On Saudi Arabia

Its people, past, religion, fault lines-and future

Book by Karen Elliott House

Article and Review by GlobalMacroForex

Karen House paints a gloomy picture of a backward corrupt regime that treats it’s only citizens horribly but caters to American commercial and military interests.  Starting with the history of Saudi Arabia, this book moves into its interactions with America, modern princes, and kings, as well as the state-run oil conglomerate ARAMCO.  The main takeaway points from the book are that Saudi Arabia is:

-Dependent on foreign workers and oil revenues

-Declining in every other aspect of the economy

-Rulers use religion to exert control even if they don’t fully adhere to it themselves

Let’s dig

Saudi Arabia’s Violent Founding

Saudi Arabia originally consisted of warring tribes.  Muhammad al Saud got an upper hand on his fellow violent warlords by using popular religion to conquer in the name of jihad.  Instead of having his followers just fight for political motivation, he used religious principles he personally did not even believe in or follow, to get a mass of devoted soldiers.

In 1745, after all of the opposition had been murdered or surrendered, the Saudi state formed.  The Al Saud family waned on and off in influence over the years until 1932 when Abdul Aziz bin Al Saud established the more recent state.  He consolidated oil revenue for power and domination and thus was the start of the modern kingdom.

ARAMCO Oil Company

The state-run oil company was built up completely by foreign engineering and labor.  The walled-off oil company is called “Little America” because the fenced off region has so many foreigners, wide streets, low bungalows, and grassy lawns that resemble a California suburb.  As this picture from Salamalaykum Sadik’s blog demonstrates,

The western oil companies that originally developed it bought the company, but then in 1980, the Al Saud regime bought it back.   Now ARAMCO alone produces the funds for the entire kingdom’s socialist welfare state.

Karen House warns that the oil will not last forever and Saudi Arabia has to diversify its economy now while it still has strong oil revenue.  She says experts are convinced current reserves are substantially lower than those officially claimed by the Saudi regime.  In addition, the depletion rate is substantially faster than they realize.  This map from the British Library shows Saudi Arabia’s levels of production compared with the rest of the region.

Oil Welfare State

While some western companies sell products, Saudi Arabia is far from free-market capitalism.  It’s essentially a welfare state of dependence on oil company revenue to fund all aspects of life for its near majority, unemployed citizens. 

“The country fundamentally is a family corporation, call it Islam Inc.”

Despite larger share of GDP spent on education than America, Saudi students consistently score lower by international comparisons.  The corrupt rulers have not created an educational environment that fosters innovation or entrepreneurial success.  Therefore, the unemployment rate has rocketed to 39%, as most people live off the state-run oil company.  The government provides food, housing, education, and many other basics services, which have created a dependence on foreign workers since the locals lack skills, especially in needed sectors like petroleum engineering.

Religious Controversy

The ulama are Islamic religious leaders that offer advice and prayer for the community.  In 2005, some ulama stepped forth to object to certain things that King Abdullah was doing.  They criticized certain aspects of modernization and where the country was heading religiously.  King Abdullah didn’t like his rule being questioned so he had these ulama fired, killed, and replaced.

Now there are religious police who wander the streets looking for violations of Sharia law.  This is particularly bothersome for women who aren’t allowed to drive.  This book depicts the story of Lulu, a married mother, who struggles with day to day life under the onerous restrictions on women.

American Empire

It’s clear that Saudi Arabia is protected and permitted to act as it does for America’s oil and currency interests in the region.

Ever since Henry Kissinger in 1973 got King Faisal to agree to never again subjugate America to an oil embargo, the Saudis have sold oil in US Dollars helping to birth the concept of the petrodollar.  (Oil revenue in US Dollars reinvested in America without changing currencies, usually invested in US Treasury bonds).  The original deal is depicted in this picture from the New York Times,

Saudi Arabia played a key role in Desert Storm against Saddam Hussein by allowing US troops to station there before entered into Kuwait.

Conclusion

While Karen House does present Saudi Arabia in a negative light throughout this book, there are some positives as she points to a youth that is rebellious and non-accepting of the traditional system.  She points to the potential for change that perhaps wouldn’t be so difficult for the Saudis to implement with the current oil revenues.  However, as she notes, things cannot continue as they currently are for very long, with complete dependence on foreign workers, oil revenues, abusive religious laws, and gross human rights violations.

right in…