Kingdom has strategic role in economic future of US
Riyadh, Saudi Arabia — Even with oil prices dropping, Saudi Arabia, by virtue of its tremendous petroleum reserves, is of the greatest strategic importance to the United States , for no matter what the cost, Saudi oil is still a raw material needed to fuel the West into the next century.
Economically and politically, Saudi Arabia is crucial.
US-Saudi relations today are undergoing a major change in emphasis, however, as the US decreases its imports of Saudi oil and the kingdom loses much of its financial clout. A Western diplomat here says: ''In the past, the relationship was so close that one could not really differentiate between political and economic aspects. Now the economic aspects are decreasing somewhat.''
At the business level, US-Saudi ties have been close since the discovery of oil, in huge quantities, by Standard Oil of California in 1938. In the ensuing years, the US has played an important role in the kingdom's rapid emergence from a land of impoverished tribesmen to a fledging industrial power.
The Arabian-American Oil Company (Aramco), now wholly owned by Saudi Arabia, prospected the oil fields, locating the world's largest onshore and the world's largest offshore reserves; tapped them; and in the process, built highways, ports, refineries, and storage depots.
Today, American companies such as the Bechtel Corporation, in partnership with Saudi government corporations, are establishing an industrial infrastructure for the country. Such American companies as Shell USA and Mobil are involved in joint ventures to produce and sell petrochemicals - manufactured at low cost in Saudi Arabia's new industrial cities of Jubail and Yanbu. Using state-of-the-art American technology and low Saudi energy costs, these new petrochemical plants are projected to control 5 percent of the world's market by the late 1980s.
Some 300 American technical advisers are working under the auspices of the US-Saudi Joint Economic Commission in Riyadh to assist Saudi agencies in managing an assortment of industrial, agricultural, and infrastructural projects. Such American corporations as McDonnell Douglas and Vinnell are equipping and training the Saudi military.
''The US now has a trade surplus with us,'' notes Commerce Minister Sulaiman al-Sulaim. ''The US is exporting full gear. Its products have a good reputation for quality with us. American businessmen have a reputation for reliability.''
Mr. Sulaim, in a Monitor interview, called for the US Congress to review the antiboycott clauses of the Export Administration Act, which expires this year. (These clauses penalize countries that boycott trade with Israel in order to conform with longstanding Arab trade sanctions.) Mr. Sulaim suggests either elimination of the antiboycott clauses or clarification of them. Small and medium American industries, he says, ''often find it difficult to trade with the Arab world for fear of coming under the antiboycott law.''
As it is, Saudi Arabia remains America's biggest export market in the Middle East with an estimated $8.1 billion in US goods entering the country - 20 percent of all Saudi imports - in 1982. But officials at the US Liason Office in Riyadh warn American firms that change is in the wind. Foreign companies now are under orders to ''buy Saudi'' when at work in the kingdom. There have been liquidity problems lately - due to the downturn in oil demand and prices and consequently a shortfall in Saudi revenue - which have meant delayed payments to some US contractors, suspension of some projects, and cancellation of others.
''It is doubtful there will be any new projects,'' an American economist in Riyadh says. ''The Saudis are finishing what they've started and are spinning out others to see what will happen (in the world oil market) before completing them.'' This diplomat says it is possible that in the next government budget the Saudis may actually have to cancel some contracts.''
Most of this pessimism is in the area of construction and industry. Already, delayed payments to contractors have strained goodwill between the Saudi government and foreign businesses, the diplomat reports. ''And some contractors may balk at having to lend 'shadow financing' to Saudi development, but I think the expectation of future business in Saudi Arabia will intervene and prevent a real falling out,'' he adds.
Even if nuts and bolts development gets diminishing emphasis in the coming lean years for Saudi Arabia, there are areas the kingdom's planners are likely to continue to fund - and in fact where funding may increase. One of these is human-resource development. The need to turn away foreign laborers and employ more Saudis as the petrodollar boom ends may give US firms specializing in educational and vocational-training materials and programs good sales prospects.
Dry-land agriculture equipment - hothouses, drip-irrigation systems, and so forth - also will be of continuing importance to the Saudi government, especially if decreased revenues mean a slowdown in imported foods.
In an attempt to promote business during this more modest era of Saudi development, the US-Saudi Joint Economic Commission is establishing a company that will assist the formation of US-Saudi joint-business ventures for medium-size firms. The idea, says Don DeMarino, a commission official, is to aid ''Saudis in sourcing good American companies, and aid Americans in examining business opportunities in Saudi Arabia.''
In short, the country-building days of Aramco and Bechtel may be winding down , but the Saudi market, once it adjusts to the coming new world-oil-price structure, remains important for American business.