Order Code IB93113
CRS Issue Brief for Congress
Received through the CRS Web
Saudi Arabia: Current Issues
and U.S. Relations
Updated July 3, 2003
Alfred B. Prados
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Current Issues
Reaction to September 11 Terrorist Attacks
Lawsuits and Investments
The July 2002 Briefing
Other Reports
Security in the Gulf Region
Containment Policies toward Iraq
Operation Iraqi Freedom
Future U.S. Military Presence
Bombings of U.S. Facilities
Riyadh, 1995
Khobar Towers, 1996
Riyadh, 2003
Arab-Israeli Conflict
Crown Prince Abdullah’s Peace Initiative
Arms Transfers to Saudi Arabia
U.S. Arms Sales
Trade Relationships
Problems in Commercial Transactions
Oil Production
Foreign Investment
Human Rights, Democracy, and Other Issues
Child Custody Cases
Background to U.S.-Saudi Relations
Political Development
Saudi Leadership
Royal Succession
Economy and Aid
Economic Conditions
Aid Relationships
Defense and Security
Congressional Interest in Saudi Arabia


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Saudi Arabia: Current Issues and U.S. Relations
SUMMARY
Saudi Arabia, a monarchy ruled by the
operated installations in Saudi Arabia have
Saudi dynasty, enjoys special importance in
raised some concerns about security of U.S.
the international community because of its
personnel and further security measures have
unique association with the Islamic religion
been implemented. Saudi Arabia convicted
and its oil wealth. Since the establishment of
and executed four Saudi nationals for carrying
the modern Saudi kingdom in 1932, it has
out a bombing in 1995. After extended inves-
benefitted from a stable political system based
tigations, on June 21, 2001, a U.S. federal
on a smooth process of succession to the
grand jury indicted 14 members of Middle
throne and an increasingly prosperous econ-
East terrorist organizations for a bombing in
omy dominated by the oil sector. Decrees by
1996, but none of them is in U.S. custody. A
King Fahd in March 1992 establishing an
third bombing occurred on May 12, 2003,
appointive consultative council and provincial
when suicide bombers attacked three housing
councils and promulgating a basic law provid-
compounds inhabited by U.S. and other west-
ing for certain citizens’ rights could signal a
ern personnel, killing an estimated 34 people
gradual trend toward a more open political
including as many as eight U.S. citizens.
system.
U.S. officials have cited Saudi support in
The United States and Saudi Arabia have
the aftermath of the September 11, 2001
long-standing economic and defense ties. A
attacks, including intelligence sharing, law
series of informal agreements, statements by
enforcement activities, and tracking of terror-
successive U.S. administrations, and military
ist financing. Some commentators maintain
deployments have demonstrated a strong U.S.
that Saudi domestic and foreign policies have
security commitment to Saudi Arabia. Saudi
created a climate that may have contributed to
Arabia was a key member of the allied coali-
terrorist acts by Islamic radicals. Saudi offi-
tion that expelled Iraqi forces from Kuwait in
cials reject this viewpoint and maintain that
1991.
Saudi Arabia hosted U.S. aircraft
they are working with the United States to
enforcing the no-fly zone over southern Iraq;
combat terrorism.
between the two Iraq wars of 1991 and 2003;
however, Saudi Arabia did not offer the use of
Other principal issues of bilateral interest
its territory for major air strikes against Iraq in
include the Saudi position on the Arab-Israeli
response to Iraqi obstruction of U.N. weapons
conflict, security in the post-war Gulf region,
inspections. Moreover, Saudi officials ex-
arms transfers to Saudi Arabia, Saudi external
pressed opposition to the U.S.-led military
aid programs, bilateral trade relationships, and
campaign launched against Iraq in March-
Saudi policies involving human rights and
April 2003, although they reportedly permitted
democracy.
In early 2002, Crown Prince
certain support operations by U.S. and British
Abdullah proposed a peace initiative based on
military forces, as well in addition to making
Israeli withdrawal from occupied territories in
some facilities available to them.
return for normal relations between Arab
states and Israel.
Bombing attacks against several U.S.
Congressional Research Service
˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
Three near-simultaneous suicide bombings at about 11:20 p.m. on May 12 destroyed
three housing compounds in Riyadh, Saudi Arabia, inhabited by U.S. military personnel,
contractors, and other foreign residents in Riyadh. As many as 34 people were killed,
including eight Americans, according to press accounts as of May 15. President Bush
condemned the attack, which he linked to Al Qaeda, and said the killers “will learn the
meaning of American justice.” A U.S. interagency team including six FBI representatives
left on May 13 for Saudi Arabia to assist in investigating the attack. On June 29, according
to press reports, U.S. and Saudi officials announced that Saudi authorities had apprehended
a leading Al Qaeda figure believed to have played a key role in the May 12 bombings.
On April 29, 2003 U.S. Secretary of Defense Donald Rumsfeld announced that with the
fall of Saddam Hussein, U.S. forces can discontinue enforcing the no-fly zones over Iraq and
that U.S. forces involved in this operation will be withdrawn from Saudi Arabia.
On June 5, press reports citing energy industry sources said Saudi authorities have
canceled a natural gas development project that had been tentatively awarded to a consortium
led by Exxon Mobil Corporation, after the companies involved had rejected final terms
offered by the Saudi side.
BACKGROUND AND ANALYSIS
Current Issues
Oil and national security concerns have combined to produce a close and cooperative
relationship between the United States and Saudi Arabia for much of the past century. Since
the award of the first Saudi oil concession to a U.S. company in 1933, both states have had
an increasing interest, respectively, in the marketing and acquisition of Saudi petroleum
supplies. As regional threats multiplied in the latter half of the century, mutual concerns over
the stability of Saudi Arabia and other moderate regimes in the Arabian Peninsula
engendered a significant degree of defense cooperation. Saudi Arabia was a key member of
the allied coalition that expelled Iraqi forces from Kuwait in 1991 and continues to host more
than 5,000 U.S. military personnel, most of them from U.S. Air Force units that enforce the
no-fly zone over southern Iraq (Operation Southern Watch). A range of issues, however,
sometimes complicate U.S.-Saudi relations, as discussed below. Also, some commentators
cite additional strains in bilateral relations since the September 11, 2001 attacks, but U.S. and
Saudi officials continue to characterize ties between the two countries as excellent.
Reaction to September 11 Terrorist Attacks
The September 11, 2001 attacks kindled criticisms within the United States of alleged
Saudi involvement in terrorism or of Saudi laxity in acting against terrorist groups.
Commentators have pointed to the high percentage of Saudi nationals among the hijackers
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(15 out of 19). Others maintain that
Saudi domestic and foreign policies
Saudi Arabia in Brief
have created a climate that may have
contributed to terrorist acts by
Population (July 2002): 23,513,330*
(includes 5,360,526 foreign residents)
Islamic radicals. Critics of Saudi
Growth rate: 3.27%
policies have cited in particular a
Area: 1,945,000 sq. km. (750,965 sq.mi.)
multiplicity of reports that the Saudi
(almost 3 times that of Texas)
government
has
permitted
or
Ethnic Groups: (native Saudis only)
encouraged fund raising in Saudi
Arab 90% Afro-Asian 10%
Arabia by charitable Islamic groups
Religion: (native Saudis only)
and foundations linked to Osama bin
Muslim 100% (Sunni 85-95%; Shi’ite 5-15%)
Laden’s Al Qaeda organization,
Literacy (2002):
which that U.S. government has
78% (male 84.2%, female 69.5%)
identified as clearly responsible for
GDP: $173.0 billion (2000);
the hijackings. An independent task
$155.2 billion (2001)
force sponsored by the Council on
External Public Debt: $28.09 billion (Dec. 2000)
Domestic Debt: $166.6 billion (Dec. 2000)
Foreign Relations, in a report
Inflation (2001): 0%
published in October 2002, asserted
that individuals and charities in
*Some estimates are 15-30% lower
Saudi Arabia have been the most
important source of funds for Al
Sources: IMF; U.S. Dept. of Commerce; CIA World Fact
Qaeda for some years, and that
“Saudi officials have turned a blind
eye to the problem.”
Saudi officials reject these criticisms and maintain that they are working closely with
the United States to combat terrorism. In October 2001, the Saudi government announced
that it would implement U.N. Security Council Resolution 1373, which called among other
things for freezing terrorist related funds. In December 2001, the Saudi Embassy in
Washington listed various measures the Saudi government had adopted to combat terrorist
financing, including a requirement for all Saudi banks to have anti-money laundering units
and the establishment of a program to monitor charitable organizations and bank accounts
associated with prominent businessmen. After publication of the Council on Foreign
Relations study in October 2002, the Saudi Embassy disputed the findings of the study, and
listed several more steps by the Saudi government to combat terrorist financing: freezing
dozens of bank accounts with suspected links to terrorists; implementing U.N. Security
Council resolutions related to terrorist financing; working with the United States and other
countries to block over $70 million in terrorist assets; auditing all charitable groups; adopting
new guidelines to prevent terrorist use of legitimate charitable groups; requiring charities
dealing outside Saudi Arabia to report their activities to the Saudi Foreign Ministry. Saudi
officials also stated in August 2002 that they were interrogating 16 Al Qaeda members who
had been extradited from Iran to Saudi Arabia. In the same vein, a Saudi report averred that
the government has questioned 2,800 terrorist suspects and 200 are currently in detention.
U.S. government statements have generally complimented Saudi cooperation with the
U.S. campaign against terrorism, while sometimes suggesting that the Saudi government
could do more. The State Department in its most recent Patterns of Global Terrorism report
noted that Saudi authorities were putting pressure on private agencies in the Kingdom to
follow existing laws governing charitable contributions — these laws had not been
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scrupulous enforced in the past. More recently, on November 25, 2002, State Department
spokesman Richard Boucher told reporters that the Administration has “made it clear again
and again we believe the Saudi response on matters involving the war on terrorism has been
very strong.” He specifically cited cooperation on law enforcement, intelligence, military
aspects of the war on terrorism, and measures to block terrorist financing. In this connection,
according to the U.S. Treasury Department, the United States and Saudi Arabia have worked
together in jointly designating several entities as supporters of terrorism. White House
spokesman Ari Fleischer was quoted in a New York Times article on November 26 as
commenting that “Saudi Arabia is a good partner in the war on terrorism, but good partners
can do more.”
Lawsuits and Investments. According to press reports in mid-August 2002,
families of more than 600 victims of the September 11 attacks have filed a suit in the U.S.
District Court of Alexandria, Virginia against three members of the Saudi royal family, seven
banks, and eight charitable organizations. The lawsuit, which also names Osama bin Laden,
members of his family, and the government of the Sudan, seeks approximately $1 trillion
in damages from these individuals or organizations for allegedly helping finance the Al
Qaeda network. According to excerpts reported in the press, the lawsuit states that “the
financial resources and support network of these defendants — charities, banks and
individual financiers — are what allowed the attacks of September 11, 2001 to occur.” Saudi
media and business spokesmen have described the suit as an attempt to extort Saudi money
deposited in the United States and exert political pressures on Saudi Arabia; some have
called for withdrawing Saudi investments in the United States, estimated by one media
source at $750 billion and another at between $400 and $600 billion. A London Financial
Times
article on August 21, 2002, quoted estimates that Saudi investors have withdrawn
between $100 billion and $200 billion from the United States in recent months, but other
sources quoted in the article expressed skepticism that a mass exodus of Saudi money is
under way. According to an August 21 BBC newscast, a Saudi lawyer is planning to file a
counter-suit against the U.S. government for detention of Saudi students in the United States
after the September 11 attacks and publication of pictures in U.S. newspapers of Saudi
citizens with alleged ties to Al Qaeda.
The July 2002 Briefing. On August 6, 2002, an article in The Washington Post
described a briefing given by an analyst from the Rand Corporation on June 10, 2002, to the
Defense Policy Board, a high-level advisory group that advises the U.S. Defense Department
on defense policy. According to the article and to other media, the briefer asserted among
other things that “Saudi Arabia supports our enemies and attacks our allies” and that “the
Saudis are active at every level of the terror chain, from planners to financiers.” Secretary
of Defense Donald Rumsfeld told reporters on August 6 that the briefing represented the
analyst’s own opinion and went on to say: “It did not represent the views of the government,
it didn’t represent the views of the Defense Policy Board.” State Department spokesman Phil
Reeker told reporters that these views “do not reflect the views of the President of the United
States or of the U.S. Government.” He added that Secretary of State Powell made that clear
in a telephone call to Saudi Foreign Minister Saud al-Faysal.
Saudi Crown Prince
Abdullah’s foreign policy adviser described views expressed in the briefing as “pure fiction.”
According to media reports, however, these views have gained some currency among various
commentators with ties to Administration policy makers.
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Other Reports. In November 2002, news media reported that Princess Haifa, the wife
of Saudi Ambassador to the United States Prince Bandar bin Sultan, had provided funds —
approximately $100,000 according to one article — over a four-year period to a Jordanian
woman (married to a Saudi citizen) who was in need of medical treatment. The recipient,
in turn, reportedly passed some of these funds to Saudi intermediaries with ties to two of the
September 11 hijackers. On November 23 and 24, a senior policy advisor to Saudi Crown
Prince Abdullah (the country’s de facto ruler) said there is no evidence that Saudi Arabia
provided money to the hijackers and that his government is determined to uncover all the
facts; a Saudi Embassy officials said the Saudi investigation will probably be widened to
scrutinize all gifts provided by the Embassy. Ambassador Bander told the New York Times
on November 26 that Saudi Arabia is a partner with the United States in its anti-terrorism
campaign, while his wife expressed outrage that donations to the needy were being linked
to terrorism.
Security in the Gulf Region
Containment Policies toward Iraq. Between the Gulf War of 1991 and Operation
Iraqi Freedom in 2003, Saudi Arabia hosted U.S. Air Force units that conducted overflights
to enforce a no-fly zone over southern Iraq. Although they did not usually object to small
scale U.S. responses to Iraqi aircraft or air defense units challenging allied aircraft
conducting these overflights, Saudi authorities were opposed to large-scale allied military
action against Iraqi targets. On several occasions, Saudi Minister of Defense Prince Sultan
has said his country would not permit allied aircraft to launch preemptive or major retaliatory
campaigns against Iraq from bases in Saudi Arabia. In the aftermath of the September 2001
terrorist attacks, Saudi authorities expressed concern over any expansion of the U.S.
campaign against terrorism to Iraq or Iran. In comments published on August 7, 2002, Saudi
Foreign Minister Prince Saud al-Faysal reiterated this position, and said the Saudi
government does not want allied forces “to use Saudi grounds” for any attack on Iraq. On
September 16, he commented that if the U.N. Security Council adopts a resolution
authorizing military force, then “everybody is obliged to follow through.”
Later, on
November 4, he told CNN that Saudi Arabia would abide by the decision of the U.N.
Security Council, but “as to entering the conflict or using facilities ... that is something else.”
Subsequent press reports continued to quote ambiguous and sometimes apparently
contradictory statements by Saudi officials regarding allied use of Saudi air bases in the event
of a war with Iraq. Saudi Foreign Minister Prince Saudi al-Faysal told reporters on
November 19 that use of Saudi bases is “a sovereign decision ... and I’m not going to
speculate on how we’re going to decide.” According to the press (The Washington Post,
November 17, 2002), U.S. officials believe Saudi officials would rule out a large presence
of U.S. ground troops but would allow U.S. forces to use a command center in Saudi Arabia
and permit use of Saudi air space by U.S. military aircraft. A New York Times article of
December 29, 2002 quoted U.S. military officials as saying that they have obtained Saudi
agreement to Saudi permission to conduct refueling, reconnaissance, surveillance, and
transport missions from bases in Saudi Arabia. Saudi officials, however, described the report
as incorrect. On January 7, 2003, the Saudi Foreign Minister told reporters that “[i]f the
United Nations asks Saudi Arabia to join, depending on the material breach that they show
and depending on the proof that they show, Saudi Arabia will decide.” He went on to say
that “even if the United Nations decides on war, we want them to give us a last chance to
exert efforts for peace.”
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A Washington Post article on February 26, 2003, quoted U.S. officials as saying that the
United States and Saudi Arabia had agreed on a broad array of military operations that the
Saudis would permit in the event of armed hostilities with Iraq. These included U.S. use of
a sophisticated air command and control center at Prince Sultan Air Base and permission for
the United States to fly refueling aircraft, AWACS surveillance planes, and JSTARS radar
aircraft from Saudi bases. One unidentified source reported that Saudi Arabia would permit
U.S. combat aircraft to conduct bombing missions against Iraqi targets after the first few days
of a war, as long as no public announcement was made.
On March 8, 2003, Saudi Arabia’s Defense Minister Prince Sultan bin Abdul Aziz
indicated that his government was allowing U.S. troops to use two airports in the northern
part of the kingdom. He said U.S. troops at Arar in the northeast are there in response to a
Saudi request for “help in a technical matter” relating to a possible influx of refugees from
Iraq, while U.S. troops at Tabuk in the northwest are conducting joint exercises with Saudi
troops to help defend the country against outside threats. In addition, media reports since
mid-February 2003 indicate an increase in allied military personnel at Prince Sultan Air
Base, which is the point of origin for allied overflights of southern Iraq under Operation
Southern Watch as well as the location of the air command and control center (see previous
paragraph). Meanwhile, on March 5, Saudi Arabia dispatched over 1,000 troops to Kuwait,
where they form part of an 8,000-member joint umbrella force drawn from several
neighboring Gulf states, called “Peninsula Shield.” This small force, described by media as
largely symbolic, was charged with helping defend Kuwait if the need arises but, according
to press reports, has no offensive role against Iraq.
Operation Iraqi Freedom. On March 19, 2003, President Bush announced the
beginning of a military campaign to compel Iraq to comply with U.N. Security Council
resolutions (Operation Iraqi Freedom). According to a statement read by Saudi Crown
Prince Abdullah on the same day in the name of the ailing King Fahd, Saudi Arabia “will not
participate in any way” in a war against Iraq. Press reports during the same time frame,
however, indicate that Saudi Arabia continued quietly to facilitate allied operations aimed
against Iraq as outlined above. At a news conference on April 1, 2003, Saudi Arabia’s
Foreign Minister, Prince Saud al-Faysal suggested a pause in the war with Iraq but implied
that Saddam Hussein should step down, saying that “Mr. Saddam Hussein has asked his
people to sacrifice for their country, and if the only thing that keeps the conflict going is his
presence, then he should listen to his own advice.” Although Saudi Arabia continued to
avoid public confirmation of any support it was providing to U.S. forces engaged in fighting
the war, press reports cited examples of unannounced Saudi logistical support, including
informal permission to use an advanced U.S.-built facility in Saudi Arabia known as the
Combat Air Operations Center (CAOC) to coordinate military operations in the region.
Future U.S. Military Presence. Media reports in January 2002, denied by both
U.S. and Saudi officials, described Saudi leaders as increasingly uncomfortable with U.S.
military personnel in their country and indicated that senior Saudi officials would prefer a
less conspicuous form of military cooperation. A year later, A New York Times article on
February 9, 2003, reported that Saudi Crown Prince Abdullah plans to request the withdrawal
of U.S. armed forces from Saudi territory after Iraq has been disarmed. Pentagon officials
reportedly said they were not aware of such plans, and on February 18, Saudi Foreign
Minister Saud al-Faysal told Saudi state television that U.S. and other allied forces have been
in Saudi Arabia under U.N. auspices for 12 years; he added that “this situation will continue
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because it is good for those countries, for Iraq and for Saudi Arabia.” On April 29, however,
U.S. Secretary of Defense Donald Rumsfeld announced that with the fall of Saddam Hussein,
U.S. forces can discontinue enforcing the no-fly zones over Iraq and forces involved in this
operation can be moved elsewhere. According to a New York Times report on April 30, the
United States plans to withdraw almost all of its 5,000 troops in Saudi Arabia (briefly
doubled to 10,000 during Operation Iraqi Freedom), leaving only a small contingent of 400-
500 troops to conduct a long-standing training mission in Saudi Arabia. The paper also
quoted military officials as saying that in line with these withdrawals, the United States plans
to move its Combat Air Operations Center to neighboring Qatar. Following the bombing of
U.S. and other western-inhabited housing compounds in Saudi Arabia on May 12 (see
below), Secretary Rumsfeld announced that the terrorist attack had not changed U.S.
withdrawal plans: “We do plan to draw down almost all these forces [in Saudi Arabia] and
maintain a relationships in training and exercises....”
Bombings of U.S. Facilities
Riyadh, 1995. Three attacks on U.S. military facilities in Saudi Arabia in the mid-
1990s created concern in the United States over the security of U.S. military personnel
stationed in Saudi Arabia and other U.S. service members stationed elsewhere in the Gulf.
The first, which occurred on November 13, 1995, at the headquarters of a U.S. training
program for the Saudi National Guard in the capital of Riyadh, killed seven persons
(including five U.S. citizens). Several months later, Saudi authorities charged four Saudis
with the crime. The four, who confessed to being influenced by Islamic fundamentalist
exiles, were convicted and executed.
Khobar Towers, 1996. The second and more lethal explosion, which occurred at
Khobar Towers (a housing facility for U.S. Air Force personnel near Dhahran Air Base) in
June 1996, killed 19 U.S. Air Force personnel, wounded many others, and prompted the
relocation of most U.S. military personnel to more remote sites in Saudi Arabia to improve
security. Press reports allegedly based on Saudi investigations and reported statements by
other suspects have suggested involvement by Iran, but Saudi officials have called these
reports inaccurate. Earlier reports had suggested involvement by exiled Saudi terrorist
Osama bin Laden, who has praised the bombings in Saudi Arabia but has not claimed
responsibility for them. On May 22, 1998, Saudi Minister of Interior Prince Nayif told
reporters from Kuwait that the Riyadh and Khobar bombings “were carried out by Saudis
with the support of others” (whom he did not identify). The Minister further stated in
November that bin Ladin was not responsible for either the Riyadh or the Khobar bombings
but acknowledged that individuals influenced by bin Ladin might have conducted the attacks.
In September 1999, media cited purported U.S. intelligence information that three Saudi
men linked to the bombing had taken refuge in Iran. On October 2, 1999, Iran’s foreign
minister rebuffed an alleged request from President Clinton to Iranian President Khatemi for
Iranian assistance in resolving the case. Asked on March 12, 2000, if any suspects in the
Khobar case were currently in Iran, Prince Nayif told reporters that “we cannot hold anyone
responsible until the facts become clear to us.” Later, on October 30, 2000, he commented
that “[t]he main suspects are not in Saudi Arabia” and added that “[w]e are making efforts
for their return to the kingdom.” There have been numerous reports, denied by both the U.S.
and Saudi governments, that both governments fear that a finding of Iranian involvement
could complicate relations with Iran or force U.S. retaliation against Iran.
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On June 21, 2001, U.S. Attorney General John Ashcroft announced that a federal grand
jury had indicted 14 individuals in connection with the Khobar Towers bombing. According
to the Justice Department, 13 of those indicted belong to the pro-Iranian Saudi Hizballah
organization and the 14th is linked to the Lebanese Hizballah organization. (Saudi Hizballah
appears to be a chapter of the parent Hizballah organization in Lebanon.) According to the
press, none of the persons indicted is in U.S. custody at this time; 11 of them are in Saudi
jails. Although no Iranian is named or charged in the indictment, Ashcroft said “[t]he
indictment explains that elements of the Iranian government inspired, supported and
supervised members of Saudi Hizbollah [variant spelling]. In particular, the indictment
alleges that the charged defendants reported their surveillance activities to Iranian officials
and were supported and directed in those activities by Iranian officials.” Ashcroft said the
investigation is continuing and additional charges will be brought, as appropriate.
During the investigation, U.S. law enforcement officials criticized Saudi counterparts
for not providing U.S. investigators with access to suspects in the Khobar bombing.
According to a May 14, 2001 article in The New Yorker and other media reports, starting in
late 1998, Saudi officials began allowing FBI agents to watch behind a one-way mirror as
Saudi interrogators posed questions provided by the FBI to suspects and witnesses. In a
phone call on June 21, 2001 — the day the indictments were announced — President Bush
thanked Saudi Crown Prince Abdullah for Saudi cooperation in the investigation. The FBI
Director also expressed his appreciation, along with his hopes that the suspects would be
brought to justice in the United States. In an interview published on June 23, however, Saudi
Interior Minister Prince Nayif appeared to rule out extradition of the suspects to the United
States, stating that “[t]he trials must take place before Saudi judicial authorities....” He added
that “[n]o other entity has the right to try or investigate any crimes occurring on Saudi lands.”
On June 1, 2002, Saudi Deputy Minister of the Interior Prince Ahmad said an
unspecified number of people previously arrested by Saudi Arabia in connection with the
Khobar bombing had been sentenced by an Islamic court. In a follow-up announcement on
June 13, the Prince said those convicted “do not include any non-Saudi nationals” and added
that the verdicts would be reviewed by higher courts and announced “at the appropriate
time.”
Riyadh, 2003. Three near-simultaneous suicide bombings at about 11:20 p.m. on May
12 destroyed three housing compounds in Riyadh, Saudi Arabia, inhabited by U.S. military
personnel and other foreign residents in Riyadh. According to latest information as of May
15, as many as 34 people were killed, including eight Americans, seven Saudis, two
Jordanians, two Filipinos, one Lebanese, one Swiss and nine unidentified persons (possibly
including the perpetrators), while many more were wounded. A fourth explosion occurred
the following morning at the headquarters of a U.S.-Saudi joint venture, but there were no
reported injuries. A military officer at the Vinnell compound, which houses U.S. contractor
personnel on a training project for the Saudi National Guard, said the truck that hit this
compound apparently contained 400 pounds of an explosive like RDX or Semtex. U.S. and
Saudi officials said the attacks had many of the earmarks of previous Al Qaeda operations
in their coordinated timing and in their techniques, wherein the assailants attacked guards
at the compound gates and then drove their trucks into the compounds. The attacks occurred
a week after a group of militants exchanged fire with Saudi security forces, who subsequently
found caches of weapons and money, and about two weeks after the State Department issued
a warning that the terrorists might be planning attacks on U.S. targets in Saudi Arabia.
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President Bush condemned the attack, which he linked to Al Qaeda, vowed to find the
killers, and went on to say that “they will learn the meaning of American justice.” Top Saudi
leaders, including Crown Prince Abdullah and Defense Minister Prince Sultan, also
condemned the attacks, and some commentators expressed the view that the attacks were
targeted against the Saudi government as well. On May 14, the U.S. ambassador to Saudi
Arabia told media that Saudi authorities had not responded to an urgent U.S. request to
bolster security at entrances to residential compounds inhabited by U.S. and western
European nationals; some U.S. officials reportedly said there had been a total of five U.S.
requests during the previous months for enhanced security but not all these requests had
mentioned specific sites that U.S. officials wanted to be guarded.
Saudi Foreign Minister Saud al-Faysal disagreed with the allegations, saying that his
government consistently fulfills requests from foreign embassies for enhanced security.
Saudi Ambassador to the United States Prince Bandar bin Sultan told ABC’s “Good Morning
America” that “[t]here is no 100 percent security when a determined, crazy evil person is
determined to die” but indicated that Saudi Arabia would pursue the perpetrators and bring
them to justice. In the meantime, a U.S. interagency team including six FBI representatives
left on May 13 for Saudi Arabia to assist in investigating the attack. Amid some debate over
the degree of cooperation the United States has received from Saudi counterparts in such
investigations, FBI Director Robert Mueller, saying during an interview on May 13 that
“[m]y expectation is that we will get full cooperation from the Saudis.”
On June 26, U.S. and Saudi officials reportedly announced that Saudi authorities had
apprehended Ali Aburahman Gamdi, an Al Qaeda figure believed to have played a key role
in the May 12 bombing. (“Al Qaeda Figure Held in Saudi Arabia,” Washington Post, June
27, 2003.) According to the report, Gamdi is the first to be arrested from a group of 19
believed by Saudi authorities to have been responsible for the bombings, but other terrorist
suspects have been arrested as well. The top advisor to Saudi Crown Prince Abdullah noted
reports of Al Qaeda members hiding in Iran and said the Saudis have asked the Iranians to
extradite any Saudis implicated in terrorist acts. He went on to note that Iran has extradited
Al Qaeda suspects in the past to Saudi Arabia.
Arab-Israeli Conflict
Saudi Arabia supports Palestinian aspirations and strongly endorses Muslim claims in
the old city of Jerusalem. It has supported Israeli-Palestinian peace agreements, and joined
with neighboring Gulf states in 1994 in terminating enforcement of the so-called secondary
and tertiary (indirect) boycotts of Israel while retaining the primary (direct) boycott. Saudi
leaders have been increasingly critical of Israel since the Palestinian uprising began in
September 2000. According to a New York Times article of May 17, 2001, Crown Prince
Abdullah declined an invitation to visit the United States in June 2001, to indicate
displeasure over what Saudis regard as insufficient U.S. efforts to restrain Israeli military
actions against Palestinians. However, the Crown Prince did accept a subsequent invitation
to visit President Bush in Texas in April 2002 (see below).
Saudi Arabia, like other Arab states, recognizes the Palestine Liberation Organization
(PLO) as the legitimate representative of the Palestinian people and provides some financial
support to Palestinian institutions. At an Arab League meeting on October 22, 2000, Crown
Prince Abdullah took the lead in creating a $1 billion fund: $800 million to help preserve
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the “Arab and Islamic identity of Jerusalem” and $200 million to help families of
Palestinians killed in the current unrest. Saudi Arabia reportedly pledged a total of $250
million to these two funds, and provided an additional $30 million to the Palestinian
Authority (PA) on November 5 as a separate donation. At an informal international donors’
conference at Stockholm on April 11, 2001, Saudi Arabia pledged $225 million in direct
monetary support to the PA over a 6-month period to cover emergency expenses. PLO/PA
Chairman Yasir Arafat received a $45 million grant during a visit to Saudi Arabia on July
23, 2001, but it is not clear whether this represented part of the $225 million grant pledged
by Saudi Arabia in April.
There have been unsubstantiated reports of Saudi assistance to the PLO’s rival
organization, the fundamentalist Hamas, particularly after the Saudi-PLO rift that occurred
after the PLO supported Iraq in 1990. In its report entitled Patters of Global Terrorism, 2001,
the State Department noted that Hamas receives funding from “private benefactors in Saudi
Arabia” and some other countries but does not estimate amounts involved. Saudi Arabia has
provided aid (variously estimated at $33 million and $59 million) to families of Palestinians
killed or injured in the 17-month-old Palestinian uprising; in addition, Saudis raised
additional funds (over $100 million according to one report) for this purpose at a telethon
sponsored by King Fahd on April 11, 2002. Saudi officials told U.S. counterparts in late
April that proceeds of the telethon are funneled through non-governmental organizations to
provide some humanitarian support to needy Palestinian families; the Saudis drew a
distinction between their fund raising activities and those of Iraq, which pays families who
will sacrifice their children as suicide bombers. In early May, Israel officials, citing captured
Palestinian documents, said the Saudi government has given money to 13 charities, seven of
which provide support to Hamas. The Saudi Ambassador denied this report.
Crown Prince Abdullah’s Peace Initiative. In February 2002, Crown Prince
Abdullah informally floated a peace proposal calling for full Israeli withdrawal from Israeli
occupied territories in return for full normalization of relations between Arab states and
Israel. An expanded version of his proposal was adopted at an Arab League summit
conference held on March 27-28, 2002. It called among other things for Israeli withdrawal
from territories it had occupied since 1967, a “just solution to the problem of Palestinian
refugees,” and establishment of normal relations between Arab states and Israel. Some
commentators believe the prince’s comments represented nothing new over and above long-
standing Arab land-for-peace proposals. Other commentators thought that such comments
from an Arab leader of Abdullah’s stature carried special weight and could portend a
breakthrough in Arab-Israeli peace negotiations.
The Saudi-initiated peace proposal was also a major topic of discussion during Crown
Prince Abdullah’s visit to President Bush at the latter’s ranch in Texas on April 25. A senior
Administration official told reporters that “[t]he President congratulated him [Abdullah}
again on his statesmanship in putting the [initiative] forward.” According to White House
spokesman Ari Fleischer, there are areas of disagreement between U.S. and Saudi peace
plans but significant areas of overlap as well.
Saudi officials found “positive factors” in President Bush’s speech of June 24 but
expressed concern over his statements conditioning a Palestinian state on the installation of
a new Palestinian leadership. A statement by the Saudi cabinet on July 1 alluded to “the
positive elements of the Bush initiative,” but on the same day Crown Prince Abdullah was
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quoted as telling the visiting Spanish Defense Minister that the Palestinian people “alone
have the right to choose their leadership.”
Arms Transfers to Saudi Arabia
U.S. Arms Sales. The United States is currently Saudi Arabia’s leading arms
supplier. Total value of arms agreements with Saudi Arabia from 1950 through March 31,
1997, was $93.8 billion, while arms agreements with Saudi Arabia from 1991 through 1998
amounted to $22.8 billion. The upsurge in Saudi arms purchases from the United States after
1990 was due in large measure to the Persian Gulf crisis and its aftermath. The largest recent
sale was a $9 billion contract for 72 F-15S advanced fighter aircraft, signed in May 1993.
As Table 1 shows, approximately 21% of the value of U.S.-Saudi arms contracts from 1950
to 1997 were for lethal equipment (i.e., weapons, ammunition, and combat vehicles, aircraft,
and ships); the largest portion (32%) went for support services (repair, rehabilitation, supply
operations, and training).
Another major component of the Saudi program has been
construction of military bases and facilities, accounting for 19%, although most military
infrastructure projects were completed by 1990. A downward trend has marked Saudi arms
procurement since the mid-1990s as Saudi Arabia completed many of its post-Gulf War
purchases and the country faced straitened finances.
On September 8, 2000, the U.S. Defense Department announced that Saudi Arabia has
asked to buy three arms packages from the United States: (1) $416 million in light armored
vehicles, anti-tank missiles, and advanced communications equipment for the paramilitary
Saudi National Guard; (2) $690 million in contractor training and maintenance support for
Saudi Arabia’s fleet of F-15 fighter aircraft; and (3) $1.6 billion in flight simulators, repair
parts, and other technical services for the F-15 aircraft. The prime contractors for the first
package would be the Diesel Division of General Motors of London, Ontario, and Raytheon
Corporation of Tuscon, Arizona. The prime contractor for the second package would be al-
Salam Aircraft Company of Saudi Arabia, which is 50% owned by Boeing Co. The prime
contractor for the third package has not yet been determined.
Table 1. U.S. Arms Transfers to Saudi Arabia, 1950-1997
Orders
Deliveries
Category
$ in
% of Total
% of Total
$ in Billions
Billions
Orders
Deliveries
Weapons & Ammunition
19.893
21.2
9.092
15.6
Support Equipment
16.614
17.7
9.815
16.8
Spare Parts & Modifications
9.778
10.4
5.259
9.0
Supply, Repair, Training
29.615
31.6
17.804
30.6
Construction
17.924
19.1
16.197
27.8
TOTALS
93.824

58.167

Note: All figures are current through March 31, 1997.
Successive U.S. Administrations have entered into military sales agreements with Saudi
Arabia because of its prestige in the Arab world, its importance as a major source of oil, and
its vulnerability to threats from neighboring states supported in the past by the Soviet Union.
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Heightened threats from Iran in the late 1980s and subsequently from Iraq provided rationale
for an expansion of the arms supply relationship, and some observers believe further sales
are needed to redress a continuing gap between Saudi weapons inventories and those of
potential adversaries. Also, the Saudi arms market has helped maintain the U.S. industrial
base and create jobs.
Some critics doubt that Saudi forces can absorb large quantities of advanced military
hardware and voice concerns that such equipment could fall into the wrong hands in the
event of external invasion or a radical change in the Saudi regime. Many are concerned that
arms being sold to Saudi Arabia might be used one day against Israel. Others doubt that
Israel is seriously threatened by Saudi Arabia, but oppose sales to Arab countries technically
at war with Israel and fear that enhancement of Saudi air and missile capabilities could
increase the costs to Israel of a future conflict. Another concern is that continuing arms sales
to Saudi Arabia undermine efforts to restrain the flow of advanced weaponry to an already
heavily armed Middle East.
Trade Relationships
Saudi Arabia was the second largest U.S. trading partner in the Middle East in 2002.
For that year, Saudi exports to the United States were estimated at $12.2 billion and imports
from the United States at $4.3 billion. Comparable figures for Israel, the largest U.S. trading
partner in the Middle East, were $12.4 billion in exports and $5.3 billion in imports. To a
considerable extent, this high volume of trade is a result of U.S. oil imports from Saudi
Arabia and U.S. arms exports to that country. The Saudis buy significant amounts of U.S.
commercial equipment, such as machinery and vehicles, as well. Also, a Washington Post
article of February 11, 2002, estimates that Saudi nationals have invested between $500 and
$700 billion in the U.S. economy.
Saudi Arabia has applied to join the 128-member World Trade Organization (WTO) as
a developing country, an arrangement that would give it a special transition period to bring
its commercial procedures in line with WTO rules. The U.S. State Department notes that
accession will require the Saudi government to initiate substantial reforms, including tariff
reduction, opening up financial services (insurance and banking), allowing competition in
telecommunications and other services, and better protection of intellectual property rights.
In recognition of its progress in protection of intellectual property rights, Saudi Arabia was
removed from the U.S. Trade Representative’s Priority Watch List in 1996, but remains on
the basic Watch List pending further progress. The U.S. Trade Representative reportedly has
also cited Saudi observance of the secondary boycott against Israel as an obstacle to
admission to the WTO. In March 2001, WTO officials reportedly expressed disappointment
over a recent list issued by the Saudi government of activities off limits to foreign investment
(see below) and predicted that these restrictions could delay Saudi accession to the WTO.
During Crown Prince Abdullah’s April 2002 visit, however, President Bush expressed
support for Saudi accession and said the United States is making technical assistance
available to Saudi Arabia to support the Saudi application.
Problems in Commercial Transactions. Complaints have arisen within the U.S.
business community over commercial disputes that have resulted in hardships for U.S.
companies doing business in Saudi Arabia and for their employees. These disputes center
on allegations by U.S. firms that Saudi clients have not paid for services rendered or have
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sought to expand terms of a contract without further reimbursement, and in some cases have
taken reprisals against U.S. employees of the firms involved. (For further information, see
CRS Report 95-666, Saudi Arabia: Commercial Disputes With U.S. Firms.).
Oil Production. With the world’s largest proven oil reserves (estimated at 261.7
billion barrels in January 2001), Saudi Arabia produced an average of 9.145 million barrels
per day (bpd) of crude oil during 2000. Approximately 14% of U.S. oil imports and 8.46%
of total U.S. oil consumption came from Saudi Arabia during 2001. Formerly the largest
foreign supplier of oil to the United States, Saudi Arabia has been exceeded in this role by
Venezuela and/or Canada during recent years (see Table 2). In recent years, Saudi Arabia
has alternately supported cuts and increases in production as oil prices on the international
market have fluctuated. Under a “gentlemen’s agreement” reached in June 2000, members
of the Organization of Petroleum Exporting Countries (OPEC) established a mechanism to
adjust the supply of oil by 500,000 bpd if the 20-day average price of oil moved outside a
$22 to $28 price band. Members disagree, however, as to whether this mechanism is
automatic or requires separate action by OPEC to implement, and Saudi Arabia has spoken
of a target price of $25 rather than a price band. Congress has approved legislation to
discourage price fixing by oil producing countries (see below). Following a prolonged strike
by oil workers in Venezuela and as the likelihood of war with Iraq increased in early 2003,
OPEC members agreed on January 12, 2003, to raise their quotas by 1.5 million barrels per
day to offset a possible shortfall in oil supply, a move reportedly spearheaded by Saudi
Arabia.
Table 2. Oil Consumption and Imports
(in millions of barrels per day)
Category
1998
1999
2000
2001
Total U.S. Consumption
18.917
19.519
19.701
19.649
Total U.S. Imports
10.708
10.852
11.459
11.871
Imports from Saudi Arabia
1.491
1.478
1.572
1.662
Imports from Venezuela
1.719
1.493
1.546
1.553
Imports from Canada
1.598
1.539
1.807
1.828
Source: DOE.
Foreign Investment. Saudi leaders have shown increasing interest in attracting
foreign investment in their energy sector, although projects in upstream oil apparently remain
off limits. On April 10, 2000, King Fahd approved a new foreign investment law which
allows international investors to have full ownership of projects and related property in Saudi
Arabia, reduces taxes from 45% to 30% on corporate profits, and restructures (but apparently
does not abolish) requirements for foreign businessmen to have a Saudi sponsor. On
February 11, 2001, the Saudi Supreme Economic Council issued a so-called “negative list”
of those investment activities that remain off limits to foreign investment. In general, the list
covers oil exploration and production, some manufacturing activities, radio and
telecommunications, transport, electricity transmission and distribution, and a range of
services including tourism, publishing, real estate brokerage, and insurance. According to
news reports in March 2001, international trade officials expressed disappointment over the
length and scope of the list. The list will be reviewed annually, however, and some observers
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have speculated that it will be shortened as the country adjusts to an expansion in foreign
investment. In a later development, according to a news report in April 2002, Saudi officials
are considering a draft law that would tax the earnings of expatriate employees in Saudi
Arabia for the first time since the 1970s, in addition to the annual corporate taxes already
levied on foreign firms operating in Saudi Arabia.
On June 3, 2001, Saudi Arabia signed three preliminary agreements worth
approximately $25 billion with eight international oil companies to develop three natural gas
fields, together with related power plants, transmission pipelines, and water desalinization
projects. Five of these companies are U.S.-based, including Exxon Mobil Corporation,
Conoco, Phillips Petroleum Company, Occidental Petroleum Corporation, and Marathon.
Exxon Mobil is the lead manager for two of the three gas field projects. Conclusion of final
agreements, originally set for mid-December 2001, has been delayed, as Saudi and company
negotiators continue trying to resolve several issues including taxes, rate of return on
investments, and size of the gas reserves being offered. According to a British Broadcasting
Company (BBC) report of September 30, 2002, the Saudi negotiating team has given the oil
company consortiums until November 1 to accept its final offers, which include additional
areas for gas excavations and a higher rate of return on investment (15.5%), which is in the
15%-to-18% range reportedly sought by the oil companies. On November 20, 2002,
however, the London Financial Times reported that the deal had encountered resistance in
several Saudi government departments.
A Washington Post article of June 6, 2003, however, citing energy industry sources,
reported that Saudi authorities have cancelled one of the two projects led by Exxon Mobil
effective June 15, after oil companies rejected final terms offered from the Saudi side.
According to the article, industry analysts think it likely that the other two agreements. Some
have speculated that the failure of the parties to agree on terms may reflect tensions within
the Saudi royal family; however, a leading industry analysts in Washington believes the
problem resulted mainly from a failure to an agreement on commercial terms.
Human Rights, Democracy, and Other Issues
Of particular concern to Westerners are pervasive restrictions on women’s activities and
an injunction against the practice of other religions throughout the Kingdom. This injunction
has been applied not only against non-Islamic faiths but also at times against the Shi’ite
Muslim community in Saudi Arabia, estimated at 500,000 or more persons mainly in the
Eastern Province. Since 1990, the Saudi government has moved quietly to ease some
restrictions on Shi’ites. Also, according to the State Department, high-level Saudi officials
have said that Saudi policy allows for private non-Muslim worship, for example, in private
homes or secluded compounds. On April 6, 2000, responding to criticisms by the London-
based Amnesty International, a Saudi Under Secretary in the Foreign Ministry maintained
that “non-Muslims enjoy full freedom to engage in their religious observances in private.”
Earlier, in April 1999, Crown Prince Abdullah told a local audience: “Taking into account
the teachings of Islam, we will do our best to enable Saudi women to continue to contribute.”
Political reforms promulgated by King Fahd appear to represent a limited move toward
democracy and protection of individual freedoms. The “main law” announced by the King
on March 1, 1992, bans arbitrary arrest, harassment, or entry of individual homes without
legal authority and specifies privacy in telephone calls and mail. On August 20, 1993, the
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King appointed a 60-member consultative council (increased to 90 in 1997 and to 120 in
2001), with limited powers to question cabinet members and propose laws. On the other
hand, King Fahd has said that free elections are not suitable for his country; he stated on
March 30, 1992 that elections “do not fall within the sphere of the Muslim religion, which
believes in the al-Shura (consultative) system and openness between ruler and his subjects
and which makes whoever is in charge fully answerable to his people.”
According to press reports in January 2003, Crown Prince Abdullah has proposed an
“Arab Charter” advocating internal reforms, increased political participation, regional
economic integration, and mutual security measures. The charter was to be submitted to a
summit conference of Arab heads of state in March.
Child Custody Cases. Child custody cases in which a Saudi husband has refused
to permit his children by an American wife to travel to the United States have been a source
of U.S.-Saudi friction. Under Saudi laws the father is almost always given custody of
children in divorce cases; moreover, in some instances where a wife secured child custody
in the United States, an estranged Saudi husband has abducted the children from the United
States and taken them to Saudi Arabia, where his claim is usually upheld. Members of
Congress have criticized the U.S. State Department for not exerting more pressure on Saudi
Arabia to resolve these cases. State Department officials say they have tried to do so, and
point out that there are approximately 1,100 such cases world wide, of which 92 involve U.S.
citizens in Saudi Arabia. According to September 2002 press reports, Saudi and U.S.
officials have agreed to work on establishing a mechanism to help resolve these issues.
Background to U.S.-Saudi Relations
Political Development
Saudi Leadership. As the birthplace of the Islamic religion in 622 A.D. and as the
home of Islam’s two holiest shrines, the Arabian Peninsula has always occupied a position
of special prestige within the Middle East. With the establishment of Arab empires based
in Damascus and Baghdad, the peninsula gradually lost its political importance and sank into
disunity. In the 16th century, much of the Arabian Peninsula came under the nominal rule
of the Ottoman Empire; however, tribal leaders effectively controlled most of the region.
During this period, an alliance developed between an influential eastern tribe, the House of
Saud, and the leaders of a puritanical and reformist Islamic group known as the Wahhabi
movement. During the first quarter of the 20th century, a chieftain of the Saud family, Abd
al-Aziz ibn Abd al-Rahman (later known as Ibn Saud) overcame numerous rivals with the
support of his Wahhabi allies and succeeded in unifying most of the Arabian Peninsula under
his rule. Four sons have succeeded him.
Royal Succession. King Fahd, the current ruler and a dynamic leader for many
years, is approximately 80 years old and suffers from medical problems including diabetes
and arthritis. In early 1996, King Fahd temporarily turned over affairs of state to his half-
brother, Crown Prince Abdullah, for a six-week period while the King recuperated from a
stroke. More recently, amid conflicting reports about the King’s condition, Crown Prince
Abdullah has increasingly carried out many governmental functions since 1996, together
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with other senior princes of the royal family. Another key figure is Defense Minister Prince
Sultan, a full brother of King Fahd, who is generally considered next in line of succession
after Prince Abdullah. (King Fahd, Prince Abdullah, and Prince Sultan also hold the
positions of Prime Minister, First Deputy Prime Minister, and Second Deputy Prime
Minister, respectively.) Press reports in August and September 2002 indicate that King
Fahd’s health has been deteriorating.
Most commentators believe the royal family would back Crown Prince Abdullah in a
smooth transfer of power if King Fahd should pass from the scene. Various sources describe
Prince Abdullah as more traditional and less western in outlook than King Fahd and more
oriented toward the Arab world. On balance, the Crown Prince seems likely to maintain
Saudi Arabia’s long-standing strategic and economic ties with the United States. U.S.
officials commented that President Bush and Crown Prince Abdullah established a very good
personal rapport during the latter’s visit in April 2002. Some speculate, however, that
succession could become more intricate after Abdullah (who is only two years younger than
Fahd but believed to be in better health) and fear that future intra-family rivalries could
weaken the Saud dynasty over the long term. Possible future candidates include some 25
brothers and half-brothers of King Fahd and a number of sons and nephews.
Economy and Aid
Economic Conditions. Oil is the dominant factor in the Saudi economy, accounting
for 35-40% of GDP, 75% of budget receipts, and 90-95% of export earnings as of 2001; even
more of the GDP is derived indirectly from the oil industry. Despite immense oil revenue,
a combination of fluctuating oil prices, domestic welfare spending, and military spending
have caused periodic budget deficits (see Table 3). For example, the 1990-1991 Gulf war
cost Saudi Arabia approximately $55 billion (including $16.9 billion contributed to the
United States to help defray expenses). Although the government was able to retire its
external debt in May 1995, it had to borrow $4.3 billion again from external sources in
December 1997 to finance purchase of aircraft and had to resort to subsequent borrowing
from both external and domestic creditors to cover other expenses.
Since 1994 the
government has instituted various austerity measures to deal with shrinking revenue.
Table 3. Saudi Budget Figures
(In billions of U.S. dollars, at exchange rate of $1.00=S.R. 3.75)
2000
2001
2002
2003
Category
Budget
Actual
Budget
Actual
Budget
Est.
Budget
Expenditure
49.3
62.7
57.3
68.0
53.9
60.0
55.0
Revenue
41.9
68.8
57.3
61.3
41.9
54.4
45.3
Balance
-7.5
6.1
0
-6.7
-12.0
-5.6
-9.7
Source: Saudi Ministry of Finance; Saudi government announcements; press estimates.
Aid Relationships. As Saudi oil income expanded, U.S. economic aid ended in
1959. Small amounts of aid continued through 1975, limited to a small international military
education and training (IMET) program after 1968. Total U.S. aid to Saudi Arabia from
1946 through its termination in 1975 amounted to $328.4 million, of which $295.8 million
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was military and $32.6 million was economic assistance. Approximately 20% of total aid
was in the form of grants and 80% in loans, all of which have been repaid. A small IMET
program of $25,000 per year to help defray some expenses of sending Saudi officers to U.S.
military service schools was resumed in FY2002, and the same amount was requested by the
Administration for Saudi Arabia in FY2003. Saudi officials also cite their country’s role as
a donor of aid to less affluent countries; according to a Saudi diplomat, the Saudi government
extended $820.3 million worth of aid to developing countries in 2001.
Defense and Security
The United States and Saudi Arabia are not linked by a formal defense treaty; however,
a series of informal agreements, statements by successive U.S. Administrations, and military
deployments have demonstrated a strong U.S. security commitment to Saudi Arabia. (For
statements by previous administrations, see CRS Report 94-78, Saudi Arabia: U.S. Defense
and Security Commitments
, February 3, 1994.) Saudi forces acquired experience during the
Gulf war and are undergoing further upgrading through a large-scale program of arms
procurement (see below), both Saudi Arabia and its five smaller Gulf neighbors remain
vulnerable to future external aggression. On one hand, both the Iranian and Iraqi armed
forces suffered major personnel and equipment losses during the 1980-1988 Iran-Iraq war
and Operation Desert Storm, respectively, and neither is in a position to offer an immediate
threat to the Gulf Cooperation Council (GCC). On the other hand, as shown in Table 4, the
combined forces of Saudi Arabia and its GCC allies are outnumbered in important categories
by those of Iraq and Iran, even after the losses sustained by both countries in recent wars.
Figures on Iraq do not include losses sustained so far during Operation Iraqi Freedom.
Congressional Interest in Saudi Arabia
In early 2000, the precipitate rise in international oil prices prompted several legislative
initiatives designed to restrain oil price increases, as mentioned above. On March 22, 2000,
by a vote of 382 to 38 (with one present and 30 abstentions, Roll Call 65), the House passed
H.R. 3822, which requires the President, inter alia, to determine which oil producing nations
are engaged in oil price fixing to the detriment of the U.S. economy, submit reports to
Congress, and “take the necessary steps to begin negotiations to achieve multilateral action
to reduce, suspend, or terminate bilateral assistance and arms exports to major net oil
exporters engaged in oil price fixing as part of a concerted diplomatic campaign with other
major net oil importers...” In the 107th Congress, H.R. 334, the Persian Gulf Security Cost
Sharing Act, introduced on January 31, 2001, would have directed the President to seek
further contributions from Saudi Arabia and other Persian Gulf states to defray the costs of
U.S. military deployments in the region. This bill did not come to the floor. Other U.S.-
Saudi bilateral issues of interest to Congress in recent years include arms sales to Saudi
Arabia, Arab-Israeli issues including the now somewhat attenuated Arab boycott of Israel,
and Saudi trade practices, including disputes between U.S. companies and Saudi clients.
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