AS American manufacturers scour foreign countries to boost export sales, one of the United States' prime overseas markets is in distress.
Saudi Arabia - oil producer, investor, creditor extraordinaire, and the largest offshore outlet for high-priced US military equipment - is showing the weakest balance sheet in decades.
Entering its 11th year of budget deficits, the Saudi government owes tens of billions of dollars to domestic and foreign creditors.
Official coffers are low: International Monetary Fund (IMF) estimates put the country's financial reserves at $5.9 billion last year, a sharp drop from $11.7 billion in 1991.
With oil prices sinking to their lowest level in five years, analysts both inside and outside the kingdom say the world's top oil producer has poor prospects for reaping the profits necessary to comfortably fund domestic needs, pay for costly imports, and service its debts.
Some Saudi watchers - concerned that the kingdom will curb its imports of expensive American-made weaponry and imperil US jobs in the process - worry that the special US-Saudi Arabia commercial relationship, cemented during the 1991 Gulf war, may be cracking.
Since 1991, the kingdom has placed some $35 billion of US military goods on order - a so-called ``wish list'' drawn up by defense planners in Riyadh when they recognized an unprecedented American public support for arming US allies in the Gulf.
According to Saudi and American industry leaders, the timing could not have been better. The Pentagon's pared-down requirements have dampened domestic demand and US sales to third-world markets have been contracting. Backlog in US arms requests
Struggling to keep production lines rolling, many in the US defense industry have regarded the Saudis as a lifeline.
Joel Johnson, international vice president, of the Washington-based Aerospace Industries Association, calculates that $1 billion in exports generates 20,000 US jobs related to aerospace and creates another 15,000 indirectly, ``such as the butcher, the baker, and the banker.'' The Saudis' $30 billion to $35 billion backlog in US arms requests translates into at least 600,000 US jobs, he says.
``That's not to be taken lightly in an industry that has laid off 100,000 people a year for the past four years,'' Mr. Johnson says. With its plans to spend $3 billion annually on US imports, he adds, the kingdom ``is keeping us from firing another 60,000 people each year.'' Johnson says that while ``it's quite obvious that they're suffering from cash-flow problems, it's also quite clear that they have considerable collateral.''
The kingdom's spokesmen keep up a constant refrain that the country's prospects are bright. Investments during the past decade have helped the Saudis make important strides in industrialization.
The infrastructure is in place for a private sector boom. Oil in the ground, they say, is liquid gold that will finance their future. Oil seen as collateral
Saudis stress that there is plenty of collateral. ``We are sitting on 300 billion barrels of oil - that's between 25 percent and 30 percent of the world's proven oil reserves'' that can generate ``anywhere between $3 trillion and $5 trillion,'' says Adel Al-Jubeir, special assistant to the Saudi Ambassador to the United States, Prince Bandar Bin Sultan. ``If we did a leveraged buyout, we'd have enough to finance our budget for the next 80 to 90 years.''
Mr. Al-Jubeir adds that ``low oil prices set the stage for increased demand down the road. Saudi Arabia is going to cash in. The question isn't `Is the money [from oil revenues] coming in or not'; rather the question is `At what rate?' ''
Oil specialists Daniel Yergin and Joseph Stanislaw estimate in a recent issue of Foreign Affairs that ``despite continued conservation, global oil demand could be 15 to 20 percent higher a decade from now.''
Oil producers will have to step up their capacity in order to support increasing demand from the growing world economy.
``Much of the new supplies will come from the Middle East, in particular from Saudi Arabia,'' they write. ``This means that production capacity in the Middle East will rise from 18.3 million barrels a day to 28 million barrels a day.''
The world's continued reliance on Middle East oil underscores the region's strategic importance and an expanding military relationship between Saudi Arabia and the West. In October, the United Nations reported that the US was the largest exporter of combat aircraft and major land-based weapons in 1992, thanks in large part to major contracts with the Saudis.
Analysts examining the sustainability of this relationship question whether the arms and other defense equipment are being pushed from Washington or pulled by Riyadh.
``The Saudis have joined alliances with American defense contractors,'' says an informed US Defense Department source. ``American military suppliers have to make sure that there is no temptation to go to the French for Tornadoes or to the EC for Airbus.'' Easier payment terms have been the lure.
Al-Jubeir disposes with characterizations of the relationship as a crutch for a crippled US industrial defense establishment. ``The defense buildup is not a luxury we cannot afford, it is a necessity we cannot live without. We happen to live in a tough neighborhood,'' he says.
But Yahya Sadowski, a Brookings Institution economist and author of ``Scuds or Butter? The Political Economy of Arms Control in the Middle East'' asserts that Washington is pressing the sales on Riyadh, whose purchasing power is waning.
Cash-strapped, ``the Saudis are actually moving very slowly - they're stringing out [the purchases of US military equipment] over time,'' he says.
Payment schedules are designed to be flexible, and drawn out, counters Al-Jubeir. The multibillion-dollar F-15 sale, for example, was approved in 1992, and the deal was finalized this past summer. ``We won't pay for it until delivery - the last quarter of 1994, then in 1995, 1996, and 1997,'' he says.
Oftentimes, deals are delayed because the development of new technologies sends previously planned production back to the plant for modifications. Historically, Saudi Arabia only buys roughly 80 percent of what it has requested approval to purchase.
The $35 billion order now in the pipeline is ``a big number that makes some people who are unfamiliar with how arms transfers work nervous,'' says Al-Jubeir, who has been by all accounts the kingdom's most effective behind the scenes lobbyist in Washington. Huge military orders
He recalls that between 1984 and 1986, the Saudis secured approval from the US government to purchase $3 billion worth of US military products. But that was only a beginning - from 1987 to 1989, the approvals totaled $20 billion.
Others worry about the current big numbers because the kingdom continues to rack up debts and has not scaled back spending.
At the very least, says Patrick Clawson, a senior fellow at the National Defense University's Institute for National Strategic Studies in Washington and a former IMF economist, the government should have slashed its costly welfare programs - from financing farm production at many times the world price to the cradle to grave social services citizens have come to expect.
Al-Jubeir disputes the need. ``We have cash-flow problems. Big deal. It's like someone living in a million-dollar house who goes out and borrows $10,000. Is he bankrupt? Of course not.''
* Next: Is Saudi Arabia, once awash in petro-dollars, now a credit risk?