This panel arose initially out of the article "How to Save Saudi Arabia" in the current issue of Foreign Policy. Given the U.S.-Saudi relationship and the U.S. presidential elections around the corner, as well as Saudi elections, which now seem a little further off than before according to last weekend's news, this article and this panel could hardly be more timely.

The author of "How to Save Saudi Arabia" is Gregory Gause. Greg is professor of political science at the University of Vermont, who specializes in Gulf countries and has written a book on Saudi Arabia and its neighbors called "Oil Monarchies." Usamah Al-Kurdi is currently a member of the Saudi Majlis Al-Shura, or Royal Consultative Council, and president of his own company. He has held numerous posts in the Saudi government and associated organizations, including the post of Secretary General of the Saudi Chambers of Commerce. James Placke is a senior associate at Cambridge Energy Research Associates whose Washington office he headed for more than a decade. Previously, Jim was a Foreign Service officer, who held the post of Deputy Assistant Secretary of State for Near Eastern Affairs during the Reagan Administration. Thomas Lippman is an adjunct scholar at the Middle East Institute, whose latest book, "Inside the Mirage," was published earlier this year. He is a veteran Washington Post journalist, and in fact, wrote the Washington Post stylebook. I would also have you note that both Jim and Usamah are members of the executive board of the National U.S.-Arab Chamber of Commerce here in Washington.

Greg's article probably raised more questions than it answered, as any good article should, with an underlying theme that applies not just to Saudi Arabia but all nations, namely the issue of legitimacy through governance. Two questions arise out of that that I would ask you all to keep in mind today. First, how does a nation balance internal security with democracy? Second, how does a nation balance immediate security with long-term security needs? So Greg, let's start with you. What are the recommendations that you made in your article, please?

Gregory Gause: Well, I was kind of in the middle of what you usually hear about Saudi Arabia in the United States, which is either they have to change completely, or they shouldn't do anything at all, and they're just fine the way they are. I thought some of the most important things that the Saudis had to do, regarding political stability and political development, were: one, the security situation.

David, you mentioned the trade-off or the question about balancing internal security with democracy. I'd argue you can't have anything approaching democracy unless you have internal security. I mean the one is the prerequisite of the other. If you don't have internal security, as we see in Iraq, you can't have people voting, you can't have people practicing open politics. So, I thought that was the first and most important task in front the Saudi regime. I don't think that that is anything that they don't know. They've certainly in the last year and a half taken a much more serious attitude toward this. The fact that there are regular confrontations now between the Saudi security forces and extremists is an indication that they are pushing the issue. They've got to do a better job. But, I think that they realize that that's the issue in front of them. I think also in the midst of the security fight, the Saudi leadership can't lose sight of the fact that there is a demand from the Saudi population, which is increasingly educated, increasingly literate, increasingly urban -- all social indicators in other parts of the world and other countries that have preceded increased demands for increased political participation.

There are demands from the Saudi population. I think a couple of the most important issues in front of the Saudis immediately are economic transparency. People want to know where the money goes. There is one school of thought that says that in oil countries, because the government doesn't have to tax people, people aren't as concerned about politics. I'd argue in fact maybe just the opposite. Because in an oil country like Saudi Arabia, so much of your everyday life and so much of your economic security is based on decisions the government makes, you have in many ways even more of an interest in having some say over what the government does or at least knowing what the government is doing. So, economic transparency in times of oil boom is important. People want to know where the money is going. In times of oil bust, people want to know, perhaps even more, where the money is going. I think the Saudis have to use their oil windfall of the last few years in ways that respond immediately and publicly to public needs, particularly in the area of infrastructural development.

The Saudi population has grown enormously. The demands on the Saudi infrastructure in terms of water, electricity -- basic elements of modern life are growing, and the infrastructure has to respond to them. There are problems in that regard that need to be dealt with. I also think the Saudis in the midst of the security crackdown shouldn't loose sight of the fact that the table has been tilted in Saudi Arabia for decades in terms of political organizations and political expression. I think they should give those on the more reformist side the same kind of treatment that Islamic activists receive. I think that if you are nonviolent and calling for political reform, that's no reason to be thrown in jail. The Saudis have to redress .. I think in their own interest, the Saudi government and Saudi family has to redress that balance and allow other voices to be heard and to organize and get themselves ready for more participatory public political life, or what you're going to see when things open up -- elections and the public sphere in general are going to be dominated by people who are of the more extreme socially conservative side of the spectrum in Saudi Arabia.

Finally, I was cautious on the whole idea of elections. I think municipal elections are fine. I think they should actually move to electing everybody on these councils. First, we've got to see what these councils do. I think they should have some real powers, and we're not really sure what they're going to do yet. I think a move to national elections, like the Majlis Al-Shura, would be counterproductive from the point of view of both reform and stability in the short-term. I think that is a long-term goal. I don't think that is immediate. I think actually that too quick a move to that could set back other elements of the reform agenda.

David Chambers: Greg, thank you very much. Dr. Usamah, you sit on the Consultative Council of the King, so if I could ask you with events in the Middle East having changed so much, so quickly, how did Greg's recommendations for a seething Saudi Arabia stack up for you?

I wonder if I can ask in light of the last seven days' news, in particular bombings in Jeddah, lawsuits filed by the New York and New Jersey port authorities against the government of Saudi Arabia, a second postponement of the Saudi municipal elections from this November to February 2005, and yesterday's State Department report rebuking Saudi Arabia for religious human rights violations and placing it in the company of countries like North Korea and Sudan -- do events like these change or reinforce Greg's recommendations in your opinion?

Usamah Al-Kurdi: David, thank you very much. Ladies and gentlemen, good morning and thank you all for being here today. Let me tell you what we are doing about reform first before I attempt to answer that question and comment on Professor Gause's thoughts.

Reform is a serious issue in Saudi Arabia. The first reform steps took place in Saudi Arabia in 1993. So, it's not something new to Saudi Arabia to actually start planning and executing its reform plans. In 1993, the law to establish the Shura Council, or the Consultative Council, was issued, and by the way, the Shura Council is now a member of the International Parliamentary Union, recognizing it as the parliament of Saudi Arabia.

In that same year, the Basic Law of government of Saudi Arabia was issued. The law establishing regional councils, there are 13 different regions in Saudi Arabia. Because of this law, these regions now have their own councils.

Reform steps followed after that in the social, political and economic area. I don't want to give you a lecture about all these events, but it is very important that we recognize that this is now a policy of the government of Saudi Arabia. Some very serious steps have been taken. Not least of them is the change in the Shura, or the Consultative Council law, that gave the Consultative Council more authority and more power. This only happened three or four months ago. The reform steps that took place in Saudi Arabia were quite extensive.

Personally, I've been following these steps in the past 10 years, and I've actually been recording them. Not last, of course, of these reform steps is the municipal elections. We have seen other reform steps in other areas. We have seen in the political area the extensive licensing - I don't know if licensing is the correct word -- of several society organizations in Saudi Arabia. We have seen many initiatives from Saudi Arabia to develop, reform and for cooperation not only in the GCC countries but also in the Arab world. Let's not forget that Saudi Arabia, 20 years ago produced the Fez initiative for peace in Palestine. We have created two human rights committees, one the private sector committee, and very soon the government committee is going to be started. We have created the National Dialogue Center, which has been in the past few months addressing extremely important issues for the future of Saudi Arabia.

Again, I can talk for a long time about economic reform. Perhaps I will make later comments on the economic development, but basically, we have been doing three things in the economic area. One, we have been issuing new laws and reviewing existing laws to try to support our economic growth. We saw the issuance of the capital markets law and the insurance law. We saw the labor law being rewritten to address the changes that are taking place in this century. In another area, we have been creating new organizations to help economic growth. We have created the Supreme Economic Council to fast-track economic decisions. We have established the new investment authority and created the tourism authority, hoping to develop tourism as an area of new investments in Saudi Arabia. 

That brings me to the third area of development in the economic sector. We have opened up many different new areas for investment for foreign and domestic investors. We have seen the privatization of water desalination and power generation. Mineral resources are receiving a lot more attention now. It is now possible for the private sector to invest in higher education. So, there is a long list of railroads, toll roads and other areas of investment because I think as much attention that you can give to economic growth in Saudi Arabia, the more likely we are to succeed with the reform plans that we have.

Of course, we are addressing many different areas and many aspects of social life as admitted by the representatives of the Congress here who have visited Saudi Arabia lately. The textbooks in Saudi Arabia now satisfy the opinion of many countries around the world. We have seen a lot more attention to child abuse and domestic violence. We have now issued a law to provide Saudi and expatriate labor work with medical insurance. We have reorganized our charities to direct all their services within Saudi Arabia, except for one organization under government supervision that is authorized to do international charities. A lot of attention is also being given to small and medium-sized enterprises. We think creating jobs is one of our most important challenges in the future.

The reorganization of the Saudi Credit Bank took place only a few days ago. This is where some of the government budget surplus has been announced like it would be used something to the term a billion dollar to expand the operations of the Saudi Credit Bank. This bank used to have a capital of $50 million. It's now almost a billion dollars. The idea again is to support small to medium-sized enterprises.

Let me add a little bit here and try to address one point that Professor Gause asked, which is the use of the surplus from the increase in the price of oil. The government announced only a week or 10 days ago that 60 percent of the surplus is going to go to the payment of the public debt. The public debt is in the tune of about $200 billion I think. A large portion of the surplus will be used to pay that public debt, and it is all domestic. The other 40 percent of the surplus is going to be used for: one, development projects in area of education, the area of health services, the area of roads and similar development projects. Another part of that surplus has been planned as I said earlier to go to the credit bank. But, a major portion, something in the order of $3 billion is going to the issue of housing. We have a real estate development fund, and now, they have $3 billion more money to develop the housing area. I don't want to spend a long time talking I'd rather be answering whatever comments you or the panel might have here. Thank you very much.

David Chambers: Just a quick question. How big is the current public debt that at least is being intended to pay? How much is going to be paid out?

Usamah Al-Kurdi: The current public debt is less than $200 billion. The surplus is to the tune of $30 billion dollars. Sixty percent of that will go the public debt. Now, more important than the actual amount of money that is going into the payment of the public debt, is the fact that servicing the public debt will be reduced that much. So, this frees more of the government budget to do projects and create more jobs rather than pay to service that debt.

David Chambers: Greg, that is an amazing picture that Dr. Usamah has just given us. Does that mesh with your own recommendations? What is your take on that?

Gregory Gause: Nothing in the article is foreign to what has been talked about in Saudi Arabia over the last decade. In fact, I cribbed most of it from Saudi friends who were kind enough to let me sit in on their conversations over the years. I think that there is recognition in Saudi Arabia the direction that things have to go. It's a question of speed and implementation. The government is extremely cautious. That caution has served the Al Saud family well in the past, but they are facing these demands, the immediate ones about security, which I actually think they are pretty well equipped to handle. But, the longer-term ones, which are new in the Kingdom are about demographic pressures and economic changes. There I think it's not a question of recognition; it's a question of action. What Dr. Al-Kurdi has set out is that there have been some actions. The question is will there be more, will they be sustained, and will higher oil prices lessen the belief in the need for substantial changes, which I think would be very problematic for the Saudis in the long-term.

David Chambers: Well, we'll definitely visit oil and oil prices in just a moment. Thomas, you have traveled extensively in the Kingdom, and you recently published a book on U.S.-Saudi relations in the 20th-century, "Inside the Mirage." What were your thoughts on Greg's article when you read it? What do you think the Saudis need to do? How important is Saudi Arabia's relationship with the U.S., especially when we make it so hard for Saudis among others to even enter this country?

Thomas Lippman: First, thank you for inviting me to participate today, and I want to salute Greg Gause for an article that meets the criteria that were always drummed into my head when I was in daily journalism -- accuracy, brevity and clarity. It is now 28 years since I first visited Saudi Arabia. As everyone in this room knows I'm sure the country has undergone probably the most spectacular, mind-bending, physical transformation that any society has been through in such a compressed timeframe in human history. It's always amazed me that the society did not come unhinged but retained its social cohesion in the face of what has happened.

Now, as Usamah pointed out, as he said, there's now a quiet visible, even to the most casual observer, a quiet visible movement toward what I would call social and political change, not at the same pace or the same scope as the physical change. But, it's unmistakable. It's happening not because Crown Prince Abdullah said it should happen but because it is human nature. You have a much different population in Saudi Arabia now from what you had a generation ago. You have a lot of educated women, who are clamoring for a larger place in the social and economic life of the country. You have more people with more access to more information by many channels than you ever had in the past.

The issue as Professor Gause's article points out clearly is how to manage that change in ways that meet popular aspirations while maintaining stability. I would just offer a few brief comments on Professor Gause's article. For those of you who haven't seen it, it takes the form of a memorandum to Crown Prince Abdullah on certain things he can do or perhaps not do in order to achieve the goal of progress while maintaining stability, such as for example, expand religious tolerance or win the battle of ideas, to give the Consultative Council a higher profile. I was quite interested to see you come out and in your list of recommendations, include in so many words a very blunt recall Prince Bandar. Now, this I think is probably accurate to say, that this reflects what a lot of your Saudi friends have been telling you because it's no reflection on Prince Bandar, a witty and energetic and quiet entertaining gentleman. Saudi Arabia, in order to maintain its valuable and necessary relationship with the United States, now needs a different kind of ambassador. I heard this from many people in Saudi Arabia. Days when the talents of a Saudi ambassador were needed to get AWACS sales through a reluctant Congress are long in the past. What's needed now is to build or rebuild the relationship between Saudi Arabia and the American people or as Greg Gause said, "Now you need someone who can sell Saudi Arabia as a reliable partner to the American public." Prince Bandar, whatever else you think of him, is so distant from the American public that I don't believe he can fulfill that task.

I would add one recommendation that's not on your list of recommendations to the Crown Prince. That would be to settle the succession issue. Get out in front with the succession issue and show the Saudi people that an energetic and magnetic personality will come after. If you think of Abdullah and Sultan as the Andropov and Chernenko of Saudi Arabia, you can see that it won't be long before they need their own -- I don't want to say their own Gorbachev -- but their own vigorous leader for a new generation. I would recommend removing the uncertainty about this and letting the Saudi people know that someone whom they trust, admire, respect and are willing to follow is waiting in the lines. Then, I would just add, I believe and I said it in my book, that for all the differences between the United States and Saudi Arabia as countries and societies, it's hard to imagine two countries that were more different when the relationship between them began in the early 1930s -- socially, economically, politically, religiously, artistically -- anyway that you could imagine.

Through great efforts and a great deal of patience and a great deal of energy and through some mutual necessity, this relationship has been made to work for both countries. I think it'll be valuable to both to continue to do so. I would just say to people in the United States that in your understandable impatience with the way the Saudis do business and the way they run their lives and the way they structure their society, it's useful to keep in mind that the unified Kingdom of Saudi Arabia is 72 years old. Where were we 72 years after the adoption of the Constitution in a comparable stage of our national development? We were preparing to fight a civil war over the slavery that sustained the economy of half of our states. We were busy wiping out our indigenous population, and women couldn't vote nor would they for decades afterwards. It's useful I think for Americans to evaluate progress, change, reform, whatever you want to call it in Saudi Arabia in the context of the way real societies work, not the way we'd like them to work.

David Chambers: Thank you for that excellent perspective. Greg, I turn to you first and say what do you say to a Saudi Gorbachev? Needed? Do you have anybody picked out yourself since you're making the recommendations?

Gregory Gause: Look, succession is the most sensitive issue for the ruling family in Saudi Arabia. It's the one in which they are least open to foreigners meddling, and there have been foreigners who have attempted to meddle in succession issues in the past. Most notably, when Gamal Abdul Nasser was president of Egypt during the last major succession fight in Saudi Arabia between then King Saud and then Crown Prince Faisal.

I don't have any recommendations about who. I think Tom is absolutely right that the primary task of a ruling family, if it's going to maintain itself, is to sustain an orderly succession that maintains the order in the country, the political order and the economic order. The Saudis have done that pretty well, but they face uncharted waters because since the founder of the modern Kingdom, King Abdul Aziz, died, succession has gone through his sons.

At some point, it is inevitable that there will be no more of the King's sons. There is no template or precedent for how succession goes to the third generation, to the generation of grandsons. Before the generation of the sons disappears, it's incumbent upon them to have a procedure in line so that that generational transition is smooth. This is a matter that they have to handle. I don't think outsiders can actually tell them what to do.

We don't know the inner workings of the family. The thing about the family is that those who talk about what's going on in the family doesn't know, and those who know about what's going on in the family don't talk. I think that's absolutely clear. But, the issue is there.

David Chambers: Usamah, Jim, do you have any comments on Thomas's recommendation?

James Placke: Nothing specific.

Usamah Al-Kurdi: Let me say that what Tom and Professor Gause just said discredits the fact that Saudi Arabia is a country that is run by institutions. The creation of the Consultative Council and the upcoming municipal elections -- I also anticipate in a year or two or maybe three, the elections of members of the regional councils, possibly in the future, members of the Shura Council, which means you probably won't see me here. [Laughter] This is a country of institutions. Let's think of it this way when we think about the issue of succession.

Now, if I may, this other issue that was raised earlier .. I mentioned the reform started in Saudi Arabia in 1993. The royal address to the Shura Council about two years ago was very clear in setting up reform as a policy of the government and addressing issues that are of interest to women and participation of the people in the policymaking process. It was very clear in the King's address to the Consultative Council at that time. So, we are not talking about individual or isolated steps that were taken left and right. The other point I would like bring up is that I would like to repeat the point about evolution. What is happening in Saudi Arabia in my opinion is a natural evolution of nations. Our country is 70 years old. The unification of Saudi Arabia actually started 100 years ago, but the name Saudi Arabia was only adopted 70 years ago. We have 100 years of experience behind us, and we know that this evolution is necessary, and this is why we are actually going through with it.

My last comment is on the issue of internal security. Rather than internal security and democracy, I think in this stage we are looking at internal security and reform. This is something that we need to pay a lot of attention to in my opinion. We may have reached the peak of terrorist activities in Saudi Arabia, and I'm saying that because I am following all the events there because I'm comparing with other countries - Red Brigades, the Basque movement, the experience of Egypt and other countries. I think we may have reached a peak there.

At the end of the day, have we done everything that we want to do? I don't think so. We still have a lot of things to do. We anticipate to have to continue to reform many aspects of our country so that we follow again the natural evolution stages. Are we going as fast as we should be going? Let me be frank with you, I don't know. I would like to see things move faster, but at the same time, I see the experiences in other countries, who went faster than their people were able to accommodate, and they had problems. After thinking about this a little bit, I think maybe doing it one step at a time is the best way to go about it. Thank you.

David Chambers: Just to follow up on that, you're talking about speed, but how about the overall goal? We talk a lot here these days about a Greater Middle East Initiative or plan. I can't actually remember what phase of that that we are in or what the current name is. But, do Saudis have an American democracy model in mind? Or, do you see a native Saudi democracy evolving? Will it be recognizable to Americans if so?

Usamah Al-Kurdi: One of the most important things about reform, I'm sure you must have heard many many people say, is that it has to come from the people. I thought this was the essence of democracy is that people govern themselves the way they see fit.

Now, for somebody else to come in and decides to do mass reform for all of the Middle East, somehow, I don't think mass reform will work.

Discretion? Yes. The transfer of other people's experience? Yes.

So, let's do this at our own pace. Let's learn from the experience of others. Help us appreciate the fact that we are going through that change. For God's sake, the last thing we need now is skepticism.

When the word postponement was used in association with the elections, I thought, "What postponement is that?" I mean the decision was to go with municipal elections a year from the decision, which meant October or November. According to the schedule of the elections that I have with me, it actually starts the first phase -- the voter registration starts on the 23rd of November. So, I don't understand where the word "postponement" came from. The decision has been made. In my view, it is being executed at the right moment. Again, give us the opportunity to do this at our own pace; change whatever we think is necessary for us to change.

As for the model? It doesn't have to follow a certain model for it to be acceptable by others. Again, we have 100 years of experience behind us. Many of you probably know that this is the third Saudi state. We had two different Saudi states in the past. So, we have a long history to learn from. That alone is sufficient for us, not have to worry about a certain model to follow. Thank you.

[Part 2 distributed separately - click here]

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