RIYADH: Saudi Arabia’s frustration with its main ally the United States over Middle East policy will not harm business relations or oil sales, despite a threat from its spy chief of a “major shift” in ties, businessmen and economists say.
Prince Bandar bin Sultan, the head of Saudi intelligence, warned European diplomats last week that energy and defence deals could suffer as a result of differences over the conflict in Syria and other issues, a Saudi source said.
Although mega-contracts have occasionally been used to strengthen political relationships, particularly in defence, economists and businessmen said business ties between US and Saudi firms were generally immune to dips in the relationship.
“I don’t think there are direct links between trade and the political relationship. That’s not how the Saudis work. But it’s also true that when the bilateral relationship is good, it helps,” said a diplomatic source in the Gulf.
The United States is the main supplier for most Saudi military needs, from F-15 fighters to control and command systems worth tens of billions of dollars in recent years, while American contractors win major energy deals.
The world’s top oil exporter and its biggest consumer have enjoyed close economic ties for decades, with US firms building much of the infrastructure of the modern Saudi state after its oil boom in the 1970s.
Younger Saudi princes were mostly educated in the United States as were many of the kingdom’s business executives, senior officials and cabinet members, including the oil, finance, economy and education ministers, and the central bank governor.
“When you hear Bandar threatening, it doesn’t mean we are going to sell our T-bills or stop the military contracts. That’s not going to happen. You are talking about a relationship and an alliance that goes back 60 years. But what they are doing is saying, ‘hey wake up, don’t take us for granted’,” said a Saudi businessman who declined to be identified.
Over the decades, Riyadh has pumped its earnings from energy sales, often to the United States, back into the US economy, buying its goods and services and investing in government debt.
The Saudi riyal has been pegged to the dollar at the same rate of $1=SR3.75 for many years, and the kingdom has put some of its $690bn foreign holdings into US treasuries.
As a result, trade has boomed, with US goods and services exports to Saudi Arabia hitting $17bn in 2011, and US direct investment there reaching $8bn in 2010.
“Commercial relationships on trade or oil won’t be affected at all. Saudi has had bad political relationships with many countries and still continued to deal with them commercially. This is just a political rift and doesn’t mean that it will affect the private or public businesses,” said a Saudi official.
Reuters
