Page 130 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

114 Dubai & Co.

Khalid. Khalid was succeeded by King Fahd, whose rule—1982 to
2005—was the longest since that of King Abdul Aziz. During the
last 10 years of his reign, however, Fahd was in deteriorating health,
and day-to-day affairs were increasingly managed by his successor
King Abdullah. Abdullah is considered a strong and capable leader,
better able to assert himself and Saudi interests than was his
predecessor.
The Saudi monarchy has had a long and fruitful relationship
with the United States. King Abdul Aziz met directly with President
Franklin Roosevelt and Great Britain’s Prime Minister Winston
Churchill and was famously photographed in his traditional garb
on the deck of a ship with the two. Even from the early days, the
core elements of the implicit pact were evident: Saudi Arabia was to
provide a steady, cheap supply of oil in exchange for full support of
the monarch, including whatever technical support was required,
and—if needed—military protection. During the first Gulf War of
1990–91, the pact was honored, when, after Iraq’s invasion of
Kuwait, the United States mobilized an international coalition to
protect Saudi Arabia and repel Saddam Hussein’s forces from
Kuwait. Saudi Arabia was made to foot much of the bill for the mil-
itary support, which had a deep and lasting impact on the
Kingdom’s fiscal health, and the United States and its allies were
ensured a stable supply of oil.
On the economic front, the vehicle of Saudi-US cooperation
has been the all-important national oil company now known as
Saudi Aramco. Throughout the 1930s and 1940s Saudi Arabia
signed a number of concessions with a group of US oil companies,
and in 1944 the operating umbrella company was named the
Arabian American Oil Company (Aramco). The terms of agreement
between the Saudis and Aramco have continued to evolve over
time. As more oil was discovered, Aramco’s mandate was extended
in return for greater fees going to the Saudis. The original rental fee
(before oil was discovered) was a mere 5,000 British pounds plus a
loan to the Saudi government and a modest royalty payment on the
sale of any discovered oil. By 1950, a 50-50 profit sharing agreement
between Aramco and the government had been reached. 16
As Saudi Arabia became more sophisticated, it increasingly
demanded a greater role in Aramco. Oil Minister Zaki Yamani first
publicly called for a Saudi stake in Aramco in 1968, and five years