BEIRUT: While the House of Saud battles against a stubborn insurgency by Al-Qaeda that increasingly is seeking to target Saudi Arabia’s rulers and exploit mounting anti-American anger, the regime is having to balance its internal struggle against external pressure for reforms demanded by US President George W. Bush’s administration.
This appears to have triggered a potentially significant shift in Riyadh’s foreign policy strategy, away from the United States, its protector since the Americans struck oil there in 1932, and toward other key members of the United Nation Security Council who are considered America’s competitors ­ Russia, China and Europe, all of whom opposed the war in Iraq and are at odds with the Bush administration to one degree or another.
On Jan. 26, Russian oil giant Lukoil signed a contract for exploration and production of natural gas in a 30,000-square-kilometer area of the Rub al-Khali, the desolate Empty Quarter that makes up most of the Saudi hinterland, the first deal of its kind with a Russian company.
Over the following two days, Riyadh signed similar deals with China’s state-owned Sinopec Group for a 38,000-square-kilometer block in the South Ghawar region in the eastern part of the kingdom, and with a European consortium headed by Italy’s Eni and Spain’s Repsol for 51,4000 square kilometers of the Rub al-Khali. Last year, European majors Royal Dutch/Shell and Total of France were awarded a similar exploration-production contract in the south.
US oil companies were conspicuous by their absence in all this and the political message was clear: Saudi Arabia will not be strongarmed into doing Washington’s bidding. ChevronTexaco had bid for all three of the latest deals, but was cut out by the Saudis after several years of negotiations that began long before Sept. 11, 2001.
That has left Chevron and other US oil companies out of the upstream gas ventures that outsiders hope will eventually give them a stake in Saudi Arabia’s oil industry, nationalized in 1975.
The trio of new contracts are small measured against Saudi Arabia’s vast hydrocarbon reserves, but they have created potentially important new alliances outside the US orbit. Russia is the world’s No. 2 oil exporter after Saudi Arabia and a potential rival of the kingdom and has long sought a political and economic foothold in the region.
The unprecedented deal struck by Lukoil, Russia’s biggest oil company in terms of sales, marks a strategic rapprochement between the world’s two leading producers and underlines Moscow’s growing role in the global energy market. The Russians believe they will be cut out of Iraq’s rich oil sector by the Americans because of growing antipathy between Moscow and Washington, but they are determined to secure a substantial stake the Middle East.
A consortium led by Tatneft, Russia’s sixth largest oil producer, recently won a $1.3 billion privatization tender for a 66 percent stake in Turkish Petroleum Refineries Inc. (Tupras) with sales of $11 billion. Tupras recently announced plans to buy up to 36 million barrels of Iraqi crude a year from the Kirkuk fields in northern Iraq once the pipeline to Turkey reopens. All this signals a new drive by Moscow for a more muscular role in international oil politics.
Relations between Moscow and Riyadh got a boost last September when Saudi Arabia’s de facto ruler, Crown Prince Abdullah, paid an historic visit to Russia. Russian and Saudi officials signed a five-year agreement on cooperation in the oil and gas sector. According to Russian Energy Minister Igor Yusufov, that could result in deals worth $25 billion.
Although the bulk of Saudi Arabia’s crude exports have gone to the US in the past, increasingly the Gulf producers have been looking eastward to the burgeoning energy market there. Asia, and particularly China, is the fastest growing market. China, which became a net importer in 1993, has been breaking into oil sectors around the world to ensure supply for its rapidly expanding economy.
Most of China’s steadily growing oil imports are from the Gulf. Many see China eventually posing a major economic and geopolitical challenge to the US, initially in Asia and then globally. Saudi Oil Minister Ali al-Naimi said at the recent economic summit in Davos that Riyadh’s ties with Beijing were expected to get stronger. Saudi Arabia already has a stake in a Sinopec-led refinery and petrochemicals venture in China.
“China is actually becoming quite a strategic ally for us in the energy business,” Naimi said. “They want to come upstream in Saudi Arabia. They are welcome, and we want to go downstream in China, where we are welcome.” It is estimated that China will need 5.8 million barrels of oil a day this year, replacing Japan as the second biggest oil-consuming state after the US.
Expect to see Riyadh strengthen its economic and political ties with China and Russia as US pressure on the House of Saud intensifies, such as the Jan. 28 revocation of diplomatic accreditation to 16 Saudis teaching Islam at an Arab institute outside Washington. The State Department said the Saudis were not eligible for diplomatic status. Such minor infractions would once have been overlooked, but the Americans chose to play it up.
General John Abizaid, the army officer of Lebanese descent who heads the US Central Command in the region, declared on Jan. 29 that Saudi Arabia, along with Pakistan, is a “broader strategic problem” for the US than either Iraq or Afghanistan. That reflected growing concern in the Bush administration for the kingdom’s stability and future.

Ed Blanche, a member of the International Institute for Strategic Studies in London, has covered Middle Eastern affairs for three decades. He is a regular contributor to THE DAILY STAR