Saudi Arabia
In 1902 Abdul al-Aziz Ibn SAUD captured Riyadh and set out on a 30-year campaign to unify the Arabian peninsula. In the 1930s, the discovery of oil transformed the country. Following Iraq's invasion of Kuwait in 1990, Saudi Arabia accepted the Kuwaiti royal family and 400,000 refugees while allowing Western and Arab troops to deploy on its soil for the liberation of Kuwait the following year. A burgeoning population, aquifer depletion, and an economy largely dependent on petroleum output and prices are all major governmental concerns.
Travelers should be aware of increased security concerns in Saudi Arabia. In view of continuing heightened tensions in the Middle East and the ongoing risk of terrorist attacks against Western interests, demonstrated by the May 12, 2003 and November 10 2003 bomb attacks in Riyadh that killed at least 51 people and injured hundreds, travelers should defer non-essential travel to Saudi Arabia. There is information suggesting that further terrorist attacks may be possible. Personnel current in Saudi Arabia should consider departure. Personnel who choose to remain in Saudi Arabia should exercise extreme caution and maintain a high level of personal security awareness. Particular care should be exercised in commercial and public areas frequented by foreigners.
On February 20, 2003, a British national was shot and killed in Riyadh. There have been a number of other recent incidents in which shots were fired at Westerners. The recent military action by U.S. and British forces in Iraq have raised the prospect that individuals or organizations could carry out terror attacks against western interests or personnel.
Saudi Arabia is governed by the Al Saud dynasty, whose power dates back to 1932. King Fahd Bin-Abd-al-Aziz Al Sa'ud, a son of the kingdom's founder, is head of state. He became king after the death of his brother, King Khalid, in June 1982. In 1986, he added the title "Custodian of the Two Holy Mosques" to his name to affirm his commitment to Islam. However, his half-brother, Crown Prince Abdullah, has effectively been ruler since he suffered a series of strokes in 1995.
Crown Prince Abdullah is considered to be less pro-Western than King Fahd, and to have greater popular support. He is described by supporters to be untainted by corruption, a patriot and a good Muslim. Critics say he has failed to meet expectations.
With oil revenues making up around 90-95% of total Saudi export earnings, 70%-80% of state revenues, and around 40% of the country's gross domestic product (GDP), Saudi Arabia's economy remains, despite attempts at diversification, heavily dependent on oil (although investments in petrochemicals have increased the relative importance of the downstream petroleum sector in recent years). The sharp rebound in world oil prices between early 1999 and September 2001 improved the country's economic outlook greatly, and to some extent removed pressures for major changes, but the sharp decline in oil prices since the September 11 terrorist attacks on the United States has thrown Saudi Arabia's economic outlook back into question. For 2002, Saudi Arabia is expected to earn about $49.6 billion in crude oil export revenues, down 17% from the $58.2 billion earned in 2001. Given this sharp decline in oil export revenues, Saudi Arabia's economy is likely to see slow, if any, growth in 2002. For 2001, Saudi real GDP growth was about 1.3%, significantly lower than forecasts made prior to September 11, 2001. The Saudi economy also has slowed sharply from 2000 when, in large part fueled by high oil export revenues, the country's real GDP grew by about 4.5%.
Saudi Arabia's weakened economy is particularly bad considering that the country needs strong economic growth in order to keep up with a rapidly increasing (and young -- 50% under age 18) population, and also in order to face the challenge of finding good jobs for its people (outside of the public sector, which is overstaffed and a drain on the country's budget). Over the past two decades or so, Saudi real economic growth has fallen far behind population growth, resulting in sharply reduced real per capita incomes and higher unemployment. Per capita oil export revenues (in inflation adjusted dollars) remain far below high levels reached during the 1970s and early 1980s (around $2,563 per person in 2001, versus $23,820 in 1980, for instance). Saudi Arabia also has a high level of domestic debt (around 100% of GDP) which it hopes to pay down.
Although Saudi Arabia continues to maintain relative fiscal discipline (including an announcement on December 8, 2001, of a 20% budget cut for 2002), movement towards economic reform remains uneven at best. For instance, reducing subsidies and increasing tariffs on electricity has proven problematic, with a rate increase announced in April 2000 subsequently reversed in October in the face of widespread public opposition. For fiscal year 2002, Saudi Arabia is likely to see a significant budget deficit (possibly $12 billion, or 7% of GDP), based on an oil price assumption (for Saudi oil) of about $17 per barrel. This assumes government revenues of $42 billion and expenditures of $54 billion. (Note: according to an analysis by the Saudi American Bank, Saudi Arabia requires an oil price of $22 per barrel with crude oil production of around 8 million bbl/d to balance its budget. This combination of conditions is highly unlikely to be met in 2002.) In sum, Saudi Arabia faces a sharp deterioration in its finances and economic situation during 2002 (and possibly for many years to come) after less than two years of relatively flush times, including a budget surplus in 2000 -- the country's first in two decades (since the sharp oil price increases of the 1970s).
In a treaty signed in June 2000, Saudi Arabia and Yemen agreed on the delineation of sections of their common border which had been in dispute since the 1930s. The deal is expected to open up opportunities for increased Saudi trade and investment in Yemen, as well as to make possible the award of oil and gas exploration rights for areas in Yemen adjacent to previously disputed areas of the border. In February 2001, Saudi Arabia and Syria signed a bilateral free-trade agreement. On June 11, 2001, Saudi Arabia announced (in a letter to UN Secretary General Kofi Annan) that it was taking ownership of Iraq's pipeline to the Saudi Red Sea coast (closed since August 1990), citing Iraqi threats and aggressive actions, including (allegedly) a series of cross-border raids in recent months. Saudi Arabia said that Iraq's behavior had "destroyed any rationale for maintaining the [pipeline] facilities."
