(contents)
Chapter 3 The grace of Allah – Oil boom (11)
074 Saudi Arabia appeared on stage (3/4)
Abdul Aziz Al-Saud, the first king of Saudi
Arabia, and his son Crown Prince Saud bin Abdul Aziz, the second king, were
unaware of the true value of petroleum. They were satisfied with the small
amount paid by US oil companies as concession fees. They overlooked the fact
that the companies pocketed the most of oil wealth. Concession fees, however,
were enough to enrich the king and his family. It was not necessary for the
king to distribute oil wealth to the ordinary citizens at that time. The second
king Saud wasted lots of money for his extravagant life. The state finance was
faced in crisis.
In 1964, King Saud was abdicated. His younger brother Faisal
reigned to the third king. King Faisal was wise and he tackled modernization of
infrastructure. He improved roads, harbors, urban planning, education and
medical treatment changing Saudi Arabia into a modern state. The world economy
was in the path of post-war reconstruction era. The consumption of petroleum
increased rapidly as essential energy resource. Oil producing countries got the
power year after year.
King Faisal made effort to increase the oil revenue as much as
possible which was the only one resource of the state revenue. He ordered Ahmad
Zaki Yamani, then oil minister, to negotiate with oil companies. Dr. Yamani who
got a degree in law from Harvard University negotiated with oil companies as
the centerpiece of OPEC. Negotiations with Seven Sisters were impossible by
Saudi Arabia alone. Seven Sisters paid no attention for the demands of Saudi
Arabia and other OPEC countries at first. The contract term was extremely
difficult to revise. But tough negotiations brought OPEC the outcome of the
royalty-expensing procedure in Jakarta meeting in 1964. And then at General
Meeting in Kuwait in 1966, the tax calculation was changed. The posted price
had become a tax reference price rather than a true market price. OPEC has
steadily got the fruits.
(To be continued ----)
(From an ordinary citizen in the cloud)
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