Arab News, Saturday, Feb 15, 2020 | Jamadi Al Thani 21, 1441
How Aramco fueled Saudi-US ties
Saudi Arabia: From “mother’s apple pie”-style homes in the deserts of the
Eastern Province to gigantic refineries in Texas, Saudi Aramco has been at the
heart of the 75-year-old partnership between the US and the Kingdom.
In fact, it preceded it. Ever since Oregon-born geologist Max Steineke teamed up
with Bedouin guide Khamis bin Rimthan to find oil at Dammam Well No. 7 near
Dhahran in 1938, the oil industry has played a major role in advancing the
Global oil supplies, and the vast amounts of crude that had been discovered in
the Kingdom, were top of the agenda when President Franklin D. Roosevelt met
with King Abdul Aziz on board the USS Quincy in 1945. “Oil was very much on
Roosevelt’s mind,” wrote American analyst Bruce Riedel in his study of top-level
US-Saudi relations, “Kings and Presidents.” He added: “It was also on the King’s
The relationship has inevitably changed over the decades, as the Kingdom learned
from its American mentor and ultimately decided to take full control of its most
precious resource, notably in the buy-out of the original American owners of
Aramco in the 1970s, and the “oil ice shocks” of that and subsequent decades.
The relationship is changing again, with the emergence of the
American shale industry as arguably the single most important development in
international energy markets over the past 10 years. But the ties between Aramco
and the US go deep, and are likely to outlast any short-term considerations of
crude prices or supply agreements.
Aramco employs thousands of staff in the US, at research and technology centers
in Houston, Detroit and Boston, as well as at the New York corporate
headquarters. It owns and operates the Motiva refinery and petrochemicals
facility on the coast of the Gulf of Mexico, the biggest such plant in North
America. Despite US energy self-sufficiency, Aramco still exports significant
quantities of its high-quality crude oil to America.
Many Aramco executives were educated at American colleges and universities. The
management systems at the Saudi headquarters in Dhahran — among the most modern
and sophisticated in the Kingdom — owe much to US standards developed during
Aramco’s formative years.
After Steineke and Bin Rimthan found crude in commercial quantities, and World
War II highlighted the need for secure and dependable oil sources, the meeting
on the USS Quincy set the seal on the US-Saudi partnership for the next two
American oil engineers and their families arrived in the Eastern Province to
work on the fields there, and were allowed a degree of home comforts virtually
unheard of in the Kingdom at that time. The US community in Dhahran grew into an
expatriate oasis, with freer dress codes and Western forms of entertainment such
as Hollywood cinema and American baseball.
The “Camp” in Dhahran still exists, though it is no longer an American enclave.
Now it is regarded as desirable accommodation by the “Aramcons,” the company’s
Saudi workers. But it still has a feeling of “Smallville USA” about it, with
porches and barbecues very much in evidence as well as US medical and other
Another clue to Aramco’s US lineage lies in the name. The Arabian-American Oil
Co. was the successor to the Standard Oil Co. of California, the firm that had
hired Steineke and Bin Rimthan in the first place, and which by the 1950s was a
member of a consortium of the biggest US oil firms that owned Aramco, producing
and exporting its crude via a concession agreement with the Saudi government.
When in 1957 the Ghawar Field was discovered, it set the seal on Aramco’s
dominance of regional and global oil supply. The Americans called Ghawar “the
field of dreams.” As US energy expert Ellen Wald wrote in her recent book
“Saudi, Inc.”, “Aramco began as an American corporation established simply to
drill for crude oil in Saudi Arabia, but within a single generation the
Americans and the Saudis transformed it into a global energy conglomerate.”
By the 1970s the world had changed, and the Saudis felt they had learned enough
about the energy business to go it alone. This was also the age of rising Arab
nationalism, when many oil-exporting countries in the region began to
nationalize their oil industries, often abruptly and without compensation,
leading to a series of geopolitical confrontations with Western corporations and
In Saudi Arabia, the process was different. Instead of nationalization, the
Kingdom discussed “participation” with the American owners of Aramco. In the
course of the decade, the company was purchased by the Saudi government from its
American owners, who were happy to get some financial return for their years of
investment, though the price of the full purchase has never been disclosed.
Daniel Yergin, a prize-winning historian of the global oil industry, wrote in
his book “The Prize” that the president of Exxon — one of Aramco’s owners —
expected “more stable future relationships” from the “participation” agreements.
As “participation” in Aramco grew in the 1970s, so did Saudi self-confidence,
especially on the price at which they could sell their product. In a series of
oil “shocks” over the next few years, the Organization of the Petroleum
Exporting Countries (OPEC) — in which the Kingdom played a leading role as the
biggest producer — raised the price of a barrel of oil substantially.
“Oil was now clearly too important to be left to the oil men,” wrote Yergin.
Most observers thought that some balance had been reasserted in global energy
markets between producers and consumers, who had been benefiting from cheap oil
Over the past three decades, oil, and Aramco’s leading position in the global
industry, have continued to set a pattern for US-Saudi relations. The two Gulf
wars against Iraq were to a large degree motivated by the US desire to maintain
security of output from its biggest crude supplier.
How it plays out in the new dynamic of the shale era — when America is much less
dependent on oil from Saudi Arabia — remains to be seen. But Aramco’s role in
the US-Saudi partnership has left a lasting legacy, and will continue to
influence the relationship between kings and presidents.