America Should Not Turn Its Back on a Faithful Friend

Clyde Prestowitz, a U.S. trade negotiator in the Reagan administration, is president of the Economic Strategy Institute. His book on foreign perceptions of the U.S. is to be published in June by Basic Books. E-mail:

Saudi Arabia has recently become the U.S. media’s favorite whipping boy. The talking heads are full of demands that the Saudis change the curricula in religious schools, make their banking system totally transparent and turn their government officials over to the mercies of U.S. lawyers hoping to find someone to pay damages for Sept. 11.

To put things in perspective, let’s run some of these demands backward. Like Saudi Arabia, the United States is a very religious country with strong fundamentalist establishments and schools. Some of the leaders of these groups have called Islam an evil and dangerous religion, and these groups, both Christian and Jewish, have played a significant role in the controversial expansion of Israeli West Bank settlements. How would we respond to demands that the U.S. government change the teachings of our fundamentalist schools and religious groups?

Then there’s banking. In 1997, the Hong Kong dollar was battered by wave after wave of speculative attacks mounted by U.S.-managed hedge funds. The head of the Hong Kong Monetary Authority told me that he didn’t understand why the U.S. couldn’t insist on greater transparency in its banking system. By 1998, the Asian crisis had become a global crisis. More recently, the failure of Enron -- partly as a result of opaque, unregulated derivatives market dealings -- dealt severe damage to the U.S. and global markets. Yet Wall Street and the Federal Reserve continue to resist requests for openness in these arcane markets.


As for making government officials available to possible prosecution by foreign legal entities, it is the U.S. that has been actively campaigning against establishment of the International Criminal Court, fearing what a possibly anti-American legal entity might do to U.S. citizens.

I have spoken recently with several Saudi leaders. They are shellshocked and deeply wounded by what they see as a sudden turning of the U.S. on longtime friends.

Over the last 50 years, hundreds of thousands of Saudis have studied at U.S. universities and have come to think of the United States as their second country. In their view, they have always been there for the U.S., and still are.

For example, as the only oil producer with substantial unused production capacity that can be brought on line quickly in case of emergency, Saudi Arabia is standing ready to prevent any possible shocks to the world oil market resulting from a war in Iraq by making up any supply shortfalls from its unused capacity. The U.S. is relying on this Saudi commitment to cushion the American economy and to keep the price of oil within reasonable bounds.

This is a role the Saudis have played frequently over the last 25 years. By using their excess capacity to discipline the market, they have helped to keep prices in a reasonable range such that the cost of gasoline for U.S. consumers today is about the same in real terms as it was before the oil crises of the 1970s. In addition, the Saudis give a $1-a-barrel exclusive discount on oil sold to the U.S. that amounts to a $500-million annual gift.

At the urging of the Pentagon, the Saudis are regularly the biggest foreign buyer of U.S. military equipment, even though much of it is of questionable use to them. And, of course, whenever Boeing gets in trouble, the Saudis can be counted on to buy more planes. The Saudis built their electric grid to U.S. specifications to facilitate sale of U.S. electrical equipment.

And many Saudis ask whether we have so soon forgotten the fact that, at our behest, Crown Prince Abdullah not only presented an unprecedented Arab plan for Israeli-Palestinian peace last year but he also got the whole Arab League to sign on to fully normal relations with Israel. The plan is in limbo, waiting for the U.S. and Israel to agree to a conference.

Undoubtedly, the Saudis need self-examination. But we might do well to remember that despite recent difficulties, they have been and remain friends and allies whose goodwill and support we need.