WASHINGTON - Strategic relations with the United States and an ambitious program of economic restructuring prevent Saudi Arabia from using its vast oil production as a weapon to pressure Israel and its supporters, say Saudi and US officials.
Washington is pleased that the Saudi stance ensures that oil "could not be wielded, should not be wielded, and will not be wielded as a weapon in international disputes", said US Energy Secretary Spencer Abraham.
His remarks, at the US-Saudi Energy Conference here on Monday, followed weeks of oil market jitters caused by calls from Arab demonstrators for Arab oil producers to use their command over the precious resource to pressure Israel and the United States to improve their treatment of Palestinians and the cause of Palestine. Iran, Iraq and Libya, all members of the Organization of Petroleum Exporting Countries (OPEC), had said they wanted to use oil in the conflict. Baghdad made good on its word; Tehran and Tripoli said they would do so only if other producers followed suit.
Officials and industry executives at the US-Saudi oil forum said they were confident the Iraqi move would fail to damage the oil market as Saudi Arabia and other OPEC producers have said they stand ready to make up for any shortfall. "Oil is not a tank. Oil is not an F-16. Oil is not a missile. It will not be used as a weapon. It is an economic source of prosperity," said Ali Al-Naimi, the Saudi petroleum minister. "We recognize how sensitive the market is and we are watching very carefully the inventory level and supply side," Naimi said.
The OPEC cartel is scheduled to convene on June 26 in Vienna to reassess production plans.
Other Saudi officials at the meeting said the kingdom needs to use its oil, which accounts for more than three-fourths of the country's total revenues, to create jobs. Of a population of 21 million people, 43 percent are younger than 14 years and will be entering the job market within the decade, they said. This year, the Saudi budget deficit is forecast to double to US$12 billion. Unemployment runs at 15-20 percent and foreign workers account for some 65 percent of the labor force, the World Bank said.
Abdulrahman al-Tuwaijri, who heads the Saudi Supreme Economic Council, an official body supervising economic modernization of the desert country, said Saudi Arabia is restructuring its economy to diversify away from reliance on oil. Tuwaijri said the government has reduced tariffs, lifted a ban on non-citizens' land and business ownership, and is working on liberalizing its goods and services sectors and passing a capital markets law. Saudia Airlines and other assets are to be privatized.
Finance Minister Ibrahim al-Assaf added that Riyadh is preparing to join the World Trade Organization and this is one more reason why oil revenues should be kept intact.
For their part, US officials and oil executives said stable oil prices are not only in the interest of Saudi Arabia but also are vital to the US and global economies. The International Monetary Fund (IMF), they noted, warned last week that volatile oil prices remained a threat to a nascent global economic recovery.
Speakers at the meeting all agreed Saudi Arabia remained the central player in the oil market and would stay so for a long time to come, keeping its place as among Washington's most important strategic allies in the Middle East. Saudi Arabia has one-fourth of the world's proven oil reserves, according to industry figures. The United States bought 18 percent of its foreign oil last year from Saudi Arabia, or nearly one-fourth of Saudi exports.
Industry executives expect worldwide crude oil demand, approximately 75 million barrels per day, to reach 90 million barrels per day or more by 2010. "With projections that Saudi Arabia will remain the worlds' largest oil exporter, and the US the world largest oil importer, and with both their volumes rising steadily, the common interests of the two countries' oil industries are likely to remain very solid," said John Lichtblau, who chairs the Petroleum Industry Research Foundation.
Last September's terrorist attacks in the United States fueled renewed calls for Washington to decrease its reliance on Middle East oil by pursuing production in Russia, the Caspian basin, West Africa, and Alaska. "This is flawed thinking and a shortsighted view of the world's oil supply and demand balance," said David O'Reilly, chief executive at Chevron Texaco Corp. "Under any reasonable economic growth scenario, these sources cannot possibly satisfy the expected demand. Diversity of supply means security of supply. Nevertheless, the numbers speak for themselves: The world needs and will continue to need Saudi oil for a long, long time to come," O'Reilly said.
(Inter Press Service)