A kingdom whose power haunts the world

As King Fahd hands over to his half-brother, Fred Halliday explains why Saudi Arabia's hold over the global economy is growing

When rumours leaked out in the autumn that King Fahd had suffered a stroke, concern was not confined to Saudi Arabia. King Fahd has now passed the reins of office to his half-brother Prince Abdullah, reputedly on a temporary basis which may well prove permanent. The handover to someone of a similar age is a deliberate attempt to emphasise continuity and business as usual: as such it may well succeed. The episode, however, is a reminder of just how important Saudi Arabia is, not only to the Middle East but also to the West.

Saudi Arabia, the only state in the world called after its rulers, is a country that has long embarrassed its friends in the Arab world and in the West. It continues blithely to deny that international standards of justice, punishment or human rights are relevant to it: the consultative assembly set up by King Fahd in 1993 has all its members nominated by the monarch, no powers of decision, and meets in secret.

All of this is justified in the name of Saudi "tradition" and of Islam, despite the fact that the tradition is something invented by the male princes of the Saudi family to suit their convenience, and many Muslims, including quite a few inside Saudi Arabia itself, dispute this interpretation.

To date, the Saudi royal family has been able to ride out the various storms: repression at home, intrusive and cruel, but mild by the standards of other, more secular and republican regimes in the region, combined with the distribution of wealth, have kept critics at bay. Saudi Arabia allows no foreign correspondents to reside on its soil. Its press at home, and the newspapers and media it controls abroad, put a tame line. Even supposedly independent commercial associates, such as the BBC Arabic TV, find themselves subject to controls by their Saudi associates.

Why has the outside world indulged this curious set-up for the past five decades? Three reasons above all suggest themselves.

One is the role of Saudi Arabia in promoting "Islam". During the heyday of secular Arab nationalism in the Middle East, after the Suez crisis of 1956, Saudi Arabia offered another focus for the Arab and Muslim worlds, one hostile to Communism and to the nationalism of Nasser's Egypt and sundry Ba'athist regimes in Syria and Iraq. Since the rise of the Islamic revolutionary movement in Iran, Saudi Arabia has sought to promote a more moderate, if still intolerant, face for Islamic movements and has spread money liberally, in the Muslim world and among the offshore umma (Islamic communities) of Western Europe, to encourage compliance.

The reasons of state behind appeals to Islamic principle were highlighted during the Gulf war of 1990-1991: three centres of power, Tehran, Baghdad and Riyadh, competed for the influence of Muslims in this struggle. Perhaps the greatest "success" of Saudi support for right-wing causes was in Afghanistan: matching the CIA in its involvement and funding its dollars through the Pakistani military, the Saudis fuelled the Islamist currents opposed to Kabul.

The second reason why Saudi Arabia matters is because of its position in the Arabia peninsula and the Persian Gulf. Useful during the Cold War - for years the largest American base between West Germany and Okinawa was at Dhahran in Saudi Arabia - it acquired new significance with the rise of Saddam's Iraq and of the Iranian revolution. From the early Sixties onwards, Saudi Arabia helped the West by bullying its poorer neighbours in Yemen, where nationalist movements were developing. With the fall of the Shah, Saudi Arabia became the most important American ally in this region; and in May 1981, while Saddam was distracted by his war with Iran, the Saudis joined with the five other monarchies of the Gulf to found the Gulf Co-operation Council.

This club of oil-producing monarchs was designed to exclude not only Iran, a radical non-Arab republic, but also Iraq, whose military and political challenge the Saudis have long feared. This became startlingly clear in August 1990, when Saddam invaded Kuwait.

The GCC is, however, less of a client Saudi body than might appear: some states, notably Oman and the Emirates, continued to trade and negotiate with Tehran during the 1980-1988 Iran-Iraq war, while others, Qatar and Oman, have moved ahead of the rest in normalising relations with Israel. Saudi Arabia continues to proclaim support for Kuwait, but there are tensions beneath the surface. The Kuwaitis do not forget that it was the Saudi tribes, not Iraq, that forcibly annexed two-thirds of their territory in the Twenties; today, some influential Saudis are talking of the need to accept better relations with Saddam, and to doubt whether, given the domestic tensions it precipitated within Saudi society, it would be worth going to war for Kuwait a second time round.

The third reason why Saudi Arabia matters is, of course, oil - the decisive position of Saudi Arabia in the oil market, the large reserves it contains, and the revenues these reserves will continue to generate. The oil market has a multiplicity of producers, and new states, such as Colombia, are coming on to the market: but while the power of the Opec cartel has continued to decline, that of Saudi Arabia as "swing producer" (ie, as the state with the greatest physical and financial capacity to vary supply) has increased: producing today around 13 per cent of the world total, Saudi Arabia has ensured that oil prices have remained low and stable.

In so doing, it has both paid off the West for its continued military support and watched while other, more populous states that oppose it - in the past Iraq, today Iran - suffer a fall in revenue. Its position in the oil market is, however, likely to strengthen: with an estimated 260 million barrels, equal to 26 per cent of the world's known reserves, Saudi Arabia will remain vital to the world economy for decades to come.

Oil prices may have been falling since the early Eighties, but on present projections there will come a time, between five and 10 years from now, when prices will start rising again as production of a commodity the world has not learnt to do without becomes more and more concentrated in the hands of four Gulf producers: Saudi Arabia, together with Kuwait (9.6 per cent of known world reserves), Iraq (9.9 per cent) and Abu Dhabi (9.1 per cent). Whoever controls Saudi Arabia will therefore be the dominant partner in a cartel within Opec that no outside power can ignore.

Little wonder, then, that members of the Saudi elite exhibit both paranoia about external enemies and criticism, and a confidence that few in the world can match. Their greatest fear is that for some reason the cornerstone of their security policy, the US military guarantee, will disintegrate: but despite tensions in the US-Saudi relationship (their ambassador in Washington, Prince Bandar, has spend much of the Clinton years out of town), the import of the oil market is not lost on the United States.

At home, the balance of piety and indulgence, of development and constraint, will continue. Junior princes may have cornered the market in smuggled alcohol; the armed forces may be unable to confront any of the kingdom's major external enemies; the educated middle classes, especially women, may be restless; but unless the leading brothers fall out badly, the ruling family can bet on the continued cohesion of their state, and on the indulgence of at least part of the population for a regime that has brought more prosperity and stability than many around it.

Until the rest of the world stops driving motor cars, the inhabitants of Saudi Arabia (or whatever the country may be called in the future) will continue to benefit from the double standards of the international community.

The author is professor of international relations at the LSE.