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‘Araby the Blest’ 263

were said to be invested or on deposit in the United States, more than half of
which belonged to Saudi Arabia, whose total financial surpluses amounted to
$50,000 million or more. Private Saudi investment in the United States prob­
ably matched that of the Saudi government, so that Saudi Arabia’s total
investment in the United States may have exceeded $50,000 million.
Moreover, it could be expected to grow in the years ahead, since OPEC’s
surplus revenues for the years 1977-80 were expected to average $40,000
million annually, 90 per cent of which would accrue to the same three countries
- Saudi Arabia, Kuwait and the UAE. The implications for the United States
economy and treasury were obvious.
Imports of oil into the United Slates during 1977 and the first half of 1978
greatly exceeded in volume not only the imports of previous years but the
country’s nominal requirements as well. Almost half the oil came from three
countries, Saudi Arabia, Nigeria and Persia, with Saudi Arabia providing the
largest amount. It was clear that the United States government was building up
a strategic oil reserve which would enable it to withstand any future constric­
tion of supplies by the imposition of another Arab oil embargo like that of
October 1973. To succeed in this aim, while staving, off the grave financial risks

involved, required the fulfilment of three conditions: an adequate and uninter­
rupted supply of oil, the maintenance of oil prices at a constant level, and an
assurance against any substantial withdrawal of the surplus oil revenues de­
posited in the United States. Saudi Arabia was clearly considered to occupy a
key position in this strategy. As early as the spring of 1974 the United States
and Saudi governments had reached initial agreement upon the desirability of
close economic and military co-operation between their two countries. On 7
June 1974 it was formally announced that joint commissions on military and
economic relations were to be established, specific reference being made in the
announcement to the ‘special relationship’ subsisting between the United
States and Saudi Arabia. In the next few months the United States Department
of Defence made a study of Saudi Arabia’s defence needs, and its findings were
accepted by the Saudi government towards the close of the year. Large orders
for arms followed. Slower progress was made with the implementation of the
agreement on economic co-operation; but by the latter months of 1976 the joint
commission had agreed upon the methods by which it would oversee the
investment of Saudi Arabia’s surplus oil revenues in the United States, on the
one hand, and assist with the economic and social development of Saudi
Arabia, on the other. When rhe Saudi crown prince, Fahad ibn Abdul Aziz,
visited Washington in May 1977 the arrangement was confirmed by the new
administration of President Carter.
What is plainly implicit in this joint arrangement is that, in return for an
undertaking from the Saudi government to meet the three conditions set out
above, the United States government has committed itself to a guarantee of full
political, economic and military support to maintain the independence and