Order Code RL33533
CRS Report for Congress
Received through the CRS Web
Saudi Arabia: Current Issues
and U.S. Relations
Updated August 2, 2006
Alfred B. Prados
Specialist in Middle Eastern Affairs
Foreign Affairs, Defense, and Trade Division
Christopher M. Blanchard
Analyst in Middle Eastern Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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Saudi Arabia: Current Issues and U.S. Relations
Summary
Saudi Arabia, a monarchy ruled by the Saud dynasty, enjoys special importance
in much of the international community because of its unique association with the
Islamic religion and its oil wealth. The United States and Saudi Arabia have long-
standing economic and defense ties. 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. Saudi Arabia was a key member
of the allied coalition that expelled Iraqi forces from Kuwait in 1991. Saudi Arabia
subsequently hosted U.S. aircraft enforcing the no-fly zone over southern Iraq. Saudi
officials expressed opposition to the U.S.-led military campaign launched against Iraq
in March 2003 (Operation Iraqi Freedom), although Saudi Arabia reportedly
permitted certain support operations by U.S. and British military forces, in addition
to making some facilities available to them. By mutual agreement, the United States
withdrew virtually all its forces from Saudi Arabia at the end of August 2003.
Bombing attacks against several U.S. and foreign operated installations in Saudi
Arabia have raised some concerns about security of U.S. citizens and what appears
to be growing anti-Americanism in some segments of the Saudi population. Since
the attacks on the United States on September 11, 2001, some commentators have
maintained that Saudi domestic and foreign policies have created a climate that may
have contributed to terrorist acts by Islamic radicals. U.S. officials have generally
cited Saudi support in the aftermath of the attacks, including increased intelligence
sharing, law enforcement activities, and tracking of terrorist financing.
In its final report, released on July 23, 2004, the U.S. National Commission on
Terrorist Attacks upon the United States (the 9/11 Commission) described Saudi
Arabia as having been “a problematic ally in combating Islamic extremism,” while
noting that Saudi cooperation has improved, especially since further terrorist attacks
in Saudi Arabia beginning in May 2003. The National Intelligence Reform Act (P.L.
108-458, December 17, 2004) contains a requirement (Section 7120(b)) that the
President submit to designated congressional committees a strategy for collaboration
with Saudi Arabia, as part of a larger report on U.S. government activities to
implement the provisions of this act.
Other principal issues of bilateral interest include security in the post-war Gulf
region, the Saudi position on the Arab-Israeli conflict, arms transfers to Saudi Arabia,
Saudi external aid programs, bilateral trade relationships and oil production, and
Saudi policies on human rights and democracy. On June 9, 2006, the House adopted
H.Amdt. 997 to H.R. 5522 (Foreign Operations Appropriations, FY2007) by 312-97
(Roll no. 244); this amendment (Section 589 of the House version of H.R. 5522)
prohibits U.S. assistance to Saudi Arabia and contained no Presidential waiver
provision. The FY2006 Foreign Operations Appropriations Act (P.L. 109-102)
contained an identical ban but provided waiver authority to the President. This CRS
report replaces CRS Issue Brief IB93113, Saudi Arabia: Current Issues and U.S.
Relations, by Alfred B. Prados; it will be updated as circumstances warrant.

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Contents
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background to U.S.-Saudi Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Political Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Aid, Defense, and Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Congressional Interest in Saudi Arabia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Current Issues in U.S.-Saudi Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Royal Succession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
September 11 Terrorist Attacks and Aftermath . . . . . . . . . . . . . . . . . . . . . . . 6
Allegations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Saudi Responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Joint Congressional Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9/11 Commission Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Major Terrorist Attacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Saudi Stance on Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Operation Iraqi Freedom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Post-War Iraq: Withdrawal of U.S. Troops from Saudi Arabia . . . . . . 10
Infiltrators? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Bilateral Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Iraqi Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Arab-Israeli Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Saudi-Palestinian Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Hamas: Pre-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Hamas: Post-Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Israel-Hamas-Hezbollah Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Arms Transfers to Saudi Arabia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
U.S. Arms Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Saudi-China Arms Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Nuclear Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Trade Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Boycott of Israel and WTO Membership . . . . . . . . . . . . . . . . . . . . . . . 17
Oil Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Foreign Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Human Rights, Democracy, and Other Issues . . . . . . . . . . . . . . . . . . . . . . . 20
Women and Political Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
List of Tables
Table 1. Oil Consumption and Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

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Saudi Arabia: Current Issues
and U.S. Relations
Recent Developments
After initially blaming the Lebanese militia Hezbollah for the current outbreak
of violence along the Israel-Lebanon border, Saudi Arabian leaders have voiced
condemnation of Israel in response to Israeli military attacks inside Lebanon that
have killed hundreds of civilians and damaged critical infrastructure. On July 25, the
Saudi cabinet warned “that if the Israeli military savagery continues to kill and
destroy, no can predict what would happen” and “that, should the option of peace fail
as a result of the Israeli arrogance, only the option of war will remain.” On July 31,
the cabinet cited “the moral, political, and material responsibility of Israel for
massacres and war crimes” and pledged “the Kingdom’s standing with all its political
and economic capabilities” by the people of Lebanon.
Saudi Foreign Minister Prince Saud al-Faisal and Saudi National Security
Council chief and former Ambassador to the United States Prince Bandar bin Sultan
visited Washington, D.C. on July 23 to deliver a letter from King Abdullah bin
Abdulaziz requesting U.S. support for an immediate ceasefire. Current Saudi
Ambassador to the United States Prince Turki al-Faisal clarified the Saudi position
later that week saying, “Saudi Arabia holds firmly responsible those who first
engaged in reckless adventure under the guise of resistance [Hamas and Hezbollah],”
adding that, the groups’ “unacceptable and irresponsible actions do not justify the
Israeli destruction of Lebanon or the targeting and punishment of the Lebanese and
Palestinian civilian populations.”
The Saudi Arabian government has pledged over $1.5 billion in financial
assistance to the Lebanese government and has organized a popular relief campaign
under the auspices of the Minister of Interior Prince Nayef bin Abdulaziz. The
government also announced plans to transfer $250 million in reconstruction
assistance “to the Palestinian people” and confirmed the transfer of half of a $92
million budgetary support pledge for the Palestinian Authority.
In late July 2006, the Bush Administration notified Congress that it has
approved over $9 billion worth of potential U.S. military sales to Saudi Arabia. The
proposed sales will support the Saudi Arabian National Guard and may ultimately
include 24 Black Hawk helicopters, 724 light armored vehicles, long-range radio
systems, night vision goggles, thermal weapon sights, and other equipment. A
number of planned re-manufacture and upgrade sales are also part of the proposed
package, including modifications for Apache attack helicopters, the transfer of 58
M1A1 Abrams tanks, and their upgrading along with 315 Saudi M1A2 Abrams
tanks. Congress has thirty days from the notification dates to block the sales.

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CRS-2
Background to U.S.-Saudi Relations
Political Development
As the birthplace of the Islamic religion in 622 A.D. and as the home of Islam’s
two holiest shrines (the cities of Mecca and Medina), 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. Five sons have succeeded him. U.S.-Saudi relations with
the modern Saudi kingdom have expanded over the years. 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.
Saudi Arabia in Brief

Population (July 2006):
27,019,731 (includes 5,576,076 foreign residents)
Growth rate: 2.18%
Area:
1,960,582 sq.km. (756,985 sq.mi.); just over one fifth the
size of the United States
Ethnic Groups:
(native Saudis only) Arab 90%; Afro-Asian 10%
Religion:
(native Saudis only) Muslim 100% (Sunni 85-95%,
Shi’ite 5-15%)
Literacy (2003):
78.8% (male 84.7%, female 70.8%)
GDP (2005):
$264 billion; growth rate: 6.1%*
External Public Debt (2005): $36.8 billion
Inflation (2005):
0.4%
Unemployment (2004):
13% (males); some estimates range up to 25%
*Unusually high figure, largely owing to mounting oil production. A leading Saudi bank
estimates 6.5% in 2005.
Sources: IMF; U.S. Dept. of Commerce; CIA World Factbook; Economist Intelligence Unit
U.S. Aid, Defense, and Security
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

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CRS-3
from 1946 through its termination in 1975 amounted to $328.4 million, of which
$295.8 million 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 $22,000 per year to help defray
some expenses of sending Saudi officers to U.S. military service schools was
resumed in FY2002 and increased slightly to $24,000 in 2003 and 2004; and $25,000
in 2005; $24,000 was requested by the Administration for Saudi Arabia in FY2006
and $20,000 in FY2007. This amount permits Saudi Arabia to purchase additional
U.S. training at a lower cost than that which is charged to countries not eligible for
IMET. Saudi officials also cite their country’s role as a donor of aid to less affluent
countries; according to the Saudi Embassy in Washington, Saudi Arabia gave $1.7
billion in development assistance and $14.7 million in relief assistance to developing
countries in 2002. In late 2005, U.S. and Saudi officials initiated a “strategic
dialogue” to expand cooperation in six key areas: counterterrorism, military affairs,
energy, business, education and human development, and consular affairs.
Congressional Interest in Saudi Arabia
108th Congress
Relevant sections of the Intelligence Reform and Terrorism Prevention Act (P.L.
108-458, December 17, 2004) capture many of the concerns reflected in the 9/11
Commission report regarding Saudi Arabia. Section 7105(a) contains findings that
review problems in the bilateral relationship but note improvements in counter-
terrorism cooperation between the two countries since mid-2003. Section 7105(b)
expresses the sense of Congress that “there should be a more robust dialogue between
the people and Government of the United States and the people and Government of
Saudi Arabia.” Section 7120(b) requires the President to submit to Congress within
180 days a strategy for collaboration with Saudi Arabia, as part of a larger report on
U.S. government activities to implement the provisions of this act.
109th Congress
The 109th Congress has continued to show concern over the role of Saudi Arabia
in the war against terrorism, with particular emphasis on encouraging Saudi leaders
to heighten their efforts against terrorist financing. S. 12, the Targeting Terrorists
More Effectively Act of 2005, introduced on January 24, 2005, contains sections on
Saudi Arabia including a statement of U.S. policy to work with the Saudi government
to curtail terrorist financing through a variety of methods; findings that Saudi Arabia
has an uneven record in fighting terrorism; and a requirement that the President
submit a report to designated congressional committees containing a long-term
strategy for U.S.-Saudi engagement and for effective prevention of terrorist
financing.1
1 Section 7120 of the Intelligence Reform and Terrorism Prevention Act (P.L. 108-458, Dec.
17, 2004) — requires the President to submit a strategy as part of a larger reporting
requirement within 180 rather than 90 days, as explained above.

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CRS-4
H.R. 604 would halt issuance of visas to Saudi citizens until the President
certifies that the Saudi government does not discriminate in its visa policies on the
basis of religious affiliation or cultural heritage. H.R. 2037, the Saudi Arabia
Accountability Act of 2005, is similar to two previous Saudi Arabia Accountability
Acts (H.R. 3643/S. 1888), proposed but not enacted in the 108th Congress. Like the
earlier bills, it would prohibit export or issuance of an export license to Saudi Arabia
for any U.S. defense articles or defense services on the U.S. munitions list or dual use
items and would restrict travel of Saudi diplomats in the United States. Section 810
of S. 600, the State Department authorization bill for FY2006-2007, expresses the
sense of Congress that the municipal elections held in early 2005 constituted a
“positive initial step” and adds that it is in the interest of Saudi Arabia to permit
women to vote and run for office in future elections.
Prohibitions on U.S. Aid to Saudi Arabia
Since 2004, several proposals to prohibit the extension of IMET aid to Saudi
Arabia have been considered and adopted by Congress. As the total amount of U.S.
aid to Saudi Arabia has been minuscule in recent years, the practical affect of the
prohibitions has been to rescind Saudi Arabia’s eligibility to purchase U.S. military
and counterterrorism training at a reduced cost. The proposals have differed in their
cited reasons for prohibiting aid as well as whether or not they provide national
security waiver authority for the President. For example, H.R. 505, the Prohibit Aid
to Saudi Arabia Act of 2005, would impose a ban on U.S. aid to Saudi Arabia
outright and contains no waiver authority. The Consolidated Appropriations Act for
FY2005 (P.L. 108-447, December 8, 2004) contains a ban on U.S. assistance to
Saudi Arabia (Section 575) but provides for a presidential waiver if the President
certifies that Saudi Arabia is cooperating in the war against terrorism. The President
issued this waiver on September 26, 2005, by Presidential Determination 2005-38.
On June 28, 2005, the House adopted H.Amdt. 379 to H.R. 3057 (the Foreign
Operations Appropriations bill for FY2006) by 293-122 (Roll no. 330); this
amendment added a Section 588 to H.R. 3057 prohibiting U.S. assistance to Saudi
Arabia and containing no provision for a presidential waiver. The Senate version of
H.R. 3057, passed on July 20, 2005, did not contain this ban. The conference report
(H.Rept. 109-265, November 2, 2005) retained the ban (renumbered Section 582) but
contains waiver authority if the President certifies that Saudi Arabia is cooperating
with efforts to combat international terrorism and that the proposed assistance will
facilitate that effort. President Bush signed the bill as P.L. 109-102 on November 14,
2005. As of July 2006, the President had not issued a waiver for FY2006 aid to
Saudi Arabia. On June 9, 2006, the House adopted H.Amdt. 997 to H.R. 5522
(Foreign Operations Appropriations, FY2007) by 312-97 (Roll no. 244); this
amendment prohibits U.S. assistance to Saudi Arabia and contained no presidential
waiver provision.

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CRS-5
Current Issues in U.S.-Saudi Relations
Royal Succession
The late King Fahd, who ruled Saudi Arabia from 1982 until his death in August
2005, was a dynamic leader but suffered increasingly from medical problems,
including diabetes and arthritis. Crown Prince Abdullah, a half-brother of the late
King and commander of the elite National Guard forces, had governed the country
on a day-to-day basis since then King Fahd suffered a debilitating stroke in late 1995.
As predicted by many commentators, the royal family backed Crown Prince Abdullah
in a smooth transfer of power when King Fahd passed away.
King Abdullah’s replacement as Crown Prince is another key figure in the royal
family, Prince Sultan, who has served for over 40 years as Minister of Defense and
Aviation. As noted above, the King and Crown Prince hold the additional positions,
respectively, of Prime Minister and First Deputy Prime Minister. In the aftermath of
King Fahd’s death, media reports initially speculated that the new King Abdullah
planned to name a Second Deputy Prime Minister (a de facto Deputy Crown Prince)
as Abdullah’s recent predecessors have done, but so far the King has not done so.
Some commentators believe the King has deferred taking this step to avoid possible
rivalries over future succession within the large Saud family, which numbers more
than 5,000 princes, according to some estimates. Possible future candidates for
succession include some 25 brothers and half-brothers of the late King and a number
of sons and nephews. For example, press sources have mentioned Prince Nayif,
Minister of the Interior, and Prince Salman, Governor of Riyadh, as possible
candidates for the position of Second Deputy Prime Minister, should King Abdullah
decide to fill this position.2
In the past, various sources described King Abdullah as more traditional and less
western in outlook than the late King Fahd and more oriented toward the Arab world;
however, in recent years he has acquired a reputation as a supporter of limited
economic and political reform. On balance, the new King 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 then Crown Prince Abdullah
established a very good personal rapport during the latter’s visits to the United States
in 2002 and 2005. King Abdallah’s retention of the late King Fahd’s cabinet
ministers is interpreted in the press as evidence of likely continuity in Saudi domestic
and foreign policies.
2 Like Crown Prince Sultan, both Prince Nayif and Prince Salman are full brothers of the
late King Fahd, thus belonging to an influential group within the royal family. Some
commentators note that the conservative Prince Nayif is thought to have resisted reforms
supported by Abdullah, while Prince Salman has a lower international profile than Prince
Sultan or Prince Nayif.

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CRS-6
September 11 Terrorist Attacks and Aftermath
Allegations. 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 (15 out of 19). Some critics go so far as to accuse
Saudi government officials of responsibility for the September 11, 2001, attacks
through design or negligence and for the continuing threat posed by the perpetrators
or by like-minded terrorist groups. Others maintain that Saudi domestic and foreign
policies have created a climate that may have contributed to terrorist acts by Islamic
radicals. For example, some believe that the Saudi regime has fostered international
terrorism by funding religious charities and education programs that propagate
extreme forms of Islam and may advocate violence.3 Critics of Saudi policies have
also cited a multiplicity of reports that the Saudi government has permitted or
encouraged fund raising in Saudi Arabia by charitable Islamic groups and
foundations linked to Osama bin Laden’s Al Qaeda organization, which the U.S.
government has identified as responsible for the attacks. The exiled bin Laden was
formerly a Saudi national, but Saudi authorities revoked his citizenship in 1994.4
Saudi Responses. Saudi officials maintain that they are working closely
with the United States to combat terrorism, which they say is aimed as much at the
Saudi regime as it is at the United States. 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. The Saudi government
later invited the Financial Action Task Force (FATF) on Money Laundering into the
kingdom to conduct a “mutual evaluation” and passed new banking regulations.5 On
February 24, 2004, Saudi Arabia and 12 other Middle East or Asian countries
attended a conference organized by the 29-member FATF, where attendees focused
on terrorist use of charitable organizations to finance terrorist operations. In February
2005, Saudi Arabia hosted a counterterrorism conference at which attendees adopted
a resolution (the “Riyadh Declaration”) condemning violence and terrorism.
Subsequently, the State Department reported that Saudi Arabia had established a
Financial Intelligence Unit (FIU) on September 10, 2005, to collect intelligence on
terrorist financing activity.
Saudi officials say they have sought to dampen religious extremism in the
Kingdom (see below). In 2004, Saudi authorities reportedly began a program aimed
at re-educating young Saudis arrested as Al Qaeda sympathizers by exposing them
3 See CRS Report RS21654, Islamic Religious Schools, Madrasas: Background, by
Christopher M. Blanchard.
4 See CRS Report RL32499, Saudi Arabia: Terrorist Financing Issues, by Alfred B. Prados
and Christopher M. Blanchard.
5 The Financial Action Task Force is “an inter-governmental body whose purpose is the
development and promotion of policies, both at national and international levels, to combat
money laundering and terrorist financing.” For more information, see the FATF website at
[http://www.oecd.org/fatf/]. According to the U.S. State Department, the FATF concluded
after the mutual evaluation that the financial control regime adopted by Saudi Arabia met
the general FATF recommendations for combating money laundering and terrorist financing.

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CRS-7
to former radical clerics with strong Islamic credentials who have renounced
violence.6
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. In its most recent annual report entitled Country Reports
on Terrorism, 2005 (published April 28, 2006), the State Department mentioned that
by the end of 2005, the Saudi government had captured or killed all 19 wanted
terrorists on a list published in May 2003 and all 26 on a second list published in
December 2003 (it is not clear if any of these have been double counted); government
efforts continue against 36 on a third list published in June 2005. 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. Assets of suspect
charities were to be merged into a new organization to be called the Saudi National
Commission for Relief and Charity Work Abroad, in an effort “to ensure that the
charity of our citizens goes to those who need it.” (The Commission is not yet
operational, however, as of July 2006.) According to the State Department report,
a Financial Intelligence Unit (FIU), originally chartered under 2003 anti-money
laundering and anti-terrorism legislation, opened on September 10, 2005.
In testimony before the Senate Judiciary Committee on November 8, 2005, U.S.
Department of the Treasury official Daniel Glaser described Saudi Arabia as “one of
the countries most central to our global counterterrorism efforts.” He went on to
summarize measures being taken by Saudi Arabia to put a stop to terrorist financing:
increased controls on the charitable sector and systemic changes in the Saudi
financial sector (including controls on cash-based transactions). Glaser also stated
that the Saudi government needed to live up to previous promises to crack down on
donors of terrorist funds within in Saudi Arabia and exert influence over international
charities based in Saudi Arabia that are active abroad.7
Joint Congressional Report. On July 24, 2003, the House and Senate
Intelligence Committees released part of a 900-page report entitled Joint Inquiry into
Intelligence Community Actions before and after the Terrorist Attacks of September
11, 2001 (S.Rept. 107-351; H.Rept. 107-792). The Bush Administration refused to
allow the release of an approximately 28-page section of the report. According to
press articles, persons who claim to have read the still-classified section of the report
say it covers Saudi links with individuals involved in the September 11 attacks;
specifically, the classified section reportedly states that senior Saudi officials
channeled hundreds of millions of dollars to charitable groups that may have helped
fund the attacks.8 Saudi officials, including the Saudi Ambassador to the United
States, have denounced the report, maintaining that “Al Qaeda is a cult seeking to
destroy Saudi Arabia as well as the United States. By what logic would we support
6 “Saudi Effort Draws on Radical Clerics to Combat Lure of al-Qaeda,” Washington Post,
May 7, 2006.
7 Josh Meyer, “U.S. Faults Saudi Efforts on Terrorism,” Los Angeles Times, Jan. 15, 2006.
8 “Classified Section of Sept. 11 Report Faults Saudi Rulers,” New York Times, July 26,
2003.

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CRS-8
a cult that is trying to kill us?”9 On July 29, 2003, in response to an urgent request
from Saudi Arabia, President Bush met with Foreign Minister Saud al-Faisal, who
called for the release of the still-classified section of the report to enable Saudi
Arabia to rebut the allegations contained therein. President Bush refused to do so on
the grounds that disclosure could reveal intelligence sources and methods to enemies
of the United States and might compromise the on-going investigation of the
September 11, 2001, attacks.10
9/11 Commission Report. In its final report, released on July 23, 2004, the
U.S. National Commission on Terrorist Attacks upon the United States (the 9/11
Commission) described Saudi Arabia as having been “a problematic ally in
combating Islamic extremism.” The report takes note of long-standing cooperative
relations between the U.S. and Saudi governments, growing misunderstandings at the
popular level in recent years, and U.S. criticisms in the aftermath of the 9/11 attacks
that Saudi officials could do more to fight terrorism. The report acknowledges
increased efforts in that regard since mid-2003 when terrorists began hitting targets
in Saudi Arabia itself with more frequency; today, according to the report, “The
Kingdom of Saudi Arabia is now locked in mortal combat with al-Qaeda.” One of
the key recommendations in the 9/11 report addresses the U.S.-Saudi relationship:
The problems in the U.S.-Saudi relationship must be confronted, openly. The
United States and Saudi Arabia must determine if they can build a relationship
that political leaders on both sides are prepared to publicly defend — a
relationship about more than oil. It should include a shared commitment to
political and economic reform, as Saudis make common cause with the outside
world. It should include a shared interest in greater tolerance and cultural respect,
translating into a commitment to fight the violent extremists who foment hatred.
Major Terrorist Attacks
During the period between the two wars with Saddam Hussein, terrorists
mounted attacks on U.S. military facilities in Saudi Arabia in 1995 and 1996. These
were followed by a series of terrorist attacks against Saudi, U.S., and other facilities
(including hotel compounds frequented by foreigners) beginning in May 2003 while
slacking off to some degree since 2004. In the past, U.S. officials have criticized
Saudi counterparts for insufficient sharing of information that Saudi officials have
gained from their investigations of terrorist acts that have killed or injured U.S.
citizens.
Press reports indicate that U.S.-Saudi cooperation in the investigation of
terrorist incidents has improved since mid-2003. Both U.S. and Saudi officials have
said the impetus for closer cooperation came from the May 2003 attacks, which one
knowledgeable observer described as “the inevitable wake up call” for Saudi leaders
increasingly concerned over apparent attempts by terrorists to target the Saudi
regime. The November bombing, which occurred after virtually all U.S. forces had
9 “Saudis Slam Congressional Report Accusing Kingdom of Poor Cooperation in Terror
War,” Associated Press News Wire, July 26, 2003.
10 “Bush Refuses to Declassify Saudi Section of Report,” New York Times, July 30, 2003.

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CRS-9
left the country, may have reinforced Saudi concerns over their vulnerability to such
attacks by Al Qaeda and like-minded groups,11 and Saudi willingness to share
information with U.S. officials. According to the 9/11 Commission’s report, “[a]s in
Pakistan, Yemen, and other countries, [Saudi] attitudes changed when the terrorism
came home.”
In the course of a shoot-out in June 2004, Saudi officials said they had killed
Abd al-Aziz al-Muqrin, the leader of an apparent Al Qaeda affiliate known as “Al-
Qaeda in the Arabian Peninsula,” who had claimed responsibility or support for
several terrorist acts including the May 2004 Khobar attack. Subsequent conflicting
press reports indicated that Muqrin’s replacement, Saleh Al-Oufi, was killed by Saudi
security forces and replaced by Saud Al-Otaibi, but a Saudi Ministry of Interior
official denied this report.
On April 18, 2006, Saudi authorities announced the arrest of five men charged
with an abortive attack on February 24, 2006, on the world’s largest oil processing
facility at Abqaiq in eastern Saudi Arabia. Saudi security forces killed 6 terrorist
suspects during a shootout in Riyadh on June 23, renewing concerns about the
terrorist threat in Saudi Arabia following statements made by King Abdullah in early
June that Al Qaeda in the Arabian Peninsula had been “defeated.”12
Saudi Stance on Iraq
Operation Iraqi Freedom. 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 (Operation Southern Watch).
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.
Saudi Arabia opposed the U.S.-led Operation Iraqi Freedom, and on March 19, 2003
(the day President Bush initiated the campaign), a communique by then King Fahd
stated that Saudi Arabia “will not participate in any way” in the war. A number of
news reports, however, indicated that Saudi Arabia informally agreed to provide
logistical support to U.S.-led forces: permission to conduct refueling, reconnaissance,
surveillance, and transport missions from bases in Saudi Arabia; landing and
overflight clearances; and use of a U.S.-built facility in Saudi Arabia known as the
Combat Air Operations Center (CAOC) to coordinate military operations in the
region.13 Also, on March 8, 2003, Saudi Defense Minister Prince Sultan bin Abd al-
Aziz said his government was allowing U.S. troops to use two airports in northern
Saudi Arabia for “help in a technical matter.” A later report in the Philadelphia
Inquirer on April 26, 2004, quoting unnamed U.S. and Saudi officials, alleged that
11 “U.S.-Saudi Anti-Terror Operation Planned,” Washington Post, Aug. 26, 2003; “A
Campaign to Rattle a Long-Ruling Dynasty,” New York Times, Nov. 10, 2003. According
to the 9/11 Commission’s report, “[a]s in Pakistan, Yemen, and other countries, [Saudi]
attitudes changed when the terrorism came home.”
12 “Saudi King Says al-Qaeda Militants Defeated,” Reuters, June 7, 2006.
13 “U.S. And Saudis Agree On Cooperation,” Washington Post, Feb. 26, 2003.

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Saudi Arabia had a wider role in the war than had been publicized at the time. In
addition to support noted above, the officials said the Saudi royal family permitted
the staging of special forces operations from inside Saudi Arabia, allowed some 250-
300 mainly transport and surveillance planes to fly missions from Saudi Arabia, and
provided tens of millions of dollars in discounted oil, gas, and fuel for U.S. forces.
Like several Sunni Muslim-led regimes in the Gulf region, Saudi leaders are
reportedly worried in the aftermath of the war about the possible spread of Shi’ite
Muslim influence in the region, especially Iraq, whose Shi’ite majority may be
vulnerable to Iranian overtures.14 A joint statement by President Bush and then
Crown Prince Abdullah on April 25, 2005 called on the international community to
support Iraq and urged neighboring states to avoid interfering in Iraq’s internal
political affairs. On September 22, 2005, during a visit to the United States, Saudi
Foreign Minister Prince Saud al-Faisal warned that trends in Iraq were leading
toward greater disunity: “I wish it would happen, but I don’t think that a constitution
by itself will resolve the issues, or an election by itself will solve the difficult
problems.” In a February 13, 2006, interview with CNN, Saudi Ambassador to the
United States Prince Turki al-Faisal said the Iraqi Sunni community had two main
demands: an equal share in the resources of Iraq (mainly oil) and safety from
retribution (by Shi’ites or Kurds).
Post-War Iraq: Withdrawal of U.S. Troops from Saudi Arabia.
Following the collapse of the Saddam Hussein regime, the New York Times reported
on April 30, 2003, that the United States planned to withdraw almost all of its 5,000
troops in Saudi Arabia and move its Combat Air Operations Center to neighboring
Qatar. The U.S. Air Force unit to which most U.S. military personnel in Saudi
Arabia had been assigned was formally de-activated on August 27, 2003. On
September 22, 2003, the New York Times reported that the last American combat
troops had left Saudi Arabia earlier in the month. Approximately 300 U.S. Army and
Air Force training personnel remained in country as of May 2006.15 In September
2005, Saudi Arabia and the United States were among 12 countries participating in
the biennial combined military training exercise “Bright Star” conducted in Egypt.
Infiltrators? In late August 2003, a senior State Department official
commented that pro-Saddam Arab volunteer fighters have been infiltrating into Iraq
through Iran, Syria, and Saudi Arabia to mount attacks against U.S.-led coalition
forces in Iraq. In remarks published on August 26, a senior Saudi foreign policy
advisor responded that “we have no evidence of Saudis crossing into Iraq and we
have received no evidence from the U.S. government.”16 According to a New York
Times report of April 23, 2004, quoting Saudi officials, the Saudi government has
installed heat sensors to detect movement on the Saudi-Iraqi border in an effort to
seal it. In late December 2004, unidentified western diplomats in Saudi Arabia
14 “As Saudi Visits, Bush Seeks Help on Lowering Oil Prices,” New York Times, Apr. 25,
2005.
15 The London-based International Institute for Strategic Studies in its annual publication,
The Military Balance, 2006, p. 207.
16 “Saudis Challenge U.S. Over Iraq Fighters,” Washington Post, Aug. 26, 2003.

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CRS-11
reportedly said that several hundred Saudi nationals were fighting in Iraq from a total
of 1,000-1,500 foreign insurgents, but went on to say that most Saudi infiltrators had
come via Syria or other countries rather than directly from Saudi Arabia, which has
tighter border controls.17
A subsequent press report also mentions “hundreds” of Saudis fighting U.S.
forces in Iraq, while a more recent report quotes an allied coalition official as saying
that “[w]e can confirm that there have been Saudi Arabian fighters in Iraq....”18
According to the same article, non-governmental experts estimate that 12% to 25%
of foreign fighters in Iraq are Saudis. In his February 13, 2006, interview, Prince
Turki said as of mid-2005 approximately 10% of captured foreign fighters held in
Iraq were Saudis. In a mid-January 2006 interview with staff from the weekly
Middle East Economic Digest (MEED), Prince Saud asserted that “our border with
Iraq is virtually closed” but went on to criticize Iraqi, British, and U.S. officials for
failing to seal the Iraqi side of the border.
Bilateral Relations. Some strains continue between Saudi Arabia and the
post-war Iraqi regime. In a speech to the Council on Foreign Relations on September
20, 2005, Saudi Foreign Minister Faisal al-Saud expressed concern over Sunni-
Shi’ite divisions, the possibility of civil war, and the growth of Iranian influence in
Iraq and commented that “we are handing the whole country [Iraq] over to Iran
without reason.”19 The Iraqi interior minister rejected Prince Saud’s comments and,
without naming names, implicitly criticized the Saudi regime as a dictatorship: “A
whole country is named after a family.”20 Secretary of State Condoleezza Rice later
commented during a Senate Foreign Relations Committee hearing that “I really think
the proper role for Saudi Arabia or for any other country in the region is to help them
[the Iraqis], not critique them.”21 On November 8, 2005, Prince Saud al-Faisal told
a Washington audience that Saudi Arabia is providing financial and material aid to
the Iraqi people to counter terrorism and noted that Saudi Arabia had convened a
meeting in early October to seek ways to bring Iraqi factions together.22
17 Financial Times (London), December 20, 2004.
18 “Islamic Activities Sweep Saudi Council Elections,” Washington Post, Apr. 24, 2005;
and, “U.S. Faults Saudi Efforts on Terrorism,” Los Angeles Times, Jan. 15, 2006.
19 Robert Gibbons, “Saudi Says U.S. Policy Handing Iraq over to Iran,” Reuters, Sept. 20,
2005.
20 Suleiman al-Khalidi, “Iraq Blasts Saudi Arabia for anti-Shi’ite remarks,” Reuters, Oct.
2, 2005.
21 Steven R. Weisman, “Rice, in Testy Hearing, Cites Progress in Iraq,” New York Times,
Oct. 20, 2005.
22 Address at the 59th Annual Conference of the Middle East Institute, accessed on Saudi
embassy website, Nov. 9, 2005: [http://www.saudiembassy.net/]. The Prince did not
estimate the amounts of money or materiel involved. In his February 13, 2006, interview,
the Prince added that an Arab League meeting in November 2005 adopted a plan for inter-
Iraqi reconciliation but did not give details.

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CRS-12
Iraqi Debt. As of January 2004, Iraq reportedly owed the Saudi government
$9 billion in debts incurred during the Saddam Hussein regime, while private Saudi
firms and banks hold about $19 billion in Iraqi debt.23
Arab-Israeli Conflict
Saudi Arabia supports Palestinian national aspirations, strongly endorses
Muslim claims in the old city of Jerusalem, and has been increasingly critical of
Israel since the outbreak of the Palestinian uprising in the occupied West Bank and
Gaza in September 2000. Unlike several other Gulf countries, Saudi Arabia has not
established trade or liaison channels for communication with Israel. At the same
time, Saudi Arabia has supported U.S. policy by endorsing Israeli-Palestinian peace
agreements, 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, and adopted a more pro-active approach to peacemaking.
In March 2002, then Crown Prince Abdullah proposed a peace initiative calling for
full Israeli withdrawal from occupied territories in return for full normalization of
relations between Arab states and Israel. The plan was endorsed by the Arab League
at a summit conference on March 27-28, 2002 and used as a basis of discussion
between then Crown Prince Abdullah and President Bush at a bilateral meeting in
April 2002.
Over a year later, on June 3, 2003, President Bush, then Crown Prince Abdullah,
and four other Arab leaders met at Sharm al-Shaykh, Egypt, where the attendees
endorsed the Road Map — a phased plan for Palestinian-Israeli peace promulgated
by the United States, the United Nations, Russia, and the European Union (the
“Quartet”). At a second bilateral meeting between President Bush and then Crown
Prince Abdullah in Texas on April 25, 2005, a joint statement by the two leaders
contained the following: “With regard to the Palestinian-Israeli conflict, the United
States and the Kingdom of Saudi Arabia desire a just, negotiated settlement wherein
two democratic states, Israel and Palestine, live side by side in peace and security.”24
Saudi-Palestinian Relations. Saudi Arabia, like other Arab states,
recognizes the Palestine Liberation Organization (PLO) as the legitimate
representative of the Palestinian people. Saudi officials say that their support to
Palestinians (estimated at $80 million to $100 million per year) is provided
exclusively to the Palestinian Authority (PA), which was established under the
Israeli-Palestinian agreement of September 13, 1993, known as the first Oslo
Accord.25 Saudi Arabia has provided aid (variously estimated at $33 million and $59
million) to families of Palestinians killed or injured in the three-year-old Palestinian
uprising; in addition, Saudis raised additional funds (over $100 million according to
23 Tom Everett-Heath, “Opposing Views of the Kingdom to Come,” Middle East Economic
Digest, Jan. 23-29, 2004, p. 1.
24 Available at the following website: [http://www.whitehouse.gov/news/releases/2005/04/
print/20050425-8.html].
25 “Flow of Saudi Cash to Hamas Is Under Scrutiny by U.S.,” New York Times, Sept. 17,
2003.

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CRS-13
one report) for this purpose at a telethon sponsored by then King Fahd on April 11,
2002. Saudi officials told U.S. counterparts in late April 2002 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 under Saddam Hussein, which
paid families who would sacrifice their children as suicide bombers.26 During then
Crown Prince Abdullah’s visit with President Bush in Crawford, Texas on April 25,
2005, Secretary of State Rice told reporters she had discussed with the Crown Prince
“the need for everyone to support, including financially, the Palestinians as they
move forward.”
Hamas: Pre-2006. There have been unsubstantiated reports of Saudi
assistance to the PLO’s principal rival organization, the fundamentalist Hamas
organization, which the U.S. government has designated as a foreign terrorist
organization. In its most recent annual report on terrorism, the State Department
noted that Hamas receives some funding from Iran, but “primarily relies on donations
from Palestinian expatriates around the world and private benefactors in Saudi
Arabia and other Arab states.”27 It adds that some Hamas fund raising activity takes
place in Western Europe and North Africa. The State Department reports do not
estimate amounts involved. According to one press report, people in Saudi Arabia
contribute approximately $5 million to Hamas per year, or approximately half of its
annual operating budget.28 Some reports indicate that Saudi authorities tolerate fund
raising for Hamas. For example, in May 2002, Israeli officials, citing captured
Palestinian documents, said the Saudi government had given money to 13 charities,
seven of which provide support to Hamas. Saudi spokesman Adel al-Jubeir
maintained that “no Saudi government money goes to Hamas, directly or
indirectly.”29
Hamas: Post-Elections. The January 2006 Palestinian elections in which
Hamas secured a majority of seats in the Palestinian parliament has raised new
questions regarding Saudi relations with Hamas. In a meeting with U.S. Secretary
26 For more information on Saudi payments to families of Palestinians killed in the
Palestinian uprising or imprisoned by Israeli authorities, see CRS Report RL32499, Saudi
Arabia: Terrorist Financing Issues, by Alfred B. Prados and Christopher M. Blanchard.
27 Country Reports on Global Terrorism, 2005, published Apr. 28, 2006.
28 Don Van Natta, Jr., with Timothy L. O’Brien, “Flow of Saudis’ Cash to Hamas Is
Scrutinized,” New York Times, Sept. 17, 2003. The report cites American law enforcement
officials, American diplomats in the Middle East, and Israeli officials. In addition, Saudi
Arabia contributed $1.8 million in 2004 to the U.N. Relief and Works Agency (UNRWA),
the U.N. Agency that provides services to Palestinian refugees in the Middle East; in
addition, Saudi Arabia provided $21 million in 2005 in response to an emergency appeal by
UNRWA.
29 Don Van Natta, Jr. with Timothy L. O’Brien, “Flow of Saudis’ Cash to Hamas Is
Scrutinized,” New York Times, Sept. 17, 2003. According to a later report, Saudi Arabia has
been giving $15 million a month to the Palestinian Authority. Joel Brinkley, “Saudis Reject
U.S. Request to Cut Off Aid to Hamas,” New York Times, Feb. 23, 2006. See also CRS
Report RL32499, Saudi Arabia: Terrorist Financing Issues, by Alfred B. Prados and
Christopher M. Blanchard.

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CRS-14
of State Condoleezza Rice on February 22, Prince Saud rejected the U.S. position
that countries should cut off aid to the Palestinian Authority until a Hamas-dominated
government renounces violence and accepts Israel’s right to exist. Prince Saud
commented that “[w]e wish not to link international aid to the Palestinian people to
considerations other than their dire humanitarian need.” The Prince called for
continuation of the peace process, but Secretary Rice questioned “[h]ow do we keep
a peace process alive if one of the parties [Hamas] is not committed to peace?” On
March 19, 2006, Prince Saud reiterated his position, saying that “humanitarian
assistance is not given to a government. It is given to a people ...” to help them deal
with a difficult humanitarian situation. In late July 2006, the Saudi Arabian
government announced plans to transfer $250 million in reconstruction assistance “to
the Palestinian people” and confirmed the transfer of half of a $92 million budgetary
support pledge for the Palestinian Authority.
Israel-Hamas-Hezbollah Conflict. Cross-border raids by Hamas and
Hezbollah against Israel and ensuing Israeli military operations in the Gaza Strip and
Lebanon have created significant foreign policy challenges for the government of
Saudi Arabia. On the one hand, Saudi leaders have felt compelled to condemn
destabilizing military operations taken by non-state actors that have pushed the
region to the brink of direct conflict. On the other hand, strong popular opinion and
official support for the Palestinian and Lebanese governments and civilians have
counseled opposition to the ongoing Israeli military response and criticism of
international parties, including the United States, that oppose an immediate cease
fire. Other factors include the role of Syria and Iran as state sponsors and suppliers
of Hezbollah and Hamas.
Saudi government efforts to overcome these challenges are evident in public
statements and actions taken in response to the outbreaks of violence. After initially
criticizing the Lebanese militia Hezbollah for their July 12 raid across the
Israel-Lebanon border, Saudi officials joined with their Egyptian and Jordanian
counterparts to place the blame for the eruption of conflict in Lebanon on Hezbollah.
Saudi Foreign Minister Prince Saud al-Faisal and National Security Council chief and
former Ambassador to the United States Prince Bandar bin Sultan visited
Washington, D.C. on July 23 to consult with President Bush and other U.S. officials
about the ongoing crisis. In their private meeting with the president and Secretary
of State Condoleezza Rice, the Saudi officials delivered a letter from King Abdullah
bin Abdulaziz requesting U.S. support for an immediate cease fire. The Bush
Administration has remained publicly opposed to an immediate cease fire.
Following Israeli military attacks inside Lebanon that have killed hundreds of
civilians and damaged critical infrastructure, Saudi Arabian leaders have voiced
pointed criticism and condemnation of Israel. On July 25, the Saudi cabinet released
a statement warning “that if the Israeli military savagery continues to kill and destroy,
no can predict what would happen” and “that, should the option of peace fail as a
result of the Israeli arrogance, only the option of war will remain.”30 This has been
interpreted variously by regional observers as a warning of the potential shared
30 “Saudi Arabia’s Royal Court Issues Statement On Situation in Lebanon,” al-Ikhbariyah
Satellite Channel (Riyadh), OSC Document FEA20060725025650, July 25, 2006.

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consequences of broader escalation or a signal of Saudi willingness to abandon the
so-called Abdullah plan for a two-state solution and wider Arab peace with Israel.
Following an Israeli military strike on the Lebanese town of Qana that killed
more than 50 civilians, a July 31 Saudi cabinet statement cited “the moral, political,
and material responsibility of Israel for massacres and war crimes” and pledged “the
Kingdom’s standing with all its political and economic capabilities by the brotherly
people of Lebanon.”31 Current Saudi Ambassador to the United States Prince Turki
al-Faisal has summarized the double-edged Saudi position in public comments in
Washington, saying, “Saudi Arabia holds firmly responsible those who first engaged
in reckless adventure under the guise of resistance [Hamas and Hezbollah],” adding
that the groups’ “unacceptable and irresponsible actions do not justify the Israeli
destruction of Lebanon or the targeting and punishment of the Lebanese and
Palestinian civilian populations.”32
The Saudi government’s rhetorical support for Lebanon has been matched with
financial and material support: the government has pledged over $1.5 billion in
financial assistance to the Lebanese government and has organized a popular relief
campaign under the auspices of the Minister of Interior Prince Nayef bin Abdulaziz.
The announced assistance will consist of a $500 million grant to the Lebanese people
as the “core” of a planned Arab-international reconstruction fund and a $1 billion
deposit in the Central Bank of Lebanon to support the Lebanese economy. Some
observers have noted that the large donations may be meant to signal to other Arab
states and Iran that the Saudi Arabian government, known for its close political and
financial ties to Lebanon, plans to assume the central role in underwriting Lebanon’s
recovery from the current crisis.
Arms Transfers to Saudi Arabia
U.S. Arms Sales. The United States has long been Saudi Arabia’s leading
arms supplier. During the eight-year period from 1997 through 2004, U.S. arms
ordered by Saudi Arabia amounted to $7.3 billion while U.S. arms delivered to Saudi
Arabia amounted to $22.9 billion, reflecting earlier orders. An upsurge in Saudi arms
purchases from the United States in the early 1990s was due in large measure to the
Iraqi invasion of Kuwait and its aftermath. The largest recent sale was a $9 billion
contract for 72 F-15S advanced fighter aircraft, signed in May 1993. Saudi arms
purchase figures include not only lethal equipment but also significant amounts of
support services and construction. 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 strained finances.
Rising oil prices, increased regional tensions, and counterterrorism requirements
have led Saudi defense and security officials to reassess their defense needs in light
of recent developments. In late July 2006, the Bush Administration notified
Congress that it has approved a number of potential U.S. military sales to Saudi
31 Saudi Press Agency, “King Abdullah Chairs Cabinet Session,” July 31, 2006.
32 Prince Turki al-Faisal, Remarks to the New American Foundation, Washington, D.C., July
31, 2006.

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CRS-16
Arabia that could be worth over $9 billion.33 The proposed sales are mainly designed
to support the Saudi Arabian National Guard and may ultimately include 24 Black
Hawk helicopters, 724 light armored vehicles, 2,300 long-range radio systems, night
vision goggles, thermal weapon sights, and other equipment. A number of planned
equipment remanufacture and upgrade sales are also part of the proposed package,
including modifications for Apache attack helicopters, the transfer of 58 M1A1
Abrams tanks, and their upgrading along with 315 M1A2 Abrams tanks already in
Saudi possession. Congress has thirty days from the notification dates to block the
proposed sales.
Saudi-China Arms Contacts. In 1988, shortly before the end of the cold
war, Saudi Arabia concluded a controversial purchase of approximately 30
intermediate range CSS-2 missiles from China, in its first and only major arms
purchase from a communist (or formerly communist) state. A Reuters news wire
report of February 15, 2004, quoted unnamed U.S. officials as voicing concern over
continued alleged cooperation between China and Saudi Arabia on missiles; the
report did not provide details. On the following day, the Saudi Press Agency said a
responsible source at the Saudi Defense Ministry denied the report, which a defense
spokesman described as “fabricated and baseless.” (See below.)
Nuclear Concerns. There have been occasional questions in the past about
possible Saudi nuclear cooperation with other states. For example, according to press
reports in 1999, U.S. officials were concerned over a visit by the Saudi Defense
Minister to nuclear and missile facilities in Pakistan, but had received assurances
from Saudi officials that Saudi Arabia was not seeking nuclear weapons or other
weapons of mass destruction. Later, a Washington Times article of October 22, 2003,
citing “a ranking Pakistani insider,” reported that Saudi Arabia and Pakistan had
concluded a secret agreement on nuclear cooperation, under which Pakistan would
provide Saudi Arabia with nuclear technology in return for oil at reduced prices. A
State Department spokesman said the Administration had seen the reports but did not
have any information to substantiate them.
Saudi Arabia has been negotiating a full-scope safeguards agreement with the
International Atomic Energy Agency (IAEA). On June 16, 2005, the IAEA approved
a Small Quantities Protocol (SQP) for Saudi Arabia; this protocol exempts countries
with minimal quantities of nuclear materials and facilities from routine inspections
and declarations. It is not clear whether the IAEA will require Saudi Arabia to
conclude an Additional Protocol, which could give the IAEA more leverage for
inspections. IAEA Director General Muhammad ElBaradei has called the SQP a
“weakness” in the nuclear safeguard regime, and the United States and some western
nations are concerned that it does not provide sufficient transparency in the case of
Saudi Arabia. A Saudi official reportedly told European officials that Saudi Arabia
would provide additional information to the IAEA only if all other parties to the
protocol did the same.34 In his January 2006 interview with the Middle East
Economic Digest, Saudi Foreign Minister Prince Saud said “We are not going to
33 Defense Security Cooperation Agency, Transmittals No. 06-25, 06-26, 06-31, 06-36, and
06-39, July 2006. Available at [http://www.dsca.mil/PressReleases/ 36-b/36b_index.htm]
34 George Jahn, “Saudi Arabia Exempt From Nuke Inspections,” Guardian, June 16, 2005.

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pursue any of these [nuclear] weapons” and went on to comment that nuclear power
“is dangerous in itself.”
Trade Relationships
Saudi Arabia was the largest U.S. trading partner in the Middle East in 2005.
For that year, Saudi exports to the United States were estimated at $26.2 billion (up
from $20.4 billion in 2004) and imports from the United States at $5.6 billion (up
from $4.7 billion). Comparable figures for Israel, the second largest U.S. trading
partner in the Middle East in 2004, were $16.9 billion in exports and $6.5 billion in
imports. To a considerable extent, this high volume of trade is a result of U.S.
imports of hydrocarbons from Saudi Arabia and U.S. arms exports of arms,
machinery, and vehicles to that country.
On September 9, 2005, the U.S. Trade Representative (USTR) announced that
the United States and Saudi Arabia had completed bilateral negotiations on terms of
Saudi accession to the World Trade Organization (WTO). On November 10,
President Bush signed a memorandum to the USTR noting that Saudi Arabia had
concluded a bilateral agreement with the United States related to Saudi accession to
the WTO.35 In the meantime, the press noted that Saudi Arabia had concluded
bilateral negotiations with all other interested WTO members, and on December 11,
Saudi Arabia became the 149th member of the WTO.36
Boycott of Israel and WTO Membership.37 Some Members of Congress
have raised questions regarding Saudi Arabia’s participation in the Arab League
boycott of Israel in light of the conclusion of a bilateral agreement with the United
States on Saudi Arabia’s WTO accession. Under the terms of the bilateral agreement,
Saudi negotiators confirmed that Saudi Arabia would not invoke the non-application
provision of the WTO Agreement toward any fellow WTO member (which would
prohibit enforcement of the boycott) and confirmed the Kingdom would not enforce
the secondary and tertiary Arab League boycotts. However, in June 2006, Saudi
Ambassador to the United States Prince Turki al-Faisal reportedly stated that the
Government of Saudi Arabia plans to continue to enforce the Arab League’s primary
boycott of Israel, drawing criticism and inquiries from some Members of Congress.
Prince Turki reportedly commented that “the primary boycott is an issue of national
sovereignty guaranteed within the makeup of the WTO and its rules,” and indicated
that the Saudi government had already made its decision clear to the United States
Trade Representative’s office (USTR). A USTR spokesman was quoted as saying
that “in [USTR’s] view, maintaining the primary boycott of Israel is not consistent
with Saudi Arabia’s obligation to extend full WTO treatment to all WTO
35 Full text in Federal Register, Vol. 70, No. 219, Nov. 15, 2005.
36 For more background, see American Association of Exporters and Importers, “Saudi
Arabia’s WTO Accession,” Vol. 105, No. 46, Nov. 22, 2005.
37 For background, see CRS Report RS22424, Arab League Boycott of Israel, by Martin A.
Weiss.

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Members.”38 H.Con.Res. 370 expresses the sense of Congress that Saudi Arabia
should fully live up to its WTO commitments and end all aspects of any boycott on
Israel. The resolution passed the House unanimously on April 5, 2006 and was
received in the Senate and referred to the Committee on Finance.
Oil Production. With the world’s largest proven oil reserves (estimated at
261.7 billion barrels in January 2001), Saudi Arabia produced approximately 9.5
million barrels per day (bpd) of crude oil as of October 2005. Approximately 11.3%
of U.S. oil imports and 7.4% of total U.S. oil consumption came from Saudi Arabia
during 2004. Formerly the largest foreign supplier of oil to the United States, Saudi
Arabia has been exceeded in this role by Canada, Mexico, and/or Venezuela during
recent years (see Table 1).
Table 1. Oil Consumption and Imports
(in millions of barrels per day)
Category
2002
2003
2004
2005
Total U.S. Consumption
19.761
20.034
20.731
20.587*
Total U.S. Imports
11.530
12.264
13.145
13.527
Imports from Saudi Arabia
1.552
1.774
1.558
1.523
Imports from Canada
1.971
2.072
2.138
2.172
Imports from Mexico
1.547
1.623
1.665
1.646
Imports from Venezuela
1.398
1.376
1.554
1.506
Source: DOE. *Note: 2005 U.S. consumption figure based on first 11 months of 2005.
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. This band eroded in subsequent years as oil prices continued to rise to
more than $50 per barrel, and in follow-up comments after the April 25, 2005,
meeting between President Bush and then Crown Prince Abdullah, the Crown
Prince’s foreign policy advisor said the $22-$28 price band has become unrealistic.39
The foreign policy advisor went on to say that Saudi Arabia has a limited spare
capacity of approximately 1.3 to 1.4 million bpd for increased production. During
the April 2005 visit, Saudi officials proposed a long-range plan to deal with
fundamental issues of supply and demand, indicating that they would aim for
production levels of 12.5 million bpd by the end of the current decade and 15.0
million bpd over time.
38 Michael Freund, “Saudi Ambassador to U.S. Admits Boycott of Israel Still in Force,”
Jerusalem Post, June 22, 2006; Freund “U.S. Official Under Fire Over Saudi Flap,”
Jerusalem Post, June 25, 2006;
39 In February 2006, Saudi Oil Minister Ali Naimi said current conditions would support a
price of approximately $50 per barrel, and some Saudi officials spoke of a $40-$50 price
range. The Oil Daily, Feb. 8, 2006.

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CRS-19
Foreign Investment. Saudi leaders, notably King Abdullah, have shown
increasing interest in attracting foreign investment, especially in their country’s
energy sector. Oil exploration and production remain generally off limits to foreign
investment; however, with the world’s fourth largest natural gas reserves (235 trillion
cubic feet), Saudi Arabia is emphasizing foreign participation in the country’s gas
sector. In 2001, Saudi Arabia signed three preliminary agreements worth
approximately $25 billion with eight international oil companies (including six U.S.-
based companies) to develop three natural gas fields. Conclusion of final agreements
met continuing delays as Saudi and company negotiators tried to resolve several
issues, including taxes, rate of return on investments, and size of gas reserves being
offered.
Eventually, in mid-2003, negotiations collapsed, and Saudi officials began
pursuing a different approach involving smaller, less ambitious projects of more
limited scope. Tenders were issued on September 15, 2003 for three new contract
areas. One U.S. company, Chevron-Texaco, submitted bids for all three; however,
it was unsuccessful in obtaining any of the contracts. Saudi Oil Minister Ali al-
Naimi and other officials said the bids were assessed strictly in accordance with the
terms offered by the various companies, although some unnamed observers suggested
that the bidding process was structured in a way that favored non-U.S. competitors.
Still other observers suggested that the awards reflect Saudi desire to cement
economic ties with Russia, China, and other third countries, and one energy expert
noted that “[t]he Saudis are clearly shifting around and looking to different parts of
the world.40
In the meantime, several U.S. companies are involved in new or projected Saudi
operations. ExxonMobile and ChevronTexaco are among several international oil
companies that the Saudis have approached regarding their plans to build a large
export refinery at the port of Yanbu, potentially worth $5 billion. In addition, in
March 2005, the Saudis awarded a contract to another U.S. company, Bechtel, as part
of a joint venture to develop three on-shore oil fields in eastern Saudi Arabia at a
potential cost of $3 billion.41
Saudi-Chinese Commercial Contacts. Saudi-Chinese commercial
relationships continue to expand. Bilateral trade peaked at $15 billion in 2005, after
a 41% growth per year since 1999, according to the Chinese Ministry of Commerce.
A visit by King Abdullah to Beijing in January 2006 was reciprocated by Chinese
President Hu Jintao on April 22, and the two leaders reportedly signed a series of
agreements including energy exploration and security collaboration. Commentators
note that Chinese economic ties are attractive to Saudi leaders because they come
with “no strings attached” and focus on economic rather than political issues.42
40 Karen Matusic, “Saudis Extend Geopolitical Base with Gas Deals,” The Oil Daily, Feb.
2, 2004; Simeon Kerr, “Saudi Arabia Strikes Hard Bargain On Gas Rights,” Dow Jones,
Emerging Markets Report, Jan. 29, 2004.
41 “Small Steps Forward,” Middle East Economic Digest, Apr. 22-28, 2005, pp. 42-44;
“Sultans of Swing,” Middle East Economic Digest, May 6-12, 2005, pp. 4-5.
42 “Avoiding Political Talk, Saudis and Chinese Build Trade,” New York Times, Apr. 23,
(continued...)

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CRS-20
Human Rights, Democracy, and Other Issues
Of particular concern to Westerners are pervasive restrictions on women’s
activities43 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. A petition
presented by Saudi Shi’ite representatives was followed by an audience with then
Crown Prince Abdullah on April 30, 2003, indicating that both the government and
the Shi’ite petitioners may be seeking to pursue a more cooperative approach.
Discrimination against the mystic-oriented Sufi sects, long opposed by the Saudi
regime, has reportedly eased in the last few years.44 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;
however, the State Department notes that Saudi officials do not always follow these
guidelines in practice and have not provided specific guidelines to determine what
constitutes private worship.45
In the State Department’s annual Report on International Religious Freedom
(September 15, 2004), Saudi Arabia was designated for the first time as a “Country
of Particular Concern.” Saudi Arabia was again so designated in the most recent
annual report published on November 8, 2005, but at an accompanying briefing, a
State Department official noted that King Abdullah has taken steps toward inter-
religious dialog. In his 2005 State of the Union address, President Bush commented
that “[t]he Government of Saudi Arabia can demonstrate its leadership in the region
by expanding the role of its people in determining their future.” In his 2006 address,
the President noted that “Saudi Arabia has taken the first steps toward reform.”
Political reforms promulgated by the late King Fahd in the early 1990s and
continued under Crown Prince Abdullah have set in motion a limited move toward
democracy and protection of individual freedoms. The “basic 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 King appointed a 60-member consultative (“Shura”) council
(increased to 90 in 1997 and to 120 in 2001), with limited powers to question cabinet
members and propose laws. On January 25, 2005, the Saudi Minister of Defense and
Aviation and Second Deputy Prime Minister Prince Sultan told Saudi newspapers
42 (...continued)
2006.
43 U.S. Under Secretary of State for Public Diplomacy Karen Hughes encountered mixed
reactions from a group of Saudi women with whom she discussed restrictions on women’s
rights on a recent trip to the Middle East. Steven R. Weisman, “Saudi Women Have
Message for U.S. Envoy,” New York Times, Sept. 28, 2005.
44 Faiza Saleh Ambah, “In Saudi Arabia, a Resurgence of Sufism,”Washington Post, May
2, 2006.
45 Department of State, Country Reports on Human Rights Practices - 2005, Mar. 8, 2006.

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CRS-21
that the council will be expanded to 150 members and given additional unspecified
authority in the next three months; a royal decree in early April 2005 approved the
expanded membership of the council.
In further steps, the Saudi government held three rounds of municipal elections
on February 10, March 3, and April 20, 2005, in a three-stage process in which male
Saudi citizens cast votes for half the members of 178 municipal councils in the
country’s first nation-wide elections. Although political parties and coalitions were
banned, post-election reports indicated that in most cases candidates endorsed by
popular Sunni Islamic religious leaders fared best. Shi’ite Muslim candidates also
did well in the Shi’ite centers of northeastern Saudi Arabia. Commentators differ as
to whether winners represented a moderate religious trend or a more militant strain.
In their joint press conference on April 25, 2005, President Bush and then Crown
Prince Abdullah noted that “[t]he United States applauds the recently held elections
in the Kingdom [of Saudi Arabia] ... and looks for even wider participation in
accordance with the Kingdom’s reform program.”
Women and Political Reform. In a February 2005 press interview, the
Saudi Foreign Minister predicted that women will vote in the next round of Saudi
municipal elections.46 Saudi women were allowed to vote and run for 12 elected
seats for the Chamber of Commerce and Industry for the major commercial city of
Jidda in elections held on November 27, 2005. Two women won seats in what was
described as an historic step. In another vein, during a meeting with U.S. Under
Secretary of State for Public Diplomacy Karen Hughes, several Saudi women
expressed satisfaction with some of the restrictions on women in Saudi Arabia; for
example, one said that she had no desire to drive a car.47
46 “Changes in the Kingdom — on ‘Our Timetable’” (interview by Lally Weymouth with
Prince Saud al-Faisal), The Washington Post, Feb. 27, 2005.
47 Steven R. Weisman, “Saudi Women Have Message for U.S. Envoy,” New York Times,
Sept. 28, 2005.

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