The Oil and the Glory

The violent day before the dreaded Day of Rage

The notional has become more real — the unrest that has roiled the Middle East has reached Saudi Arabia, the foundation of the global oil market. At first, this small protest in the Eastern Province city of Qatif was received calmly by oil traders. But then, at least two protesters and a policeman were shot ...

Fayez Nureldine AFP/Getty Images
Fayez Nureldine AFP/Getty Images

The notional has become more real — the unrest that has roiled the Middle East has reached Saudi Arabia, the foundation of the global oil market. At first, this small protest in the Eastern Province city of Qatif was received calmly by oil traders. But then, at least two protesters and a policeman were shot with rubber bullets in confusing circumstances. On that news, oil traders, who had been bidding down oil prices because it seemed the appropriate casino strategy against negative economic news, decisively reversed themselves, and pushed them back up. Oil prices ended the day yesterday justly slightly down.

Today is a scheduled "Day of Rage" in Saudi Arabia. Organized on the Internet, the protest had been expected to be a likely dud. Now it might be different.

"This has been our biggest fear — that the unrest infecting the Middle East would surface as violence or bloodshed in Saudi Arabia," Cameron Hanover, an energy hedge fund consultant firm, wrote in an overnight note to clients. "If protests start to create ‘martyrs’ in Saudi Arabia, then it could be the beginning of the end."

Here is video of the protest scene:

Henry Kissinger, addressing oil executives at a conference in Houston by live video last night, said that observers expecting the turbulence to result in a breakout of democracy are engaging in "wishful thinking." All that one can say is that protesters have rejected one governing model. "But there is no indication of what the new model will be," he said. "We are in the first act of a five-act drama."

Before the Saudi news hit the wires, I got the view of a senior oil executive from the region: Sara Akbar, CEO of the Kuwait Energy Company, a privately held oil and gas producer based in Kuwait City (video excerpt below). Akbar, who drills for oil and gas in Egypt, Russia, Ukraine and Yemen, has been probably the most openly blunt-spoken of any oil executive attending the CERAWeek conference, the annual Davos of the energy industry, hosted by oil historian Daniel Yergin, and she was no less so regarding Saudi Arabia.

In a nutshell, Akbar said no country in the Middle East, including the trio of big oil and gas producers — Saudi Arabia, Kuwait, and Qatar — is immune from the turbulence we have been watching in recent weeks. Akbar thinks that Saudi Arabia will come out of the turmoil all right, but that King Abdullah (pictured above) has much more political and social work to do. As a modest proposal, she suggests that the King privatize the state oil company, Aramco:

Saudi — it has a fantastic king. But 40 percent of the population is under 25, and there are no jobs. If they can solve that, they will solve their main problem. They should open up their resources so there is more than one oil company creating jobs. You can’t have this monopoly on resources.

Akbar, who became relatively well-known after the Iraqi invasion of 1990 when she served on a squad putting out the fires set by the retreating Iraqi army in Kuwait’s oilfields, styled her remarks as the "view from the street," distinguishing herself from Western peers who are somewhat hazarding guesses.

For starters, there is much wringing of hands and shaking of fists over Col. Muammar al-Qaddafi, but Akbar had a plain description for the state of affairs. "Libya is one country I never invested in. The reason is because [Qaddafi ] is a true moron. He’s a maniac. The biggest mistake was when the West embraced him and gave him power again. Now he is killing his own people. "

This week, she said, Libya’s former ambassador to the U.S., Ali Aujali, who resigned more than two weeks ago, flew into Houston "pleading for help" from oil industry officials to persuade President Barack Obama to use military force in his country. She said that the executives expressed sympathy. Akbar herself did not speak up, but she objects categorically to the use of unilateral U.S. force anywhere in the Middle East.

It will be very badly perceived by the governments if it takes sides. Let the people decide. People in the Middle East are conspiracy thinking all the time. If they see movement by the U.S., they will think, ‘Oh, this is a conspiracy.’    

Akbar said the trouble will wash through the region. "You will see changes in all the countries," she says. But the outcome will be "a big, positive step for the future."

We see the end of the dictatorship systems. We want to be a real country with a real democracy. You have elections, but they are phony. You see a huge amount of corruption. That is the worst thing. In the long term, this step will enhance the economy, but it will be a bumpy road. Arabs like to argue a lot before deciding. It will take a long time before democracy.

Here is a clip from our conversation:

 

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