Energy Independence & American National Security:

Can the United States De-fund

the House of Saud?

Joshua Montgomery

Chicago-Kent College of Law

Spring 2007

joshmontgomery@hotmail.com

Within the title are two assumptions:

• Assumption 1: American dependency on foreign oil is harmful, particularly, because it threatens the national security of the US.

Assumption 2: A well-funded Saudi Arabia is a danger to the national

security of the United States.

These assumptions prompt two important questions:

• Question 1: If the US becomes an energy independent nation, or at least largely so, will Saudi Arabia be substantively de-funded?

Question 2: Would a de-funded Saudi Arabia be a positive development in the national

security of the US?

• Note: Question 2 is not a corollary to Assumption 2. • It is possible that Saudi Arabia is a threat to American

national security regardless of whether it is well funded or de-funded.

Assumption 1: American dependency on foreign oil is harmful, particularly, because it

threatens our national security.

What harms stem from a dependency on foreign oil?

One opinion: There are no harms.

Not everyone agrees that it is dependency that causes harm, just the way that the dependency is managed.

One proponent of this position is the Reason Foundation, a libertarian think tank.

Reason Foundation Position

• “America should become more – not less – ‘dependent’ on foreign oil. In fact, the best way for America to defuse the so-called Middle Eastern oil weapon is by purchasing even more oil from the region.”

• Our dependence is the flip side of their dependence. We can leverage our oil purchases to control rouge states’ behavior.

The Majority Opinion: “America is addicted to oil…”

• Since the 1973 oil embargo, 24 of the 34 State of the Union addresses have proposed solutions to our energy problem.

• The result? In 1973 the US imported 34.8 percent of its oil. Today it imports just over 60 percent.

American Energy Security Declaration of Energy Independence

• It will provide stability at the gas pump.• It will protect the environment.• It will facilitate industrial development.• It will eliminate the trade and budget

deficits.• It will create more than a million jobs.• It will foster new technologies.

• As of May 2007 this declaration was signed by the governors of 9 states.

National Security and US Oil Dependency

• McCain: In many parts of the world where we are dependent upon our oil supply there's either instability or challenges. So I think it is a national-security argument to reduce our dependency on importing oil.

• Hillary Clinton: Our dependence on foreign oil threatens our economy and hamstrings our national security.

The Saudi Arabia Connection: It’s how they spend their money

• “Over the last three decades, Islamic extremism and violence have been funded from two countries, Saudi Arabia and Iran, not coincidentally the world's first and second largest oil exporters.”– Newsweek 2005

Assumption 2: A well-funded Saudi Arabia is a threat to the national security of the US

• As a core tenet of its foreign policy, Saudi Arabia funds the global propagation of Wahabism.

• Saudi Arabia has been the single biggest source of funding for fanatical interpretations of Islam, and the embodiment of that interpretation in organizations and schools has created a self-perpetuating institutional basis for promoting fanaticism across the Muslim world.

Saudi Arabia & Human Trafficking

• Saudi Arabia is a destination country for workers from Southern Asia who are subjected to conditions that constitute involuntary servitude including being subjected to physical and sexual abuse, non-payment of wages, confinement, and withholding of passports as a restriction on their movement

• Tier 3 - Saudi Arabia does not fully comply with the minimum standards for the elimination of trafficking and is not making significant efforts to do so

Saudi Arabia & Women’s Rights

• Women in Saudi Arabia who walk unaccompanied, or are in the company of a man who is neither their husband nor a close relative, are at risk of arrest on suspicion of prostitution or other "moral" offences.

• A woman's testimony does not carry the same weight as that of a man. In a Shari'a court, the testimony of one man equals that of two women.

• Women cannot speak in family law courts.

Criminal Law in Saudi Arabia

• The Government executed persons for criminal offenses after closed trials in which forced confessions are common and few procedural safeguards are provided.

• Sentencing is not uniform…under Shari'a as interpreted and applied in Saudi Arabia, crimes against Muslims receive harsher penalties than those against non-Muslims.

Question 1: If the US becomes more energy independent will Saudi Arabia

be substantively de-funded?

• Saudi Arabia is the leading oil exporter.

• The United States is the leading oil consumer.

• At first glance the answer to this appears to be yes.

Top World Oil Net Exporters, 2005

0 2 4 6 8 10

QatarKazakhstan

AngolaIraq

LibyaMexicoAlgeria

VenezuelaNigeriaKuwait

UAEIran

NorwayRussia

Saudi Arabia

Co

un

try

Net Oil Exports (million barrels per day)

0

5

10

15

20

25

Total Oil Consumed

1

Ccountries that consumed more than 2 million bbl/d in 2005

Top World Oil Consumers, 2005 (millions of bbl/d)

United States

China

Japan

Russia

Germany

India

Canada

Brazil

South Korea

Mexico

COUNCIL ON FOREIGN RELATIONS

U.S. Consumption, Production, and Imports of Oil, 1949–2005

0

5

10

15

20

25

1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004

Mil

lio

n B

arre

ls p

er D

ay

Net Imports

Production

Consumption

Source: EIA Annual Energy Review 2005.

US Petroleum Imports from Saudi Arabia(Thousand Barrels per Day)

• 1973 Average ........................486• 1975 Average ........................715• 1980 Average .....................1,261• 1985 Average ........................168• 1990 Average .....................1,339• 1995 Average .....................1,344• 1996 Average .....................1,363• 1997 Average .....................1,407• 1998 Average .....................1,491• 1999 Average .....................1,478• 2000 Average .....................1,572• 2001 Average .....................1,662• 2002 Average .....................1,552• 2003 Average .....................1,774• 2004 Average .....................1,558

2007 US Crude Oil Imports (as of 4/17)

0

500

1,000

1,500

2,000

CA

NA

DA

ME

XIC

O

SA

UD

I

VE

NE

ZU

ELA

NIG

ER

IA

AN

GO

LA

ALG

ER

IA

IRA

Q

EC

UA

DO

R

KU

WA

IT

UN

ITE

D

BR

AZ

IL

CH

AD

CO

LOM

BIA

LIB

YA

Top 15 Exporting Countries

Th

ou

san

d B

arre

ls p

er D

ay

De-funding hardly seems possible.

• Demand side: Saudi Arabia is a minority share of American market

• Supply side: American purchases are only a fraction of the Saudi Arabian market

– Note: This is one reason why the libertarian idea of “consumer control” is ineffective and unrealizable.

It only gets worse….

• Dwindling supply– US oil production is low– Saudi Arabian oil fields may be dwindling

• New measurements are not being allowed• Increasing number of wells are being built and

capacity is remaining the same wells aren’t producing the amounts they were before

– Running at capacity? No one knows…

If the supply is dwindling….

• Scarcity drives up the price– No new (easily accessible) fields are being

discovered– Pessimism about expected supply

• Companies are less likely to devote huge sums of money to get the oil

• Race to the oil is unlikely – prohibitive costs are to high

• The result: Saudi Arabia stays well-funded from its high priced remaining oil supplies

The other end of the tunnel…?

• If Saudi Arabia’s supply is not dwindling:– Emerging markets

• China & India• Their growth is expected to more than surpass any

amount that the US can realistically cut

– Saudi Arabia can control a majority of the supply side of the world oil market

Foreign Investments

• Saudi Arabia is encouraging foreign investments

• Increasing ownership of foreign assets– Largest shareholder of Citibank is Prince Al

Waleed

Question 2: Is a de-funded Saudi Arabia good for US national

security?

Some Pro’s

• International spread of Wahabist Islam will certainly be decreased.

• Human trafficking in Saudi Arabia would decrease because the flow of immigrant workers would cease.

• A bankrupt Monarchy would almost certainly collapse.

Some Con’s

• Saudi Arabia could cash in it’s chips – and it has a lot of chips (investments in foreign markets).

• If the monarchy collapsed a new regime could always be worse…– Although it is doubtful that they would wield the

same influence as Saudi Arabia does now.

• America’s Military Industrial complex would suffer.

Conclusions:• America is dependent on foreign oil, but most of

this oil does not come from the Middle East.• This makes it nearly impossible to de-fund Saudi

Arabia directly.– But the US should contribute as little as possible to

hostile/radical regimes

• Energy independence is still in US national security interests.– Independence means the economy wouldn’t be

subject to the whims of foreign governments via the oil market.