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OnlineInvestorsNews Volume M 9-7, June 16th, 2004
a free supplement of The Growth Stock Report

Secure your Gold and Oil Positions
Saudi Arabia is on the Brink of Civil War

Bill Ridley
June 16, 2004

The last thing the United States needs right now is another conflict in the Mid East to deal with, but unfortunately America's key ally in that troubled region is showing signs that they are on the brink of a civil war. With 25% of the world's oil at stake, our next military mission will likely be in Saudi Arabia.

For the worst possible reasons, the likelihood of oil and gold dropping much further in price seems highly unlikely. In fact, it is very possible we could see a sharp price spike.

A couple of weeks ago, Secretary of Defense Donald Rumsfeld told graduates of the U.S. Military Academy at West Point that the "declared war on terror is closer to the beginning than the end."

This ominous statement was followed by a speech by President George W. Bush to Air Force Academy graduates at Colorado Springs, where he remarked that the war on terrorism will be the "work of decades."

Due to the inescapable fact that the source for terrorism funding and manpower comes mostly from Saudi Arabia and that Saudi is the major global supplier for oil, Rumsfeld and Bush could have just as easily said that securing the Mid East oil fields will be the work of decades.

Today, the biggest political and economic disaster in the making is taking place in Saudi Arabia. Increased al-Qaeda terrorist attacks in that country are a major reason why we are now paying more to fill up our cars and why inflation is on the rise.

Some energy economists are saying that the cost of a barrel of oil now has at $10 to $15 premium due to the uncertainty in the Middle East. In Saudi Arabia, analysts are worried that the ruling House of Saud are losing control of their homeland security and are showing signs that they are incapable of protecting their oil infrastructure.

Increased terrorist activity is hard for oil analysts to ignore. About 8 weeks ago a truck bomb blasted a main Saudi police station which was followed by the May 29th attack at a foreign workers compound in Khobar. An organization calling itself the al-Qaeda of the Arabian Peninsula later released statements denouncing members of the Saudi Royal Family and accusing them of plundering the nation's oil wealth.

You would think that a nation that controls 25% of the world's oil reserves would be a shining star for education and development for their people instead of the home base for terrorist financing and training.

So what happen?

Close examination reveals that the Saudi Royal Family of some 6,000 princes (women are excluded), along with favored business buddies like the bin Ladens, absorb virtually all the billions of oil revenues. Their shallow egos demand displays of material wealth and power evident by pampered palace living. One nurse who I know of who worked over there reported that one Saudi prince who she attended to had gold bars placed on his bedroom floor to keep his feet cool. And of course there are the chauffeured limousines, private jets, and western educations for the royals. This is another classic example of third world politics where the power elite keep themselves in luxury while their subjects are kept under strict control.

The Saud Royalty enforces strict Islamic laws and harsh punishments for the 22 million subjects under their rule. By our standards, the rule of the law is primeval. For the worst lawbreakers, public beheadings are still the norm.

To help keep the masses somewhat happy however, billions of dollars have been doled out to the under classes. These funds have gone to some positive things such as schools and mosques however there is a clear money trail showing that al Qaeda terrorists have also been on the receiving end.

Clearly, this terrorist financial support shows there is dissention within the ranks of the Saudi power elite. The clearest example being Osama bin Laden himself.

A couple of weeks ago, the House of Saud decided they should crack down on these misappropriated "charity" organizations that have supported terrorism. One such foundation called the Al Haramain Islanic Foundation has dished out about $50 million a year to groups who have links to terror organizations.

The situation is further complicated by power struggles within the top ranks of the Royalty. King Faud has been ill since 1995 and some reports suggest he is near death. This would leave Prince Abdullah as the defacto leader. However some within the House of Saud oppose Abdullah. And it would seem, so do many Saudi citizens.

The British newspaper, The Observer commented that "Anti-government demonstrations have swept the desert kingdom in the past months in protest at the pro-American stance of the de facto ruler, Prince Abdullah."

Saudi's minister of interior, Prince Nayef, who is also in charge of preventing terrorism, has strong support though he seems neutral toward the extremist element. Perhaps this is why four terrorists where able to disguise themselves as security forces and enter the well fortified foreign workers compound at Khobar which killed 22 people. More unbelievable is that the terrorists actually escaped while being surrounded by hundreds of security forces!

Aside from al Qaeda, much of the Saudi population are not big fans of the United States either because of the close ties we have had with Israel and because we have had a military presence there since the end of the Gulf War.

Once King Faud dies, the potential for civil war within Saudi Arabia will be high.

If Prince Nayef decides to challenge Prince Abdullah, he may have the help of terrorist supporters. Within Saudi Arabia there is a generation of hard core religious fanatics who have been brainwashed into believing they are on a mission to rid the world of non-believers. This is what one Arab writer has described as the "culture of death." These are the people who don't think twice about blowing up innocent people along with themselves.

This isn't a pleasant scenario however it's very real. More troubling is that if Saudi Arabia's oilfields ever go offline for too long, the world will go into a major economic tailspin.

Meanwhile, the targets of choice for terrorists in Saudi Arabia are the western workers who live and work there. Alex Standish, the editor of Jane's Intelligence Digest, said the situation in Saudi Arabia has strong parallels to the fall of the Shah of Iran who was toppled in 1979. He said there is a lot of evidence to suggest al Qaeda is gathering strength.

The bombings and assassinations are having there desired effect as westerners are starting to leave. If this exodus continues, oil shipments would be severely impaired. The United States and the rest of the industrial world are counting on Saudi to increase their oil production, not dial it back. It should be more then obvious the world will not sit idly by and wait for the Saudi's to sort out their political problems.

Having positions in gold has always been the best insurance policy against the potential for a major financial and political upheaval. It's been decades since global economic security has been in such tenuous position. The logic of owning gold in some form makes more sense today then ever before in our generation.

Jun 16, 2004
Bill Ridley
Website: Online Investors News


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