By George H. Wittman on 5.20.08 @ 12:07AM
The case of the Saudis' 300,000 additional barrels.
About six months ago Saudi oil authorities, sensing pressure
developing for them to increase production, began once again to
warn of their fears of over-pressed extraction schedules. Increased
pumping operations, they complained, would place a stress on their
existing marketable reserves. A purely minor concern, it would
seem, for surely they have more than enough reserves and production
capacity.
This same argument was dutifully repeated to President George W.
Bush during his meetings last Friday with his "good friend," King
Abdullah ibn Abd-el Azziz al Saud. In recent weeks this theme has
attained the character of a mantra aimed at deflecting U.S. and
other nations' desire for lower oil prices. The Saudis have been
repeatedly reminded of their claim last year that they would be
increasing their production capability 40 percent by 2009.
While the American oil industry speaks glowingly of the growth
of technical competence of Saudi managers, the political world
knows only the conspicuous consistency of the Saudi Royal Family's
insatiable hunger for wealth. Accompanying this, however, is the
royals' fear that their sole natural resource is being too rapidly
diminished -- despite the fact that Saudi Arabia's known oil
reserves are by far the largest in the world.
King Abdullah thirty years ago, when he was in his 50s and
commander of the tribal-based Saudi National Guard, maneuvered
against his half-brother Crown Prince Fahd to maintain the
essentially feudal nature of rule rather than proceed with the
stronger parliamentary structure then under consideration.
In spite of Fahd's royal precedence, Abdullah was successful in
the long run in modernizing yet essentially maintaining the
traditional indirect, but effective, method of monarchial
governance. In simple terms, the tribal sheiks continue to be
supported in their historical leadership role through carefully
calculated royal allowances and gifts. It's the Royal Family's
ultimate control of national wealth that makes this system
possible, hence the insecurity over future oil and gas
reserves.
Abdullah had never been the international bon vivant
that Fahd was. Nonetheless, he was far more assiduous in
cultivating and maintaining relations with other Arab leaders, even
when their national politics did not dovetail with those of the
Saudis. His close and friendly relationship with the late president
of Syria, Hafez al Assad, is a good example of his special sense of
Arab solidarity that marks Abdullah's approach to foreign
affairs.
CERTAINLY THE WHITE HOUSE well knew of these and other proclivities
of the Abdullah regime when the president's visit was scheduled.
Ostensibly this was a visit to balance Bush's trip to Israel. What
President Bush wanted, however, was a definitive gesture by the
Saudis in respect to increasing oil production. Either on purpose
or by accident, the gesture of Abdullah toward his friend George
was mishandled.
Initial reports by the American media indicated that the U.S.
desires had been rejected by the Saudi oil minister. The following
day a new announcement was made that, just before the Bush party
arrived, the Saudis had pushed up production approximately 300,000
barrels per day as a gesture of hospitality. This would place Saudi
production at a new total of 9.45 bpd by June. Not much of an
increase, but an increase nonetheless.
The perplexing part of all this has been the contradictory
statements of Oil Minister Ali Naimi: He originally had gone into
some detail how all the Saudi customers were without complaint
regarding the ready availability of Saudi products, and therefore
no increase was necessary.
The Bush team displayed a diplomatic non-reaction to this news.
The altered positive positioning the following day was accepted as
if nothing had happened. It's amazing how 300,000 barrels daily can
smooth over some rough patches. Press coverage was confused, but
this time it had reason to be.
THE BOTTOM LINE is that an internal Saudi conflict between the
country's oil minister and foreign minister was worked out. The
highly experienced Prince Saud bin Faisal, long time foreign
minister, maneuvered a success from a near disaster -- something
for which his late father King Faisal was famous.
The Saudis now own more U.S. dollars than they have ever known.
The swelled numbered accounts in Switzerland and elsewhere of the
many members of the Royal Family are being recycled back into the
investment world at current bargain prices.
All the Saudis have to worry about is whether and when the
Iranians decide their Sunni Arab neighbors (with their large
eastern province Shia population) have become too enticing a
target. King Abdullah and his relatives count on the oil-hungry
Americans always being there to bail them out. That's Washington's
well-worn ace-in-the-hole. Unfortunately that leverage doesn't seem
to be working too well.
topics:
Iran, Israel, Oil
