Saudi Arabia Facing a Double-Barreled Gun

The two F-15 fighters thundered down the runway of King Abdul Aziz Air Base and rose steeply into the skies above the gulf. The flashy maneuver, conducted last week for visiting American Vice President George Bush, displayed the impressive might of a Saudi Arabian air force that has been largely trained and equipped by the U.S. Yet the show of strength was also a reminder of the dangers that confront Saudi Arabia, a fabulously wealthy kingdom that sits atop the largest proven oil reserves on earth. Faced with plunging revenues at home and increasingly ominous military threats abroad, the Saudis are passing through anxious times. Declared King Fahd ibn Abdul Aziz last month in a nationwide address: "We are surrounded by the most critical conditions we have ever faced."

Indeed, the Saudis find themselves staring at a double-barreled gun. While their policies caused the drop in oil prices from $28 per bbl. to $10 per bbl. over the past six months, that decline has cut deeply into the kingdom's revenues. Compounding its woes has been the continued collapse of a building boom that transformed the desert nation (pop. 6 million) into a land of superhighways, high-rise offices and shopping malls. At the same time, recent successes of Iran in its war against Iraq (see following story) have made the security-conscious Saudis extremely nervous. By invading Iraq's Fao Peninsula last February, the Iranians established a menacing threat to Saudi Arabia and its equally vulnerable gulf neighbors. The danger was underscored last week when an Iranian helicopter gunship fired a missile into a Saudi oil tanker in gulf waters, leaving four crewmen missing and seven wounded.

The threat posed by Iran has led the Reagan Administration to propose selling the Saudis $354 million worth of air and sea missiles. The White House last week sent formal notice of the sale to Congress, and now faces an uphill battle to head off expected disapproval of the deal. For his part, * Bush last week stressed Washington's commitment to Saudi Arabia during his eight-day tour of the gulf region. The Vice President repeated the Administration's determination to maintain the free movement of oil and proclaimed that the U.S. does "not want to see Iranian expansion result in a change in the balance of power in this area."

So frightened are the Saudis of foreign intrusion that they have embarked on a substantial military buildup. Growing concerns about the safety of its oil fields have led the kingdom to boost defense outlays every year since the Iran-Iraq war started in 1980. Allocations for defense and internal security are now Riyadh's largest single expenditure. They totaled $17.7 billion last year and represented nearly a third of all government spending.

That is a heavy burden for even so rich a country as Saudi Arabia, especially since its great wealth has begun to shrink. From a peak of $113 billion in 1981, Saudi oil earnings dropped to $28 billion last year. Uncertainty over petroleum prices and revenues prompted Fahd last month to take the unprecedented step of postponing approval of the country's new budget until summer. To the Saudis, accustomed to decision making by royal decree, the delay was a sign of indecision and uncertainty at the country's highest political level.