Author: FRANK KANETue, 2018-03-20 05:00ID: 1521492298369161800
DUBAI: Nothing fundamental has changed since the very first meeting between a king of Saudi Arabia, Abdul Aziz bin Saud, and an American president, Franklin D. Roosevelt, in the spring of 1945 on board the USS Quincy in the Suez Canal in Egypt.
Then, according to historians of the meeting, the key themes were: Security and oil. The two men found common interests in their desire to fix regional borders in the wake of World War II (though they differed significantly over the issue of Palestine) and both wanted to guarantee markets for crude oil.
But the business of America is business, and the political relationship that was struck that day cemented an already existing commercial relationship in the oil fields. Since then, US-Saudi business relations have gone from strength to strength, even in such difficult times as the oil “spikes” of the 1970s and the aftermath of the 9/11 attacks on the US.
Daniel Yergin, the Pulitzer-winning author of the “The Prize,” told Arab News: “This is a partnership that goes way back. It is striking that the crown prince will be coming to the United States on the 80th anniversary of the discovery of oil in Saudi Arabia by American geologists.”
The relationship has broadened significantly from the simple “guns for oil” formula of the past. Now, US companies play a major role in the overall economic development of the Kingdom, from infrastructure and industry, through finance and investment, to health and entertainment.
Even in the early days, US companies saw the opportunities that came with the opening up of the Kingdom, with big corporations such as engineering group Bechtel following the oil companies’ lead to build roads and other essential infrastructure.
Ellen Wald, American Saudi expert and author, describes in her forthcoming book “Saudi, Inc.” how Bechtel moved from laying oil pipelines to building royal palaces, highways, schools, power plans, hospitals and hotels. “It saw the Saudi public works campaign as a sure source of profit,” she wrote.
Many US businessmen have spoken about the big transformation going on in the Kingdom under the Vision 2030 strategy in much the same way — as a gigantic and potentially very profitable program of public works.
An overview of mutual business reveals the scale and the depth of US-Saudi business links, and also underlines the fact that it is a two-way street.
Figures from the Washington DC-based US-Saudi Arabian Business Council (USSABC) showed total bilateral trade at $35.2 billion, with the Kingdom holding a slight balance advantage from its $18.9 billion of exports. Saudi Arabia is in the top 20 US trade partners, while America is the second biggest partner for merchandise into the Kingdom.
Saudi Arabia is the second biggest source of imported oil into the US and the third biggest source of international students in the US educational system.
Saudi Arabia — private sector and government — is estimated to have more than $1 trillion invested in the US, including a big holding of US Treasury bills.
There are some eye-watering investments within those overall figures. Saudi Aramco’s Motiva Enterprises is the largest oil refinery in the US, based in the oil state of Texas, which will also be home to a $3.9 billion petrochemicals plant joint-venture led by Exxon Mobil and Saudi Basic Industries Corporation (SABIC).
The pace of investment has increased in recent years. The Saudi sovereign investor Public Investment Fund (PIF) has put $3.5 billion into high-tech mobility company Uber, while PIF has teamed up with Blackstone in a $40 billion program of infrastructure investment.
The flow is far from one-way. Chemicals giant Dow is the largest foreign investor in the Kingdom, thanks to its $20 billion joint venture with Aramco in the Sadara petrochemicals plant. GE, the engineering conglomerate, has pledged billions of investment in power and energy in Saudi Arabia as part of its long-running business partnership. Exxon Mobil continues to be a major investor in Saudi energy.
And, of course, there is the defense industry. Saudi Arabia is America’s biggest customer for military sales, with all the big US defense manufacturers working as suppliers at all levels of the security business.
At the Riyadh summit last year, President Trump was able to announce $110 billion of defense deals with Saudi Arabia, including deals with Lockheed Martin, Boeing and Raytheon. Analysts expect those transactions to be taken to the next level during the royal visit to the US.
The USSABC estimates that the total amount of foreign direct investment (FDI) from the US to Saudi Arabia amounts to $9.83 billion — the highest of any foreign country into the Kingdom — while $12.3 billion went in the opposite direction, supporting 10,600 American jobs in affiliates of Saudi-owned firms.
There was much speculation after last year’s anti-corruption drive in the Kingdom that foreign firms might hold back on FDI, but so far there have been no reports of US firms canceling any FDI projects. The USSABC declined to comment on the effects of the anti-corruption campaign.
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