Oil and the Islamists

by George Caffentzis

New Internationalist magazine, December 2001

The hidden civil war within the oil-producing countries from Algeria to Iran may help to provide a context for the brutal attacks on the World Trade Center and the Pentagon.

The role of the US has been the crucial factor in the region, as exemplified by the devastation of Iraq, unstinting US support for Israel, the US Government's proprietary attitude to oil resources in the Middle East, and the building of US bases in Saudi Arabia, Islam's most sacred land.

The result has been deep divisions within the ruling elites which pit pro-American governments - often consisting of royal dynasties in the Arabian Peninsula - against dissidents who, in the name of the Qur'an, accuse them of being corrupt, of squandering the region's resources, of selling out to the US, of having betrayed Islam. These dissident fundamentalists have used their wealth to create a multinational network of groups stretching through every continent, and offered an alternative 'social contract' to the poor of North Africa, the Middle East and West Asia.

From Cairo's bread riots of 1976, through the uprisings in Morocco and Algeria of 1988 - both crushed in bloodbaths - to the more recent anti-IMF riots in Jordan (and the list is much longer), it is evident that it has become more and more difficult for poor sectors of the population to survive. The fundamentalists have attempted to win over people in urban areas through providing basic necessities such as schooling and healthcare that have been suffering as a result of cuts in government subsidies and programs dictated by the World Bank and IMF. It is the Islamic fundamentalist networks, for example, that organize healthcare and education in the Palestinian 'territories', almost functioning as an alternative government to the PLO at grassroots level.

But Islamic fundamentalism also continues to have an attraction within the ruling circles of the wealthiest Muslim nations. This internal contradiction has created a tangled net of consequences which is now embarrassing many not just in the governments of the Middle East, but in the US Government too. For they have financed and trained the very generation of dissidents who are now so violently turning against them. On the one side, a portion of Middle Eastern oil revenues has been used to fund assaults on symbols of the New World Order; on the other, the US Government financed and trained many members of this dissident branch of the Middle Eastern ruling classes in its effort to destabilize the Soviet Union in Afghanistan.

Many of those who have been brought back into power in George W Bush's administration were the ones who were responsible, during his father's presidency, for the training and financing of the very organizations they now hunt under the banner of 'terrorism'. The executive dynasties in both the US and Saudi Arabia must both be worried about family members who have been compromised by their past connections to the networks they now claim to be responsible for the events of 11 September - and this includes the US President's family. For example, The Wall Street Journal of 28 January reported that George Bush Senior works for the bin Laden family business in Saudi Arabia through the Carlyle Group, an international consulting firm - as do other close associates of the President like former Secretary of State James Baker.

The 11 September attacks were, however, symptoms of desperation, not of power, resulting in a devastating US military response with predictable results: the destruction of thousands of Islamic fundamentalist militants along with tremendous collateral damage to the people of Afghanistan and probably other countries in North Africa, the Middle East, and West Asia. Who on the ground can survive in such a maelstrom? Indeed, the actual perpetrators and their accomplices, whoever they are, must have been very desperate to take such a risk with their own network and the lives of millions of people of the region.

Clearly something so very important was going on that the perpetrators of 11 September needed to thwart by desperate and inherently uncertain measures. What was it? My view is that the source of this desperation involved the oil industry and globalization in the Arabian Peninsula. Here is my hypothesis.

In 1998 (after the collapse of oil prices due to the Asian financial crisis), the Saudi monarchy decided, for 'strategic reasons', to globalize its economy and society, beginning with the oil sector. The oil industry had been nationalized since 1975, which means that foreign investors were allowed to participate only in 'downstream' operations like refining. But in September 1998 Crown Prince Abdullah met senior executives from several oil companies in Washington DC. According to Gawdat Bahget, writing in Arab Studies Quarterly: 'The Crown Prince asked the oil companies' executives to submit directly to him recommendations and suggestions about the role their companies could play in the exploration and development of both existing and new oil and gas fields.'

These 'recommendations and suggestions 'were then submitted to the Supreme Council for Petroleum and Mineral Affairs in early 2000 (after being vetted by the Crown Prince) and in the middle of 2000 the Saudi Government ratified a new foreign-investment law. Under the new law, 'tax holidays are abolished in favor of sweeping reductions in tax on profits payable by foreign entities, bringing them nearer to levels that apply to local companies. Wholly owned foreign businesses will have the right to own land, sponsor their own employees and benefit from concessionary loans previously available only to Saudi companies.'

Clearly 'the right to own land' would be a red flag for anyone committed to the sacred character of the Arabian Peninsula. Experts on the Middle East were literally falling over themselves in their effort to highlight the new Investment Regulation. 'Keep your fingers crossed,' said one, 'but it looks as if Saudi Arabia is abandoning almost 70 years of restrictive, even unfriendly policy toward foreign investment.' This law constituted, in effect, a NAFTA-like agreement between the Saudi monarch and the US and European oil companies.

At the same time as this law was being discussed, a ministerial committee announced that up to $500 billion of new investments would be deployed over the next decade to change the form of the Saudi national economy. Around $100 billion of this investment was already promised by foreign oil companies.

In May 2001 the first concrete step in this stepped-up globalization process was concluded when Exxon/Mobil and Royal Dutch/Shell Group led eight other foreign companies (including Conoco and Enron from the US) into a $25-billion natural-gas development project in Saudi Arabia. The financial press noted that the deal would not be very lucrative in itself, but that 'it's part of a long term ploy of the oil companies, [which] want ultimately to get access again to Saudi crude'.

By the summer of 2001 the Saudi monarchy had cast the die and legally, socially and economically crossed the globalization Rubicon. It did so not because Saudi Arabian debt was unmanageable (as was the case with most other countries which bent to the globalizing dictates of the IMF) but because, faced with a intensifying opposition, the Royal circle realized that only with the full backing of the US and European Union could they hope to preserve their rule in the years to come.

Their strategy was aimed at getting the economy moving again and thereby reducing three things: its dependence on oil exports; its large and growing youth unemployment rate; and its huge foreign labor force (around 6-7 million in a population of about 22-23 million). This required a radical departure from the patronage the Saudi monarchy had exercised in the past to keep social peace, made possible until recently by its immense oil wealth. But this wealth is not infinite and is declining. GNP per capita fell from approximately $13,000 in 1983 to $8,000 in 1993 and has since continued to fall.

Inevitably, this strategy was bound to impact on the economic policies of the other oil-producing governments in the region, especially Oman, Qatar, United Arab Emirates, Bahrain, and Kuwait. But if it worked, it would also deal a decisive blow to the Islamicist opposition, undermining its ability to recruit converts - people employed in the upper echelons of a 'globalized economy and society' would be distinctly less likely to respond than those driven to despair by political powerlessness and long periods of unemployment. The cat-and-mouse game that the Saudi monarchy had played with fundamentalist dissidents (in which the King and his dynasty claimed to be even more fundamentalist than them) would end. But the introduction of foreign ownership of land and natural resources, backed up by large investments, and the hiring of more expatriates from Europe and the US, would also bring major social change in its train.

Whatever hopes the Islamic opposition in the ruling classes of the Arabian Peninsula had ever harboured of getting their governments to send American troops packing and turning their oil revenues into the economic engine of a resurgent Islam were facing a historic crisis in the summer of 2001. Without a major turnaround, the Islamic fundamentalist opposition would have to face the prospect of total civil war in their own countries or face extinction. It is possible that elements of this opposition decided that only a spectacular action like the 11 September attack could turn back the tide. Perhaps they hoped that the turmoil and uncertainty generated by the attacks on New York and Washington would generate a strategic US retreat from the Arabian Peninsula - just as the bombing in Lebanon in 1983 led the US to pull out from there.

On the basis of this analysis, then, the 11 September attacks on New York City and Washington DC were linked to a struggle over the fate of oil politics in its heartland: the Arabian Peninsula. We should be watchful of developments there, which will undoubtedly be hidden from sight, and not just the sound and fury directed towards Afghanistan. And in this context, it is pertinent to ask: how can the populations of North America and Europe continue to be blind to the social cost of the oil they put in their cars, and the economic and social inequities built upon it?

Oil watch

September 11th, 2001

Middle East Watch

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