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EDITOR'S NOTE:
The Middle East Institute and Foreign Policy magazine hosted a panel to discuss an article written by Professor Greg Gause titled,
"How to Reform Saudi Arabia Without Handing It to
Extremists." The article took the form of a memorandum addressed to Crown Prince Abdullah noting that, "To survive, the monarchy must battle the militants, reassure the religious establishment,�and give the middle class a taste of democracy." The panel, which met in front of a full house and was broadcast live via C-SPAN television, was held at the Carnegie Endowment for International Peace in Washington, DC on September 16, 2004.
We are pleased to share a transcript of the proceedings.
[Part 1 distributed separately - click
here]
How to Reform Saudi Arabia Without Handing It to Extremists
Part 2
David Chambers: Jim, saved for last because we need a cold and hard look at reality. A lot of hopeful talk here. Tell us what you see in terms of these recommendations and these analyses if you would, please. How does this mesh with the realities of the oil market and other factors as you see them? How is the U.S. helping or hurting the Saudi reform efforts?
James Placke: Well, despite that open invitation to throw cold water over it, David, I don't think I will because I think the discussion among my colleagues has been very much to the point, and it underscores the fact that whether or not if the pace is sufficient, there's definitely a reform movement in Saudi Arabia. This conversation also reminded me of one of the great truths about Saudi Arabia, of which there are several. But, one of them is things move very slowly in Saudi Arabia. Everything has an antecedent, but often it's so remote that you can't identify it. This is true of reform as well.
Listening to my colleagues, I was reminded of a circumstance in the early 1980s when I was charge de affaires at the American embassy at that time. The late Senator Chaffee of Rhode Island scheduled a visit in July. In Saudi Arabia, anybody who can will be somewhere else in July, including much of the government. But, I did find a senior government official who was willing to meet with the Senator, that would be appropriate. He was also a prominent member of the royal family. The Senator and I came in and sat down, and the Saudi official took us from where we were that day in the early 1980s all the way to a constitutional monarchy. This was 20 years ago. This was a member of the family. So, these ideas are not brand new. They're not floating around among revolutionaries. They are widespread throughout the society.
Another indicator of that was after the first Gulf War, which ended in February 1991. There was the term the "Riyadh Spring," after the Prague Spring about a decade earlier. There was a moment. Women were driving as a demonstration of women's rights. There were various petitions submitted to the government -- one from the right, one from the left, if you will. But, what struck me about them was that they were virtually identical in what they were seeking -- transparency and accountability in government, equality before the law and greater political participation. Now, what these wings of the political spectrum would have done with these reforms, had they come about at that point, would have been vastly different. But, the agenda was pretty well determined and quite uniform, surprisingly so.
Usamah has mentioned that one of the early reforms, one of the most important ones, was the establishment of the Majlis Al-Shura in 1993. Well, that was three years later. The "Riyadh Spring" only lasted a couple of months, but the antecedent of the Majlis was this movement that really took on momentum and a life of its own that I think has continued to this day.
Clearly, reform has accelerated, especially under Crown Prince Abdullah, whose done I think an amazing job given his age and given the difficulties of unifying the family around reform. There were two things in Greg's article that struck me as evidence of this difficulty. One was, and it was almost a parenthetical issue that Greg raised but I think quite an important one, to what extent are the Saudi security forces -- who have not distinguished themselves lately -- penetrated and subverted by Islamist elements. I think that is an important issue, and one that is going to be part of what will control the pace of reform.
The other was his reference to the well-publicized arrest some months ago of three prominent and very moderate reformers. This is evidence that the Saudi government is not all on the same page. It generally goes back to the Ministry of Interior, which is probably the most conservative element in the Saudi establishment. Where does this leave us? Well, in my mind, there isn't a question of whether or not Saudi Arabia is in a reform mode. It is. Usamah has given a very compact and also very complete summary of the major elements of the reform movement program.
The questions in my mind are will it be fast enough and, secondly, how will we know?
Well, I guess I would suggest two benchmarks: the level of activity to identify and constrain the Islamist movement that is anti-Saudi government and anti-Saud family and the unity within the family with which this is pursued. As I said I think there are some questions at this point. We'll see how this proceeds.
Secondly, and Usamah touched on this well, the question of economic opportunity for a still rapidly growing population. More than half of the Saudi population is below the age of 18. There are no statistics on this but there are various ways that you can derive at least an estimate. Some of the better economists in the Kingdom puts current Saudi unemployment of working age, male adults somewhere between 20-25 percent. That's very high and it's getting higher every year. That's a pressing problem and the element of reform on the economic side is, in my view, as important as it is on the political side.
Finally a word on oil, which I can't of course refrain from getting into having spent the last fifteen years or so as an oil analyst. In preparing for today's discussion I thought I should go back and take a look at what's happening with Saudi oil lately. Well, Saudi oil production of course is way up. It's gone up by over a million and a half barrels a day in the course of this year -- from last Spring to the current time.
But where is the oil going? Well, to my great surprise, because I kept a chart for a decade or more, about the top five oil suppliers to the United States - the countries from which the US imports most of its oil - Saudi Arabia has been at the top for several decades and that's by design. To the Saudi establishment maintaining that position was an important element in sustaining, what was often referred to as the "strategic relationship."
Something has changed because Saudi sales to the US have fallen off the table. And that began at the end of 2002. What was happening at the end of 2002?
Well, we were getting ready to invade Iraq. And I think while there was what has been generally described as sufficient degree of cooperation with Saudi Arabia in enabling the United States to undertake that adventure, it clearly was not in tune with Saudi thinking, or really anyone else in the Arab world for that matter. I think what we are seeing is not punishment or retribution. I think it is, again, a slow recognition on the Saudi side that the "special relationship" is not so "special" anymore. If the Saudis, and they do, read editorials in American newspapers or read the comments of commentators and occasional remarks by senior government officials, I think they pretty much have to come to that conclusion. Well, what has happened? Oil is still coming into the US. More is coming in from Canada and Mexico where virtually it's in a dead heat for number one supplier. More is coming in from Nigeria, which by the end of the year I would say that Saudi Arabia would have fallen out of the top five and Nigeria will be very much in fourth place. The only consequence of this is, I think, the political consequence. Oil supply is not disrupted in any way at all. Saudi Arabia acknowledges repeatedly that its interest in long term oil market stability is paramount and it behaves accordingly. When it comes to oil policy I would listen to what Saudis say, but more importantly I would watch what they do. They often talk about quota adjustments but look at what their production is - sometimes it's going in the opposite direction.
The oil market is well supplied. Saudi oil supplies are now going into China. China has increased its imports to by 40%, or will in the course of this year. And China has become the world's second largest importer, superceding Japan and now just behind the United States. The reason it's going there and not going to the US is pure economics. In order to maintain that number one rank, as the premier supplier to the American market, for many years the Saudis did that simply by the way they priced their oil. That's the way you sell any commodity. If you price it attractively enough you will be the number one supplier.
In a general way, it would be difficult to document, but they were foregoing a larger net-back that they could have gotten on those crude oil barrels in East Asia of somewhere between 20 and 30 cents a barrel. In effect that was a subsidy to the American consumer. Well, that's disappeared and the market is reacting accordingly. Saudi oil is going to China. Its still coming here and will still continue to come here because it's such an enormous factor in the market. But I would draw the inference, that Saudi Arabia has drawn the inference, as I said, that the "special relationship" perhaps is no longer so "special." That may color how the two parties look at each other as we move down the road. I think in the end it's the internal questions of Saudi reform that are the paramount questions.
David Chambers: Jim, this is big news, certainly to me. If I can ask, do you have some numbers to go with that -- what were Saudi levels over the past five years and how far they've dropped.
James Placke: Well, Saudi exports to the US in, say, the last 20 years reached their peak in late 2002 at 1.7 million barrels a day. Statistics through the Department of Energy on imports into the US which are, by far, are only available through May. Up through May it had dropped from that level, 1.7, to just over 1.1 - that's 600 thousand barrels a day. That's a big chance. And it's sufficient as I said to probably take them out of the top five suppliers altogether by the end of this year.
David Chambers: Does that mean that Saudi Arabia, in a sense then, is no longer our foreign "ace in the hole" in terms of being a supplier. I mean, isn't the market currently in a situation where there are very low oil reserves world-wide and therefore, is there real significance for the shift.
James Placke: Well, what's significant is not where a given barrel of oil comes from, whether it comes from Venezuela, Nigeria, Canada or Saudi Arabia is really immaterial - setting aside questions of crude quality and suitability to certain refiners and so on, technical issues. What's important is that those barrels be available. On that side, Saudi performance I think has been exemplary. They've raised their production by as I said about a million and a half barrels a day in the course of this year. It's just that those barrels aren't coming here. Does that make the US any more vulnerable? No. In fact, maybe less so. Because now a greater proportion of our imports are coming from our two neighbors to the north and south, and from Atlantic basin countries including, interestingly enough, the United Kingdom - which is now I think about the number seven supplier to the US market - but also Nigeria, Angola, Venezuela and Columbia.
David Chambers: Greg, your article specifically mentions "pump up the volume." I took that to mean increasing oil production and so forth. Jim has just finished saying that Saudi oil is going elsewhere these days. Does this information change your thoughts or recommendations.
Greg Gause: No, actually what I thought in my memo - the memo format is kind of fun. Tom Friedman doesn't have a monopoly on it. You can kind of "be out there" a little bit more than you might be otherwise. The recommendation, was actually not on production, which they've taken up almost as high as they can go. One can talk about, what I would say was the miscalculation of the Saudi oil
decision makers at the beginning of 2004 when they misread the market and thought the prices would go down after the winter heating season and thus cut production, helping to spark the price increases. Once they realized they miscalculated I though that they behaved in a way that Jim says they normally behave to try to maintain some sort of market stability. To me it's the question of surplus capacity. The Saudis have, at costs to themselves - it costs money to sustain surplus capacity that you're not pumping from, the Saudis had basically played the role of the central bank in the world oil market. If there were problems they would increase production. They did after 9/11. They did in the ramp up to the Iraq war. They did when Venezuela was on strike. And so, they have solidified their role in the world economy by playing that central banker role. But now because of changes on the demand side - Jim mentioned in China and other places - we're at a point where there's precious little surplus capacity in the world. And if Saudi Arabia wants to continue to enjoy that kind of role and respect that its had in the world, in the diplomatic scene, I think it might have to invest some more in maybe ramping up its productive capacity - not so much its immediate production - but its capacity so it can continue to say that we have that million and a half, two million barrels of surplus capacity. So that if there is a serious short term disruption somewhere else because of natural disaster or political events "we" can fill the gap. That's been a role the Saudis have played for some time and it's central to their standing in the world economy.
David Chambers: Tom, I going to ask you and then Usamah, if I can, your reactions as well to this information from Jim.
Thomas Lippman: I don't believe that information was particularly surprising. Remember that, some years ago when I held the "oil portfolio" so to speak, as a journalist, Jim was one of my tutors on this subject. It is absolutely true that oil has no nationality. It is also true that the record shows that even state producers in countries with which we have terrible relations will continue to sell oil because they need the money. It was true in Libya and it was true in Iran. So the provenance of a particular barrel of oil, is, as Jim said, I agree, irrelevant.
There's a certain logic to the growing economic and even political relationship between Saudi Arabia and China. Just last week I believe it was the Saudis announced the creation of a sort of permanent diplomatic liaison staff for regular consultations on political issues with the Chinese. And if you go all the way back to 1988 and the infamous SS-20 missile sale from China to Saudi Arabia, it seems to me that there's a certain logic for the Saudis looking around and saying, "wait a minute - we need a good relationship with a country that's a permanent member of the Security Council, is a strong and growing market for our oil, is a nuclear power, and, by the way, is untainted by having invaded any Arab countries. That may well be why, and I'd like to hear from Jim on this, after all the talk about which foreign oil companies were going to be brought in to develop the natural gas industry, the United States was not included but China was.
James Placke: On think on the latter point the answer is pretty simple. In fact, the contracting process that let contracts for four projects in the gas development area that were announced last March was extremely open and transparent. Even the American competitors readily acknowledge that. Chevron came in second in two of the four projects - two on which they bid. And Chevron was the original concessionaire in Saudi Arabia that actually discovered oil. Saudis would have been happy to have Chevron there but it's a strictly commercial consideration.
Thomas Lippman: I'd like to believe that.
James Placke: I can't find anything else in it, Tom, I really can't. I've looked.
Greg Gause: It probably does have political implications down the road. Because, for decades the only real, if you will, societal base of support for US-Saudi relations - not at the elite level - but in society, were American businesses, particularly oil companies, that did business in Saudi Arabia. And after Saudi Aramco completed the participation transfer and it became a completely Saudi owned company you found that Mobil just wasn't as interested in carrying the domestic political water for Saudi Arabia in the US. And I thought that the gas deals would be a way to reengage big American industry back in the energy sector in Saudi Arabia in a direct way.
I don't doubt at all that these were financial decisions. The rate of return, from everything I heard, was just not what American companies demand these days. Some of these national companies, like in China were willing to take a lower rate of return because they saw, perhaps, a political take on this. But I do think this is yet another reflection that the relationship isn't as "special" as it used to be.
James Placke: There is another tradeoff in this oil transaction, or set of transactions, there's a general expectation that Saudi Arabia, after having knocked on the door in China for 20 years will finally be allowed to come in and invest in a Chinese refinery - probably taking roughly a half interest. Something they've wanted to do to expand their market reach in that area. It is the fastest growing economy in the world - it has been for several years. A lot of it is market driven.
Your description of the attributes that a significant partner for Saudi Arabia ought to have - permanent member in the Security Council, nuclear power, and so on - does obviously fit China very nicely. Somehow I can't quite bring myself - I may be yet to be educated on this - can't quite stretch my imagination far enough to see Saudi Arabia and the Chinese having the kind of relationship that the United States and Saudi Arabia once had and no longer have. I think it's just a readjustment - part of the rebalancing around the world, post Cold-war. That's really when the relationship began to go downhill -- when we lost that unifying element of having a common enemy: God-less Communism in the case of Saudi Arabia and the Soviet menace in the case of the United States.
Thomas Lippman: But it also reflects the maturing of Saudi Arabia as a society. Saudis no longer need TWA to teach them how to run their airline.
James Placke: Absolutely, and they don't need the four Aramco partners to teach them how to run their oil industry. They learned those lessons and they learned them very well.
Usamah Al-Kurdi: I was worried about me talking about oil. Because I can spend three or four hours talking about it. Gentlemen, thank you very much. I don't need to make any comment here, [laughter] except just to confirm that in additions to all the occasions that were mentioned before when Saudi Arabia pumped up the oil to keep it at reasonable prices and quantities was the 80s when Saudi Arabia decided to play the "swing producer" role.
The idea was there was too much speculation and somebody needed - at great expense to Saudi Arabia's economy in those days - but it has been important for us to make sure that the oil is available in prices and quantities that will support economic growth in countries that import oil. Two comments here, one on the unemployment. When a university professor announced his calculations for unemployment in Saudi Arabia was 24 percent. I had to call him three or four times, sent him three or four written notes to say "please give me a copy of your study." Nothing came through. When the Saudi American Bank report said unemployment - I'm talking about a few years back - it said unemployment in Saudi Arabia is at 14 percent. I called a guy I know there and said, "Where did you come up with this number. Can I see your calculations?" He said, "No, but I got them from a report by the American Embassy in Riyadh." So I called the American Embassy in Riyadh and I said, "Can somebody give me the numbers you used to come up with 14 percent?" He said, "No, we can't because we took it from Saudi-American Bank."
My calculation is five and a half percent. Finally the government realized that they actually have to calculate and announce the unemployment rate and their number is nine and a half percent. But it's a number that I think is not based on statistics, but conclusions driven from other indicators. So I think it may be less than the nine and a half percent that the government announced.
The issue of moderate reformers that were arrested. To really understand what happened there let's look at the complete picture, not part of it. There were ten people arrested. Two or three days later seven of them were released and about a week later the three were taken to court where they are receiving a public hearing. Media is present. The trial is being made public. I think this is an important part of the reform that has happened in Saudi Arabia -- is the way the government is dealing with these people.
Thomas Lippman: David can I ask a question?
David Chambers: Absolutely.
Thomas Lippman: If you permit me I'd like to go back to the topic of Greg's article. As I understand the gist of your argument, it's that because of the primacy of the security issue, Abdullah would do well to proceed cautiously on certain reforms, because the kind of reforms that we might approve of, only stir up opponents of the regime and cause trouble. One of the things you say is "You, Abdullah, need to be particularly cautious about women's issues in the short term because nothing else could as quickly alienate the religious leaders whose support you need for the security fight." Should women be allowed to vote in the elections?
Greg Gause: No.
I think the women's issue is the third rail of Saudi politics. I think it's the one thing, one of the most important things, that would unite - let's call them from the Islamists wing, or movement, from the Mufti of Saudi Arabia over to the most radical, violent Al Qaeda type. If you want to take one issue that would unite them, I think it would be on women's issues.
Should women vote? Of course they should. And eventually the Saudis - and this has to be a top down thing. Because it's not going to come from the bottom. I don't think it's going to come from society. There are too many obstacles. There's too many entrenched interests and it's too sensitive an issue.
I think that the issue immediately of women voting in the municipal elections would cause more problems for the reform agenda in Saudi Arabia than it would help. If there's one issue I think that would mobilize guys with long beards and short thobes to come out and vote for people who would stand against a general reform agenda in Saudi Arabia it would be women's issues.
I think that there are other things that can be done. I think the women's driving issue is - society is ripe for this. Look, women drive in Saudi Arabia - out in the countryside, they do. So phase it in.. only women who have jobs - that's one way to start; only during daylight hours. There are ways that it can be phased in and it can be done not as a social change but as an economic reform. And I think that as economic reform it is much more saleable. Look, how many billions of dollars leave Saudi Arabia every year because the foreign drivers that are hired to drive women are sending money back to their families in Pakistan, the Philippines and wherever they're from.
If you sell this as an economic issue I think you can actually make some changes on the women's rights front that would not engender a big backlash, that, at least in my judgement, a declaration of giving a right to vote right now would.
David Chambers: Jim..
James Placke: To try to lend a little perspective to this particular issue of the status of women in Saudi Arabia. On one of my visits to the Kingdom in the late 1990s happened to coincide with a speech that Crown Prince Abdullah made at Yanbu in Western Saudi Arabia on the Red Sea. It was widely covered in the local media and the entire speech was about the role of women in Saudi society. This was a nettle he seized voluntarily, no one was pushing him, nobody could push him into doing this. It was really very forward looking and I thought very well grounded, and very much welcomed speech. But nothing happened. And about three weeks later Prince Nayef, the Minister of Interior, made a kind of a counter speech. It was pretty clear who was on which side and it was an issue that did not reemerge for quite a long time.
I think the Crown Prince has a sense of these things and has a sense of where he would like to see things go - I have no question. But getting to push them there is difficult.
Going back to where you started, Tom, on Greg's article, there are things that need emphasis on this question on how you manage then the expanding role of women in Saudi society. The other side of the coin that I thought Greg reflected very well in his article was that the last thing you would want to do is have, let's say, an American style election today, because what you would get would be an extreme Islamist government. And that would not be in anyone's interest. So it's a very difficult path to walk. You can go too slow or you can go too fast.
David Chambers: Doctor Usamah, you're our guest here. Do you have any comments for us?
Usamah Al-Kurdi: When French television asked my wife if she wanted to drive, her answer was, "Why do people from other countries keep pushing things on my agenda?"
Women in Saudi Arabia are a lot more interested in jobs and education than driving or anything else. I was reading a very interesting few page debate among women on whether or not they wanted to participate in the upcoming elections. I think they were divided 50/50. But sometimes I think maybe we should allow the women in Saudi Arabia to decide what is on their agenda. And I'm sure they can make their own decision.
Are women going to vote this time? I don't think so. Are they going to vote in the future? I think they will. When? I don't know.
David Chambers: It is amazing that many Americans spend a lot of their lives pursuing enough money so they can be driven. I guess the grass is always greener.
We are going to have to wrap up today. This discussion could definitely go on all day, and probably should given the caliber of our experts. But we do have to wrap up.
[Part 1 distributed separately - click
here]
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