Bloomberg August 1, 2005
King Fahd, Saudi Arabia's Ruler for 23 Years, Dies
By James Cordahi and Sean Evers
Aug. 1 (Bloomberg) -- Saudi Arabia's King Fahd died today, ending a 23-year rule that was marked by pro-U.S. policies, tense relations with Islamic clerics and a rise in the OPEC nation's oil output. He was 82 and suffered from worsening health after a stroke in 1995.
Fahd's half-brother, Abdullah bin Abdulaziz al-Saud, who assumed day-to-day power after the stroke, becomes monarch. He'll be crowned Wednesday, a Royal Court spokesman said on state TV. Abdullah, who ignored terrorists in the kingdom for a decade, is now battling al-Qaeda cells that killed almost 100 foreigners in the country in the past two years.
``On oil policy I don't think there'll be any change,'' Daniel Hanna, Middle East economist for Standard Chartered Plc, a U.K. bank, said in a telephone interview from Dubai, United Arab Emirates. ``Abdullah has been the country's de facto ruler since 1996, so it's more a case of continuity.''
As ruler of Saudi Arabia after the death of half-brother King Khaled, Fahd tapped the world's largest oil reserves to bolster the royal family and bankroll Islamist groups and poorer Arab states.
Fahd died in the King Faisal hospital in the capital, Riyadh, at 7:30 a.m. local time, said a member of the royal family, who declined to be identified.
``King Fahd was a man of wisdom and a leader who commanded respect throughout the entire world,'' U.S. President George W. Bush said today in an e-mailed statement. ``He was a friend and strong ally of the U.S. for decades.''
Al-Qaeda
The threat from Islamic fundamentalists deepened after 15 Saudi nationals took up the call of Fahd's greatest nemesis, Osama bin Laden, and conducted the Sept. 11 terrorist attacks on the U.S. Two decades of per-capita-income decline while the House of Saud built palaces across the world, along with an education system dominated by Islamic studies, provided a recruiting ground for al- Qaeda.
``Saudi Arabia is a dinosaur state,'' said Anthony Harris, formerly the U.K.'s ambassador to the United Arab Emirates, Saudi Arabia's Persian Gulf neighbor. ``It can't be good for a country to be ruled by leaders in their 80s,'' Harris said.
Crown Prince Abdullah was born in 1924, according to the Web site of the Saudi embassy in Washington. He's been heir-apparent since Fahd became king and previously was Commander of the National Guard, a tribal force loyal to the al-Saud family.
Oil Policy
``The succession is just going to pass off fairly smoothly and the Saudi population is going to be fairly sympathetic after the death of Fahd,'' said Neil Quilliam, Middle East analyst at London- based Control Risks Group, which advises international companies about the dangers of investing in different countries.
Abdullah's half-brother, Prince Sultan bin Abdulaziz, Minister of Defense, becomes Crown Prince, the Royal Court spokesman said on state TV. He was born in 1928, according to GlobalSecurity.org, an Alexandria, Virginia-based organization that tracks global security issues.
Prince Sultan is one of the so-called Sudairi Seven, sons of the founder of Saudi Arabia, King Abdulaziz, and one of his wives, Hussa bint Ahmad Al Sudairi. The seven include King Fahd, as well as Prince Nayef, Minister of Interior, and Prince Salman, Governor of Riyadh.
``I don't expect any change in policies, only continuity,'' Prince Turki al-Faisal, Saudi Arabia's ambassador to the U.S., told reporters at a meeting in London.
It was Crown Prince Abdullah who suggested in 1998 opening the previously state-controlled petroleum industry to foreign investment after oil prices fell to less than $10 a barrel. The industry had been nationalized in the 1970s.
Shell Committed
``I congratulate my friend, King Abdullah, on assuming the Saudi throne,'' Bush said. ``I have spoken today to the new king, and the U.S. looks forward to continuing the close partnership between our two countries.''
Royal Dutch Shell Plc and Total SA are joint-venture partners with state-owned Saudi Aramco, the world's largest oil producer by volume, in a project to find and produce natural gas in the Arabian desert.
``We remain committed to continuing our operations in the kingdom,'' Simon Buerk, a Shell spokesman in London, said. ``We are confident the transition of power will be stable.''
Total declined to comment on the king's death.
Pressed by rising unemployment among Saudi males, Crown Prince Abdullah wants more private and foreign investment in the kingdom to accelerate economic growth and job creation.
Oil Boom
``Crown Prince Abdullah is expected to continue with reforms that were announced by late King Fahd in 2003,'' Ihsan Buhulaiga, a member of Saudi Arabia's consultative Shura Council and an economist, said in a telephone interview from Riyadh. ``Saudi Arabia is undertaking reforms because of socio-economic pressure where the problems of poverty, which afflicts as much as 10 percent of the population, and unemployment are important.''
During the last five years, the kingdom has benefited from rising prices for oil, on which it depends for about a third of its gross domestic product. Prices in New York have almost doubled since 2001 when they averaged $25.95 a barrel, according to Bloomberg data. They're averaging $52.74 a barrel this year.
Crude oil for September delivery rose $1.33, or 2.2 percent, to $61.90 a barrel at 1:41 p.m. New York time on the New York Mercantile Exchange. Prices touched $62.30, the highest since trading began in 1983.
Record prices will generate $157 billion for Saudi Arabia this year, 48 percent more than the $106 billion in 2004, Samba Financial Group, the kingdom's second-largest lender, said in a twice-yearly report on the economy last month.
``In times of danger, he maintained the integrity of his country and he defended regional stability,'' French President Jacques Chirac said in a statement.
U.S. Military
Prince Sultan Air Force Base was turned over to U.S. forces after the first Gulf War so the U.S. could enforce the southern no- fly zone in Iraq. For the second war against Iraq, the U.S. shifted command and control operations to Qatar and has withdrawn forces that had been used to enforce the no-fly zone since 1991, said Anthony Cordesman, an analyst at the Center for Strategic and International Studies in Washington.
``There's still a very strong U.S. military advisory presence in Saudi Arabia,'' said Cordesman, who is co-author of a book on Saudi military security. ``It was always a very difficult problem because Islamists never wanted a non-Saudi, non-Islamist military presence in Saudi Arabia. There was tolerance of it after the Gulf War, but it was a very difficult political problem.''
Saudi-born bin Laden's terror network has long opposed the royal family, accusing it of being insufficiently Islamic and too close to the West, particularly the U.S. The group was said to have conducted its first attack in the kingdom as far back as 1996, when 19 U.S. servicemen based in Khobar were killed.
Gun Battles
The Saudi security forces are now locked in a continuing fight with militants across the country, including killing three in a gun battle on the outskirts of Mecca on April 21. The government says it has killed or captured 23 of the 26 most-wanted it included on a list published last year.
Al-Qaeda militants have claimed responsibility for attacks on residential compounds housing foreigners in Riyadh and Khobar over the last two years. Following those incidents, employees of foreign- owned companies asked that their family members be sent home. Total, Shell and BAE Systems Plc were among the companies who met the request.
``It's quite clear to me that al-Qaeda wants to take down the royal family and the government of Saudi Arabia,'' former U.S. Deputy Secretary of State Richard Armitage said after one of the attacks on foreigners in 2003.
Palace Tutors
The 11th of 45 sons of Ibn Saud, the founder of Saudi Arabia, Fahd was educated by palace tutors and his father's circle of advisers. One of his first official assignments came at the age of 23 when he accompanied his older brother, Faisal, to the San Francisco conference in 1945 that founded the United Nations.
``King Fahd was a man of great vision and leadership who inspired his countrymen for a quarter of a century as king and for many more years before that,'' U.K. Prime Minister Tony Blair said in a statement.
Saudi Arabia's Tadawul All Share Index ended the day 0.6 percent higher at 13,266.72 in Riyadh after earlier dropping as much as 5.9 percent.
In the years after World War II, the exploitation of Saudi Arabia's oil reserves gathered pace and Fahd, along with other young Saudis, enjoyed the lifestyle that their wealth afforded, including the nightclubs of Monaco, London and New York, and palaces on the Mediterranean.
His domestic policy as king was a balance between his liberalizing tendencies and the necessity of heeding demands from Islamic fundamentalists in the nation.
Security Concern
When Fahd came to power he took the title ``Custodian of the Two Holy Mosques'' to appease religious leaders. It is a reference to Islam's holiest shrine in Medina and the birthplace of the Prophet Mohammed in Mecca. He also pumped millions of dollars into fundamentalist education.
``Fahd may have contributed to the rise of religious extremism by emphasizing his role as the protector of Islam's holiest sites,'' said Mohammed Abduljabbar, a political-risk analyst. ``But it was a great achievement to develop closeness to the U.S. and the West, without paying a big price domestically.''
His concern about the kingdom's safety from attack was highlighted in August 1990 when Iraqi President Saddam Hussein directed his army into Kuwait and was poised to continue into Saudi Arabia, leaving Fahd with little choice but to invite in 500,000 Western troops.
Fahd, the royal family he headed, and his U.S. allies were resented by opponents inside and outside the kingdom who have pooled their resources to undermine the House of Saud. Most U.S. troops have now left Saudi Arabia, meeting one of bin Laden's main demands.
© Copyright 2005, Bloomberg L.P.
