OnlineInvestorsNews
Volume 10-12, August 19, 2005
Saudi Arabia - The Next
Mid East Flashpoint
Bill Ridley
www.jameswinston.com
Aug 22, 2005
The last thing the United States
needs right now is another conflict in the Mid East to deal with,
but unfortunately America's key ally in that troubled region
is showing signs that they are on the brink of a civil war.
At stake here are 26% of the
world's oil reserves and 204 trillion cubic feet of natural gas.
If extremist revolutionaries get their way, they will attempt
to bring the U.S. and the rest of the western world to their
knees by jacking up oil prices to punitive levels.
For the worst possible reasons,
the likelihood of oil and gold dropping much further in price
seems highly unlikely. In fact, it is very possible we could
see sharper price spikes.
Playing into the latest price
surge over $60 has been the recent death of Saudi Arabia's King
Faud, which has traders fretting the country's oil output could
be disrupted as concerns of a civil war heighten. Just hours
before the newly crowned King Abdullah arrived in the holy city
of Medina, security forces killed the leader of al Qaeda in Saudi
Arabia in a gun battle.
Earlier this month, terrorism
concerns caused the U.S. to shut an embassy and two consulates.
In an already skittish market, any unrest in Saudi Arabia is
especially unnerving particularly given the fact that the major
source for terrorism funding and manpower comes mostly from Saudi
Arabia who are also world's leading supplier of oil.
Saudi Arabia has the potential
to become the world's biggest political and economic disaster
and is one of the major reasons why we are now paying more to
fill up our cars.
Some energy economists are
saying that the cost of a barrel of oil now has a $10 to $15
premium due to the uncertainty in the Middle East . Analysts
are also worried that the now ruling King Abdulla will lose control
of Saudi security and most importantly, control of the oil infrastructure.
Increased terrorist activity
is hard for oil analysts to ignore. Last year a truck bomb blasted
a main Saudi police station which was followed by the May 29th
attack at a foreign workers compound in Khobar. An organization
calling itself the al-Qaeda of the Arabian Peninsula later released
statements denouncing members of the Saudi Royal Family and accusing
them of plundering the nation's oil wealth.
You would think that a nation
that controls 25% of the world's oil reserves would be a shining
star for education and development for their people instead of
the home base for terrorist financing and training.
Close examination reveals that
the Saudi Royal Family of some 6,000 princes (women are excluded),
along with favored business buddies like the bin Ladens, absorb
virtually all the billions of oil revenues. This is another classic
example of third world politics where the power elite keep themselves
in luxury while their subjects are kept under strict control.
The Saud Royalty enforce Islamic
laws and harsh punishments against the 22 million subjects under
their rule. By our standards, their rule of the law is primitive.
For the worst lawbreakers, public beheadings are still the norm.
To help keep the masses somewhat
happy however, billions of dollars have been doled out to the
under classes. These funds have gone to some positive things
such as schools and mosques however there is a clear money trail
showing that al Qaeda terrorists have also been on the receiving
end.
Clearly, this terrorist financial
support shows there is dissention within the ranks of the Saudi
power elite. The clearest example being Osama bin Laden himself.
Life in the Desert
The Saudi ruling classes have
riches beyond our comprehension. They have gone to the best schools
in Europe and the United States, received the best medical care
from American and European doctors. I remember one story from
a nurse who said that one of the sheiks she had given care to
in his palace had gold bars on the floor of his bedroom to keep
his feet cool!
Unfortunately this extravagant
wealth has not trickled down to the average family who live in
the streets outside the palace gates in Riyadh . Millions of
fundamentalists live in a world of fear, ignorance, and poverty
which has breed contempt. Such a state of mind is open to believing
the negative religious doctrine that focusing on death and destruction
of those people and places which they believe are responsible
for their unhappiness.
The mind control tactics of
the religious leaders will keep the masses satisfied until they
reach paradise either by their natural death or by sacrificing
themselves for their cause. When you live a life of hell, a suicide
bombing, is a glorious answer and a face saving escape.
Of course in reality what is
happening is a transfer of power from one group of self centered
control fanatics to another. One group uses their education,
breeding and military control to maintain power and the other
use religious doctrine to persuade the masses to do their biding.
Caught in the middle of this
mess is the economic stability of the western world.
In the 1970s another U.S. ally,
the Shah of Iran, was driven out of power by religious fanatics
led by the Ayatollah Khomeini. Washington insiders are now worried
The House of Saud may also fall victim to an internal uprising.
The state of mind of the average
Saudi citizen is worrisome. Their views of the world are summed
up within the pages of the Arabian bestseller, Bin Laden, Al-Jazeera,
and I.
The book reviews an interview
with Osama bin Laden well before September 11th. In the book
he proclaims that "Every American man is an enemy, whether
he is among the fighters who fight us directly or among those
who just pay U.S. taxes."
When it comes to the oil resources
bin Laden says, "A barrel of oil should cost $144. By these
calculations, Americans have stolen $36 trillion from Muslims.
They owe each member of the faith $30,000."
The only reason that OPEC hasn't
put the screws to the western world has been the overpowering
influence of the Royal Saud family.
Saudi Arabia and the US have
maintained a special relationship since 1945 when President Roosevelt
and King Ibn Saud cut a deal whereby the U.S. would help keep
them in power in exchange for reliable oil supplies.
This arrangement had worked
well for many years but now it appears to be unraveling. To guarantee
their wealth, the House of Saud has had to suppress the religious
fanatics while keeping up appearances that they themselves are
of the faith of the righteous.
To facilitate their security,
the Royal family has had to rely on American help, without being
too obvious about it.
Showdown in the Desert
Last year the House of Saud
decided they should crack down on these misappropriated "charity"
organizations that have supported terrorism. One such foundation
called the Al Haramain Islanic Foundation has dished out about
$50 million a year to groups who have links to terror organizations.
The situation is further complicated
by power struggles within the top ranks of the Royalty. There
are those within the House of Saud who oppose King Abdullah.
And it would seem, so do many Saudi citizens.
The British newspaper, The
Observer commented that "Anti-government demonstrations
have swept the desert kingdom in the past months in protest at
the pro-American stance of the de facto ruler, King Abdullah."
Saudi's minister of interior,
Prince Nayef, who is also in charge of preventing terrorism,
has strong support though he seems neutral toward the extremist
element. Perhaps this is why four terrorists where able to disguise
themselves as security forces and enter the well fortified foreign
workers compound at Khobar which killed 22 people in 2004. More
unbelievable is that the terrorists actually escaped while being
surrounded by hundreds of security forces!
Aside from al Qaeda, much of
the Saudi population are not big fans of the United States because
of the close ties with Israel and U.S. military's presence there
since the end of the Gulf War.
If Prince Nayef decides to
challenge Prince Abdullah, he may have the help of terrorist
supporters. Within Saudi Arabia there is a generation of hard
core religious fanatics who have been brainwashed into believing
they are on a mission to rid the world of non-believers. This
is what one Arab writer has described as the "culture of
death." These are the people who don't think twice about
blowing up innocent people along with themselves.
Meanwhile, the targets of choice
for terrorists in Saudi Arabia are the western workers who live
and work there. Alex Standish, the editor of Jane's Intelligence
Digest, said the situation in Saudi Arabia has strong parallels
to the fall of the Shah of Iran who was toppled in 1979. He said
there is a lot of evidence to suggest al Qaeda is gathering strength.
This isn't a pleasant scenario
however it's very real. More troubling is that if Saudi Arabia's
oilfields ever go offline for too long, the world will go into
a major economic tailspin. The United States and the rest of
the industrial world are counting on Saudi to increase their
oil production, not dial it back. It should be more then obvious
the world will not sit idly by and wait for the Saudi's to sort
out their political problems.
Vinnell Corporation "Mercenaries
are Us"
You may recall hearing about
Vinnell Corporation last year when the bombing of their premises
in Saudi Arabia made headlines around the world. This was the
second such attack on Vinnell's property and personnel in Saudi
Arabia, the first attack having been done in 1995.
Vinnell is a subsidiary of
Northrop Grumman and in 2004 they were in the last year of a
$831 million five year contract to train Saudi's 80,000 National
Guard under the supervision of the U.S. Army.
Jane's Defense Weekly has described
these guardsmen as "a kind of Praetorian Guard for the House
of Saud, the royal family's defense of last resort against internal
opposition." That is why Vinnell and its employees were
targeted in 1995 and again in May 2004.
By extension, The Saudi Arabian
National Guard, are seen as a de-facto American military force.
Without the National Guard, the royal family would be forced
to leave the country and the revolutionaries could step in and
use their control of oil to bring down the western world.
This cannot happen and it won't.
What remains unclear is to what degree will the U.S. military
need to act in order to stabilize Saudi oil supplies over the
upcoming months. As it looks right now, Saudi Arabia could be
the next the next battle ground for U.S. forces.
In 2004, Saudi authorities
with guidance from the CIA, started uncovering a network of Islamic
extremists, arms, and sleeper cells all over the kingdom. Though
a strong anti-Saud movement has been in existence for many years,
officials are stating they have only just discovered these cells
since last year following the May 12 suicide bombing in Riyadh
.
Since the bombings back in
May, Saudi officials have arrested more than 200 suspects. Though
authorities have just scratched the surface of uncovering these
militants, it is clear from the large numbers of terrorist cells
found and the sophistication of their arsenal, that this group
is very powerful and well connected to money and the black market
arms trade.
Militant expert and journalist
with the Asharq alAwsat newspaper, Mishari al-Thaidi, says "it's
clear that they have sympathizers all over the Muslim world,
including many young Saudis vulnerable to the call of Jihad (holy
war), more recently because of the US war in Afghanistan and
Iraq. The portrayal of those as crusader wars against Muslims
makes it easier for al-Qaeda to gather recruits."
Conclusion
Back in 1945 President Roosevelt
and King Ibn Saud cut a deal whereby the U.S. would help the
Royal House of Saud stay in power in exchange for reliable oil
supplies. Though the U.S. has had many worry free years of oil
supplies from Saudi Arabia, things are unwinding.
Though we don't get a lot of
news about Saudi Arabia's growing revolution, it just may be
the main stream media's top news story in the not too distant
future.
If extremist revolutionaries
get their way, they will attempt to bring the U.S. and the rest
of the western world to their knees by jacking up oil prices
to punitive levels.
Having positions in gold has
always been the best insurance policy against the potential for
a major financial and political upheaval. It's been decades since
global economic security has been in such tenuous position. The
logic of owning gold in some form makes more sense today then
ever before in our generation.
Bill Ridley
Contact
website: www.jameswinston.com/
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