Israel Caught in Oil Squeeze Play

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AP

Madeleine Albright talks with Saudi Crown Prince, Abdullah in the Saudi capital

Saudi Arabia doesn't like Saddam Hussein. And besides, there's money to be made pumping more oil at current prices. That meant good news Monday for Western consumers, as Iraq was forced to back off from its threat to cut its oil output and reopen the taps it closed last Friday. Baghdad was left little choice after the Saudis undertook to fill the shortfall left on world markets by the withdrawal of Iraq's daily output of 2.5 million barrels, thereby nullifying the impact of Saddam's latest gambit. Iraq had hoped that by raising pressure on the world oil price it would strengthen its campaign to break out of the U.N. sanctions regime imposed on Baghdad at the end of the Gulf War.

One country that will find little to cheer about in the Saudis' latest rescue of Western consumers is Israel. While it's in Saudi Arabia's self-interest to help out the West in this instance — both to maintain stability in world oil prices and to deny a victory to its belligerent Iraqi neighbor — Riyadh also has some demands of its own. The Saudi leadership is reportedly outraged by Israel's reaction to the latest Palestinian uprising, and wants to see the U.S. play a more evenhanded role in the region. Crown Prince Abdullah, de facto ruler of Saudi Arabia since his half brother King Fahd's stroke, has warned, for example, that the kingdom would break ties with any country that moved its embassy to the disputed city of Jerusalem.

Israel proclaims the Holy City as its capital, and although few countries have moved their embassies there from Tel Aviv, moving the embassy there is a popular call in U.S. domestic politics. Indeed, both the Gore and the Bush campaigns committed themselves during the election to moving the embassy, but they may be reluctant to stir up Arab hostility — particularly if that translated into higher oil prices. Of course, the Saudis are not threatening and make no overt linkage between their geopolitical positions and their stance on oil prices. In fact, Saudi Arabia's official position is that it wants the oil price issue depoliticized. But there is mounting domestic political pressure on the royal family to take a tougher stand on Israel and distance itself from U.S. influence. Moments like the one last week when an Iraqi gambit on oil suddenly made Saudi Arabia Washington's most important friend in the region highlight the U.S. need to keep the Saudis sweet. And in the Middle East, Washington can't please all of its friends all the time.