Riding the wave of interest in the new Saudi Arabia

A man and his camel pictured near an early Saudi oil well in the 1940s. Oil production in the Kingdom started with Dammam Well No. 7 which began producing commercial quantities of crude oil in 1938. (Supplied)
Updated 03 April 2018

Riding the wave of interest in the new Saudi Arabia

DUBAI: Ellen Wald began working on her “Saudi project” 10 years ago, but she could not have known that she was going to catch a wave of interest in the affairs of the Kingdom just at the time of the biggest transformation in its near 100-year history.

The Philadelphia-born academic and author, whose book “Saudi, Inc.,” has just been published amid much expectation, said she had been interested in the Middle East ever since she could remember. “I’ve always felt drawn to the desert. I just found it all so fascinating.”

But that casual wanderer’s interest was galvanized by the terrorist attacks on the US on 9/11, 2001, and suddenly she found herself right in the middle of the hottest subject of the day — the political, economic and cultural affairs of the most complicated region on the planet.

“There was an explosion of interest in the region, and a lot more courses and classes to choose from,” she told Arab News. She made the most of it.

She studied history at Princeton, specializing in what the university called “Near Eastern Studies” before going on to postgraduate work at Boston University. It was there that her focus concentrated on the topic that was to form the core of “Saudi, Inc.”

A doctoral dissertation entitled “The United States, Great Britain and the Middle Eastern Oil Industry” involved extensive research in America, in the UK and in the region. It also gave her an opportunity to get close to some of the people actually involved in the formative years of the Saudi energy industry, some of whom were still alive and happy to share their recollections.

“I found an incredible amount of source material in the US on the early days of the Saudi oil industry. The US was very good at keeping records of that time — in the State Department, in corporations, and with private individuals.”

The doctoral thesis eventually expanded into “Saudi, Inc.,” a fascinating blend of business, history and politics, often told through the personal recollections of individuals directly involved in the events that made Saudi Aramco what it is today — the biggest oil company in the world, and one of the most efficient.

The book achieves the feat of making business history — which can often be fairly dry and even dull — come alive through the eyes of the historic figures who made it happen. It opens with King Abdulaziz Al-Saud, the father of the Kingdom, preparing for the assault on Riyadh in 1902 that was to lead eventually to the establishment of the Saudi state.

After capturing the city’s main fort, “he watched the sun set over the vast desert before him and looked toward Makkah, many miles to the west, and many victories away,” Wald wrote.

We meet Sheikh Abdullah Sulaiman, who rose from the poverty of the Nejd hinterland to become minister of finance to the new king, who had an accounting system that only he could understand and who stored the entire exchequer of the Kingdom in gold, cash and gems in chests at his family home.

We also meet Harry St. John Bridger Philby, the British expat who had earned the King’s confidence partly by converting to Islam, and who played a crucial part in the negotiations between the Kingdom and Standard Oil of California, the American company that snatched the Saudi concession away from the British.

Together, these and others led the project that, after five years of frustrating and unproductive drilling, struck oil in serious quantities in Damman Well Number 7, kick-starting the modern Saudi oil-driven economy and leading to the creation of Saudi Aramco. Legend has it that the King told people he had been secretly hoping the Americans would find water instead.

“The Americans saw the Saudis as simple and unsophisticated, but one of the themes of the story is how they always seemed to end up giving in to them. The Saudis usually got their way,” said Wald.

“Abdulaziz had a long-term vision and he brought in the Americans to help him achieve it. To a large degree, he just let them get on with it, so it was a partnership, but always subject to ongoing negotiation. Both had what the other needed,” she added.

I found an incredible amount of source material in the US on the early days of the Saudi oil industry. The US was very good at keeping records of that time — in the State Department, in corporations, and with private individuals.

Ellen Wald

In 1970, amid a surge of nationalist sentiment in the Middle East which saw many Western oil assets appropriated and nationalized, the Saudis decided they too should control their energy destiny, and a 10-year process began that ended with 100 percent Saudi ownership and the creation of the modern Saudi Aramco. “In the end, the Saudis got what they wanted, but they did it in a way that maintained the American partnership. That was very important for them,” Wald said.

One man who played a key role in these events was Ali Al-Naimi, senior Aramco executive and later Saudi energy minister, whom Wald met on a recent visit to the Kingdom. “He understood back then that Aramco had to be more than just an oil company. It was about more than just drilling holes in the desert. The role it plays in the Saudi economy and society would not have been possible under American ownership,” she said.

The book is published just as Saudi Arabia is going through the biggest changes since the discovery of oil, with the Vision 2030 strategy under Crown Prince Mohammed bin Salman and the forthcoming initial public offering (IPO) of Aramco.

The intense global interest in the Kingdom has put Wald’s expertise very much in demand. She recently became a non-resident scholar at the Washington, DC-based think-tank The Arabia Foundation, in addition to her teaching responsibilities at Jacksonville University in Florida, where she lives. She also writes opinion columns for Forbes Online and for Arab News.

Her views on the big issues of the global energy business are punchy and to-the-point. On the possibility of a permanent alliance between the two biggest oil producing blocks, the Organization of Petroleum of Oil Exporting Countries (OPEC) and Russia, she is skeptical. “I don’t think it is really possible to do a deal between them for 10 or 20 years. These people evaluate markets on a monthly basis and nobody knows what they will be like over that time frame.

“But there could be an ongoing but looser framework for co-operation between OPEC and Russia, perhaps assessed in steps of six months or a year. We have seen, for example with Iran in OPEC, that the oil business can transcend politics,” she added.

On the burning question of the day — the market venue that Saudi Aramco will choose for the International phase of its IPO — she is certain. “If they want what’s best for the company, they’ll go for the New York Stock Exchange. But I really don’t know where they will choose. Maybe multiple listings in addition to Tadawul will be the way they go,” she said.

She has been a regular visitor to the Middle East over the years, but made her first visit to the Kingdom a few months ago, a trip she hopes will be the first of many. “I’m hoping to come back as a tourist. There is so much I want to see outside of the business environment. I’m sure a lot of Americans, many of whom like to go to exotic places, will want to check out the new Saudi Arabia.”

Her book looks set to spark a wave of interest in the Kingdom in the US. “Aramco is a great company, and if people look past the oil business they will see that it has funded the entire Saudi state for most of its history, generates a big profit and makes enormous capital expenditure. I hope my book can help the world to understand that,” she said.

Oil rises on US-Iran tensions, but trade war concerns weigh

Updated 5 min 38 sec ago

Oil rises on US-Iran tensions, but trade war concerns weigh

  • There are expectations producer club OPEC will continue to withhold supply this year
  • President Donald Trump on Monday threatened Iran with ‘great force’ if it attacked US interests in the Middle East

SINGAPORE: Oil prices rose on Tuesday on escalating US-Iran tensions and amid expectations that producer club OPEC will continue to withhold supply this year.
But gains were checked by concerns that a prolonged trade war between Washington and Beijing could lead to a global economic slowdown.
Brent crude futures, the international benchmark for oil prices, were at $72.24 per barrel at 0534 GMT, up 27 cents, or 0.4 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were up 26 cents, or 0.4 percent, at $63.36 per barrel.
“Escalating tensions between the US and Iran, in addition to signs that OPEC will continue its production cut, drove oil higher,” said Jasper Lawler, head of research at futures brokerage London Capital Group.
US President Donald Trump on Monday threatened Iran with “great force” if it attacked US interests in the Middle East. This came after a rocket attack in Iraq’s capital Baghdad, which Washington suspects to have been organized by militia with ties to Iran.
Iran said on Tuesday that it would resist US pressure, declining further talks under current circumstances.
The tension comes amid an already tight market as the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers have been withholding supply since the start of the year to prop up prices.
A meeting has been scheduled for June 25-26 to discuss the policy, but the group is now considering moving the event to July 3-4, according to OPEC sources on Monday, with its de-facto leader Saudi Arabia signaling a willingness to continue withholding output.
Price gains were constrained by pressure on financial markets, which have this week been weighed down by worries that the United States and China are digging in for a long, costly trade war that could result in a broad global slowdown.
Singapore, seen as a bellwether for the health of the global economy, on Tuesday posted its lowest quarterly growth in nearly a decade of 1.2 percent year-on-year. Growth in Thailand, a key Asian emerging market, also slowed to a multi-year low.