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The Overview of US-KSA Economic Relations in 1970-2000 Research Paper

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Updated: Jul 8th, 2020

Introduction

In the international system, states relate through cooperation or conflicts. It is therefore true that states strive to maintain peace or explore some ways of solving conflicts. The US has had a cooperative relationship with Kingdom of Saudi Arabia both economically and politically. The interests of the US in the MENA region have been furthered through Saudi Arabia.

In other words, the US uses Saudi Arabia to access the Middle East region. Through the efforts of the US, GCC (Gulf Cooperating Countries) was formed (Coll, 1994). GCC is much concerned about economic development in the MENA region, whose leader is Saudi Arabia. Scholars observe that KSA is strategic to the survival of the US in the region.

Recently, the US wanted to dispose off radar to the government of Saudi Arabia in order to obtain economic benefits. This would mean that the US could obtain oil and other natural products at a fair price. Through analysis, it is established that the US gains more from Saudi Arabia because products entering KSA are not worth what it gets out of the state. In other words, there is unfavorable balance of trade and payment between the two states.

In the international system, states exist according to the Hobbestian state of nature, where life is anarchic, brutal, short lived and characterized by tensions. The US relates with Saudi Arabia in terms of oil and security. The US ensures that its national interests are met through cooperation with other states.

This is the same case with Saudi Arabia. Therefore, states play a zero-sum game, whereby one’s lose is another’s gain. This paper explores economic relationships between the US and the Kingdom of Saudi Arabia. The paper evaluates relations that have been going on since 1970s to 2000s. The paper employs realist theory to explain what has been going on between the two countries in the economic front.

The Arms Market

In 1970s, the government of Saudi Arabia bought sophisticated types of military weapons from the government of the US. This was after Saudi Arabia had recoded high margins of profits from the sale of oil. The US encouraged Saudi Arabia to arm itself after the Iranian revolution, which was viewed as a threat to the security of the region.

Saudi Arabia decided to embark on military proliferation, with the US being their main adviser, as well as supplier. Through the assistance of the US, the Royal Air Force was established to counter any threats posed by Iraq-Iran war. Arms trade continued until 1980s when the US refused to supply some arms perceived to be harmful to human survival. In 1990, the arms trade between the two states peaked after Iraq invaded Kuwait.

After the Iraqi-Kuwait war, the arms trade decreased due to the costs of the Persian Gulf War and low profits on oil. During the period, that is 1970s to 2000s, the US is claimed to have sold goods worth $100 billion to the government of Saudi Arabia (Lacey, 1982). Most of the trade came in after 1990 Iraqi-Kuwait war. Goods and services sold to Saudi at the time included weapons, backup equipments, spare parts, support services and building materials.

The trade was affected by the American public opinion, claiming that the weapons could be used to destabilize Israel. The Jewish community in America requested the government to review its economic relations with Saudi Arabia because the goods supplied could reach the hands of terrorists.

The American Israel Public Affairs Committee (AIPAC) was against the sale of advanced arms such as Maverick air to ground missiles (1976), F-15 fighter bombers (1978) and a more reliable equipment referred to as AWACS airborne early warning aircraft (1981).

Even though Ford, Carter and Reagan regimes managed to argue their case, the AIPAC had a breakthrough in 1985, whereby it managed to block the sale of F-15S (Nonneman, 2006). The Jewish society lobbied the congress to block the deal. Saudi Arabia did not stop arming itself because it sought an alternative through Britain.

Arab-Israeli Conflicts and Communist Economic Ideology

The Middle East conflict system affected economic relations between Saudi Arabia and the US in 1973. The American public was under tension because Saudi Arabia was perceived to support Palestine while the majority of Americans supported the new state of Israel.

Saudi officials reacted to the US’s support of Israel by slapping economic sanctions in form of embargoes to oil production and supply. In the US, the public was forced to seek alternative sources of energy, which ended up causing inflation and economic downturns due to oil shocks. The US contemplated of raiding Saudi Arabia and other parts of the world in order to acquire oil.

Through economic sanctions, the US was forced to enter into new bilateral relationships with Saudi Arabia. The two states agreed to oppose communism as an economic ideology. Furthermore, economic demands forced the US to renew military cooperation. Through renewed cooperation, the Saudi government benefited from American investments in form of infrastructure, industrial development and US securities (Mai, 2005).

During the regimes of Carter and Reagan, the government of Saudi Arabia supported American economic policies, which were against communism. In 1991, the Saudi government played an important role in evicting Iraqi forces from Kuwait. The US government rewarded Saudi Arabia with a number of economic benefits, including accessing American market without restrictions.

Post Cold War Relations

After the strained relations between the East and the West, relations between the two states changed completely. However, the two states continued to support each other economically. For instance, the US ensured that Saudi Arabia continued to enjoy markets in the US and in the Western world.

The US guaranteed Saudi Arabia protection from external aggressors such as Germany and Russia. Even though the animosity over the Israeli-Arab conflict persisted, it did not affect economic relations of the two states. Saudi Arabia supported Clinton’s policy of dual containment that is, checking the influence of Iran and Iraq within the region. This was aimed at keeping Iran and Iraq at bay economically (Lippman, 2004).

This implied that only Saudi Arabia was to emerge as a strong state both politically and economically within the Middle East region. In 1995 and 1996, the US intervened militarily to salvage economic interests of Saudi Arabia. During this intervention, 24 American soldiers were exterminated in the conflict.

After the 1991 Gulf War, Saudi citizens demanded for reforms in both political and economic fronts. Citizens complained about deteriorating conditions in the country, citing American interference as a major problem. Civil societies and Saudi professionals condemned the government for neglecting citizens, by not providing basic needs such as food, shelter and clothing (Vassiliev, 2002).

In 1980s, the charitable organizations and other civil groups solicited funds to free citizens victimized by the Saudi and American governments in Chechnya, Afghanistan, Bosnia and Kashmir. This affected economic relations between the US and Saudi Arabia. Through such activities, extremist groups such as Al-Qaeda emerged.

Terrorist groups within the Middle East region have greatly shaped economic relations between Saudi Arabia and the US. The US has been forced to use economic rewards to please Saudi Arabia in order to win its support in combating terrorism.

Conversely, political activities such as issues to do with security, did not affect bilateral relations between the US and Saudi government. The two states differed over the Israeli-Palestine conflict and suggested political reforms such as provision and respect for human rights.

Post Sep 11 Relations

The US citizens accused the Saudi government for laxity as regards to the 9/11 attack. Fifteen Saudis were involved in the September attack meaning that the terrorist group chose Saudi citizens in order to break diplomatic ties between the two states. It was a major setback to Saudi-US relations.

It could only be compared to the 1973-74 oil embargoes. Scholars in Saudi Arabia conceded that the attack had a negative effect to economic relations between the two states. Some extremist groups in the US hold the Saudi government responsible for the 9/11 due to negligence. Critics argue that Saudi government allowed extremist religious groups to emerge by permitting fundraising aimed at liberating prisoners of war.

The two states have formulated policies that would see off terrorism in the Middle East region. The Saudi officials acknowledge that terrorism is a big threat to economic activities because extremist groups aim at destroying property and lives. Many oil reserves have been destroyed as one way of weakening Saudi’s relations with the US (Vitalis, 2006).

Extremist groups know that the US relates with Saudi Arabia in terms of oil only. Nothing else interests Americans than oil. It can therefore be observed that oil is the cause of cooperation between US and Saudi Arabia. Furthermore, oil is the source of conflict in the Middle East region.

Conclusion

It can be concluded that although the two states have never enjoyed political relationships, they have managed to relate well economically since 1970s to 2000s. It is through economic relations that the US has gone a notch higher to supply weapons of mass destruction to Saudi Arabia.

The US uses all possible means to please the Kingdom of Saudi Arabia. In early 1970s, the relations were purely economic but after 1980s, it was both economic and political. In1980s, the Saudi government supported the US economic policies, which conflicted with communism. After the Cold War, the US reviewed its diplomatic policies with the Saudi government.

The US demanded that the Saudi government had to open up and allow all members of society to participate in political processes such as voting and expressing themselves freely (Madawi, 2006).

This move was strongly refuted by the Saudi government. The US could not tie economic benefits to political processes since Saudi never wanted any aid. After the September 11 attack, the US attempted to incorporate the Saudi government in investigating the perpetrators. It should be noted that issues to do with security and politics did not affect economic relations between the two states. To date, the two states enjoy a cordial economic relationship.

References

Coll, S. (1994). Ghost Wars: The Secret History of the CIA, Afghanistan, and Bin Laden, from the Soviet Invasion to September 10, 2001. New York: Penguin Press.

Lacey, R. (1982). The Kingdom: Arabia & the House of Sa’ud. Harcourt Brace: Jovanovich.

Lippman, W. (2004). Inside the Mirage: America’s Fragile Partnership with Saudi Arabia. New York: West view Press.

Madawi, A. (2006). Contesting the Saudi State. Cambridge: Cambridge University Press.

Mai, Y. (2005). Changed Identities: The Challenge of the New Generation in Saudi Arabia. Columbia: University of British Columbia Press.

Nonneman, G. (2006). Saudi Arabia in the Balance: Political Economy, Society, Foreign Affairs. New York: New York University Press.

Vassiliev, A. (2002). History of Saudi Arabia. New York: New York University Press.

Vitalis, R. (2006). America’s Kingdom: Mythmaking on the Saudi Oil Frontier. Stanford: Stanford University Press.

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IvyPanda. (2020) 'The Overview of US-KSA Economic Relations in 1970-2000'. 8 July.

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