President Carter's decision to freeze Iranian assets in U.S. banks has raised troubling questions in the minds of Saudi Arabian government officials and financiers, Saudi and foreign sources report.
Although concern about the freeze has been eclipsed by the Great Mosque takeover in Mecca for the time being, it, nevertheless, is likely to be prominent in the background of Treasury SECRETARY G. William Miller's discussions here this weekend. Miller arrived tonight for three days of talks with Saudi rulers about petroleum and financial matters.
Saudi reaction to the freezing of funds and the suspension of Iranian oil purchases is considered critical. The Saudi kingdom, which has amassed on estimated$50 billion in unused oil profits, keeps more than two-thirds of its reserves in U.S. financial institutions. Moreover, its wealth and influence around the Persian Gulf make it likely that any Saudi nervousness about the safety of its U.S. deposits would spread to other rich oil countries in the region.
With this is mind, the U.s. tReasury Department telephoned Saudi Finance Minister Mohammed Aba Khail before announcing the freeze last week to assure him it did not constitute a precedent likely to be repeated with Saudi assets. Since then, Washington has renewed the assurances in public statements and private messages relayed by the U.S. embassy in Jiddah.
In public at least, these steps seem to have had the desired effect. Prince Saud, the Saudi foreign minister, headed off an attempt at the Arab foreign ministers' conference last week in Tunis to condemn Carter's actions. At home, the Saudi government has been careful to express understanding of the exceptional circumstances that led to it.
In private, however, Saudi officials have been less willing to accept the freeze. Saudi and foreign sources with access to high-level Saudi thinking report considerable concern that, in spite of Washington's assurances, the decision set an unfortunate precedent.
"The reaction here was a great deal of nervousness," said a banker.
A deputy minister in the Saudi government said Carter's decision created less confidence because of fears that the Arab-Israeli dispute could at some point lead to a confrontation with the United States analogous to the standoff with Iran. If Carter could freeze Iranian money now, what is to prevent Washington from freezing Arab money in the event of another oil embargo like the one declared after the 1973 Middle East war, he asked.
"This has scared a lot of countries," he added.
The government of neighboring Kuwait, another oil power whose policies are often aligned with those of Saudi Arabia, openly criticized the U.S. move Sunday, calling it "an extremely dangerous precedent."
Similar concern reaches high into the Saudi government, diplomatic and Saudi sources say, but the kingdom's rulers have kept silent about it because of their overriding desire to maintain good relations with the United States.
"They believe it's wrong -- there's no doubt about that," said a U.S.-educated Saudi official. "But they try to make excuses."
Among those said by knowledgeable sources to have expressed concern is Aba Khail, Miller's counterpart and his main interlocutor for this weekend's talks. Also included among those who expressed opposition is Abdul Aziz Koreishe, head of the Saudi monetary authority, the kingdom's central bank, according to sources in contact with high Saudi officials.
A number of lower level officials and Saudi bankers, particularly those with advanced U.S. educations, are reported to share the worry about the Iranian precedent. These younger officials generally advocate taking a harder line with the United States and making decisions based on Saudi Arabia's own economic interests.
Their advice has been overruled so far, however, because of the royal family's policy of maintaining Saudi Arabia's special security ties to the United States. Prince Fahd, the first deputy prime minister and crown prince who has a preponderant voice in running the kingdom, is the chief advocate of the special relationship, informed analysts here say.
In addition to the freeze on Iranian assets, some Saudi officials have expressed irritation at the precedent set by Carter's boycott of Iranian oil. Even though the boycott was almost simultaneous with an Iranian cutoff, they say, the decision puts the United States in the position of using oil as a political weapon, although Carter in his announcement, said he was doing it to remove oil from the political issue.
The long-standing U.S. argument that oil production levels and prices should be separated from political concerns could be harder to accept after the Iranian example, they add.
"Why are we in the Arab world being told it is wrong to use oil as a political weapon when for the United States it is justified" asked a high-ranking Saudi official.