bahrain

Saudi Arabia: Ancient Kingdom, Modern Issues - Robert Lacey
Saudi Arabia showing the oil producing areas in the Eastern Province (pink), the holy cities of Mecca and Medina in
the western province of the Hejaz (green), and the central area of Nejd (blue), the traditional power base of the house
of Saud. From Inside the Kingdom by Robert Lacey 2010.
1.
Say Saudi Arabia, and most people in the west think ‘oil’ – the Kingdom’s oil resources are
among the largest in the world, with 40 or 50 years production in reserve by any measure. For
much of this year, 2012, Saudi Arabia has been out-pumping Russia, producing in the region
of ten million barrels of oil per day – 1.5 million or so for domestic consumption, 7.5 million
bpd for export at a price of around $100 per barrel. Of this $100, it is thought that $75 or so
are needed to meet domestic budgetary requirements, leaving a 25% surplus which enables
the country to operate at a very low level of debt - its financial surpluses being largely invested
in, and contributing to the stability of, the US dollar (Saudi Arabia comes third behind China
and Japan as a holder of US treasury bonds). Saudi Arabia is the only major oil producer with
currently dominant pumping flexibility, meaning that they are able to push energy prices up
by restricting production – as, famously, in the oil embargo years of the 1970s - or,
particularly in the years since the crash of 2008, to pump at high capacity in order to keep
prices level and bolster world economic activity at a difficult time. Some Saudis like to take
credit for their ‘kindness’ to the international economy in this respect, but they are, of course,
acting in their own interests when they pump to keep the world afloat. In this sense, with its
objective of keeping oil production constant and prices stable, the Kingdom serves as a major
energy ally and long-term economic partner of Great Britain.
2.
As the map above shows, Saudi oil and gas reserves are situated in the east of the country on
the Gulf coast facing Iran. But it is in the west, along the Red Sea coast facing Egypt and Sudan,
that lie the two Holy cities of Mecca and Medina, and it is these that make Saudi Arabia of
supreme spiritual importance for the one billion-plus Muslims in the world. The fifth of the
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