Details Created: Saturday, 28 November 2015 17:03 Written by Trevor Rayne

The war on Islamic State (IS) will not confront one of its major sources of support and inspiration because Saudi Arabia is the world’s biggest exporter of crude oil, selling over one in every ten barrels traded. Saudi and Gulf capital are pivotal to the imperialist financial system. The wealth and power of the Saudi monarchy poisons the Middle East with sectarian hatred and buys compliance in Britain, Europe and the US. Trevor Rayne reports.

Saudi capital is integral to the City of London and Wall Street; the giant banks and multinational corporations are interwoven with Saudi and Gulf corporations. For forty years Saudi money has funded counter-revolution and reaction in the service of imperialism. The Saudi government supported NATO’s attack on Libya in 2011 with money and weapons. Saudi Arabia funded and armed jihadi groups fighting the government in Syria. Successive British governments are deferential to the barbaric Medieval dynasty that rules Saudi Arabia, cherishing its arms orders and grateful for Saudi collusion in maintaining imperialist domination of the Middle East.

Saudi Arabia’s rise

Standard Oil Company of California (Chevron) discovered oil in Saudi Arabia in 1938. Saudi oil was important to the US war effort from 1941 onwards. In 1943 US President Roosevelt announced the extension of Lend-Lease, material and financial backing, to Saudi Arabia because ‘the defence of Saudi Arabia is vital to defence of the United States’. On 14 February 1945 Roosevelt concluded a secret agreement with King Ibn Saud whereby the US would provide Saudi Arabia with military security in exchange for oil. Global oil production increased tenfold from the Second World War to early 1970s. When oil prices rose sharply in 1973/74 Gulf petrodollars were recycled through US and European banks as loans to underdeveloped countries, helping to create the Third World debt. The House of Saud grew wealthy and by 1978 Saudi Arabia had invested $10bn in US industry and up to $70bn in US Treasury Bonds and other government securities.

The previously US-owned oil company in Saudi Arabia, Aramco, was nationalised in 1980. Today, Saudi Aramco's value has been estimated at anywhere between $1.25 trillion and $7 trillion, making it the world's most valuable company. Saudi Arabia is not only the world’s biggest oil producer; it has spare capacity to boost supplies in times of crisis which it did when Iraq occupied Kuwait in 1990. Saudi oil exports to China now exceed those to the US. Saudi Arabia is a major source of oil imports for China and India; it is therefore strategically important to US ambitions for global hegemony.

In 2008 Saudi Arabia had nearly three quarters of a trillion dollars invested in the US. Saudi and Gulf money is also deposited in the City of London; one of Saudi Arabia’s biggest banks, SABB, formerly the Saudi British Bank, is an associate company of HSBC. Saudi and Gulf investors own about a third of Barclays Bank and are major owners of other leading European companies, including Sainsbury, Volkswagen and the London Stock Exchange.

Saudi Arabia is crucial to arms companies’ profits and it spends more per capita on weapons than any other country. Saudi Arabia was viewed as a US preserve after the Second World War, with Britain focused on Kuwait and the other Gulf states. The British Labour government, elected in 1964, had no such qualms and concluded a contract worth £120m in 1965 to supply aircraft, missiles, radar system and training teams to Saudi Arabia; setting up its own training organisation in the country. The 1965 deal was Britain’s biggest ever export contract. In 1985 Britain and Saudi Arabia concluded the Al Yamamah arms contract worth $43bn, the biggest contract ever awarded to a British firm, BAE Systems. The deal included 132 Tornado and Hawk aircraft, with commissions allegedly paid to British middlemen and the Saudi royal family. The National Audit Office launched an investigation into the deal but its report was suppressed. The Labour government halted a Special Fraud Office investigation at the end of 2006, citing ‘security grounds’ and co-operation with Saudi Arabia in the war against terrorism. Prime Minister Blair personally intervened, asking his Attorney General to drop the corruption investigation.

David Cameron, as leader of the Opposition, might have been expected to embarrass the Labour government over the suspended investigation, but he kept silent. Before the 2010 general election the Conservative Party received £250,000 from the wife of Wafic Said, one of those responsible for the Al Yamamah contract. Between 2010 and 2014 Britain was the biggest arms supplier to Saudi Arabia, with export licences issued worth nearly £4bn.

Saudi Arabia has consistently supported imperialism, funding the counter-revolutionary UNITA in Angola and Contras in Nicaragua. From 1979 to 1989 Saudi money paid for the Mujahedeen against the government and Soviet forces in Afghanistan. Saudi Arabia funded Iraq’s invasion of Iran between 1980 and 1988. It cost $61bn for the US-led Coalition forces to expel Iraq from Kuwait in 1990/91; $36bn of this was paid for by Saudi Arabia and the Gulf states. In 2011 Saudi forces invaded Bahrain to suppress peaceful protests by the Shia majority against the Sunni monarchy. Saudi Arabia and Saudi individuals have funded jihadi groups from Chechnya to Syria, Iraq to Afghanistan, Pakistan and India. This October, ‘Saudi officials in Vienna have called for a repeat in Syria of the jihad waged in the 1980s against the former Soviet Union in Afghanistan’ (Financial Times 16 November 2015).

Human rights

Wikileaks revealed cables showing that in November 2013 British and Saudi diplomats agreed to support each other’s election to the United Nations Human Rights Council. This is astonishing cynicism: ‘As the UK’s embassy in Riyadh sets out in a book you really never want to have to need, the Information Pack for British Prisoners in Saudi Arabia: Criminal law punishments in Saudi Arabia include public beheading, stoning, amputation and lashings. Serious criminal offences include not only internationally recognized crimes such as murder, rape, theft and robbery, but also apostasy, adultery, witchcraft and sorcery. In addition to the regular police force, Saudi Arabia has a secret police, the Mabahith, and “religious” police, the Mutawa. The Saudi courts impose a number of severe physical punishments. The death penalty can be imposed for a wide range of offences including murder, rape, armed robbery, repeated drug use, apostasy, adultery, witchcraft and sorcery and can be carried out by beheading with a sword, stoning or firing squad, followed by crucifixion’ (Financial Times 12 October 2015). In 2014 Saudi Arabia executed 87 people. In 2015 it had executed 88 people before the end of May.

Saudi Arabia and IS practice the Sunni Wahhabi version of Islam. When IS occupied Mosul in June 2014, the group adapted Saudi textbooks for use in secondary schools propagating hatred of ‘infidels and dissidents’. The barbarous punishments described above are conducted by the Saudi state and IS; when performed by IS they elicit outrage, but the crucifixions, beheadings, floggings and torture performed by Saudi Arabia are euphemistically described by Prime Minister Cameron as ‘punishment procedures’.

Slavery was officially banned in Saudi Arabia in 1964 but still exists under the kafaka sponsorship system, where the residence status of migrant workers is tied to their employers, giving employers total control. Employers confiscate passports, money and mobile phones and can sell migrant workers on. Eight million migrants form a third of the population and half the workforce. They work up to 15 to 20 hours a day, seven days a week. Women domestic workers ‘are also at particular risk of sexual violence and other abuses’ (Amnesty International). Many migrant workers commit suicide. They are frequently the execution victims. In April 2013 Saudi Arabia’s senior cleric declared that all Christian churches on the Arabian Peninsula must be destroyed. This is the Saudi Arabia that the British government presents to the UN as qualified to adjudicate on human rights!

In March 2014 British Home Secretary Theresa May signed a Memorandum of Understanding (MoU) with her Saudi counterpart to use British security and policing expertise to modernise Saudi Arabia’s Ministry of the Interior. A MoU is a formal agreement without legal status. ‘This will complement work going on between the College of Policing and a range of Saudi security bodies,’ the Foreign and Commonwealth Office explained. The College of Policing was established in 2011. What the College does with Saudi Arabia is not disclosed because to do so ‘is likely to prejudice the interests of the UK abroad’ and undermine such interests, says the College, nor will it say what overall income it gets from Saudi Arabia, citing grounds of national security.

After a split in the Cabinet in October 2015 over a proposal for the Ministry of Justice to provide training worth £5.9m to Saudi Arabia’s prison service the deal was dropped. It had been criticised by Labour Party leader Jeremy Corbyn. The Saudi ambassador to Britain reacted angrily in the Daily Telegraph saying over 50,000 Britons were employed on Saudi contracts ‘worth tens of billions of pounds’ and said Saudis have invested £90bn in British businesses. He threatened, ‘If the extensive trade links between the two countries are going to be subordinate to certain political ideologies this vital commercial exchange is going to be at risk. We want this relationship to continue but we will not be lectured to by anyone.’ BAE Systems is in talks with the Saudi government to extend a contract for Typhoon fighter jets - this was jeopardised. The British government acted swiftly to reassure the ambassador: when Saudi Arabia said that it was releasing a British citizen threatened with 350 lashes for possessing alcohol, Foreign Secretary Philip Hammond quickly hailed the ‘strength, depth and breadth’ of Anglo-Saudi relations.

Saudi Arabia is not immune from capitalism’s global crisis. To balance its budget Saudi Arabia needs oil to sell at $105.6 a barrel. At the time of writing oil sells for $43.6 a barrel, with an oversupply of the fuel. Oil revenue constitutes 80% of Saudi government income and 45% of GDP. Hydrocarbon revenues were $246bn in 2014 and are expected to drop by 45% in 2015. A $48bn budget surplus in 2013 will turn in to a $130bn deficit in 2015. In June 2015 Saudi Arabia raised oil output to a record 10.6m barrels a day. The intention being to force rival producers out of business, but the effect has been to drive prices further down. Additionally, Saudi Arabia is leading a war on the Houthis in Yemen that has killed 5,400 people and threatened hundreds of thousands of people with starvation. Houthis are Shia and Saudi Arabia views them as Iranian proxies. With low oil prices the war is not affordable.

Saudi Arabia’s foreign reserves are depleting, forcing the government to borrow from abroad. The International Monetary Fund has asked Saudi Arabia how it intends to deal with its ballooning deficits, saying its financial reserves could disappear in five years. Energy subsidies cost the Saudi government $107bn a year or 13.2% of its GDP. Subsidies go to businesses and the IMF wants them cut. Poverty is extending beyond migrant workers in Saudi Arabia and unemployment is growing. Divisions are opening up in the House of Saud. Pakistan has refused a Saudi request to send soldiers to help its war on Yemen; previously Pakistan relied on Saudi money but was offered Chinese and Russian help instead. The malign influence of this corrupt dynasty will wane. Stop British arms supplies to Saudi Arabia.

Acknowledgement to Adam Hanieh, Capitalism and class in the Gulf Arab states.

For a Box

The 2002 US Senate report into the 9/11 attacks of 2001, still has 28 pages redacted. They are thought to show the role of Saudi finance in the attacks. Fifteen of the 19 hijackers were Saudis. Delicacy in Saudi matters shows respect for money, not for humanity.