The Fall of the House of Saud

Americans have long considered Saudi Arabia the one constant in the Arab Middle East—a source of cheap oil, political stability, and lucrative business relationships. But the country is run by an increasingly dysfunctional royal family that has been funding militant Islamic movements abroad in an attempt to protect itself from them at home. A former CIA operative argues, in an article drawn form his new book, Sleeping With the Devil, that today's Saudi Arabia can't last much longer—and the social and economic fallout of its demise could be calamitous

Given all these threatening forces, one might think that every map in official Washington would have a red flag sticking out of Riyadh, as a reminder that Saudi Arabia is on life support. The truth is quite the opposite. Before 9/11 the United States never issued an advisory indicating the obvious security problems for Americans traveling to Saudi Arabia. Dependents of U.S. citizens residing there were never advised to leave. According to official Washington, even today the country is stable: its government is in undisputed control of its borders; its police force and army are efficient and loyal; its people are well clothed, well fed, and well educated.

Consider the way the State Department has handled visas for Saudi nationals. Until 9/11, Saudis were not even required to appear at the U.S. embassy in Riyadh or the consulate in Jidda for a visa interview. Under a system called Visa Express a Saudi had only to send his passport, an application, and the application fee to a travel agent. The Saudi travel agent, in other words, stood in for the U.S. government. Just about any Saudi who had the money could book a flight to New York after a mere twenty-hour wait. Until recently Saudis were exempt from the new anti-terrorism entry regulations that apply to citizens of other Middle Eastern countries, despite the fact that most of the 9/11 terrorists were Saudis.

"The Saudi Arabian Government, at all levels, continued to reaffirm its commitment to combating terrorism," the State Department's 1999 report Patterns of Global Terrorism soberly asserted. The report went on to state, "The Government of Saudi Arabia continued to investigate the bombing in June 1996 of the Khobar Towers." This was false; Prince Nayef, Saudi Arabia's grim Interior Minister, had been stalling the investigation for years. Nayef told the kingdom's other senior princes that he was reluctant to help the United States with the Khobar investigation. In one heated meeting Nayef ignored Defense Minister Sultan when Sultan warned that stonewalling the FBI would end up causing a rift with the United States. To make his point Nayef went out of his way to avoid meeting the FBI's director, Louis Freeh, when Freeh showed up in Saudi Arabia to see what he could do to get the Khobar investigation going. Nayef put himself out of reach—on his yacht, anchored off the coast near Jidda, in the Red Sea—and turned the chore over to two low-ranking officials in the internal-security service, neither of whom knew anything about the Khobar investigation.

Even after the 1998 attacks on the U.S. embassies in Kenya and Tanzania, which were organized by Osama bin Laden from his bases in Afghanistan, the Saudi royals continued to aid the Taliban and its main supporter in the region, Pakistan. This was hardly a secret: in July of 2000 Petroleum Intelligence Weekly, which calls itself the "bible" of the international petroleum industry, reported that Saudi Arabia was sending as many as 150,000 barrels of oil a day to Afghanistan and Pakistan in off-budget foreign aid that had a value of something like $2 million a day. Furthermore, the United States had known since 1994 that the Saudis were supporting Pakistan's nuclear development program, ultimately contributing upwards of a billion dollars. More recently, because Saudi law does not allow foreign agencies to directly question Saudi citizens, the FBI has not been allowed to interview Saudi suspects, including the families of the fifteen Saudi hijackers, about the 9/11 attacks. For more than a year after September 11 Saudi Arabia refused to provide advance manifests for flights coming into the United States—which could have led to a basic and potentially fatal breach of security. Although there are plenty of possible al Qaeda members awaiting trial, as of this writing there hasn't been a single Saudi arrest related to 9/11—not even of a material witness.

As for the CIA, the Agency let the State Department take the lead and decided simply to ignore Saudi Arabia. The CIA recruited no Saudi diplomats to tell us, for instance, what the religious-affairs sections of Saudi embassies were up to. The CIA's Directorate of Intelligence avoided writing national intelligence estimates—appraisals, drawn from various U.S. intelligence services, about areas of potential crisis—on Saudi Arabia, knowing that such estimates, especially when negative, have a tendency to find their way onto the front pages of U.S. newspapers, where they might have an undesired effect on public opinion. The CIA's line became the same as State's: There's no need to worry about Saudi Arabia and its oil reserves.

No need to worry, of course, means business as usual—and for decades now that's meant that almost every Washington figure worth mentioning has been involved with companies doing major deals with Saudi Arabia. Spending a lot of money was a tacit part of the U.S.-Saudi relationship practically from the very beginning: the Americans would buy Saudi Arabia's oil and would provide the Saudis with protection and security; the Saudis would buy American weapons, construction services, communications systems, and drilling rigs. In the global-economics game this is known as "recycling," and in this case it worked well: two-way trade between Saudi Arabia and the United States grew from $56.2 million in 1950 to $19.3 billion in 2000—an average annual growth rate of nearly 70 percent.

Consider the case of the Carlyle Group—a private investment company, founded in 1987, that almost since its inception has been conducting immensely profitable business with Saudi Arabia. From 1993 to 2002 the chairman of Carlyle was Frank Carlucci, who served first as Ronald Reagan's National Security Adviser and then as his Secretary of Defense. Carlyle's senior counselor is James Baker, who served as Secretary of State under George H.W. Bush—who in his post-presidency also happens to be a Carlyle adviser. Others who hang their hats at Carlyle include Arthur Levitt, the head of the Securities and Exchange Commission under Bill Clinton, and now Carlyle's senior adviser; John Major, a former Prime Minister of Great Britain and the current chairman of Carlyle Europe; William Kennard, who chaired the Federal Communications Commission during the second Clinton Administration; Afsaneh Mashayekhi Beschloss, a former treasurer and chief investment officer of the World Bank; and Richard Darman, who ran the Office of Management and Budget under the first President Bush and also served as deputy secretary of the treasury under Reagan.

Carlyle isn't the only company in this business. Halli-burton, run by Dick Cheney between his stints as Secretary of Defense under the first George Bush and Vice President under the second, has been a frequent beneficiary of Saudi money. In late 2001 Halliburton landed a $140 million contract to develop a new Saudi oil field. For many years Condoleezza Rice, now President Bush's National Security Adviser, served on the board of Chevron, which merged in 2001 with Texaco. The new corporation, ChevronTexaco, is a partner with Saudi Aramco in several ventures and has recently joined forces with Nimir Petroleum to develop oil fields in Kazakhstan. Currently on the board of ChevronTexaco are Carla Hills, who served as the Secretary of Housing and Urban Development under Gerald Ford and as a U.S. trade representative under George H.W. Bush; the former Louisiana senator J. Bennett Johnston, who made a specialty of energy issues while in Congress; and the former Georgia senator Sam Nunn, who served most notably as head of the Senate Armed Services Committee.

Elsewhere, Nicholas Brady, the Secretary of the Treasury under the first President Bush, and Edith Holiday, a former assistant to the first President Bush, serve on the board of Amerada Hess, which has teamed with some of Saudi Arabia's most powerful royal-family members to exploit the rich oil resources of Azerbaijan. In 1998 Amerada Hess formed a joint venture, Delta Hess, with the Saudi-owned Delta Oil to explore and exploit petroleum resources in Azerbaijan. The Houston-based Frontera Resources Corporation joined the Azerbaijan hunt the same year, teaming with the newly created Delta Hess. Among the members of Frontera's board of advisers: the former Texas senator, former Secretary of the Treasury, and 1988 Democratic vice-presidential candidate Lloyd Bentsen; and John Deutch, a former CIA director.

Just to make sure that no one upsets the workings of this system, perhaps by meddling in internal Saudi affairs, Saudi Arabia now keeps possibly as much as a trillion dollars on deposit in U.S. banks—an agreement worked out in the early eighties by the Reagan Administration, in an effort to get the Saudis to offset U.S. government budget deficits. The Saudis hold another trillion dollars or so in the U.S. stock market. This gives them a remarkable degree of leverage in Washington. If they were suddenly to withdraw all their holdings in this country, the effect, though perhaps not as catastrophic as having a major source of oil shut down, would still be devastating.

The U.S.-Saudi relationship would not be as cozy as it is without there being someone well connected on both sides who can move comfortably between them. That someone is the fifty-four-year-old Prince Bandar. Although he ranks low on the royal bloodline (his father is King Fahd's brother Sultan, the Saudi Defense Minister, but his mother was a house servant), Prince Bandar has been the Saudi ambassador to the United States since 1983. He is the only foreign ambassador to have a security detail assigned to him by the State Department. A daredevil fighter pilot in his younger years, a Muslim with a taste for single-malt Scotch, and an envoy with a perpetually open wallet, Bandar has proved adept at working both the public and the private sides of diplomacy. As the Saudi military attaché to the United States, he scored a stunning coup in 1981 by persuading Congress to approve the sale of awacs air-defense technology to his country, over the objections of aipac, the pro-Israeli Washington lobby. Later, as ambassador, Bandar conveyed the kingdom's thanks by secretly placing $10 million in a Vatican City bank, as reported last year in The Washington Post; the money, deposited at the request of William Casey, then the director of the CIA, was to be used by Italy's Christian Democratic Party in a campaign against Italian Communists. Later still, in June of 1984, Bandar started paying out $30 million from the royal family so that Lieutenant Colonel Oliver North could buy arms for the Nicaraguan contras.

It is on the personal front, however, where Bandar shines. A visit in the early nineties to the summer home of George H.W. Bush, in Kennebunkport, Maine, earned the prince the affectionate family sobriquet "Bandar Bush." Bandar reciprocated by inviting Bush to hunt pheasant on his estate in England. For good measure he also contributed a million dollars to the construction of the Bush Presidential Library, in College Station, Texas. King Fahd sent another million to Barbara Bush's campaign against illiteracy. (He had donated a million dollars to Nancy Reagan's "Just Say No" campaign against drugs four years earlier.) Bandar was once Colin Powell's racquetball partner.

Press accounts portrayed Bandar as largely on the outside during the Clinton years, passing melancholy weeks at his mountain compound in Aspen, Colorado (more than 50,000 square feet, thirty-two rooms, sixteen bathrooms). If Bandar was less physically present, however, he was his usual useful self. In 1992 he persuaded King Fahd to donate $20 million to the University of Arkansas's new Center for Middle Eastern Studies, a gesture of respect for the Arkansas governor who had just been elected President. He is said to have played a role in persuading the Libyans, in 1999, to turn over two intelligence operatives suspected in the 1988 bombing of Pan Am Flight 103, over Lockerbie, Scotland. As he reportedly does at the end of every administration, whether he is perceived as friend or foe, Bandar also invited each of the Clinton Cabinet members out to dinner, at a restaurant of their choice, in a private room or a public one, depending on their willingness to be seen with him.

Prince Bandar once told associates that he is very careful to look after U.S. government officials when they return to private life. "If the reputation then builds that the Saudis take care of friends when they leave office," Bandar has observed, according to a source cited in The Washington Post, "you'd be surprised how much better friends you have who are just coming into office." Practically every deal with the Saudis eventually becomes hard to trace, lost in some desert sandstorm back near the wellheads where the money sprang from in the first place. Many of Washington's lobbyists, PR firms, and lawyers live off Saudi money. Just about every Washington think tank has taken it. So have the John F. Kennedy Center for the Performing Arts, the Children's National Medical Center, and every presidential library built in the past thirty years.

Bandar hurtled back to prominence after the election of George W. Bush, occupying a spot somewhere between ambassador and permanently enthroned visiting head of state. But after 9/11 he began to experience some difficulty in maintaining a positive Saudi image. In March of last year agents of the Treasury Department raided the northern-Virginia offices of four Saudi-based charities: the SAAR Foundation, the Safa Trust, the International Institute for Islamic Thought (IIIT), and the International Islamic Relief Organization (IIRO). Also raided was the local headquarters for the Muslim World League, an umbrella group funded by the Saudi government. All five organizations are located only a few miles from Bandar's mansion overlooking the Potomac River. The organizations can point to a long list of genuinely humanitarian causes they have aided and supported; but they also have a long list of alarming associations. Testifying before Congress in August of 2002, Matthew Levitt, a senior fellow with the Washington Institute for Near East Policy, noted that Tarik Hamdi, an IIIT employee, had personally provided Osama bin Laden with batteries for his satellite phone—a critical link in the stateless world that bin Laden inhabits. IIIT and the SAAR Foundation are suspected of helping to finance Hamas and the Palestinian Islamic Jihad, the sponsors of some of the most lethal suicide bombers in the Middle East. From 1986 to 1994 Muhammad Jamal Khalifa, a brother-in-law to Osama bin Laden, ran the IIRO's Philippine office, from which he channeled funds to al Qaeda. Only excellent work by the Indian police prevented another IIRO employee, Sayed Abu Nasir, from bombing the U.S. consulates in Calcutta and Madras.

In mid-2002 word leaked to the press that the semi-official Defense Policy Board, chaired by the notorious cold warrior Richard Perle, had sponsored a report declaring Saudi Arabia to be part of the problem of international terrorism rather than part of the solution. Saudi Arabia, the report stated, was "central to the self-destruction of the Arab world and the chief vector of the Arab crisis and its outwardly-directed aggression." It went on to say, "The Saudis are active at every level of the terror chain, from planners to financiers, from cadre to foot-soldier, from ideologist to cheerleader." Within hours Colin Powell was on the phone to the Saudi Foreign Minister, assuring him—and through him, the royal family—that such apostasy was not and never would be the official stance of the Bush Administration. To reinforce the message, President Bush invited Bandar down to the family ranch at Crawford, Texas.

And yet the image problems have continued. In October of 2001, nato forces raided the offices of the Saudi High Commission for Aid to Bosnia, founded by Prince Salman, and discovered, among other items, photos of the U.S. embassies in Kenya and Tanzania, before and after they were bombed; photos of the World Trade Center and the USS Cole; information on the use of crop-duster planes; and materials for forging U.S. State Department badges. His job wasn't made any easier when, in the fall of last year, Bandar found himself having to explain away the fact that about $130,000 in charitable contributions from his wife, Princess Haifa, might have ended up with two of the 9/11 hijackers.

In the wake of these revelations a U.S. delegation headed by Alan Larson, President Bush's undersecretary of state for economic affairs, traveled to Riyadh last November, ostensibly to prod the Saudis toward increasing the surveillance of their charities and financial networks. But U.S. and Saudi sources say that one of the main reasons for Larson's trip was to ensure that if the United States invaded Iraq, the Saudis would guarantee the flow of extra oil into the world market. The U.S. embrace of the House of Saud was as tight as ever.

Washington's answer for Saudi Arabia—apart from repeating that nothing is wrong—is to suggest that a little democracy will cure everything. Talk the royal family into ceding at least part of its authority; support the reform-minded princes; set up a model parliament; co-opt the firebrands with a cabinet position or two, a minor political party, and some outright bribery; send Jimmy Carter in to monitor the first election; and in a few generations Riyadh will be Ankara, maybe even London. The governmental mechanism may be faulty, the Washington view maintains, but the people who administer the government are for the most part committed to rooting out corruption, rounding up terrorists, and recognizing the right of the people to self-government.

It's utter nonsense, of course. If an election were held in Saudi Arabia today, if anyone who wanted to could run for the office of president, and if people could vote their hearts without fear of having their heads cut off afterward in Chop-Chop Square, Osama bin Laden would be elected in a landslide—not because the Saudi people want to wash their hands in the blood of the dead of September 11, but simply because bin Laden has dared to do what even the mighty United States of America won't do: stand up to the thieves who rule the country.

Saudi Arabia today is a mess, and it is our mess. We made it the private storage tank for our oil reserves. We reaped the benefits of a steady petroleum supply at a discounted price, and we grabbed at every available Saudi petrodollar. We taught the Saudis exactly what was expected of them. We cannot walk away morally from the consequences of this behavior—and we really can't walk away economically. So we crow about democracy and talk about someday weaning ourselves from our dependence on foreign oil, despite the fact that as long as America has been dependent on foreign oil there has never been an honest, sustained effort at the senior governmental level to reduce long-term U.S. petroleum consumption.

Not all the wishing in the world will change the basic reality of the situation.

* Saudi Arabia controls the largest share of the world's oil and serves as the market regulator for the global petroleum industry.

* No country consumes more oil, and is more dependent on Saudi oil, than the United States.

* The United States and the rest of the industrialized world are therefore absolutely dependent on Saudi Arabia's oil reserves, and will be for decades to come.

* If the Saudi oil spigot is shut off, by terrorism or by political revolution, the effect on the global economy, and particularly on the economy of the United States, will be devastating.

* Saudi oil is controlled by an increasingly bankrupt, criminal, dysfunctional, and out-of-touch royal family that is hated by the people it rules and by the nations that surround its kingdom.

Signs of impending disaster are everywhere, but the House of Saud has chosen to pray that the moment of reckoning will not come soon—and the United States has chosen to look away. So nothing changes: the royal family continues to exhaust the Saudi treasury, buying more and more arms and funneling more and more "charity" money to the jihadists, all in a desperate and self-destructive effort to protect itself.

The fact is that the West, especially the United States, has left the Saudis little choice. Leading U.S. corporations hire and rehire known Saudi crooks and known financiers of terrorism to represent their interests, so that they can land the deals that will pay the commissions back in Saudi Arabia—commissions that will further erode the budget and thus further divide the ruling class from everyone else. Former CIA directors serve on boards whose members have to hold their noses to cut deals with Saudi companies—because that's business, that's the price of entry, that's the way it's done. Ex-Presidents, former prime ministers, onetime senators and congressmen, and Cabinet members walk around with their hands out, acting as if they're doing something else but rarely slowing down, because most of them know it's an endgame too. But sometime soon, one way or another, the House of Saud is coming down.

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Robert Baer served for twenty-one years with the CIA, primarily as a field officer in the Middle East. He resigned from the Agency in 1997 and was awarded its Career Intelligence Medal in 1998. This article is adapted from the forthcoming book Sleeping With the Devil (Crown Publishers), to be published in June.

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