If it was boomtime with oil at $12, imagine what life was like in Saudi Arabia when oil hit $36.
The Arabs owned the earth. They bought planes and yachts, Rolls-Royces, Cadillacs, Daimlers and Mercedes, second homes in London, third homes in Paris and fourth homes in Florida. They bought bricks and mortar on Wall Street, banks in the City of London and designer jewelry in France.
While a lot of Saudis were trying to find ways to spend money outside the country, Hisham Nazer’s Ministry of Planning had its hands full spending it inside the country. If you were running an international construction company, you couldn’t pack your best salesman off to Saudi Arabia fast enough.
“It was an incredible sight,” Sir James Craig insists. “When you drove in from the airport to Riyadh, it was almost a cliché. It was one big builders’ yard. It was absurd. Wherever you looked you saw a dozen huge cranes, building, building, building.”
The Saudis not only found themselves in the land of plenty, most of them thought they now owned a long lease on it. And not many Saudis seemed too upset by what was going on.
Says Craig, “I think most people enjoyed it. There were some who had doubts. But they were the more thoughtful people. Usually the older generation. The younger ones just jumped on the bandwagon and enjoyed themselves. In retrospect, I think the fears of the older ones that it might harm both the economy and the national psychology proved to be justified to a certain extent. But at the time you heard very few doubts about it.”
However, Craig can clearly recall when the first, slight cloud appeared on the horizon. It was the middle of 1981. Oil prices had just begun to come down off their peak. No one knew where they’d bottom out. There were rumblings of the severe glut to come.
At one point, Craig was talking to the Governor of the Saudi Arabia Monetary Agency and wanted to know, “If this cloud proves to be only one of many, what will you do?”
The Saudi banker replied, “There are some of us who won’t be very upset. Some of us think the economy is overheated, that a too rapid economic change has put social pressures upon us. We don’t need all of this.”
Craig was taken back with the man’s candor. “You don’t?”
The banker replied, “No, we don’t. For example, in my family, we have something like seven servants. We could manage perfectly well with two. We have something like nine cars. We don’t need more than two.” Then he stopped to pause for a few seconds and a little smile came over his face. “But I don’t know what my sons would say.”
Suddenly, Yamani’s prediction of a glut didn’t seem so farfetched. “It was so clear to me that this would happen. Normally when there’s a surplus, you buy for stock to replenish it and when there’s a shortage, you draw from stock. What happened here was exactly the opposite. When we had a shortage because of the Iranian Revolution, companies started to buy heavily to stock up. When we had a surplus in 1981, those same companies started drawing heavily from their inventories. This was not a healthy situation. But it was a fact.”
By the middle of 1981 oil prices had eased their way down from around $40 to settle in the $32-$36 range, with the Saudis at the lower end of the scale and the majority of OPEC at the higher end. To support those prices, most of the OPEC producers cut their production. Only Saudi Arabia pumped at full throttle.
In July, the oil ministers from Algeria, Libya, Iraq, Kuwait and Abu Dhabi came to see Yamani in Taif, hoping to convince him to cut back on production and support the higher prices. He refused to go along with them.
Iraq’s President Saddam Hussein even appealed directly to King Khaled for the same cause. But the king said Saudi Arabia wanted prices down. While the rest of OPEC said they want prices held high.
A crisis was brewing.
The Indonesian Dr. Subroto lobbied the cartel’s members, suggesting an extraordinary meeting to help clear the air. It took Yamani nearly two weeks to agree to the session, but once he did, the 13 oil ministers and their staffs descended on Geneva.
At the Intercontinental, panic was the order of the day.
Normally the hotel has plenty of time to prepare for OPEC’s arrival. This time the management had to make the hotel ready within a few days. Guests already in the hotel were invited to make other arrangements. Reservations for incoming guests were cancelled. Security checkpoints were hastily set up. Journalists with their ears to the ground got first call on what few rooms were left in town, while the ones who heard about the meeting too late found themselves in far-flung digs.
As soon as Yamani arrived, the show was off and running.
Early on, in private meetings with selected ministers, he dropped some well-placed and subtle hints that Saudi Arabia, might be willing to come up $2 if the other members would meet him at $34. But the Venezuelan minister, an inveterate politician who even shakes hands with waiters when he leaves a restaurant, insisted his country would stick to its $36 price. He claimed that a drop in the official price would hurt his country’s income. He claimed it was unnecessary, even under depressed market conditions, to go below present levels as long as everyone else stuck to them.
Saudi Arabia was not prepared to increase prices to meet Venezuela, and Venezuela was not prepared to decrease prices to meet Saudi Arabia. The meeting quickly took on the air of a stand-off between Yamani and the Venezuelan.
In terms of delegates, Yamani was wildly outnumbered. All of the hawks and most of the moderates, like Kuwait, rallied with Venezuela. But Yamani could not be swayed.
The strain took its toll early on and tempers started to flare.
If nothing else, hoping to ease the tension, Yamani made a traditional Arab peace offering. He sent a basket of dates to all the other ministers. But the message was lost in the heat of frustration as four days and nights of negotiations failed to get either side out of the trenches.
Unable to beg, cajole, push or shove Yamani from his position, a few of the delegates resorted to back-door politics. At least four ministers cabled home to their head of state requesting that King Khaled be informed directly. On the night of August 19-20, Khaled took calls from the ruler of Kuwait and the Presidents of Iraq, Indonesia and Venezuela.
But Yamani had his bases covered and Khaled’s answer was a royal variation on, sorry sir, not my table. The king politely explained to each of his callers that they’d best speak to Fahd.
All right, they each said, put him on the phone.
Unfortunately, Khaled then added, Fahd is on holiday out of the kingdom and cannot be reached.
It served the Saudis’ purpose even if it wasn’t quite the case.
Fahd was vacationing in Morocco where Yamani had been able to reach him. He’d briefed the crown prince on the situation and Fahd instructed his oil minister not to go above $34.
Dr. Subroto, who in his own quiet way had been working for a compromise at $35, visited Yamani in the top-floor suite and made a final plea. Yamani said he must respectfully decline. So now Subroto tried to bring the others down to $34.
Algeria, Libya, Iran, Iraq and of course Venezuela said no.
And that was the end of that.
The Venezuelan minister left Switzerland without making any pronouncements.
Some of the other ministers went on record as saying, “OPEC is dead.”
Sheikh Ali Khalifa al-Sabah of Kuwait, whose turn it was to take over as OPEC president from Dr. Subroto, was stopped by reporters on his way out of the hotel. They asked him if it was true that OPEC was dead.
He mumbled, “News of OPEC’s death has been much exaggerated.”
But Yamani was the one the press corps really wanted to talk to. He faced the press in the sweltering heat of a noisy, over-crowded conference room where air conditioning seemed as scarce as compromise.
“I am not an expert in psychology,” he tried to make the cynical western journalists believe. “What has happened here was political. We can eliminate this glut if we drastically reduce our production, which we are not going to do. For me, I do not think it is humiliating when I face an economic reality. All important organizations in the world move their prices up and down according to the reality of the market. That is no political humiliation.”
At the State Department, they sincerely hoped it was just that, political humiliation. The line from several well-placed Reaganites in Washington was, shed no tears for OPEC.
Saudi Arabia also came under the gun.
“The Saudis, as always, are pursuing their self-interest,” wrote Hobart Rowen in the Washington Post. “All the Saudis have been trying to do is force the other OPEC nations to cut their prices to the level the Saudis think will best sustain the sale-ability of the huge Saudi oil reserves.”
His conclusion was that it might be time for the oil-importing nations to take charge. He said they mustn’t be any more bashful in an era of oil surplus than OPEC was when there was a shortage.
But the oil-consuming nations hardly had to bother. The disarray within OPEC was already doing it for them. In spite of the hawks’ wishes to keep prices up, the. market simply wasn’t there.
It was the beginning of a long slide, which gathered momentum as it was further aggravated by barter deals, with Libya, Nigeria and Iran trading oil for goods; and discounts, with Nigeria and Iran unofficially offering oil at up to $4 less than their own posted price; and non-OPEC oil, with Great Britain and Norway pumping away, feeding the glut.
All this time, Yamani kept warning his partners, “The average price of a barrel of oil may fall below $32 and OPEC could collapse if it continues to lose its share of the world oil market.”
Al-Sabah called the cartel together again in late October 1981 and, under the banner of accepting the realities of the market, the 13 agreed to freeze the price at $34 until the end of 1982. It sounded good in a press release. And in a perfect world it might even have worked.
Within a matter of months the price of spot market crude had slipped below the official OPEC level. As a result, the Iranians began dumping more and more oil onto the market to finance their war with Iraq. Then Venezuela and Mexico dropped their prices. And the BNOC cut the price of North Sea crude.
Now spot crude nudged close to $30.
Another emergency OPEC meeting was called for mid-March, 1982. Nigeria opened the session by claiming that so many of their contracts were being cancelled they’d have to get into heavy discounting just to keep in business.
Yamani knew Nigeria was the weakest chain in the OPEC link and was worried that any panic could set off a price war. He knew who the villains were, so a not-so-subtle warning went out to the major oil companies. The Middle East Economic Survey published a report, citing “an unnamed senior Saudi official,” saying that the oil companies active in Nigeria had better increase their petroleum purchases there or they’d face reprisals from the other states.
Royal Dutch/Shell always claimed it did not pay any attention to the MEES report. Mobil, Texaco and Elf tried to give the same impression. But it’s known that both Mobil and Texaco increased their Nigerian purchases and it’s reasonably believed that, despite official denials, Shell and Elf did too.
It goes without saying there was never any doubt that everyone knew who the senior Saudi official was.
But that was just a sideshow.
The main problem Yamani had to deal with was how to keep world oil prices from eroding. The result of the mid-March meeting was an agreement to reduce OPEC’s overall production from around 20 mbd to 18.5 mbd. Yamani also announced that Saudi Arabia would stand apart from the others in the group and, if the $34 price was still threatened, they would cut back on their own production, playing the role of swing producer.
It was the first time in OPEC’s history that the group made a decision on production levels. It was also, some people thought, the first serious indication that OPEC was about to collapse.
Daniel Yergin, a Boston oil consultant, called OPEC’s plight, “The biggest crisis since it won control of the world oil market.”
William Brown of New York’s Hudson Institute made the pronouncement that “OPEC is 100% dead.”
Bijan Mossavar-Rahmani, an Iranian delegate to OPEC until 1978 and now at Harvard University, claimed, “Forces very much out of OPEC’s control govern oil prices.”
Petroleum Intelligence Weekly revealed that Saudi oil production was on the way up and that Sheikh Yamani had actually reprimanded some of the Aramco partners for not taking enough oil. PIW also hinted, “Saudi Arabia is acting as if it has given up any ideas of defending OPEC’s $34 marker crude price and may be content to see a substantial reduction.”
Before long, Yamani would be leading the retreat.
*****
Khaled was dead and Fahd was now on the throne.
The king died at the age of 69 of a heart attack on June 13, 1982 at his home in Taif.
Within a few hours, Fahd also officially named himself Prime Minister. Abdullah became Crown Prince and First Deputy Prime Minister. Sultan was appointed Second Deputy Prime Minister.
Once again, talk spread of Yamani’s impending dismissal. With Khaled gone, the rumor-mongers claimed, there’s no one left to protect him. Even official news sources within the kingdom acknowledged that a ministerial reshuffle “could not be ruled out.”
Word around town was that Faisal’s son. Prince Saud, would be moved from his job as Foreign Minister into the petroleum job. The Foreign Office portfolio would then go to Prince Salman.
When it didn’t happen right away, the rumor-mongers promised, but it will.
But it didn’t.
The world oil situation continued to worsen, not helped any, as Yamani saw it, by the Reagan administration.
The movie actor president was the sixth to serve during Yamani’s years in office. And Yamani suggests that, socially anyway, the White House under Reagan was a pleasant and relaxed place to visit.
He remembers, “At the end of a formal dinner dance one evening, I was standing in the shadows near the front door waiting for my car. The orchestra was still playing. The President and Mrs. Reagan were just saying goodnight to some of their guests. They didn’t see me there. They didn’t know I could hear them. And after they waved goodbye, Reagan put his arms around Nancy and whispered to her, ‘Come on honey, let’s dance. Now the party can finally begin.’”
He doesn’t have the same kind words for Reagan’s oil policies. Much to the annoyance of the Saudis, one of the first things Reagan did when he got to the White House was greatly to increase America’s strategic reserves. With prices coming down, the United States was buying for the future.
“Three days after I was sworn in as Secretary of Energy,” explains Dr. James Edwards, now head of the Medical School at the University of South Carolina, “President Reagan told me to go out and deregulate the price of oil. I hardly knew how many gallons there were in a barrel. But I did know that, if we took the controls off, philosophically it was the right thing to do. And all through that period Sheikh Yamani was very friendly.”
However, when Edwards started buying heavily for stock, he says Yamani expressed grave doubts. “It created a problem for him. As I recall, at our very first meeting, he voiced his concern about it. He said it presented a political problem in his country.”
Yamani told Edwards, “You are taking oil out of the ground in Saudi Arabia, bringing it over here and putting it back into the ground to use against us economically.”
Edwards nodded, “I understand your problem,” then took his best shot at the Saudis’ weakest point. “But what if that big bear (the Soviet Union) came trotting down from the north of you, and occupied your land. And took your oilfields. And cut off the flow of oil from your part of the world to the rest of the world. Wouldn’t it be good if we had a stored supply of oil somewhere to fuel the tanks and the planes and the ships so we can go back there and retake that land for the royal family and re-establish the flow of oil back to the free world?”
Yamani looked him straight in the eye and said, “Are you implying that one day you will no longer be a superpower?”
Edwards followed Reagan’s orders and went right on increasing the strategic reserves, bringing the stock up from 90 million barrels when he first went to Washington in 1981, to 350 million barrels when he left in 1984.
“That’s a lot of oil,” Edwards says now. “A lot of security. Sure, Zaki could have said, I won’t help you fill your reserves. Instead he quietly backed off the position. You see, he understands how the world works. He’s got a brilliant mind and I always felt he was a friend of this country.”
Yet, Edwards contends, it was very much a two-way street. “There was a controversy about giving them AWACs.” (The airborne early warning and control system that continually patrols the Gulf as part of the Saudis’ air defense network.) “I knew what those planes meant to Saudi Arabia so I did some quiet lobbying for them. When it was over I rang Zaki on a State Department line to congratulate him on getting the AWACs. That same day he announced that the Saudis were bringing the price of oil down. So I congratulated him on both instances. Do you know that I later learned from some of my friends at the State Department that they were upset I’d congratulated him on fixing the price of oil.”
Fixing the price at $34 until the end of 1982 did not solve the problem. It merely postponed the nastiness that erupted at OPEC’s December 1982 meeting when Iran accused Yamani of undermining the cartel by not wanting to see prices stay at $34.
There was an odd irony in this, as not so long before it had been Yamani who’d fought to keep the cartel together by preaching the inherent risks in allowing oil to climb above $28. He believed that increasing the price would be an historical mistake and create a structural change in the world economy. Yet Fahd was under pressure from Kuwait, Qatar and Algeria to join them in raising the price from $28 to $32. Yamani argued strongly against it. Cunningly, Fahd waited until Yamani was on his way to an OPEC meeting before sending Hisham Nazer to Kuwait and Qatar to strike a deal.
History proved Yamani right. Within a few days, the other OPEC countries raised their prices again. Conservation measures clicked into effect. And the eventual collapse of the market was almost certainly more severe than it otherwise would have been.
With oil at $34, the 13 OPEC members scrambled to divide up their agreed 18.5 mbd overall production quota. But after 12 of the 13 nations put in their requests, the total stood at 23.5 mbd. And that was without Saudi Arabia as the swing producer.
The meeting broke up in disarray.
To show their displeasure, the Iranians blamed Yamani for the cartel’s failure to agree on national quotas.
“With the firm revolutionary stance of the Islamic Republic of Iran,” commented the Teheran Times with its typical lack of objectivity, “the fabricated power of Sheikh Ahmed Zaki Yamani would no longer be effective and the United States would have to appoint another agent in his place. The world expansionists, with the US on the top, by their political maneuvers tried to weaken the OPEC and bring it to the edge of annihilation. But the Islamic Revolution, with no reliance on political, military and economic means, aborted wicked policies of the US and its lackeys thus achieving a grand success in bringing the oil price to its actual ruling level.”
It shows what Yamani was up against at some of these meetings.
In late January 1983 OPEC tried yet again. The emergency meeting was held at the Intercontinental in Geneva and the atmosphere was only slightly less ugly than it had been in December. Eleven of the 13 states had reconsidered the quotas proposed at the previous meeting and were now willing to accept. The holdouts were Kuwait and Saudi Arabia.
Yamani didn’t necessarily object to the quotas, he simply wanted to include with the plan an adjustment in the differentials between various crude prices. He said he’d go along with the group if the prices of certain cheaper crudes were raised. It meant the African members, among them Nigeria, would have to raise their prices. But they protested that in a declining market such a move was tantamount to suicide. So the Saudis and the Kuwaitis said no to the proposed quotas. When they did, the UAE and Qatar changed their votes from yes to no and that looked like the end of OPEC.
“The conference is finished,” Yamani said leaving the meeting room. “It was a complete failure. Quite honestly, I don’t see a very bright future. In a few days we expect to see the price of North Sea oil come down by $2-3. And that will be the beginning of a chain reaction.”
The press asked what he thought would happen in the months ahead and Yamani answered, “If I had my crystal ball with me and I looked into it, I would see the British government reducing the North Sea oil prices under pressure from the oil companies. This is the first step. That will pressure the others into further discounting. It’s just the beginning. You will have a very interesting month of February.”
Returning home, Yamani confided to the Saudi magazine Iqra that there was no alternative but to seek a lower price. He said, if they didn’t do it themselves, market forces would do it for them.
He went on, “I can’t see any way out of a price reduction. We have lost patience with the OPEC members that have chosen a short-term self-interest policy in preference to OPEC’s and their own long-term interests. This has forced some countries to cut their production to unacceptable levels. Some OPEC members who kept to their ceilings found themselves in a financial bottleneck. While others who didn’t keep to the ceilings practiced radicalism.”
Colonel Qaddafi read that interview and went wild. Apparently, he took Yamani’s remarks personally. So he complained directly to Fahd.
Giving in to outside pressure, the king issued an official statement to say that the magazine report was not true.
Except that it was.
Saudi production had reached such a low level that further reductions were just about impossible. And they did up their production in March.
By then, BNOC had cut its prices by $3 to $30.50. And Nigeria cut its prices by $5.50 to $28.50.
Nigel Lawson had triggered a price war.
OPEC was looking at $30 oil when it met in London on March 3. Eleven brutal days later, the group managed to agree to fix the price at $29.
Yamani sternly warned his colleagues that it was no good having an official OPEC price if certain nations - he didn’t have to name Nigeria - were then going to throw discounts into the deal and bring the prices below the benchmark anyway. Saudi Arabia, he said, stood almost alone in continually refusing to do discounting deals with the intention of stealing a larger chunk of the market.
The British press reported the OPEC meeting in minute detail. What they didn’t know was that during those 11 days “certain representatives” of OPEC had struck an informal deal with Nigel Lawson, exacting a promise from the British to help support the price by keeping production down to 2.1 mbd.
At his press conference after the meeting Yamani promised, “OPEC will be in the driver’s seat again.”
From the back of the over-crowded main ballroom in London’s Intercontinental Hotel a crusty, 75-year-old, New York oil trader named Harry Neustein heckled Yamani, “Sure, tell me about it.”
Yamani let the remark pass. He tried to continue. But Neustein had ideas of his own. “Oil is becoming a rag trade again,” he shouted at the Saudi oil minister. “The small traders are back in where they belong. We are the new oil ministers.”
If nothing else, Neustein’s antics reinforced the idea that the oil market was out of control and that, even if OPEC knew what to do, it might not be able to pull it off.
Nigel Lawson, the man who didn’t have official talks with Yamani, was suddenly concerned enough to go to Riyadh. For unofficial talks of course.
“The oil market now has a healthier tone,” Lawson acknowledged. “We will definitely get an increase in the demand for oil.”
But not that week. Or even that year.
Nigel Lawson was named Chancellor of the Exchequer and Peter Walker took his place at Energy.
By the end of 1983, with discounting still going on and pressure on prices to come down, Yamani again appealed to Britain to cooperate in keeping prices firm. Yamani asked Walker not to increase North Sea production. Walker responded that Great Britain did not plan any increase on its current production, which was then running at 2.4 mbd. That was already 300,000 barrels a day more than had been informally promised.
In August 1984, on his way to Wales to accept his honorary doctorate, Yamani stopped in London for a secret meeting with Peter Walker.
The speech he’d written for Wales asserted that a new round of price cuts would induce serious problems in the world banking community, damage sterling and could mean the shutting down of some North Sea fields. In the private session with Walker he made the very same points.
Yamani said that, should the price of oil fall below $25, Venezuela and Mexico would have trouble repaying their debts to American banks. That would undoubtedly cause havoc in the foreign exchange markets and damage the pound. He reminded Walker that North Sea oil was expensive enough to produce and that declining prices could fatally damage the British oil industry. And he pointed out that all of this would surely reverberate badly in the City.
Evidently, Walker got the message. The next day, under Walker’s instructions, the Department’s number two, Alick Buchanan-Smith, wrote a secret letter to BNOC’s eight major customers begging them to respect the formal price levels set by BNOC.
It was an unprecedented step. But then, Yamani had found the government’s weak point. There was no way that Mrs. Thatcher, Nigel Lawson or Peter Walker wanted to risk a crisis which would threaten sterling.
Not surprisingly, the Department of Energy denied any “understandings” with OPEC or Yamani, or that anyone from the Department sent letters with lightly veiled threats to BNOC’s clients.
Yamani’s visit to Walker had paid off. Spot prices held steady. What worried Yamani was that, deep down, he knew it was only temporary.
*****
Before the year was out, British North Sea production was up to 2.6 mbd. The market was flooded and yet, some countries were still overproducing. Frustrated, Yamani felt he simply had to drive home the message that it was in everyone’s interest to keep oil prices stable.
He went to Cairo and met with President Mubarak. Egypt is too minor a producer to be an OPEC member. But that didn’t mean Yamani was going to look the other way when they dropped 50 cents off their crude and dissociated themselves from the cartel’s policies. More significantly perhaps, this was the first formal meeting of an Egyptian President with a Saudi cabinet minister since the Camp David Agreements in 1979.
He also travelled to Malaysia, Indonesia, Mexico and Australia. When Nigeria announced a $2 cut in prices, he rushed there, trying to convince the military regime that they were playing with fire, that they could trigger a price war which might be fatal. They didn’t believe him.
Neither did the Norwegians, as Statoil followed the Nigerians by knocking $1.50 off its North Sea oil.
“He came to Oslo for two days,” says Kaare Kristiansen who was the Energy Minister at the time. “He was always stressing that oil-producing countries should stand together and show solidarity to each other. He also thought we should in some way be connected with OPEC. But that wasn’t our policy at all because we are associate members of OPEC and you cannot be both.”
Yamani was desperate to make the Norwegian minister realize that the $1.50 price cut was unnecessary. But Kristiansen wasn’t any easier to persuade than the Nigerian generals.
“The problem was that our buyers knew the formal price in OPEC was not the real one. They weren’t willing to pay our state oil company a higher price than they were willing to pay other producers.”
The way Kristiansen saw it, OPEC brought these hard times upon itself. “By using mixed oil grades and netbacks and barter deals, they’d undermined the pricing system themselves. We in Norway have no possibility of making such tricks so we have to put the real price on our long-term contracts. We cannot hide that the real price is lower than the formal price.”
Yamani wasn’t prepared to agree with his opinions of OPEC, although Kristiansen did discover they had at least two things in common.
God.
And dried fish.
“He’s a very easy going man,” says Kristiansen, “and rather pious. As I’m a believing Christian and he is a believing Moslem, we exchanged opinions about that. There he seemed to be very understanding. Two believers, even if they believe in different religions, share a great deal.”
As for the dried fish, Kristiansen had picked Yamani up at the airport to bring him to a government guest house. On the way into town, Yamani asked his host about the Norwegian delicacy, a heavily salted cod that is specially dried on the mountains along the sea. He said that, as a boy, he’d eaten such fish in Saudi Arabia and that getting some now would be a very nostalgic experience. Kristiansen promised to see what he could arrange.
He dropped Yamani at the guest house and gave him some time to settle in. When he returned a little while later Yamani wasn’t there. He’d already asked the guest house staff if they knew where he could get some dried fish. They told him. And so he went out alone to buy some.
*****
The Saudis were slipping deeper and deeper into trouble.
Fahd’s 1983/84 budget listed cuts unilaterally across the board. Defense, down 18.5 percent. Manpower development, down 12.8 percent. Social development, down 20.1 percent. Transport and communications, down 23.3 percent. Economic resources, down 40.1 percent. Infrastructure, down 18.1 percent. Municipal services, down 27.3 percent. Administration, down 5.5 percent. Lending institutions, down 14.5 percent. Domestic subsidies, down 19.2 percent.
The country was simply not earning enough to pay for all the ambitions they had when the world was oil dry. And in Saudi Arabia, turning back those spending programs meant losing face. It also meant political discontent among people who had grown accustomed to having their raised standard of having expectations met.
In the middle of May 1983, Fahd began a reshuffling of his cabinet. A rumor leaked out of the closed-door palaces of the Al Fahd that Yamani was to be replaced as oil minister. Out of respect for his 21 years of service he would become a special adviser on foreign affairs.
A Beirut newsletter, the Arab Report and Memo, said that his replacement would be Hisham Nazer. When it didn’t happen right away the rumor-mongers promised, it will. It was the closest they’d come so far to being right.
In April 1984 the Saudi Health Minister, Dr. Ghazi al Gosaibi, was fired.
Often referred to as one of the most efficient technocrats in Fahd’s cabinet, Gosaibi was also sometimes referred to as one of the most powerful non-royals in the kingdom. A reformer who didn’t hide his feelings about corruption in the government, for example, Gosaibi didn’t like the way Prince Sultan doled out defense contracts and he said so. Then he published a poem in a newspaper criticizing the king. He was history within hours. Gosaibi only learned of his firing when he heard about it on the radio.
Privately, Yamani had been saying for years that all government officials should be required to make an annual declaration of wealth. He felt that might slow down some of the kick-backs and commissions that come out of deals finagled by so many people in Saudi Arabia simply by knowing how to work from within the kingdom’s labyrinthine bureaucracy.
But such disclosures would never sit well with the Saudi royal family. After all, they get their percentage of the action too. So Yamani was, at various times, quietly reminded that he had enough to worry about with the oil business. All the more so now that the oil business wasn’t so good.
The Saudis were in trouble.
So was Yamani.
*****