The Peak Oil Crisis: The Saudi Op-Ed

On November 29, the Washington Post carried an op-ed by Nawaf Obaid, an advisor to the Saudi government. Despite the obligatory "the opinions expressed are his own", and a press release denying government involvement, the piece clearly carries an important message from Saudi King Abdullah to President Bush, Washington, and the American people.

"Stepping Into Iraq" starts by reminding President Bush that in February 2003 the Saudi Foreign Minister had warned him that if the US removed Saddam Hussein by force he would only be solving one problem by creating five more.

Obaid goes on to point out that had the President followed the Foreign Minister’s advice, Iraq would not now be facing "full blown civil war and disintegration."

The thrust of the message, however, is a thinly veiled warning to the US not to walk away from Iraq. Obaid quotes the Saudi Ambassador who said last month: "Since America came into Iraq uninvited, it should not leave Iraq uninvited." And Obaid adds, "If it does, one of the first consequences will be massive Saudi intervention to stop Iranian-backed Shiite militias from butchering Iraqi Sunnis."

"As the economic powerhouse of the Middle East, the birthplace of Islam and the de facto leader of the world’s Sunni community (which comprises 85 percent of all Muslims), Saudi Arabia has both the means and the religious responsibility to intervene," he continues.

The Saudis, of course, are reminding us that while America can get on its ships and planes and go home, Saudi Arabia is going to be left right at the heart of what is starting to look more and more like the beginnings of a regional war. Should the fighting increase, it is only a manner of time before the vital interests or perhaps the very existence of the Kingdom, or at least the Royal family, is threatened.

The Saudis are clear about why they are sending this message to America. "Just a few months ago it was unthinkable that President Bush would prematurely withdraw a significant number of American troops from Iraq. But it seems possible today." Obviously the American election, with the unmistakable message that the American voters want out is much on Saudi minds. "The Saudi leadership is preparing to substantially revise its Iraq policy," says Obaid.

The critical part of all this is just what the Saudis are going to do in the face of an American threat to withdraw. The op-ed lists three options. First Riyadh could give their Sunni kinsmen (money, arms and logistical support. So far they claim to have refrained from doing this because the Sunni insurgents were busy shooting and blowing up Americans so it was considered highly impolitic to aid them. This of course shows commendable self-restraint as the Iranians have been supporting the Shiites for years.

The second Saudi option would be to fund, equip, and train new "Sunni brigades" to offset the Shiite militias. This of course would formalize the "civil war."

Now, however, we get to the Saudis’ third option as suggested by Obaid— oil. "King Abdullah may decide to strangle Iranian funding of the militias through oil policy." "If the Saudis boosted production and cut the price of oil in half, the kingdom could still finance its current spending. But it would be devastating to Iran, which is facing economic difficulties even with today’s high prices."

Now the notion of the Saudis flooding the 85 million barrel a day world oil market with enough oil to halve the world price and destroy the Iranian economy is a stretch. Saudi oil production has been dropping in recent months and some analysts believe this is from necessity not choice. Even if the Saudis were to attempt to increase output, it would likely be hard-to-sell heavy crude, and the effort would probably damage future oil production by over producing existing fields.

The Saudis may no longer be able to increase production enough to attain their political objectives, however, there is no reason why they can’t cut their production. Cutting is easy and it can be done is many ways varying from an overt embargo as happened in the 1970’s to more subtle reductions.

Why are the Saudi’s continuing to produce circa 9 million barrels a day? Given the tight worldwide oil market, the Saudi’s could cut their production in half; the price of oil would more that double; they would get richer; their oil fields would get a much needed rest; and there would be oil left for their great-grand children to export.

What keeps them from cutting production and reaping all these benefits? That too is simple, their relationship with the USA. So long as the US was their number one protector, and needed the oil to keep flowing, the Saudis historically would bend over backwards to help Washington out. The only exception was the short-lived oil boycott back in 1973.

Now, however, everything has changed. Against Saudi advice, the US charged into Baghdad and set 27 million Iraqis at each other’s throats. America’s partners in the invading "coalition" are bailing out one by one. The US people have just voted to change something and it is clear that "stay the course" is not going to obtain for much longer.

The key Saudi foreign policy objective at the minute clearly is to keep sufficient US military forces in Iraq to keep the lid on the situation for as long as it takes to keep the mess from spilling over into Saudi Arabia itself.

The threat to the existence of the Saudi Royal Family from a spreading civil war now is much greater than any threat from an unhappy Washington. Can anyone imagine the new US Congress voting to invade some other large Middle Eastern country in the near future? With what?

Could a major cutback in Saudi oil production bring down America? Maybe not, but it sure could do a lot of harm. The most blatant action would be cut their oil production in half. Taking 4-5 million barrels a day off the world oil market would get everybody’s attention very quickly. Oil prices would certainly go well over $100 per barrel. In short order, the US and world economies would suffer greatly.

The Saudis could, however, bring pressure without doing anything so provocative as a major production cut. Simply ratcheting down production in an unobtrusive manner should be enough to scare Washington into reconsidering leaving Riyadh, as the leader of the world’s Sunnis to deal with the mess on its own.

Just before President Bush met with the Iraqi Prime Minister in Jordan last week, Vice President Cheney was summoned to Riyadh to receive the whole Saudi message. It may be many years before we learn exactly what that message was, but already President Bush is back to talking about "staying the course."

It may be a lot harder, or a lot more expensive, for the US to get out of Iraq than anyone ever thought.