Published on Monday, December 10, 2001 in the Boston Herald U.S. Ties to Saudi Elite May Be Hurting War on Terrorism by Jonathan Wells, Jack Meyers and Maggie Mulvihill
First of two parts. A steady stream of billion-dollar oil and arms deals between American corporate leaders and the elite of Saudi Arabia may be hindering efforts by the West to defeat international Islamic terrorism.
U.S. business and political leaders are so wedded to preserving the gilded American-Saudi marriage that officials in Washington D.C. continue to give the oil-rich Gulf monarchy a wide berth, despite mounting evidence of support in Saudi Arabia for Osama bin Laden's terrorist network, some experts say.
Since the Sept. 11 attacks, Saudi Arabia has been a reluctant ally, refusing to let the U.S. use Saudi bases as staging areas for military operations in Afghanistan.
The Saudis have also balked at freezing the assets of organizations linked to bin Laden and international terrorism, some of which are Saudi-run. Just last week, Bush administration officials embarked on their second trip this month to the kingdom to try to convince the Saudi government to cooperate.
``If there weren't all these other arrangements - arms deals and oil deals and consultancies - I don't think the U.S. would stand for this lack of cooperation,'' said William Hartung, a foreign policy and arms industry expert at the World Policy Institute. ``Because of those relationships, they have to tread lightly.''
The Saudi government's refusal to publicly join the war against terrorism is rooted in its own fragile internal politics, experts say. Inside the gulf monarchy there is a deepening schism between the authoritarian ruling elite and a politically powerless populace burdened by a rapidly declining standard of living. The Saudi royal family, headed by the ailing King Fahd bin Abdul Aziz Al-Saud, is seen by many in the country as bloated and corrupt.
On top of that, the Saudi people, most of whom adhere to a particularly harsh brand of conservative Islam called Wahabbism, have become increasingly anti-American, alienated by their leaders' extensive dealings with the non-Islamic West. This anger was revealed starkly in the days following Sept. 11, when it was learned that 15 of the 19 suicide hijackers were Saudis.
Nevertheless, the Saudi elite and corporate America continue to do big business and reap the rich rewards of their close and longstanding associations.
Jean Charles Brisard, a French security expert and co-author of the recently released book, ``Bin Laden: The Forbidden Truth,'' said the American addiction to Saudi oil and arms money threatens to undermine national security in the West.
``We have to have a critical look at 50 years of foreign policy,'' Brisard said. ``We've had to close our eyes to the support (from Saudi Arabia) of the radical fundamentalists.''
Brisard and other analysts say the extensive U.S.-Saudi collaboration is increasingly risky because to Bin Laden, a Saudi exile, and other Islamic terrorists, it is an unforgivable betrayal of Islam.
Bin Laden has already declared his aim of overthrowing the Saudi royal family and expelling all Americans and other Westerners from the kingdom's soil.
A Herald examination of corporate records, intelligence reports and published accounts - as well as interviews with terrorism and foreign policy experts - reveals an extraordinary array of U.S.-Saudi business ventures which, taken together, are worth tens of billions of dollars.
They range from deals to pipe oil and natural gas out of former Soviet republics and develop Saudi Arabia's own vast natural gas reserves, to lucrative but rarely talked about arrangements pairing private U.S. military contractors with virtually every branch of the Saudi armed forces.
In the oil industry, U.S.-Saudi ventures include:
Two consortiums involving U.S. oil giant Unocal and a pair of private Saudi oil firms - Delta Oil and Nimir Petroleum - which won rights in the mid-1990s to develop Azerbaijan's vast oil reserves. Both are multi-billion-dollar deals.
Another American-Saudi venture between U.S.-based Amerada Hess and Delta Oil - called Delta-Hess - has won the rights to drill in two other oil fields in Azerbaijan. Delta-Hess is also part of a group in line to build a $2.4 billion oil pipeline from Azerbaijan to Turkey.
A 1998 joint venture between Texaco and Nimir Petroleum has already begun drilling in a 1.5 billion barrel oil field in Kazakhstan.
For the last 13 years, half of Texaco's refining and marketing operations in the U.S. have been owned by Saudi Aramco, the government-owned company that controls all of Saudi Arabia's vasts oil reserves.
This year, some of the biggest U.S. oil firms were tapped by the Saudi government to undertake a $25 billion project to extract and sell 220 trillion cubic feet of the kingdom's natural gas.
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One of the most revealing examples of how U.S.-Saudi business interests seep into foreign diplomacy is a major pipeline deal in the 1990s that almost resulted in the U.S. recognizing the Taliban regime as the legitimate government in Afghanistan.
In 1995, U.S. oil giant Unocal formed a partnership with the Saudi-owned Delta Oil and mounted a high-stakes international lobbying campaign to build oil and natural gas pipelines from oil fields in Turkmenistan, through Afghanistan and Pakistan, and out to the Arabian Sea.
The Unocal-Delta consortium, which included firms from Indonesia, Japan, Korea and Pakistan, reportedly reached a tentative agreement in January 1998 with the Taliban government under which the oil companies would pay the radical Islamic regime for the right to run oil and gas through their country.
The consortium, called CentGas, was prepared to pay the Taliban more than $100 million a year.
Unocal spokesman Barry Lane downplayed the company's dealings with the Taliban, insisting that the oil firm also discussed the pipeline deal with opposition factions in Afghanistan.
``No agreements were reached with anybody, outside of Turkmenistan and Pakistan,'' Lane said. ``This was not an Afghanistan project. Afghanistan was not the focus.''
In 1996, the Islamic extremist Taliban faction effectively gained control of Afghanistan. From 1996 to 1998, as Unocal and Delta executives were talking to the Taliban, the fundamentalist regime was allowing bin Laden and his al-Qaeda organizations set down roots in their country.
But before the pipeline deal could go through, Unocal needed the U.S. to recognize the Taliban as the legitimate government in Afghanistan. To that end, company representatives arranged high-level meetings between the Taliban and State Department officials in Washington, D.C.
On at least one occasion, in December 1997, Unocal officials played host to high-ranking Taliban leaders in Texas. The American oil executives reportedly wined and dined them and took them on a shopping spree.
One of the Unocal representatives dining with the Taliban was Zalmay M. Khalilzad. Khalilzad, a former assistant undersecretary of defense in the first Bush administration, was working for Cambridge Energy Research Associates on Unocal's behalf and advocating that the Clinton administration ``engage'' with the Taliban.
Now Khalilzad is on President Bush's National Security Council and is a key adviser in the administration's quest to destroy the Taliban.
Despite the four-year effort by the Unocal-Delta consortium, which cost the U.S. firm $15 million, the pipeline project collapsed in late 1998 after terrorists allegedly under the direction of bin Laden bombed two U.S. embassies in Africa. Then-president Clinton responded by firing cruise missiles at a suspected bin Laden bunker in Afghanistan.
``There was this idea that as bad as (the Taliban) were on human rights, they were going to create a level of stability that would allow things to take place, such as this pipeline deal,'' said Hartung.
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The financial bond welding the U.S. and Saudi governments begins with oil but it doesn't end there.
Between 1990 and 1999, the Saudi government paid U.S. arms makers $30 billion for a wide array of weaponry - including F-15 fighter aircraft, M-1A2 Abrams tanks, and Apache attack helicopters - as well as for the training necessary to operate and maintain the U.S.-made arsenal, according to Department of Defense statistics. Those arms and technology deals are, by law, publicly disclosed.
What is less known, however, is that for the last 25 years Saudi Arabia's rulers have also employed a handful of politically connected American companies to buttress the monarchy's military and internal security forces.
These secretive U.S. firms, sometimes referred to as ``spook outfits,'' earned billions of dollars over the last decade alone, equipping, training and managing virtually all branches of the Saudi Arabian armed forces.
As a result of these contracts, tens of thousands of American workers and their families have lived and still live on Saudi soil. This year, private American military companies placed an estimated 35,000 to 40,000 workers inside the kingdom, according to the Congressional Research Service, a non-partisan adjunct to the Library of Congress.
For many Saudi Islamic fundamentalists who oppose the royal family's longstanding alliance with the west, that heavy U.S. presence is deeply offensive.
Because of this, U.S. officials are reluctant to talk about private American military companies operating inside Saudi Arabia.
David DesRoches, a spokesman for the Defense Department, said access to information about U.S. activities inside Saudi Arabia is limited because public disclosures could compromise Saudi security. He also said Saudi officials raise objections when the U.S. releases this sort of data. ``The Saudis are touchy,'' DesRoches said.
The work being done by private U.S. military contractors inside Saudi Arabia is sanctioned by the Pentagon and much of it is carried out by retired U.S. military personnel.
Those companies are working or have recently worked with the Saudi Arabian air force, marines, navy, and national guard. One U.S. firm, O'Gara Protective Services, has been hired directly to guard members of the royal family.
The following U.S. firms are among those bolstering Saudi Arabia's armed services:
Vinnell Corp., a subsidiary of TRW, is currently in its 26th year of helping ``modernize'' the Saudi Arabian National Guard. The most recent five-year contract, awarded in 1998, was estimated at $831 million and involved 280 U.S. government personnel and 1,400 Vinnell representatives. Vinnell has a long history of working side-by-side with U.S. intelligence agents and armed forces personnel. In the 1960s and 1970s, Vinnell earned hundreds of millions of dollars in Vietnam, first building U.S. bases and later blowing them up following the U.S. withdrawal.
The firm also engaged in some secret programs in Vietnam. In a March 1975 Village Voice interview, a Pentagon official called Vinnell ``our own little mercenary army.''
Vinnell's parent company, BDM, also has had numerous contracts in
Saudi Arabia.
>From 1995 to 1997, a BDM subsidiary, BDM Federal, had a $50 million
contract ``developing, implementing and maintaining logistics, supply,
computer, reconnaissance, intelligence and engineering plans and
programs'' for the Saudi air force. The pact put 400 BDM employees in
Saudi Arabia.
In 1996 and 2000, BDM Federal won two contracts: $44.4 million deal to build housing at the Khamis Mushayt military base in Saudi Arabia and a $65 million contract to provide 845 personnel for maintenance of Saudi Arabia's fleet of U.S.-made F-15 fighter jets.
Until 1998 when BDM was purchased by defense giant TRW, its largest stockholder was the Carlyle Group, an influential Washington, D.C., investment firm loaded with former high-ranking national security officials.
Science Applications International Corp., based in San Diego, had two recent contracts totaling $166 million to upgrade the Royal Saudi Naval Forces' communications and command systems.
Booz, Allen & Hamilton, based in McLean, Virginia, had a five-year contract, which apparently ended in January 2000, working for the Saudi Naval Forces. At the time it was awarded, the Pentagon estimated the contract at $21.8 million. Officials would not disclose any details about the contract's final value or current status.
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Published on Tuesday, December 11, 2001 in the Boston Herald Bush Advisers Cashed in on Saudi Gravy Train by Jonathan Wells, Jack Meyers and Maggie Mulvihill
Second of two parts. Many of the same American corporate executives who have reaped millions of dollars from arms and oil deals with the Saudi monarchy have served or currently serve at the highest levels of U.S. government, public records show.
Those lucrative financial relationships call into question the ability of America's political elite to make tough foreign policy decisions about the kingdom that produced Osama bin Laden and is perhaps the biggest incubator for anti-Western Islamic terrorists.
Nowhere is the revolving U.S.-Saudi money wheel more evident than within President Bush's own coterie of foreign policy advisers, starting with the president's father, George H.W. Bush.
At the same time that the elder Bush counsels his son on the ongoing war on terrorism, the former president remains a senior adviser to the Washington D.C.-based Carlyle Group. That influential investment bank has deep connections to the Saudi royal family as well as financial interests in U.S. defense firms hired by the kingdom to equip and train the Saudi military.
Last year, former President Bush visited Saudi Arabia's King Fahd bin Abdul Aziz Al-Saud, but a Carlyle spokesman said the two did not discuss Carlyle business as previously reported. The elder Bush is reportedly paid between $80,000 and $100,000 for each Carlyle speech he makes. The company declined comment on the former president's pay.
The Carlyle Group has also served as a paid adviser to the Saudi monarchy on the so-called ``Economic Offset Program,'' an arrangement that effectively requires U.S. arms manufacturers selling weapons to Saudi Arabia to give back a portion of their revenues in the form of contracts to Saudi businesses, most of whom are connected to the royal family. A company spokesman said yesterday that arrangement was ended ``a few months ago,'' but said he did not know whether it was terminated before or after the Sept. 11 attacks.
A spokesman for former President Bush, reached yesterday, had no immediate comment on his work for the Carlyle Group.
These intricate personal and financial links have led to virtual silence in the administration on Saudi Arabia's failings in dealing with terrorists like bin Laden, said Charles Lewis, executive director of the Center for Public Integrity, a Washington, D.C.-based government watchdog group.
``It's good old fashioned `I'll scratch your back, you scratch mine.' You have former U.S. officials, former presidents, aides to the current president, a long line of people who are tight with the Saudis, people who are the pillars of American society and officialdom,'' said Lewis.
``So for that and other reasons no one wants to alienate the Saudis, and we are willing to basically ignore inconvenient truths that might otherwise cause our blood to boil. We basically look away,'' he said. ``Folks don't like to stop the gravy train.''
Some foreign policy observers said as long as American power brokers in lucrative business deals with the Saudis do not simultaneously craft U.S. foreign policy, there is no conflict of interest.
``To have Bush Sr. on the board of Carlyle is not necessarily a significant problem because Carlyle has interests all over the world,'' said Vincent Cannistraro, a former counter-intelligence chief for the Central Intelligence Agency.
Companies regularly entice powerful political figures to work for them, he said.
``It's kind of business as usual. Where it really affects things is when someone with a financial interest in a company also has a policy position in the administration,'' Cannistraro said.
Insiders trading
A significant portion of the millions of dollars U.S. companies and their politically influential executives have earned in deals with the Saudis has been through military contracts.
The Carlyle Group had a major stake in the large defense contractor B.D.M., which has multimillion-dollar contracts through its subsidiaries to train and manage the Saudi National Guard and the Saudi air force, U.S. Department of Defense records show. In 1998, Carlyle sold its controlling interest in B.D.M. to defense giant TRW International.
Meanwhile, the boards of directors of the Carlyle Group, B.D.M. and TRW are all stocked with high-level Republican policy makers.
Frank C. Carlucci, a former secretary of defense under President Reagan, was chairman of B.D.M. for most of the 1990s. Carlucci, who also served as Reagan's national security adviser and a deputy director of the CIA, now heads the Carlyle Group.
Along with former President Bush, other officials from past Republican administrations now at the Carlyle Group include: former Secretary of State James A. Baker III; ex-budget chief Richard Darman; and former Securities and Exchange Commission chairman Arthur Levitt.
President Bush is himself linked to the Carlyle group: He was a director of one of its subsidiaries, an airline food services company called Caterair, until 1994. Six years later, when Bush was governor of Texas, the board of directors of the Texas teachers' pension fund - some of whom were his appointees - voted to invest $100 million with the Carlyle Group.
The president of B.D.M. is Philip A. Odeen, a former high-level Pentagon official in the Nixon administration. During the Clinton administration, Odeen chaired the Pentagon task force that planned the restructuring of the U.S. military for the 21st century. Currently, he is the vice-chair of the Defense Science Board, which advises the Pentagon on emerging threats.
TRW, the new owner of B.D.M., has its own noteworthy board members, including former CIA director Robert M. Gates and Michael H. Armacost, who served as undersecretary of state under President Reagan and as ambassador to Japan for former President Bush.
Big Saudi money also makes its way back to Texas and the Bush family. The family of Saudi Arabia's longtime U.S. ambassador, Prince Bandar bin Sultan bin Abdul Aziz, gave $1 million to the Bush Presidential Library in College Station, Texas.
The revolving door
Another example of the complex web connecting U.S. and Saudi powerbrokers is Dick Cheney, who moved from the Pentagon to the international oil business and back as vice president last year.
After serving as the elder Bush's secretary of defense, Cheney was hired to run oil-services giant Halliburton Co., where he worked until he resigned last year to campaign with the younger Bush. In 2000, his last year with Halliburton, Cheney received $34 million when he cashed out from the company.
Not surprisingly, Halliburton's links to Cheney and other Washington power brokers appear to have helped the company's business prospects in the Middle East.
Just last month, Halliburton was awarded a $140 million contract to develop an oil field in Saudi Arabia by the kingdom's state-owned petroleum firm, Saudi Aramco, and a Halliburton subsidiary, Kellogg Brown & Root, along with two Japanese firms, was hired by the Saudis to build a $40 million ethylene plant.
Cheney isn't the only member of President Bush's inner circle whose work for firms connected to the Saudis has paid big dividends.
The current national security adviser, Condoleezza Rice, is a former longtime member of the board of directors of another giant oil conglomerate with business in the Saudi desert, Chevron, which merged with Texaco this year. Rice even has a Chevron oil tanker named after her.
Substantial profits received by U.S. leaders in private sector deals with the Saudis have helped to squelch criticism of the royal family's refusal to address the role its country has played in fueling Islamic terrorism, Lewis said.
``There's a disconnect there,'' Lewis said. ``I'm fascinated that we don't lay this at Saudi Arabia's doorstep. But the chances to cash in and the amount you can cash in for are starting to become absolutely astronomical. Who wants to look like the Boy Scout complaining about it and potentially jeopardize their own post-employment prospects?''
Former advisers to the president's father also hold key positions with U.S. firms which have teamed up with the Saudis on major oil deals.
Former Bush Secretary of the Treasury Nicholas Brady and a former Bush assistant, Edith E. Holiday, are both on the board of directors of Amerada Hess, an American petroleum firm currently teaming up with several powerful Saudi families to develop oil fields in Azerbaijan.
Another company that has done business with wealthy Saudis is international energy firm Frontera Resources Corp. based in Houston. Until recently, Frontera was a 30 percent investor in a $900 million project to develop oilfields in Azerbajian. Also investing in the project were Azerbaijan's state-run oil company and Delta-Hess, a joint-venture created by the Saudis' Delta Oil and Amerada Hess.
Randy Theilig, a Frontera spokesman, said the company relinquished its interest in the project in July because it was no longer ``economically viable,'' and has no current business dealings with the Saudis or in Azerbajian.
Members of Frontera's board of advisers, which includes former CIA director John Deutch and former Secretary of the Treasury and U.S. Sen. Lloyd Bentsen, have been active financial supporters of the Democratic Party.
Shining a bright light on the web of financial connections between the power elite in the U.S. and Saudi Arabia is critical, Middle Eastern foreign policy experts said.
``I think the fact that they have these connections makes it important for this information to be made public,'' said Henry Siegman, a senior fellow on the Middle East at the Council on Foreign Relations.
Larry Noble, executive director of the Center for Responsive Politics in Washington, D.C., a non-partisan group that examines money and politics, said the Bush-Carlyle connection is a concern.
``It is well known that the father is a close adviser to his son and therefore it does raise concerns,'' Noble said ``It's not necessarily that the father has been compromised, but the danger is that it leads people to question George W. Bush. The public has a right to feel their leaders are making independent judgments without the influence of private interests.''