||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.
Abdulaziz is briefed by an American official of Aramco
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.
Fahd, Crown Prince Abdullah and Prince Sultan with executives of
American and European oil companies
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
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.
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.
Prince Abdullah (left) addresses a Saudi Arabian-U.S. Business
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
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
Arabia has granted billions of dollars worth of projects
American companies to establish
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
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.
Minister Ibrahim Al-Assaf and U.S. Treasury Secretary Paul O'Neill
co-chair a meeting in Riyadh in March 2002
review economic relations.
are several hundred joint ventures
Saudi Arabian and American companies,
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.
President George Bush (above) addressed the Jeddah Economic Forum,
one of many events organized to promote joint ventures, in January
companies (right) are active in a wide range of fields, including
the fast food industry.
cooperation has been beneficial
both countries, by providing business opportunities
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.