11-03-04 The Saudis are turning away from the US and towards Russia, China and Europe all of whom opposed the war in Iraq and are at odds with the Bush administration to some degree. On 26 January, the Russian oil giant LUKoil signed a contract for exploration and production of natural gas in the Rub al-Khali area, the first deal of its kind with a Russian company.
Over the following two days, Saudi Arabia also signed a similar deal with China's state-owned Sinopec Group and with a European consortium headed by Italy's ENI and Spain's Repsol. Last year, European majors Shell and Total of France were awarded a similar exploration-production contract.

US oil companies were conspicuous by their absence and the political message was clear. ChevronTexaco had bid for all three of the latest deals but was excluded by the Saudis after several years of negotiations. That has left Chevron and other US oil companies out of the upstream gas ventures that outsiders hope will eventually give them a stake in Saudi Arabia's oil industry, which was nationalised in 1975.
The trio of new contracts are small measured against Saudi Arabia's vast hydrocarbon reserves but they have created potentially important new alliances outside the US orbit. Russia is the world's second biggest oil exporter after Saudi Arabia and a potential rival of the kingdom, and has long sought a political and economic foothold in the region.

The unprecedented deal struck by LUKoil, Russia's biggest oil company in terms of sales, marks a strategic rapprochement between the world's two leading producers and underlines Moscow's growing role in the global energy market.
Although the bulk of Saudi Arabia's crude exports have gone to the US in the past, increasingly the Gulf producers have been looking to the burgeoning energy market in Asia. China, which became a net importer in 1993, has been breaking into oil sectors around the world to ensure supply for its rapidly expanding economy. Most of China's steadily growing oil imports are from theGulf. Many see China eventually posing a major challenge to the US.

Our prediction:
Expect to see more of the same from Riyadh, especially as US pressure on the House of Saud intensifies. General John Abizaid, who heads the US Central Command in the region, declared on 29 January that Saudi Arabia, along with Pakistan, is a "broader strategic problem" for the US than either Iraq or Afghanistan. That reflected growing concern in the Bush administration for the kingdom's stability and future.