning plans to roll back petrol subsidies in the face of escalating food inflation. Our contacts are concerned languishing refining margins are driving down refinery utilization. Recession may be the one brake on crude prices in the near term, but our contacts are divided on its impact. Their crude price forecasts range between $90 and $150/barrel.

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Saudis Resist Continued Requests for Significantly More Production ——————————————-

¶2. (C) The oil industry newsletter “Foreign Reports” summed up the industry’s take-way from the President’s recent visit: “Responding to demand, not demands - The message from Riyadh this afternoon may be summed up: Saudi Arabia can and will respond to increased demand from its refining customers by increasing its production, but it will not respond to politically-motivated calls for more oil.” Minister Naimi was careful to point to customer requests to justify his announcement of a increase in production of 300,000 bpd. The increase should bring Saudi Arabia’s June production to 9.45 million bpd. By Monday, OPEC price hawks, Libyan oil official Shukri Ghanem among them, jumped in to criticize Minister Naimi’s decision “to cave in to requests from the U.S.”

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Is this Market Broken?
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¶3. (C) Here in Riyadh, our banking sector contacts are focused more on long-term market disequilibirium. Like energy economists worldwide, they are scratching their heads, asking how we can slow this spiral of escalating crude prices. Brad Bourland, Chief Economist, and Paul Gamble, Head of Research from Jadwa Investments, one of the newly-established Saudi investment banking houses, are concerned the price feedback loop between crude and finished petroleum products is increasingly tenuous globally. Bourland points to analysis by Deutschebank’s Adam Siminsky, who posits a growing disconnect between the crude and finished product markets.

¶4. (C) Bourland explains while crude has increased by nearly 6 times in the last four years, gasoline prices in the U.S. have at most tripled. While consumers complain vociferously about rising pump prices, nonetheless they are not absorbing the full brunt of rising input prices. The refining sector is absorbing the growing pricing differentials between crude and finished products, leading to plummeting refining utilization rates in the U.S. For example, refining utilization rates fell to 84 percent in the U.S. recently. Bourland noted the U.S. majors would continue to operate their vertically-integrated refineries - as they have little choice but to move their crude through the

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system. However, under these price conditions, independent refiners operate in the red, and many are simply idling their capacity. The Petroleum Economist confirmed that in March, many refiners ran at a loss.

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Poor Price Elasticity in China, India, ME: Food Price Inflation is a New Complication
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¶5. (C) Bourland noted that given the widespread public subsidies in China, India, and the rapidly growing markets of the Middle East, there is no pass-through of these higher crude prices to the consumer in much of the world’s market. Essentially there is no price signaling, “go slow” sign in the form of higher prices for consumers as crude rises. As a result, he expects we will continue to see unrestrained demand growth, especially in the Middle East and China.

¶6. (C) Bourland was not optimistic about prospects for encouraging greater price elasticity in the world energy markets. Inflation, particularly food inflation, recently has become a front-burner issue for many nations. Pressed consumers in many nations have recently found themselves on a knife’s edge regarding food security, and are not likely to peacefully accept the rolling back of petrol subsidies which have become effectively institutionalized. Bourland also cautioned that Saudi Arabia’s domestic consumption of crude continues to grow by about 100,00 bpd annually, ensuring a tight global market for the foreseeable future.

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U.S. Market Demonstrates Elasticity, but Price Responses in Europe also Limited
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¶7. (C) Bourland believes the U.S. market is demonstrating some price elasticity in the downstream market, and this is beginning to curb consumption. In the U.S., pump prices are rising sharply. He noted gasoline in Connecticut, for example, had hit $4.50/ gallon. Gamble, a British citizen, noted that in Europe, the pump price is heavily weighted towards the government’s tax take, so the impact of rising crude prices is felt much more slowly. Consumer response in Europe is also correspondingly slower. Europe’s ability to respond with transport measures that might have a near-term impact on per capita fuel consumption is also limited, as most people already take public transportation or drive fuel efficient cars.

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IEA Pessimistic on Prospects for Greater Price Elasticity ———————————-

¶8. (C) Energy Attache queried Dr. Nobuo Tanaka, the Executive Director of the International Energy Agency, during a recent presentation at the International Energy Forum in Riyadh about the prospects for introducing greater price elasticity in the global market. Specifically, in November 2007, China had announced it would begin rolling back subsidies. Dr. Tanaka indicated that the harsh winter weather and the associated transportation problems at the Chinese New Year had largely halted roll-out of China’s program. He was not optimistic about other large developing nations following suit with new roll-backs. In light of the recent tragic earthquake in Sichuan, it is likely China will be in no position to force a politically unpopular subsidy roll-back on the population now.

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Jadwa Forecasts $90 Barrel Oil for 2008; SABB Forecasts $150 —————————————-

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¶9. (SBU) Looking forward, Jadwa Investments forecasts an average price of $90/barrel for oil 2008, with a drop to $70/barrel by the end of 2008. Jadwa forsees a constant monthly downward trend in demand, due to the U.S. economic recession and its impact on the global economy. Bourland noted Jadwa’s analyses departed from DeutscheBank’s forecast of an average barrel of $105 for 2008. On the other hand, Dr. John Sfakiankis, from the Saudi British Bank, an HSBC subsidiary, remarks that the U.S. is already in recession, and crude prices nonetheless continue to rise. He predicts crude prices topping $150/barrel “are not unlikely” by the end of the summer.

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$15 Billion/Month into Official Reserves
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¶10. (C) Bourland estimates the Saudi state is earning roughly $1 billion/day now in oil revenues, of which it expends roughly half, and adds the other half to its official reserves. He noted SAMA added $15 billion to its reserves in March, the seventh month running that reserve additions totaled more than $10 billion. “The amounts are overwhelming,” Bourland summarized. He also explained that although the Saudi Arabian Monetary Authority (SAMA), the central bank, continued to hold U.S. Treasury bills, it was also diversifying. SAMA’s Investment Department “prides themselves on being diversified,” he related.

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Dollars: The Unloved Currency as Saudis Wait for a Possible Re-Valuation —————————————-

¶11. (C) This enormous influx of petro-dollars is largely held by SAMA. Bourland explained that Saudi investors, however, are currently hoarding riyals. They continue to be afraid of being caught out by a possible re-valuation in the USD-pegged currency. He noted investors continue to anticipate an eventual re-valuation, but “the pressure is not like it was last fall” when the fixed exchange rate came under heavy speculative attack in November. Instead, Bourland sees Saudis hoarding riyals because the “U.S. markets would go on sale” if the Saudi government re-values. Bourland pointed out it was difficult for Saudi investors to even find large quantities of U.S. dollars, saying “it’s hard to get $500 million or $1 billion in USD, the banks don’t want to hold that much.” Bourland stated he does not see much Saudi money involved in hedge funds or other speculative instruments allegedly running up crude prices.

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“The Money is Safer in the Ground”
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¶12. (C) Bourland noted that the confluence of demands to manage this enormous cash flow, and the challenges to managing growth in the oil sector were beginning to worry the Saudi leadership. He referenced recent comments from an informed source in the oil sector who explained that Saudi Aramco was scaling back proposed future expansion plans. Quoting King Abdullah’s recent comments (ref B) that Saudi Arabia would cap production capacity at 12.5 million bpd and “leave crude in the ground for its children”, Bourland remarked, “There are more accidents, there are escalating costs (in the oil sector). I think the King is reaching the conclusion that the money is safer in the ground than in the bank. He doesn’t want to see it squandered.”

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Saudi MinPet: “Blame it on the Weak Dollar”
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¶13. (C) The Saudi Ministry of Petroleum has noted to us in

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consultations throughout 2007 and in January 2008 that much of the run-up of the price of crude could be blamed on the gradual decline in the USD, as crude contracts are priced in dollars. We concur to a certain extent, but as crude has surged beyond $110/barrel, and the dollar seems to have found a bit of a floor in recent weeks, we find this argument less compelling. As well, crude priced in euros and yen has also surged to new record highs in recent weeks. Taking inflation into account is another issue. The Economist noted in April that crude would have to hit $134/barrel to equal in inflation-adjusted terms 1981’s record crude prices. Two weeks ago, the NYMEX market did just that.

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Comment
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¶14. (C) 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. The May announcement of a 300,000 bpd increase in production barely dented price escalation. It appears unlikely Saudi Aramco could muster the million or more barrels which appear to be needed to make a dent in the normally upwards price trajectory. Saudi Aramco’s ability to sustain such a production increase for a year or more raises serious questions. A series of major project delays and accidents XXXXXXXXXXXX over the last couple of years is evidence that Saudi Aramco is having to run harder to stay in place - to replace the decline in existing production. Additional production would likely come from increasingly heavy crude which the world lacks sufficient capacity to easily refine. The Saudis appear dis-inclined to discount its heavy crude sufficiently, so the market is dis-inclined to purchase it. In neighboring Iran, the regime is now purchasing floating storage for heavy crude which has no takers. While this Mission is far from embracing doomsday “Peak Oil” theorists, Saudi Aramco’s challenges are significant.

¶15. (C) King Abdullah’s recent comments on “leaving some oil in the ground” did not set new oil production policy, but hewed to the previous Saudi commitments to build a capacity of 12.5 million bpd. Nonetheless, his remarks may hint at an emerging conservationist ethic in Saudi Arabia — extending beyond energy to encompass how the Kingdom will more broadly husband its resources for future generations. Bourland highlights the King’s concerns with energy issues, but also his growing worries with how his successors will manage and secure the Kingdom’s financial patrimony as well.
GFOELLER
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Reference ID: 08RIYADH868
Created: 2008-06-03 15:03

During the past ten years, the political efforts of Saudi Arabia were focused on two issues:
Firstly, regaining Washington’s trust, friendship, alliance and protection of the Saudi regime, especially after the events of 11 September 2001, which badly affected their relationship. This objective was achieved, for after 4 years the relationship is back to normal. This was primarily due to Saudi money, which was spent generously, and the regime’s political concessions to the US at the expense of the Palestinian cause. This is in addition to America’s failure in both Iraq and Afghanistan, as well as the need for a Saudi role in the region.

Secondly, confronting Iranian influence, it seems that Saudis are very much preoccupied with Iran’s scientific and nuclear development, Iran’s regional and global growth which has reached Africa and its ability to build strong alliances with the countries of Latin America.

Saudi Arabia’s policies towards many issues such as Pakistan, Afghanistan, Iraq, Lebanon, Sudan, Yemen, Algeria, Russia, Israel and Palestine, are all determined by the priorities of the Saudi- Iranian conflict. This conflict has also badly affected the production and the pricing of oil, whereby Saudi tries to decrease Iran’s oil revenue by failing to adhere to the OPEC quota, and hence manipulating the price of oil.