Page 456 - Arabia the Gulf and the West

The ‘Sting* 453

The Saudi government’s appetite for revenue has grown in direct proportion to
its lavish expenditure and the soaring costs of its current five-year development
programme. The sum of $28,400 million per annum originally budgeted for

the implementation of the programme has proved grossly inadequate. The oil
revenues for 1978 were in the vicinity of $34,000 million, which at prices
current in that year represented an output of around 8.4 million b/d.
(ARAMCO’s average production for 1978 is said to have been 8.1 million b/d.

Production from Saudi Arabia’s share of the former Saudi-Kuwaiti neutral
zone averaged 300,000 b/d.) Perhaps as much as $20,000 million per annum
more is needed to carry out the development programme in its original form.
Where is the money to come from? Increased production of any significant

dimensions seems out of the question, for the reasons already adverted to,
including the fluctuating state of the market. To trim the programme to fit the
financial cloth would require sweeping economies of expenditure upon indus­

trial development, the armed services, the bureaucracy, education and other
social services, economies which could not fail to produce adverse effects,
especially in terms of political unrest. The only alternative, it would seem, is to
seek higher oil prices.
All the indications are that the Saudi government intends to continue to

impose restraints upon oil production so as to prolong the technical life of the
fields - which in turn implies that it will seek to raise prices at intervals in order
to maintain revenues at a desired level. The only way to achieve this aim is
through the survival of the OPEC cartel, which is why Saudi Arabia, one of the

principal founders of the organization, will strive to ensure its survival. How
much, if at all, her ‘special relationship’ with the United States may hamper her
pursuit of these aims has yet to be seen. Her equally special relationship with
ARAMCO is unlikely to act as a brake upon her activities and ambitions, even
though the Saudi government sorely needs the company’s assistance, not only

to operate its oil industry but also as an instrument with which to regulate or
manipulate the volume of oil on the market, and its price. Under the terms that
have so far been revealed of the arrangements worked out between the Saudis

and ARAMCO for the continued operation of the Saudi oil industry,
*hi ^CO remain a wholly American-owned services company, respon-
S1 e for producing operations, exploration and development, as well as for
marketing Saudi Arabian oil through its parent companies. Ownership of the

m reserves and the company’s physical assets in Saudi Arabia, TAPline
excepted, passes to the Saudi government, which will also control output, as it
M °ne f°r some years past.

of h UCh same relationship has been established between the governments
co 6 ° . Arab oil states and the companies operating in their territories. The
C0™Pan!es concessions and assets have been fully nationalized, or, if the
case^f11168- haVe ^een Permitted to retain a minority shareholding (as is the

’ or instance, in Abu Dhabi), it is because the local government is