by Robert Baer
Bandar was not someone to be joked with, even by the president’s CIA director. If Bandar suspected the CIA was undermining the kingdom in any way, he would complain to the president, then let loose a pack of rabid K Street lobbyists on the agency. Let’s say some case officer in Berlin decided to “pitch” a Saudi diplomat, or try to recruit him to spy for the CIA. Recruited, the Saudi would be able to tell the CIA what, for instance, the religious-affairs section of the embassy in Berlin was doing, like maybe funding terrorist cells in Hamburg. Instead, assume the Saudi turned down the pitch and reported it to Riyadh. The case officer would hear the crystal breaking all the way from Berlin. As soon as the president put down the phone and recovered his hearing from Bandar’s screeching, there’d be a call from a lobbyist, maybe one of the president’s old political chums. “Mr. President,” the lobbyist would purr into the phone. “We really must keep a better eye on those cowboys out at Langley. You know we have this big Boeing deal coming up, and if Bandar…” Act Three opens twenty-four hours later with the young case officer on an airplane back to Washington to start his new job: handing out towels in the CIA’s basement gym.
Cowed by the same unspoken fears, the CIA’s directorate of intelligence avoided writing National Intelligence Estimates on Saudi Arabia. It knew that NIEs - appraisals drawn from across the intelligence community, including the CIA, the Defense Intelligence Agency, and elsewhere - often find their way onto the front pages of U.S. newspapers and from there on to Bandar’s breakfast tray, next to his fresh rose, croissant, and cup of Earl Grey tea. The directorate also knew the president hated reading bad news about the kingdom. It was one thing for Rwanda to go in the toilet, but not his good friends the Al Sa’ud. So I guess the CIA was on to something when it treated Saudi Arabia like a domestic problem.
So what do the Saudis have on the president, or the State Department? I’ll start by saying I don’t believe in conspiracies; I don’t think Washington has ever been able to keep a secret. It’s something a lot more subtle and insidious. It’s what I call a consent of silence, or, more politely, deference. (A circumlocution preferred by certain ex-ambassadors to Riyadh who have chosen to turn a blind eye to the kingdom’s dissolution.) It all begins with fast money, a category in which I include cheap oil. Saudi Arabia has lots of money and lots of oil. The country also proved over and over that it was willing to spend it, as well as open the oil spigots anytime we asked. With a national capital addicted to fast money and cheap oil, complaining about the situation was considered bad form, like pissing in the village well. No one wanted to hear it, and no one wanted to do anything about it. The only people willing to tell the truth were on the political fringe, and they were smugly dismissed as cranks.
4. Saudi Arabia - Washington’s 401(k) Plan
IF YOU’VE EVER SPENT serious time in the Middle East, you know it’s virtually impossible to pick up a tab. What usually happens at the end of dinner is that your Arab friend pretends he’s going to the bathroom but veers off to corral the maître d’, pull him out of sight, and pay. It’s done so smoothly, you don’t notice a thing. Another trick is for your friend to make sure you end up at a restaurant where he knows the owner: Then there’s no way you can pay. Among Levantines, this ritual about who pays for dinner is a sign of hospitality; rarely does it involve any sort of quid pro quo. For the Saudis and rich Gulf Arabs, it’s a matter of buying and selling people. If you hold yourself out as an alpha dog, you have to pick up the tab to remind the other dogs where they fall in the pack.
During the lead-in to the Gulf War, I was in Paris and got to see this money ritual up close. One night I invited four prominent Kuwaiti opposition leaders to dinner at the Ritz Hotel, maybe Paris’s fanciest. (Princess Diana and Dodi Fayed had their final tryst there before they died in a car accident later that night.) The Ritz was normally too pricy for my CIA expense account, but the gritty charm of my usual Paris dives would have been wasted on the Kuwaitis. They may not have been royals, but they were fabulously rich.
As we were about to order, the Kuwaiti minister of petroleum, ‘Ali Al Sabah, entered the restaurant, pulling in his wake a score of retainers. Passing our table, he nodded vaguely to my Kuwaiti friends, then stopped dead in his tracks when he caught sight of me. Normally, Gulf Arabs keep to themselves when they go out at night in cities like Paris and London. I was definitely out of place.
The petroleum minister came over to find out who I was. Shaking hands around the table, he pointedly came to me last, trying to make believe I was the furthest thing from his mind. I gave up only my name. Make the bastard work to find out what I do for a living, I thought to myself.
“And what brings you to Paris?” he finally asked.
The minister swallowed hard when I told him I worked at the American embassy. In those dark days before Coalition Forces gathered, stumbling across an American official meeting with the opposition was certain to ruin a Kuwaiti oil minister’s day. Not only did Kuwait’s ruling elite wonder if it was going to get its kingdom back; it was uncertain it would be allowed to rule even if it did. Having overrun Kuwait with nary a peep of opposition, Saddam Hussein might bypass the Amir and cut a deal directly with the Kuwaiti people to share power - the same people I was having dinner with. But that could happen only if the United States went along. Hence, the interest in moi.
The minister paused and then did what he knew best - threw money at the problem. With a crooked finger, he summoned the maître d’. “These gentlemen are my honored guests,” the minister said loudly enough for half the restaurant to hear. “Give them anything they ask for.”
Before the maître d’ could get away, the minister grabbed him by the arm. “And for my American friend, your best bottle of Bordeaux.”
For a split second, I considered telling the esteemed oil minister that while the Amir might be able to buy and sell the U.S. Treasury, our air force could still turn his sandbox into molten glass. I couldn’t, though; I had to think about my guests. A tussle over the check with the minister of petroleum would have caused them problems for years on end. As for the Bordeaux, halfway through dinner, I faked my own trip to the bathroom to check the wine list. It set back the Sabah something like $5,200, hardly worth a blink in Kuwait City.
Saudi Arabia’s seduction of Washington worked the same way: They paid, we took, and everyone politely averted their eyes. It all began with a lesson the Saudis learned at San Clemente, California, after the 1968 presidential election: America might be the most powerful nation on earth, but its leaders couldn’t say no.
ADNAN KHASHOGGI is almost a cartoon of the Saudi wheeler-dealer: a sometime venture capitalist and arms middleman, ridiculously rich (in fits and starts), and unapologetic for it. One day Khashoggi turns up in the newspapers accused of obtaining $64 million in illegal loans from the collapsed Bangkok Bank of Commerce. The next day he’s in the New York society columns, attending charity balls in the Hamptons and donating millions to help American farmers.
The son of the personal physician of Ibn Sa’ud, who founded the modern Saudi kingdom in 1932, Khashoggi was serving by the mid-1970s as middleman on an estimated 80 percent of all arms deals between the United States and Saudi Arabia. From Lockheed alone, he pocketed $106 million in commissions from 1970 to 1975. Other defense contractors contributed hundreds of millions more during the decade. Northrop officials told a Senate subcommittee looking into foreign payments by U.S. corporations that it had given Khashoggi $450,000 to bribe Saudi generals into buying the company’s wares - an allegation that didn’t prevent the Reagan administration from using Khashoggi as its own middleman during the Iran-Contra fiasco. (Having served as basically a pimp for the Shah of Iran in the 1970s, Khashoggi knew how to cut a dirty deal as well as anyone.)
In the late 1970s Khashoggi made a splash by trying to donate nearly $600,000 to three prestigious Philadelphia-area colleges - Swarthmore, Haverford, and Bryn Mawr - to establish a Middle East studies program that would create understanding and sympathy
for the Arab point of view. That plan fell apart after the Northrop bribe charges surfaced. Undeterred, the civic-minded Khashoggi jumped back into higher education in 1984 with a $5 million gift to American University, on Massachusetts Avenue in D.C., halfway between the White House and the Beltway. AU had planned to honor Khashoggi’s money by naming the school’s new sports center and convocation hall after him, but administrators changed their minds in the wake of the Iran-Contra hearings. Even universities have consciences, apparently.
By January 1987, when Time put Khashoggi on its cover as the prototype of the new international operator, he was a regular at Marbella, the jet-set-hot retreat on the Spanish Riviera, where he maintained a five-thousand-acre estate. Other addresses included Paris, Cannes, Madrid, the Canary Islands, Rome, Beirut, Riyadh, Jeddah, Monte Carlo, a 180,000-acre ranch in Kenya, and a $30 million, thirty-thousand-square-foot apartment on Fifth Avenue in New York with a pool overlooking the spires of Saint Patrick’s Cathedral. To get to and among his many homes, Khashoggi had his choice of the 282-foot yacht Nabila, the same one used in the James Bond movie Never Say Never Again; a DC-8, where he could rest on a ten-foot-wide bed beneath a $200,000 spread of Russian sable; two other commercial-size jets; twelve Mercedes stretch limos; and so on. (Time estimated the cost of Khashoggi’s lifestyle at $250,000 a day in early 1987, servants included, or a little over $91 million a year, roughly a quarter of the annual budget of Haiti, a nation of seven million people.) At Marbella, there was a small warehouse devoted to nothing but the Saudi’s wardrobe: over a thousand handmade suits alone, cleaned, pressed, encased in plastic, and ready to be shipped to any golden shore where their owner might happen to wash up for a few nights or more.
None of this normally would make the slightest difference to us as Americans. We all grew up with stories about the fabulous wealth of Arab sheikhs and their viziers. It started to make a difference, though, when the money slopped over into Washington or, rather, San Clemente. In late 1968, days after Richard Nixon won the White House, Khashoggi was one of the first to fly out to congratulate the president-elect. He didn’t forget to pass on the regards of Interior Minister Fahd - the prince who’d sent him to San Clemente and the current brain-dead king. When Khashoggi got up to leave, he “forgot” his briefcase, which happened to be stuffed with $1 million in hundreds. No one said a word. Khashoggi went back to his hotel to wait for a telephone call. The phone never rang. It never would. A couple days later, and Khashoggi knew the trick had worked: Washington was for sale. Like original sin, that changed everything.
You won’t find that tale in the history books. You can barely find anyone still alive to confirm or deny it. Having paid out so many bribes in his life, even Khashoggi probably doesn’t remember it. I heard the story from a source who was directly involved. Is it true? I don’t know. But it’s taken as gospel inside the palaces of Riyadh and Jeddah. Thanks to that story and a lot of others, Saudis believe Washington is no different from Rabat, Paris, London, or any other capital that has its hand out. And if anyone had any doubts, Nixon’s first visitor in the White House was Fahd. Nixon put him up at Blair House, the official White House guest residence strictly reserved for heads of state. See: It was all about money.
Five years later, when Nixon Treasury Secretary William Simon set out for Riyadh hoping to sell T-bills and bonds to a kingdom newly awash in petrodollars, he was armed with talking points like a pitchman making cold calls. “Investment directly with the U.S. Treasury can provide great convenience and protection against the adverse movements otherwise likely to face an investor when placing or liquidating large investments,” read one of the slides prepared for Simon.
The idea was to get the Saudis to underwrite the U.S. budget deficit. Eager to become America’s lender of last resort, with all the leverage that implied, the Saudis took the bait and happily swallowed it. Soon William Simon and Secretary of State Henry Kissinger had cooked up another scheme: the Saudi-U.S. Joint Commission on Economic Cooperation, which would create an infrastructure for “the new Saudi Arabia,” one modeled on the United States. The Saudis jumped on that one, too, and the commission worked after a fashion, a miracle considering Saudi Arabia is a theocratic tyranny without property or individual rights. But the only important thing was that the Saudis paid for everything - U.S. salaries, Saudi salaries, living expenses for American commission workers detailed to Saudi Arabia, the whole shooting match, depositing over $1 billion in a U.S. Treasury account.
Washington knows fast money when it sees it, but it had never seen anything like this. The cookie jar was bottomless. It wasn’t long before the Saudis were spreading money everywhere, like manure on a winter’s field. The White House put out its hand to fund pet projects that Congress wouldn’t fund or couldn’t afford, from a war in Afghanistan to one in Nicaragua. Every Washington think tank, from the supposedly nonpartisan Middle East Institute to the Meridian International Center, took Saudi money. Washington’s boiler room - the K Street lobbyists, PR firms, and lawyers - lived off the stuff. So did its bluestocking charities, like the John F. Kennedy Center for the Performing Arts, the Children’s National Medical Center, and every presidential library of the last thirty years. The Saudis even kicked in a quarter of a million dollars on a winter sports clinic for disabled American veterans.
Saudi money also seeped into the bureaucracy. Any Washington bureaucrat with a room-temperature IQ knows that if he stays on the right side of the kingdom, some way or another, he’ll be able to finagle his way to feed at the Saudi trough. A consulting contract with Aramco, a chair at American University, a job with Lockheed - it doesn’t matter. There’s hardly a living former assistant secretary of state for the Near East; CIA director; White House staffer; or member of Congress who hasn’t ended up on the Saudi payroll in one way or another, or so it sometimes seems. With this kind of money waiting out there, of course Washington’s bureaucrats don’t have the backbone to take on Saudi Arabia.
What’s going on here? The way I look at things, it amounts to an indirect, extralegal tax on Americans. Saudi Arabia raises the price of gasoline, then remits a huge percentage to Washington, but not just to anyone. A big chunk goes to pet White House projects; part goes into the pockets of ex-bureaucrats and politicos who keep their mouths shut about the kingdom. And a lot goes to keeping our defense industry humming in bad times. Add it all up, and Saudi Arabia is one of Washington’s biggest hitters.
Washington likes to describe all this with an inoffensive, neutral economic term: recycling petrodollars. But it’s plain old influence peddling. And by the way, the Saudi tax is a lot more efficient than the IRS. The Saudis do both the collecting and the spending, keeping Washington’s visionless bureaucrats out of it. The General Accounting Office and the Office of Management and Budget would only demand some pointless accounting for all that money.
THE SAUDI ARABIA of today isn’t the gold mine it was in the 1970s and early’80s, when it had more cash than sand. Back then the huge remittances to the U.S. didn’t put a dent in the Saudi budget. That all changed when the Gulf War ate up Saudi Arabia’s entire budget surplus. Since then the country has been living off credit and begging for money. But Riyadh knew it couldn’t back out, couldn’t quit running a parallel IRS. Pissing off Washington’s power elite was as dangerous as pissing off its fanatics.
Here’s an example. Throughout the nineties, Americans (and Europeans) consistently paid less for Saudi oil than Asians paid, on the average of $1.00 a barrel. In 2001, prices split sharply, with Americans reportedly buying Saudi oil for $4.83 less a barrel. That’s an effective discount of $2.8 billion a year - a discount off Asian markets at least. And in September 2001, in the wake of the September 11 attacks, the price disparity between American and Asian markets surged to a reported $9.66. Oil analysts I talk with dismiss the notion that Saudi Arabia has in place a program to sell discounted oil to the United States. Oil markets are extremely complicated, they tell me, and there are logical market reasons that Asi
ans from time to time pay more for Saudi oil. Asians, for instance, willingly pay a steep premium in order to secure their oil supplies, even buying higher priced spot contracts when markets are volatile. There are other considerations, like transportation costs and varying market structures, the fact that Asia produces almost no oil of its own, and the fact that Saudi Arabia is invested in U.S. downstream production. These factors alone, the oil analysts tell me, are what accounted for the wide price differences between Asian and Western markets in September 2001. As one analyst told me, “It’s simply that Asia pays a surcharge for its oil. There is no Saudi discount for oil going to the U.S.”
Be that as it may, the point is that Saudi Arabia has consistently forgone making enormous profits in tight markets, such as occurred after September 11. If the Saudis had taken even a little of their oil off the market on the afternoon of September 11 instead of pumping more, it could have made billions gouging Americans. The same thing happened in 1990 when Saudi Arabia and its Gulf allies opened their taps, making up for the five-million-barrel-a-day output lost from both Iraq and Kuwait. Had they wanted, they could have kept oil hovering above $100 a barrel and walked away from Desert Storm with a lot of money rather than a gaping deficit.
