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Newsletter #287

October 12-18, 2008

What's New on SUSRIS

Energy, Recession and Responsibility

"..There is, however, a real economic link between high oil prices and recession. The one has helped triggered the other -- as Saudi Arabia and one or two other producers warned might happen on more than one occasion over the summer when the oil price rocketed. It has been seen in airlines going bust or airline staff being laid off because of high aviation fuel prices; in rising prices, particularly of food, because of rising transport costs; in other businesses forced to either lay off staff or close their doors because of uncontrollable energy costs; in people canceling vacations and cutting back on spending because of inflation triggered, again by soaring energy prices.. ..some oil producers have to accept a degree of responsibility. Last month, when OPEC, much against Saudi Arabia’s advice, voted to cut production in an effort to keep prices high, they acted — like the speculators and the bankers — from self-interest. They could not see, or would not see, the damage that excessively high oil prices was doing, not just to the global economy but to long-term demand as well, with high prices pushing consumers to look to alternative technologies.."  [more]

"The Vital Triangle: China, the United States, and the Middle East" - A Conversation with Jon Alterman

"You know, on the one hand, there’s just a business driven desire to diversify. They understand China is, without question, a growing market. They hear talk in the United States about ending dependence on Middle East oil, which upsets Middle Eastern producers who wonder about the future of the relationship. China is much quieter, although people in China, Chinese strategists, certainly talk an awful lot about ending dependence on Middle Eastern oil. But realistically they’re not so sure how they can do that. There are also some ways in which the American-Saudi relationship is bound up in emotion. Americans want to have an emotional relationship. Saudis with experience in the United States have an emotional relationship. There’s a way in which the relationship with China is a pure business relationship. It’s unsentimental. It’s based on financial principles. There’s a certain attractiveness in not getting emotionally involved for many Saudis who feel that they’ve been burned by the United States. The idea of a country that doesn’t profess a desire to change Saudi society is attractive. If it is not an alternative, it is at least a supplement to the long standing U.S. relationship.."  [more]

"The Vital Triangle: China, the United States, and the Middle East" - Chapter One - Introduction - Jon B. Alterman & John W. Garver

"From Washington, Hu went on to Riyadh, Saudi Arabia, where the mood was much different. A carefully scripted tour went off without a hitch, and the two countries signed agreements strengthening cooperation in several areas, including energy exploration and security. Hu also became one of the first foreign leaders ever to address Saudi Arabia's Consultative Council, the country's appointed parliamentary body. There were no protestors, no uncomfortable conversations, and no damage control. Two nations made narrow agreements in their mutual interest, uncomplicated by either country's sense of its global role or its global responsibility. Saudi Arabia has gas and oil; China needs gas and oil. On that basis, agreements were made. Hu's Arabian sojourn piqued interest in the United States, in part because the U.S. agenda with each country is so complicated. The U.S.-Saudi relationship has been close for more than a half-century, but what began as a relationship in the 1930s principally about oil and energy security has evolved into one that also concentrates heavily on counterterrorism, radicalization, the Arab-Israeli conflict, Iraq, Iran, and human rights.   [more]

"The Vital Triangle: China, the United States, and the Middle East" - Chapter Three - Saudi Arabia: The Pivotal State - Jon B. Alterman & John W. Garver

"Of all the Arab states finding themselves between the United States and China, Saudi Arabia is the most pivotal among them, and of all of the Middle Eastern countries, Saudi Arabia has courted China most assiduously. As mentioned above, King Abdallah's first overseas trip upon ascending the throne was to China. His visit in January 2006 made him the first Saudi king ever to visit the People's Republic. In 2007, Saudi Arabia (along with Angola) was China's largest source of foreign oil, exporting more than a half million bbl/d. By the end of the decade, Saudi and Chinese officials expect that number to double. Saudi exports to China have grown remarkably quickly; as recently as 1995, Saudi Arabia ranked twenty-fifth among China's suppliers.."    [more] 

Update on Global and Local Financial Conditions - Oct 16 - Brad Bourland

"..The economic outlook for Saudi Arabia is deteriorating. Oil prices dropped below $75 for the first time in over a year yesterday and could well slip below $70 per barrel by end-Friday. We expect Opec to cut production in order to defend prices of around this level (though its next scheduled meeting is not until November 18) and indications are that Saudi Arabia has taken off the market much of the supply increase it introduced in the summer. Lower oil production and prices will dramatically reduce the budget and current account balances, though in both cases we still expect relatively comfortable surpluses.."  [more] 

In the News

Fall in Oil Prices Douses Persian Gulf's Inflation

"..The double whammy of tumbling oil prices and tight credit isn't all bad news for the petro-states of the Persian Gulf. For the time being, it's providing a much-needed breather from breakneck growth that just a few months ago threatened to overheat the region's small but booming economies. Oil prices would have to fall much further -- and stay low for perhaps several years -- before crimping government budgets. Meanwhile, a sudden slowdown in local and international financing could do what the region's central bankers have so far failed to: rein in the region's runaway inflation.."   [more] 

Happy Anniversary: Thirty-Five Years After the Oil Embargo

"..Thirty-five years later, the world is still on tenterhooks, waiting to see what OPEC does with the oil spigot. This time, though, an embargo isn’t in the cards—just an old-fashioned cut in oil supplies. The oil cartel will meet next week in Vienna, and will cut at least one million barrels of oil production per day, Qatar’s oil minister said. OPEC could cut further at its regular December meeting. That’s probably a bigger cut than will actually be needed to balance global oil supply and demand and stabilize falling oil prices, Barclays bank argues. Demand for oil is plummeting with the economic crisis and will likely fall even more next year. And non-OPEC countries notoriously miss their oil-production targets. Which means the oil market will probably come into balance early next year anyway. But oil markets are impatient, and want balance now.."  [more] 

In global crisis, oil insulates Gulf

"..Against the backdrop of an imploding global financial system, one of the world's richest men unveiled plans to build the world's tallest building in Saudi Arabia. Prince Alwaleed bin Talal bin Abdul Aziz revealed a display model of Kingdom City, a $26.7 billion mini-city to be constructed near the Red Sea port of Jeddah. At its center will be a tower more than a kilometer high (the exact height is a secret) for offices, luxury residences, and a five-star hotel. With a fortune estimated by Forbes at $21 billion, Prince Alwaleed, chairman of Kingdom Holding Company, doesn't have to worry about getting a line of credit, even in these financially shaky times. Still, his apparent confidence about the future reflects the predominant view in oil-rich Saudi Arabia and its Gulf neighbors about how the fiscal tsunami sweeping the rest of the globe may affect them. Despite repercussions here that have included a downward slide in oil prices and trouble in stock markets, government officials and outside experts forecast that their region will suffer, but not as much as most."   [more] 

Saudi seen on top of crisis, transparency an issue

"Saudi Arabia's government could step in to buy collapsing stock on the local bourse and the central bank will keep banks liquid if necessary, but the global financial crisis should have a limited effect on the oil giant. Barring surprises such as the sudden bank collapses that hit other major economies, analysts predict Saudi Arabia's status as the world's largest oil exporter offers it at least short-term protection even though falling oil prices will cut its earnings. "They have a cushion because of the oil money in the treasury and if anyone's going to be in a safe position it's Saudi Arabia," one Western diplomat said, reflecting the general view in the Riyadh diplomatic community.."  [more] 

Saudi poor swept aside by Jeddah development plans

"..When officials in Saudi Arabia's second city unveiled ambitious development plans this week, Abdul-Kadeer Batargi and his neighbours found it hard to get caught up in the euphoria. For low-income residents in Nuzla and other poor districts in central Jeddah, the city authority's determination to turn the Red Sea port into a glass-and-highrise vision like Dubai means they will be turfed out of their homes.."  [more] 

Saudi Prince Aims For The Sky
"..The curtain has been lifted on Saudi Prince Alwaleed Bin Talal’s plans to build the world’s tallest building. Or at least some of the plans. The new tower will be taller than 3,280 feet--but the prince isn’t saying how much taller. "I don’t want to say [the exact height] right now," said the prince at an event Saturday night in this steamy city by the Red Sea. To do so would give other developers a specific height to surpass, he explained. Alwaleed is an international investor and one of the many nephews of the Saudi king. In March, Forbes estimated his personal fortune at $21 billion, making him the 19th richest man in the world.."   [more] 

Calendar

[details]

Middle East Institute 62nd Annual Conference
"US Middle East Policy: Pathways to Renewal"
November 20-21, 2008
Washington, DC

[details]

Keeping Track - Recent SUSRIS Items

More News This Week

• Islamic Books Project Launched in London [Oct 18]

• Saudi Stocks Shed Nearly 3% [Oct 18]

• New Madinah Airport to Handle 30 Million Passengers Annually [Oct 18]

• Lebanon and the Saudi Position [Oct 18]

• PM to Visit Saudi Arabia, Qatar [Oct 17]

• Saudi Minister: Imams Unable to Keep young People From Extremism [Oct 17]

• Saudi Arabia Guarantees Bank Loans and Liquidity [Oct 17]

• Shoura Looks at Saudis Abandoning Families Abroad [Oct 17]

• OPEC Moves Crisis Talks to Oct. 24 [Oct 17]

• For Saudi Human Rights Association Death Penalty is Lawful [Oct 16]

• Unigold Gets Saudi Mining Licence [Oct 16]

• Saudi Inches Up Despite Gulf Losses [Oct 16]

• Women’s Presence at Eid Al-Fitr Festivities Sparks Heated Debate [Oct 16]

• Rice Vows to Leave No Stone Unturned in Peace Bid [Oct 15]

• Saudi Arabia Hosts Taliban Talks to Bolster Pakistan [Oct 15]

• OPEC Cuts 2009 Crude Oil Demand Forecast for a Second Month [Oct 15]

• Saudi Cuts Oil to Europe [Oct 15]

• Women Students Beat Men to Clinch More Foreign Scholarships [Oct 15]

• A Prince for all Titles [Oct 15]

• Malaria Nearly Wiped Out: Al-Manie [Oct 15]

• Intellectual Rights Forum in Jeddah Set [Oct 15]

• Amnesty Condemns Saudi Executions [Oct 14]

• Saudi Maaden, Rio Tinto Aluminum Venture Delayed [Oct 14]

• Lebanon Leader Woos Saudi Investors [Oct 14]

• Kingdom Part of CCS Initiative [Oct 14]

• Biggest 1-day Gain for Stocks in 20 Years [Oct 14]

• OIC Finalizing Action Plan for Women Empowerment [Oct 14]

• Saudi Cuts Oil to Europe, Keeps Asia Supply Steady [Oct 13]

• Rate of Earnings Growth Declines in Saudi Arabia [Oct 13]

• Oil Can Fall to $50-$60 if Credit Stays Tight [Oct 13]

• Kingdom Still Needs 6 Million Housing Units [Oct 13]

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