S audi-U.S. commercial relations date back to 1926, shortly after King Abdulaziz bin Abdulrahman Al-Saud extended his protection to the western parts of the country. The introduction of stability and security to the area attracted American businessmen to the Red Sea port of Jeddah, offering trade and business opportunities to Saudi trading companies, although commercial and business contacts were minimal in the next few years as King Abdulaziz dedicated his energies to the formation of the modern Kingdom of Saudi Arabia, which was realized in 1932.

King Abdulaziz is briefed by an American official of Aramco

 on a visit to the company's facilities in Ras Tanura on the Arabian Gulf in May 1939

Events of the next year were to set the tone for the Saudi-U.S. economic and commercial relations that endure to this day. At the time oil was being extracted from the immediate region of Saudi Arabia’s Eastern Province, notably in Bahrain and near the head of the Arabian Gulf in Iran, and some geologists suspected that oil was also to be found in the Kingdom. The major players in the region were British and other European oil companies, who were convinced that they alone had the necessary regional experience and expertise to discover oil in Saudi Arabia.

King Fahd, Crown Prince Abdullah and Prince Sultan with executives of American and European oil companies

 after the signing of the historic agreement in June 2001 for major investments in the Saudi gas and petrochemicals industries.

Instead of the established European companies, King Abdulaziz chose an American firm to search for oil and extract whatever was found. On May 29, 1933, Finance Minister Abdullah Al-Solaiman and Lloyd Hamilton of Standard Oil of California (SOCAL) signed the agreement granting the American oil company exclusive exploration rights to some 360,000 square miles of land in the Eastern Province. The firm later formed a consortium with other American oil companies that became known as the Arabian American Oil Company (Aramco).

Aramco soon discovered vast reservoirs of oil along Saudi Arabia’s Gulf region and began developing the fields and establishing the necessary infrastructure to extract and transport the oil to ports for shipment abroad. Even though in May 1939 the U.S. tanker Scofield loaded the first shipment of Saudi crude oil for transport to refineries abroad, the advent of World War II delayed large-scale export of oil until 1945.

Finance Minister Abdullah Al-Solaiman and Lloyd Hamiltan on May 29, 1933, sign the agreement granting the American oil company SOCAL exclusive exploration rights in the Kingdom.

The granting of the oil concession to an American partner opened the doors of Saudi Arabia to a broad range of other American companies who initially came to provide products and services for the oil industry and later entered into ventures in other areas, ensuring that the United States soon became the Kingdom’s largest trading partner, and it remains so to this day.

As oil revenues increased in the 1950s and 1960s, the government embarked on ambitious programs to establish roads, schools and hospitals. Saudi development accelerated with the introduction in 1970 of the first of an ongoing series of five-year development plans. Soon, contracts were being awarded for the establishment of a modern infrastructure of roads, sea ports, airports, telecommunications, hospitals, schools and other facilities and services. Since 1970, the Kingdom has spent more than 1.3 trillion dollars on development projects, with most of these contracts being awarded to American companies, who have over the decades established working relationships and a track record of success in the Kingdom.

The U.S. tanker Scofield takes on the first shipment of Saudi Arabian crude oil for export on May 1, 1939.

Dedicated to preserving and promoting their special economic and commercial relationship, the two countries formed a joint Saudi Arabian-U.S. Economic Commission in 1974 to provide advice on technical and planning matters to expand business activity. Another step in this direction was taken in 1994 with the formation of the U.S.-Saudi Arabian Business Council to act as an effective forum for bringing business leaders from the two countries together to promote joint ventures, economic cooperation and trade. The organization's contributions have been especially valuable at a time when the Saudi Arabian private sector, with government support and encouragement, is rapidly expanding its role in the Kingdom's continued development, and U.S. businesses are looking for new opportunities abroad.

Crown Prince Abdullah (left) addresses a Saudi Arabian-U.S. Business Council forum 

in New York in September 2000.

An organization of business leaders from the two countries, the council’s mandate is to become the focal point for the exchange of knowledge between the Saudi and U.S. private sectors and to promote understanding of Saudi Arabia within the U.S. business community, and of the U.S. within the Saudi business community. Working out of offices in Washington, DC, and Riyadh, its primary objectives are to promote trade and investment, encourage manufacturing-related joint ventures in Saudi Arabia, create awareness of opportunities in the Kingdom for small- and medium-sized U.S. companies, increase knowledge and understanding of the business and cultural environments of both countries, and develop and strengthen working relationships with relevant private and government agencies and industry leaders in order to meet the needs of businesses. The council has hosted regular gatherings of Saudi and U.S. business leaders.

Deputy Prime Minister and Commander of the National Guard Crown Prince Abdullah bin Abdulaziz in September 2000 attended a council gathering in New York to talk about Saudi Arabia’s efforts for economic reform, opening the country to greater foreign investment and achieving oil market stability. When Second Deputy Prime Minister, Minister of Defense and Aviation and Inspector-General Prince Sultan bin Abdulaziz visited Washington, DC, in November 1999, he addressed a council conference. “Gatherings like this one must ultimately benefit both of our friendly countries, since they provide opportunities for an exchange of views and an exploration of ways and means to promote the role of the private sector in U.S.-Saudi relations,” he said.

In February 2001, the council hosted a forum in Houston, Texas, on investment opportunities available in the Kingdom. The two-day conference was inaugurated by Saudi Arabian Ambassador to the United States Prince Bandar bin Sultan bin Abdulaziz and attended by former U.S. President George Bush and a large number of executives from Saudi Arabian and U.S. companies.


King Fahd and President Clinton 

co-chair a meeting in Saudi Arabia in 1994.


The electronics company in Riyadh is one of hundreds of Saudi-U.S. joint ventures.

The close commercial and economic relationship between Saudi Arabia and the United States has resulted in the rapid growth of two-way trade, from 56.2 million U.S. dollars in 1950 to 19.3 billion dollars in 2000. A long the way, the two countries have invested vast sums of money in each other’s economies. Recent examples include the formation by the national oil company Saudi Aramco and Texaco Inc. of Star Enterprise, a multi-billion-dollar venture that refines and supplies petroleum products for distribution in 26 states in the eastern and southeastern United States. In 1997, the two companies joined Shell Oil to form Motiva Enterprises, one of the largest refining and marketing companies in the United States.

In recent years, Saudi Arabia has continued to grant large contracts to U.S. companies for the purchase of goods and services. For example, Saudi Arabian Airlines took delivery in 2001 of the last of 61 jetliners it had purchased under a contract worth six billion dollars with Boeing and McDonnell Douglas, and American Telephone and Telegraph (AT&T) was granted a contract worth four billion dollars for expansion of the Kingdom’s telecommunications network. Early in 2001, the Saudi Arabian General Investment Authority (SAGIA) issued a license to a consortium of U.S. companies to build 3,000 new schools at a cost of 3.5 billion dollars. In July 2001, Lucent Technologies Inc. of the United States won a joint contract worth 600 million U.S. dollars to expand Saudi Arabia’s mobile phone network by adding more than 1.1 million mobile telephone lines in the Kingdom by the end of 2002.

An automatic teller machine in Jeddah is a sign of the close Saudi-U.S. cooperation in the financial sector.

Saudi Arabia has granted billions of dollars worth of projects

 to American companies to establish 

a national electricity network in the Kingdom.

The largest joint venture undertaken to date was launched in June 2001 when the Custodian of the Two Holy Mosques King Fahd bin Abdulaziz, who is also President of the Supreme Council for Petroleum and Mineral Affairs, chaired a meeting of the council that approved the signing of agreements with American and European oil companies for major investments in the gas sector. The agreements also provide for implementation of three pivotal investment projects that include production of electric power and desalinated water, as well as development of the natural gas and petrochemical industries. Together, the new joint ventures will involve investments of some 20 to 50 billion dollars.

Minister of Foreign Affairs Prince Saud Al-Faisal, who headed the Saudi team negotiating the new contracts with the oil companies, said the first venture, led by Exxon-Mobil with Royal Dutch Shell, British Petroleum and Phillips Petroleum, will focus on the utilization of existing Saudi Aramco natural gas supplies in the South Ghawwar oilfield and on aggressive exploration for gas in the northern part of the Rub’ Al-Khali. This venture also includes investments in electric power generation, water desalination and petrochemicals production on both the east and west coasts of the Kingdom, with capacities to total 4,000 megawatts of electricity, 300 million gallons of water per day and two million tons of petrochemicals a year.

Finance Minister Ibrahim Al-Assaf and U.S. Treasury Secretary Paul O'Neill co-chair a meeting in Riyadh in March 2002

 to review economic relations.

There are several hundred joint ventures

between Saudi Arabian and American companies,

including in the metals industry.

The second venture, led by Exxon-Mobil, with Occidental and Marathon, combines the development of known natural gas reserves in the northwest of the Kingdom, and includes electric power generation and water desalination projects. In addition, new areas will be opened up to exploration along a stretch of the Red Sea.

The third venture, led by Shell, with TotalFinaElf and Conoco, will focus on the exploration and development of associated gas in the Shaybah Field in the Rub’ Al-Khali, the development of known natural gas supplies in the Kidan field and exploration in nine of the largest concession blocks in the Kingdom. The gas produced will provide valuable feedstock for power, water and petrochemical projects connected to the Master Gas System.

Former President George Bush (above) addressed the Jeddah Economic Forum, one of many events organized to promote joint ventures, in January 2000.

 

American companies (right) are active in a wide range of fields, including the fast food industry.

Economic cooperation has been beneficial

 to both countries, by providing business opportunities

 to American firms and by transferring technology and skills to Saudi companies and workers.

Other steps undertaken in recent years by the Saudi government hold great hope for Saudi-U.S. commercial relations in the years and decades to come. These steps, intended to prepare the Saudi economy for the challenges of the future, will strengthen the private sector and provide greater investment opportunities for U.S. and other foreign companies in Saudi Arabia. They include the formation of the Supreme Economic Council (SEC) in September 1999, followed by the establishment of the Supreme Council for Petroleum and Mineral Affairs in January 2000. In April 2000, the Saudi Arabian General Investment Authority was formed to facilitate foreign investment in the Kingdom by providing information to foreign investors on investment opportunities and to shorten investment procedures. The establishment in the same month of the Supreme Commission for Tourism (SCT) will further open this attractive sector to investments by U.S. and other foreign companies.

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