Oil and Security Policies <UN> International Comparative Social Studies Editor-in-Chief Mehdi P. Amineh (Amsterdam Institute for Social Science Research, University of Amsterdam, International Institute for Asian Studies, University of Leiden) Editorial Board Sjoerd Beugelsdijk (Radboud University, Nijmegen, The Netherlands) Simon Bromley (Open University, uk) Harald Fuhr (University of Potsdam, Germany) Gerd Junne (University of Amsterdam, The Netherlands) Kurt W. Radtke (International Institute for Asian Studies, The Netherlands) Ngo Tak-Wing (University of Leiden, The Netherlands) Mario Rutten (University of Amsterdam, The Netherlands) Advisory Board W.A. Arts (University College Utrecht, The Netherlands) G.C.M. Lieten (University of Amsterdam, The Netherlands) H.W. van Schendel (University of Amsterdam/International Institute of Social History, Amsterdam) L.A. Visano (York University, Canada) VOLUME 32 The titles published in this series are listed at brill.com/icss <UN> Oil and Security Policies Saudi Arabia, 1950–2012 By Islam Y. Qasem LEIDEN | BOSTON <UN> Cover illustration: © Ruletkka|Dreamstime.com. Library of Congress Cataloging-in-Publication Data Qasem, Islam Y., author. Oil and security policies : Saudi Arabia, 1950-2012 / by Islam Y. Qasem. pages cm. -- (International comparative social studies, ISSN 1568-4474 ; volume 32) Includes bibliographical references and index. ISBN 978-90-04-27774-8 (hardback : alk. paper) 1. Petroleum industry and trade--Political aspects--Saudi Arabia. 2. Energy consumption--Political aspects--Saudi Arabia. 3. Internal security--Saudi Arabia. 4. National security--Saudi Arabia. 5. Security, International--Saudi Arabia. 6. Saudi Arabia--Foreign relations. I. Title. HD9576.S32Q26 2015 338.2’72820953809045--dc23 2015028649 This publication has been typeset in the multilingual “Brill” typeface. With over 5,100 characters covering Latin, ipa, Greek, and Cyrillic, this typeface is especially suitable for use in the humanities. For more information, please see www.brill.com/brill-typeface. issn 1568-4474 isbn 978-90-04-27774-8 (hardback) isbn 978-90-04-27773-1 (e-book) Copyright 2016 by Koninklijke Brill nv, Leiden, The Netherlands. Koninklijke Brill nv incorporates the imprints Brill, Brill Hes & De Graaf, Brill Nijhoff, Brill Rodopi and Hotei Publishing. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Koninklijke Brill nv provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, ma 01923, usa. Fees are subject to change. This book is printed on acid-free paper. <UN> To my mother and the memory of my father ∵ <UN> Contents Acknowledgments ix List of Tables and Figures x List of Abbreviations xii Introduction 1 1 Rentier Theory and Saudi Arabia 4 2 Neo-Rentier Theory 28 3 The Pre-Boom (1950–1970) 43 4 The First Boom (1970–1985) 65 5 The Bust (1985–2000) 94 6 The Second Boom (2000–2012) 119 7 Conclusion 138 Bibliography 153 Index 163 <UN> Acknowledgments Most of the research for this book is derived from a PhD dissertation written at the Political Science Institute at Leiden University. I am truly grateful to a num- ber of friends and colleagues, who supported, motivated, and guided me throughout this journey. I would like to acknowledge Professor Lisa Anderson for her advice and support during the research and writing of the dissertation. My dissertation promoter, Prof. Dr. Madeleine Hosli, at Leiden University kindly and patiently helped me tackle many challenges in the way of comple- tion of the dissertation. Special thanks to the faculty of Political and Social Sciences at Universitat Pompeu Fabra (upf), where I completed a Diploma of Advanced Studies. Their support and motivation encouraged me to study oil dependence and security. The Generalitat de Catalunya provided funding towards my PhD research, for which I am truly grateful. I am also deeply indebted to several anonymous readers for their helpful comments and criticisms. Writing this book has been a joy and a challenge, but it could not have been accomplished without the love and support of my wife, Nynke. She not only tolerated my long working hours but also thoughtfully read and commented on previous and current drafts. My two little children, Noura and Kamil, brought infinite joy into my life while working on this book. Their cheerful presence gave me the necessary boost to write and rewrite. Finally, thanks to my parents, Irfat and Yasin Qasem, to whom this book is dedicated and who dedicated their lives to securing a better future for their children. Islam Y. Qasem The Hague 2014 <UN> List of Tables and Figures Tables 1.1 Norway oil revenues (percentage of total revenue) and government expenditures (percentage of gdp) 9 1.2 Saudi Arabia revenues (Million dollars), 1938–1944 16 1.3 Saudi Arabia budget allocation (Million sr), 1947–48 20 1.4 Saudi Arabia oil revenues as a percentage of total exports and total revenues, 1947–2012 22 1.5 Current and capital government expenditure as percentage of gdp, 1963–2012 25 2.1 Crude oil prices in us dollars, 1950–2012 39 3.1 World oil consumption (Million b/d), 1960–1970 44 3.2 Oil production by region (1000 b/d), 1960–1970 45 3.3 Oil exports by region (1000 b/d), 1960–1970 45 3.4 Proven oil reserves by region as a percentage of world reserves, 1960–1970 46 3.5 Saudi Arabia revenue, 1954–1970 48 3.6 State expenditures on salaries and compensations, 1959–1969 50 3.7 State expenditures on development projects, 1960–1969 51 3.8 Defense and internal security allocations (Million sr), 1950–1970 54 4.1 World oil consumption (Million b/d), 1970–1985 66 4.2 Oil production by region (1000 b/d), 1970–1985 67 4.3 Proven oil reserves by region as percentage of total world reserves, 1970–1985 68 4.4 Oil exports by region (1000 b/d), 1970–1985 68 4.5 Saudi Arabia revenue, and budgetary deficits and surplus, 1970–1980 70 4.6 Total government expenditure on development (Billion sr) 71 4.7 Growth in civilian labor force (1000) 72 4.8 Government subsidies (Million sr), 1970–1985 73 4.9 Subsidized government loans (Million sr), 1969–1985 75 4.10 Defense and internal security allocations (Million sr), 1970–1985 76 4.11 The Arab oil embargo of 1973 80 4.12 Saudi Arabia’s output change from September 1973 level (1,000 b/d) 81 4.13 Saudi Arabia oil production (1000 b/d), 1978–1979 83 4.14 Crude oil exports (1,000 b/d) 89 4.15 Spot opec reference basket price and its components (us dollars a barrel), 1985–1986 91 4.16 Values of petroleum exports (Million us dollars) 92 <UN> List of Tables and Figures xi 5.1 World oil consumption (Million b/d), 1986–2000 95 5.2 Oil production by region (1000 b/d), 1986–2000 96 5.3 Proven oil reserves by region as percentage of total world reserves, 1985–2000 97 5.4 Oil exports by region (1000 b/d), 1986–2000 98 5.5 Saudi Arabia oil revenue, 1986–2000 99 5.6 Budgetary deficit and surplus (Million sr), 1986–2000 100 5.7 Plan and actual of development expenditures (percentage of total), 1985–2000 103 5.8 Actual spending on development (Billion sr) 104 5.9 Government subsidies (Million sr), 1986–1999 105 5.10 Subsidized government loans (Million sr), 1970–1999 106 5.11 Allocation to Defense as percentage of Government Consumption, 1980–2000 107 5.12 Spot opec reference basket price and its components (us dollars per barrel), 1990–1991 111 5.13 Saudi Arabia oil production (1,000 b/d), 1989–2000 112 5.14 Saudi Arabia oil exports by region (Million barrels) 113 6.1 World oil consumption (Million b/d), 2000–2012 120 6.2 Oil production by region (1000 b/d), 2000–2012 121 6.3 Proven oil reserves by region as percentage of total world reserves, 2000–2012 122 6.4 Oil exports by region (1000 b/d), 2000–2012 123 6.5 Saudi Arabia oil revenue, 2000–2012 125 6.6 Budgetary deficit and surplus (Million sr), 2000–2012 125 6.7 Actual spending on development (Billion sr) 127 6.8 Government subsidies (Million sr), 2000–2012 128 6.9 Allocation to defense as percentage of government consumption, 2000–2012 130 7.1 World supply of primary energy, 2006–2030 149 7.2 Saudi Arabia conventional liquids production, 2005–2030 151 Figures 2.1 Model of Neo-Rentier theory 31 2.2 Patterns of dependence 35 2.3 Oil periods (Pre-boom, boom, bust, and boom) 38 5.1 Oil price vs. Current and capital expenditures 102 5.2 Oil price (Arabian Light) vs. defense expenditures 108 6.1 Oil price vs. Current and capital expenditures 126 6.2 Oil price (Arabian Light) vs. defense expenditures 130 <UN> List of Abbreviations aoi Arab Organization Industrialization aramco Arabian American Oil Company awcs Airborne warning and control system b/d barrels per day bp British Petroleum eia Energy Information Administration gdp Gross Domestic Product imf International Monetary Fund ipc Iraq Petroleum Company Mbd Million barrels per day mdaa Mutual Defense Assistance Agreement mees Middle East Economic Survey nato North Atlantic Treaty Organization oapec Arab Petroleum Exporting Countries. Members: Algeria (1970), Bahrain (1970), Kuwait (1968), Libya (1968), Syria (1972), uae (1970), Egypt (1973), Iraq (1972), Qatar (1970), Saudi Arabia (1968), Tunis (1982) oecd Organization for Economic Cooperation and Development opec Organization of the Petroleum Exporting Countries.