Second in a series
The worst day in Saudi-American relations was Oct. 20, 1973, when Saudi King Faisal joined an Arab oil embargo against the United States. In a matter of days, the global oil market was thrown into chaos. Americans waited in long lines to buy gasoline. Within weeks, the price of oil more than tripled.
Not for the first or last time, the United States had misread the situation inside Saudi Arabia. When Egypt and Syria launched the Yom Kippur war against Israel that October, American officials said, publicly and privately, that the Saudis would never join an oil embargo to support their Egyptian and Syrian allies. But when it became clear that Israel was about to humiliate the Arabs once again and the Nixon administration asked Congress for an emergency appropriation of $2.2 billion to pay for arms shipments to Israel, Faisal yielded to the wishes of the Saudi Ulema, the country's Muslim elders, and wielded his oil weapon to punish the United States.
The oil embargo, accompanied by production cuts, was short-lived, but it changed the world. Faisal was pleased to find a way, in March 1974, to lift it, but by then the price of oil had risen from less than $3 a barrel to more than $11. It was a change destined to transfer hundreds of billions of dollars from oil-consuming nations to oil producers, making Saudi Arabia enormously rich. On the foundation of that wealth and the oil that produced it, the modern Saudi-American relationship was constructed.
It was constructed urgently by the United States, which was chastened and scared by the embargo. William E. Simon, one of its architects as the secretary of Treasury at the time, neatly summarized the United States' suddenly intense interest in Saudi Arabia on the eve of a visit to the kingdom in August 1974.
"My visit to Saudi Arabia," Simon wrote in a memorandum, "is an important next step in the continuing process of establishing the closest possible partnership with the Saudis. For the U.S. the primary interest is our continued access to Saudi Arabian oil in adequate quantities . . . at an acceptable political as well as economic price. We wish to assure that the Saudis continue to exercise their growing power in oil and monetary matters with moderation and in ways consistent with our own objectives."
Simon's memo, preserved in his papers at Lafayette College, makes the policy objective sound quite simple, but the reality was much more complicated, as the embargo had demonstrated. The sharing of power between the secular and religious authorities of Saudi Arabia is one of the many factors that have made the Saudi-American alliance "one of the most complicated relationships that we have," in the words of former secretary of state Madeleine K. Albright.
The history of the modern relationship -- much of it never publicized and little understood by Americans -- makes clear that it isn't just complicated; it is also intensely intimate in many respects but always colored by profound cultural differences.
Saudi Arabia's new horde of "petrodollars" was on Simon's mind as he prepared for his visit to the kingdom. The Americans hoped the Saudis would use much of their windfall to help finance the U.S. budget deficit by buying American Treasury bills and bonds. Simon wanted to be sure the Saudis had easy access to these securities. A list of talking points prepared for Simon shows the arguments Americans made to the Saudis, some of which sound like a commercial for Salomon Smith Barney or Merrill Lynch: "Investment directly with the U.S. Treasury can provide great convenience and protection against the adverse movements otherwise likely to face an investor when placing or liquidating large investments."
To keep the petrodollars flowing, Simon and Secretary of State Henry A. Kissinger proposed a Saudi-U.S. Joint Commission on Economic Cooperation. Its innocuous name disguised its role in pursuing what Simon called "a new concept of foreign relations . . . to develop a link of relationships" between the two countries "that will permeate many levels of economic life."
The idea, according to Charles Schotta, a senior Treasury Department official at the time, was to create a mechanism that would allow Americans to provide technical advice and assistance to Saudis on a broad range of issues, from how to create a modern customs service and how to collect statistics on a fast-growing economy to how to desalinate and distribute drinking water. The arrangement had one unique aspect: The recipient of the assistance, Saudi Arabia, paid for all of it.
The Saudis ultimately deposited well over $1 billion in an account at the Treasury Department in Washington to pay the costs of everything done under the auspices of the Joint Commission, including the salaries and living expenses of the Americans who worked for it. Americans administered that fund and, after consultations with Saudis, decided how it would be spent.
Its impact is visible today in many ways. Americans taught Saudis how to create the infrastructure of a modern state -- something they had to build from scratch beginning in the mid-1970s. Not surprisingly, the Americans taught them to do what Americans do. Schotta put it this way:
"If you were a U.S. businessperson doing business in Saudi Arabia, the apparatus there would be entirely familiar to you because it looks and operates very much like its counterpart agencies in the U.S." This begins on arrival, Schotta said. "Arriving in Saudi Arabia, going through customs and immigration, is just like arriving in the U.S." The Saudi banking system, financial markets and many other governmental practices and institutions, all were shaped or influenced by advisers hired under the Joint Commission.
An Arranged Marriage
Like the work of the Joint Commission, the Saudi-American relationship went unnoticed, or barely noticed, in the United States.
"What the public knew [about the relationship] was not very much," said Don DeMarino, who lived in Saudi Arabia from 1985 to 1987 and was the local director of the Joint Commission. "When I lived there, no Americans were interested."
The Saudis liked it that way, according to an American with experience in Saudi Arabia. They "have always preferred to operate this relationship on a small and high pedestal" -- between the most senior officials.
Given the differences between them, the Saudi-American relationship was always more like an arranged marriage than a romantic union. On one side, a theocratic monarchy sitting atop one-fourth of the earth's oil, a strict Islamic regime allowing neither freedom of speech nor any political rights to its citizens; on the other, the modern world's oldest, most open democracy and by far its largest consumer of oil. The values, customs and beliefs of either society would horrify the other if they were imposed upon it, yet since the time of Simon's visit to Saudi Arabia, the two governments have played the parts of the closest of friends. And they really have been close, relying on each other for national security, oil, political support, money, intelligence and more.
The alliance has been convenient for both parties, giving Saudi Arabia the security it craved in a dangerous neighborhood while assuring the United States a reliable supply of oil at -- nearly always -- an affordable price. But there were inherent sources of tension.
The Saudis have made an ongoing effort to prevent Americans from understanding them, particularly their politics. What goes on inside the councils of the ruling House of Saud, the royal family, has remained hidden. For their part, Americans have given the Saudis ample opportunity to be cynical about U.S. attitudes and intentions.
From the moment the Saudis became rich, Americans materialized who were eager to share their wealth -- from reputable giants such as Boeing and Bechtel to fly-by-night crooks looking for a fast buck, or riyal. The Saudis have reciprocated with demands that foreign contractors pay "commissions" of at least 5 percent to well-connected locals, often one of the kingdom's 8,000 princes. Prince Bandar bin Sultan, the Saudi ambassador to the United States, said recently that of the $400 billion or so Saudi Arabia has spent over three decades to construct a modern nation, perhaps $50 billion was lost to corruption or mismanagement. "So what? We did not invent corruption," he told a PBS interviewer.
The U.S. government, eager to help in countless ways, was always alert for an economic advantage. U.S. government agencies have always charged the Saudis top dollar while accepting Saudi generosity whenever it was offered. For example, U.S. aircraft have used Saudi jet fuel since the first American AWACs flew to the kingdom in 1979. When the Saudis send a military officer to a U.S. training facility, they pay a higher tuition than other countries, including America's NATO allies.
The U.S. Corps of Engineers supervised billions of dollars worth of construction projects in Saudi Arabia, beginning soon after World War II, and intensely from 1974 onward. The corps moved its Mediterranean Division from Italy to Riyadh, renaming it the Middle East Division, and ultimately divided the country into three districts. Over the years, the corps supervised construction of three huge bases, including the $6 billion King Khalid Military City, a Saudi military academy, two deep-water ports for the Saudi navy, airfields, barracks and housing estates, and much more. When signed, the contracts for this work were worth more than $14 billion -- several times that much in 2002 dollars.
The Saudis spent well over $100 billion on American weapons, construction, spare parts and support, and for years have ranked first in the world as a customer for American arms makers. They bought F-5 and F-16 fighter jets, AWACs observation aircraft, Abrams M-1 tanks, Bradley armored vehicles, naval vessels and much more.
"Let's face it," said Edward S. Walker Jr., former assistant secretary of state for Near Eastern affairs, "we got a lot of money out of Saudi Arabia."
Over time, the Saudis became almost as efficient at exporting money to the United States as they were at exporting oil. There was simply no way the kingdom -- population 10 million in 1980 -- could absorb the hundreds of billions of dollars it was earning from oil, even with its aggressive program of domestic development. The government, through the Saudi Arabia Monetary Authority, or SAMA, bought securities from the U.S. Treasury while individual Saudis who benefited from the new oil wealth made investments with Western financial institutions.
Saudis came to America to learn new skills. In the 1950s and 1960s, the American-owned Arabian-American Oil Co. (Aramco) sent hundreds of Saudis to American universities. In the 1970s and '80s, the Saudi government financed college educations in the United States for tens of thousands of Saudi students. For Saudi men who were born between the 1940s and 1960s, American degrees are a badge of membership in the national elite. Today, 21 of the 30 ministers of the Saudi government have American degrees, 16 of them PhDs.
Saudis who studied here often fell in love with America and have chosen to live parts of their lives here. Chas W. Freeman, who was the U.S. ambassador to Riyadh in the early '90s, estimates that 100,000 Saudis own houses or apartments in this country. Saudis can pursue lives here they couldn't dream of in the kingdom -- the men exploiting creature comforts not permitted at home and the women enjoying freedoms denied them in Saudi Arabia.
These are "bicultural" Saudis, a term Bandar uses to describe himself, and they are far from typical of their countrymen. "We are the ones who have to fight the temptation" to assume they are typical of the majority of Saudi Arabians, Bandar said.
Saudis have used their money to make new American friends or reward old ones. In 1991, the governor of Arkansas asked Saudi Arabia to contribute to a new center of Middle East studies at his state university. There was no reply for more than a year. Then, in November 1992, the governor got a call from King Fahd, who was calling to congratulate Bill Clinton on being elected president of the United States. Fahd told Clinton the Saudi government had decided to give $20 million to fund the Middle East studies program.
In 1985, Fahd gave $1 million to first lady Nancy Reagan's "Just Say No" anti-drug program. In 1989, the king gave another million to first lady Barbara Bush's campaign against illiteracy. The Saudis have contributed to every modern president's presidential library, according to a Saudi source.
Bandar has made a number of charitable donations, including a multimillion-dollar gift to Children's Hospital in Washington. In 1991, he put up $250,000 to pay for the Disabled American Veterans winter sports clinic. He has also used money to do favors for American officials.
In a more substantive gesture of friendship, the Saudi envoy made a secret trip to Rome to deposit $10 million into a bank account in Vatican City at the request of William J. Casey, President Ronald Reagan's entrepreneurial -- and secretive -- director of central intelligence. The money was intended for the coffers of Italy's Christian Democratic Party to be used against the Italian communists in an Italian election.
Not long afterward, in June 1984, Robert C. "Bud" McFarlane, Reagan's national security adviser, told Bandar that the contra rebels in Nicaragua were running out of money. Congress would not let the administration give them more, a blow to Reagan's policies, McFarlane explained. The contras were anti-communists fighting a civil war against Nicaragua's leftist Sandinista regime -- not a matter of great concern to the Saudis, but Bandar got the message.
Several days later, he came back to McFarlane with the news that the Saudis would secretly put up $1 million a month for the contras. Later, the stipend was doubled. Ultimately, Saudi contributions to the contras totaled more than $30 million. They were supposed to be a secret but became known when the Iran-contra scandal erupted.
Americans who have worked with the Saudis in official capacities often remain connected to them when they leave public office, from former president George H.W. Bush, who has given speeches for cash in Saudi Arabia since leaving office, to many previous ambassadors and military officers stationed in the kingdom. In some cases, these connections have been lucrative.
Walter Cutler, who served two tours as the U.S. ambassador in Saudi Arabia, now runs Meridian International Center in Washington, an organization that promotes international understanding through education and exchanges. Saudi donors have been "very supportive" of the center, Cutler said. Walker, the former assistant secretary of state for Near Eastern affairs, is president of the Middle East Institute in Washington, which promotes understanding with the Arab world. Its board chairman is former senator Wyche Fowler, ambassador to Riyadh in the second Clinton administration. Saudi contributions covered $200,000 of the institute's $1.5 million budget last year, Walker said.
Bandar has told associates that he makes a point of staying close to officials who have worked with Saudi Arabia after they leave government service. "If the reputation then builds that the Saudis take care of friends when they leave office," Bandar once observed, according to a knowledgeable source, "you'd be surprised how much better friends you have who are just coming into office."
A Secret Deal
Secrecy is a regular feature of Saudi-American interactions. It was an important part of the worst moment in the relationship between the 1973 oil embargo and Sept. 11. Once again, Bandar was the central actor.
Though the Saudis were easily America's biggest customer for armaments, they resented the process they had to go through to acquire the most advanced U.S. systems. Twice they survived showdown votes in Congress when friends of Israel opposed the sale of advanced aircraft to them. And on other occasions administrations had to evade congressional opposition to sell weapons to Riyadh. The United States refused to sell some kinds of advanced weapons to the Saudis, including missiles. So the Saudis bought from other countries, too, including Britain, France and -- in one deal that caught the United States by surprise -- China.
In secret talks that began in China in 1985, Bandar negotiated a billion-dollar purchase of Chinese CSS2-class missiles with a range of about 1,500 miles, or enough to reach Turkey and Israel from Saudi territory. The United States -- and Israel -- failed to discover what was going on for two years. When intelligence agencies in both countries realized what had happened, they were livid. The State Department instructed Hume Horan, the recently arrived U.S. ambassador in Riyadh, to see King Fahd in March 1988 to deliver a stern message expressing "surprise and disapproval of this action," as Horan recalled in an interview.
Horan had served as the No. 2 man in the embassy from 1972 to 1977. He had wide-ranging contacts in Saudi society. He was known in the foreign service as America's best Arabic linguist and as a scholarly student of the Arab world. He was the son of an Iranian aristocrat who had been Iran's foreign minister and an American mother, a fact known to the Saudis, who have never liked the Iranians.
Horan said he knew the king would be offended by the verbal spanking he had been ordered to deliver, so he called Washington to confirm that officials there understood the import of their instructions. Yes, he was told -- deliver the message. He did so. When he returned to the embassy, he found a new telegram from Washington revoking his previous instructions -- which he had just carried out. "My goose was cooked," he recalled.
Bandar had persuaded senior officials of the Reagan administration not to deliver an official protest to Fahd. Bandar reassured the Americans that the missiles would be deployed in a way that made clear they were no threat to Israel. They had a conventional warhead and were intended to deter Iraq and Iran, Saudi's traditionally hostile neighbor, and would be used only in retaliation, the Saudis said.
The administration sent Philip Habib, a retired undersecretary of state then serving as a special Mideast peace envoy, to Riyadh to try to mend fences with Fahd. Habib brought Horan to his meeting with the king, a diplomatic mission that has never previously been described.
Fahd was clearly furious with the ambassador, Horan recounted, and asked Habib, in front of him, to have Horan replaced. When Habib raised the issue of the missiles, the king said angrily that he had told Horan "to keep his nose out of it." He complained to Habib about Horan's Iranian ancestry.
The Reagan administration decided to quickly replace Horan by bringing back his predecessor, Cutler, also a foreign service professional, but not an Arabic speaker and scholar like Horan. The decision was so quick that even before Horan could leave the country, the State Department asked him to seek Saudi approval for Cutler's reappointment as ambassador. This was a mission that humiliated Horan, as he makes clear nearly 14 years later.
"They made us kowtow," he said. Successfully forcing the Americans to replace their ambassador gave the Saudis a palpable psychological edge in their dealings with the United States. "The American ambassador's influence ended in Riyadh," Horan said. Henceforth, Bandar dominated the relationship in Washington.
When Iraqi troops marched into Kuwait in August 1990, the oil-for-security bargain at the center of the Saudi-American relationship was fulfilled. Saddam Hussein threatened the world's greatest oil basin in and around the Persian Gulf, with Saudi Arabia at its center. Within months, half a million American soldiers had arrived in Saudi Arabia preparing for Desert Storm, a massive military campaign to expel the Iraqis from Kuwait.
This huge deployment was made without any formal agreements. The Americans promised to withdraw from Saudi Arabia when the job was done, or when asked to leave, but they never completely left. About 5,000 U.S. troops remain today, and their presence has become a source of controversy.
Saudi leaders have been criticized by Islamic extremists abroad and religious leaders inside the kingdom for allowing the American military to become a seemingly permanent presence in the land of Islam's two holiest shrines in Mecca and Medina. The ruling House of Saud is particularly sensitive to the views of its Ulema because it depends on their support for its legitimacy.
Muslim clerics have been partners in power in Saudi Arabia since the 18th century, when the king's ancestor, Mohammed Ibn Saud, made a deal with Mohammed ibn-Abd al-Wahhab, a charismatic Muslim who led a fundamentalist religious revival in Arabia. From that moment to the present day, the House of Saud has ruled Arabia (as it has for most of the past 250 years) in concert with the leaders of the Wahhabi religious establishment.
Fahd pleaded and prodded to win a reluctant endorsement from his Islamic elders. The 1990 fatwa, or religious edict, issued by the most influential elder, Sheikh Abdel-Aziz Bin Baz, suggested this reluctance: "Even though the Americans are, in the conservative religious view, equivalent to nonbelievers, as they are not Muslims, they deserve support because they are here to defend Islam."
Many other members of the Ulema accepted this conclusion only reluctantly, or not at all, according to Saudi sources. But first the Bush and then the Clinton administrations decided that as long as Hussein remained in power and posed a threat to his neighbors, the United States would need the facilities provided by Saudi Arabia, particularly the Prince Sultan Air Base. There, the Pentagon has built a state-of-the-art command center that it used to coordinate the air war against Afghanistan.
In the first flush of victorious enthusiasm after the Gulf War, the Saudis were happy to pick up much of the tab for the allies who helped defend them -- a tab of perhaps $60 billion. And the Saudis began an aggressive arms acquisition program -- $33 billion more for America's arms makers. But by the mid-1990s, the Saudis could no longer afford these purchases. They fell $6 billion to $7 billion into arrears and had to stretch out some payments and slow down the delivery of F-16s to avoid canceling contracts. Plans to buy more aircraft were shelved.
With help from European and American allies, the Saudis could defeat Hussein, but they could not prop up oil prices. From a peak of $227 billion in 1981, Saudi oil income fell below $60 billion a year in the '90s to as low as $35 billion in 1998 (all these are expressed in constant, 2000 dollars). This led to big deficits in the Saudi budget and severe cuts in military spending. Even the $80 million to $100 million the Saudis paid annually to cover local costs of the U.S. military presence was becoming a burden.
New political problems arose as well. With the inauguration of Clinton in 1993, Bandar and the Saudis lost their best friends, the comrades-in-arms from the Gulf War of the first Bush administration. Clinton wasn't as interested in the Gulf as Bush had been, and Bandar never had the access to the new administration that he had to the old.
Bandar -- by his own admission -- got bored with his job and began to spend more time at his English country estate or in his Aspen, Colo., retreat. "The Saudi-American relationship went into auto-pilot basically," said Bandar, himself a former Saudi warplane pilot. "There was nothing dangerous that could derail it or require constant watch."
Then in 1995 and 1996, terrorists attacked American targets in Saudi Arabia, in Riyadh and then at Khobar Towers. Twenty-four Americans were killed in the two incidents. The perpetrators of both had ties to Saudi fundamentalists. Four men who confessed to the Riyadh bombing were quickly beheaded -- so quickly that American investigators were given no chance to interview them. The four said they were inspired by Osama bin Laden. American investigators also complained about limited access to the Khobar Towers investigation.
The United States reacted to Khobar Towers by moving its personnel to a remote desert location and sending all dependents home. Americans serving in Saudi Arabia were put on short tours of duty, from 60 days to a year.
Meanwhile, Saudi religious leaders were pursuing their own agenda throughout the Muslim world, funding mosques and schools from Turkey to the Far East and actively supporting the Taliban movement in Afghanistan. They could do these things with the generous donations of Saudi citizens, led by members of the royal family, who consider charity a fundamental part of life and give primarily to religious institutions. Saudi Arabia's Wahhabi clerics made no secret of their proselytizing ambitions.
According to a Saudi analyst, Nawaf E. Obaid, the United States, and particularly U.S. intelligence agencies, never grasped the influence of the Wahhabi elders on Saudi policies, from the time of the 1973 oil embargo through the period of Saudi support for the Taliban. In a Harvard master's thesis, the Saudi-born Obaid concluded that "U.S. analysts have underestimated, overlooked or misunderstood the nature, strength and goals of the Wahhabi movement in Saudi Arabia, as well as the extent to which the secular leaders are beholden to this group."
Obaid ended his prescient paper with a warning that Saudi Arabia was entering a period of "rapid and enormous change" featuring dramatic population growth, decreasing oil revenue and an uncertain royal succession.
"In this situation," he predicted, "it is likely that the religious establishment will gain a relatively larger share of power and, therefore, represent a greater challenge to the U.S."
Staff researcher Madonna Lebling contributed to this report.