Oil Policy

King Saud utilized to many of the qualified Saudis who had returned to their country after having studied abroad. Amongst them was Abdullah Al Turaiky, the first Saudi Minister for Petroleum in (1960-1380 H). And so was established the first Ministry of Petroleum and Mineral Resources.

King Saud wanted to rely on local managers to take control of the development drive in the country. He had taken several initiatives to promote trained and qualified manpower, starting by opening schools, institutes and universities, and by utilizing experts from neighboring and friendly countries, and by sending young Saudis abroad for further education. He was honest and fair in his relations on the personnel and social level; he set an example of the devotion to the best interest of the country and the nation. These were in fact the bases of his foreign policy. 

Knowing that oil was a vital source of income for his country, and abiding by the agreements clauses in force with international oil companies, King Saud kept dreaming of the day when Saudi Arabs will have the competence, qualifications and means to manage the industry and fully exploit all its aspects without relying on foreign companies. When asked to approve of new concessions to oil companies, he was always keen to provide the Government with higher shares than those given by previous concessions where shares of oil companies were higher than those of the Saudi government. He was also keen that Saudi Government had a stronger grip on those companies businesses and turnovers by introducing Government representatives into their boards in numbers equal to their shares percentages. Accordingly, King Saud granted the concession to the Japanese Oil Company on October 14, 1957/1377 H. Still wishing to benefit his country of a higher percentage of the profits, he asked for 56% of the profits instead of 50%. This step was considered as a "revolution" against traditional business conducted with such companies.

Other oil producing countries including Arab countries followed his lead and claimed higher interest rates from oil companies they were dealing ith1. He also ordered the foundation of a Saudi tankers company to carry Saudi oil to the markets. It was one of the many projects that aimed at including the Government and the Saudi citizen in the transportation operations profits. 
Behind this proposal were Abdullah Al-Sulaiman and Mohammed Ali Reza, the new Minister of Commerce then. They submitted their project in partnership with the Greek businessman Onasis who owned a huge fleet of tankers. King Saud did not hesitate to approve this project. The Aramco Company and the American Government made strong protestations against these proposals.

On April 20, 1954 corresponding to 17th Shaaban 1373 H, the first Saudi tanker capable of carrying 46,000 tons was inaugurated. It was named "King Saud the First". The American Secretary of State John Foster Dallas considered this project as the first step taken by King Saud towards imposing more control on the oil resources and thus jeopardizing the American oil companies' interests in the area.
[3] The situation became so critical that the American Secretary of State, Dallas, asked his ambassador in Jeddah, Ward Sworth, to remind King Saud of the outcomes of Mossaddeq's attempt to nationalize the Iranian oil industry. He declared "King Saud and his advisors must ask themselves where will they end up in three years, or even one year without the oil revenues1" if the Saudi oil was to be boycotted. In such case, the Americans were forecasting a disaster.
But King Saud was not troubled by these warnings and considered them as a direct interference in his country's affairs. With this confrontation, the unexpected happened. One of Onasis dealers sued him and exposed secret commissions exchanged amongst the litigious parties. The story was mediatized. At the same time, ARAMco Company sued Onasis (and won).

King Saud was informed of these secret commissions and was "shocked", so he decided, with some disappointment and regret, to abandon the project although, on the long term, it was of benefit to his Governri1ent and his country. It was said that Onasis, when recalling this incident, declared repeatedly that his project was what warned of the foundation of the OPEC (Organization of Petroleum- Exporting Countries) and of the nationalization of the oil industry in many producing countries.
The Kingdom played a leading role in founding OPEC. The Government of Saudi Arabia invited Iran, Kuwait and Iraq to a convention, which was also attended by Venezuela- to address this issue. Following the convention, all countries decided to found the OPEC. 

The Organization mainly aimed at joining forces and taking counsel in matters regarding oil prices fixing, including international prices, ensure the best interest of its members and defend their rights in oil industry and oil investment.
In the wake of this convention, OPEC was founded in 1380 H/1960. Along 'with Venezuela, Iran, Iraq and Kuwait, the Kingdom was one of the founding countries. The Minister of Petroleum and Mineral Resources, Abdullah Hammoud Al-Turaiki, signed for Saudi Arabia. The convention went into effect on January 1961.


Fahda Bint Saud



  1. ^ 1957 SAUDI ARABIAN REVIEW FOR ( 303 . P ) ( 6 . V ) SAUDI ARABIAN POLITICAL DIARIES Previous reference ( 1957 ) . ( P 303 )
  2. ^ Leasy Robert  ،. UK , London ( 1987 )، for arabic translation ( P 221 ).
  3. ^ A.H Al-Mamlaka Al-arabiya Al-saudia qam qadruha ،Abdulkareem Nuzl  – 2nd publition 1403.
  4. ^ Previous reference ( Page 223 )