June 28, 2010 / 2:23 PM / 8 years ago

FACTBOX-U.S.-Saudi relations ahead of Abdullah-Obama talks

RIYADH, June 28 (Reuters) - Saudi Arabia’s King Abdullah will meet U.S. President Barack Obama in Washington on Tuesday to discuss Israeli-Palestinian peacemaking, the nuclear standoff with Iran, and economic cooperation.

Here is some background on relations between the United States and the world’s largest oil exporter. Oil has always been at the heart of the political, diplomatic and economic links that tie Riyadh to its ally Washington.

STRATEGIC ALLIANCE

Since the modern Saudi state was founded in 1932 by King Abdul-Aziz, or Ibn Saud, father of all succeeding monarchs, the kingdom has nurtured ties with Washington that date back to Ibn Saud’s grant of an oil concession to a U.S. firm in 1933.

The king’s first trip abroad was to meet President Franklin Roosevelt on a U.S. destroyer in the Suez Canal in 1945.

Washington has relied on the world’s biggest oil exporter to play a moderating role in the OPEC cartel by countering demands by countries such as Iran or Venezuela for higher prices or the use of oil as a political weapon to pressure the West.

But the strategic alliance was tested to the limit by the Sept. 11, 2001, attacks on the United States by mainly Saudi hijackers loyal to al Qaeda leader Osama bin Laden.

Many U.S. officials then took a hostile line, arguing that Saudi Arabia’s lack of political freedom and its austere Islamic Wahhabi doctrine made it a breeding ground for militants.

Ties improved after the ruling family, allied to a rigid religious establishment, cracked down on militants who attacked Saudi and Western targets in the kingdom. Riyadh has reviewed its education system, fired hundreds of clerics for inciting anti-Western hatred and begun a scheme to reintegrate militants.

King Abdullah has also started an interfaith dialogue with Christians and Jews to show a more tolerant face of Saudi Arabia, which sees itself as bastion of Sunni Islam.

POLITICAL ISSUES

In 2002, Abdullah floated an Arab-Israeli peace plan, offering Israel normal ties with the Arab world in exchange for a Palestinian state in the West Bank and Gaza, with East Jerusalem as its capital, and an agreed solution for Palestinian refugees.

Saudi Arabia wants Obama to play an active mediating role and pressure Israeli Prime Minister Benjamin Netanyahu to make concessions in pursuit of peace with the Palestinians.

Riyadh has tried to contain the power of non-Arab, Shi’ite Iran. It fears tits interests could suffer if Iran cuts a deal with the United States or pursues nuclear work the West suspects has military aims as well as the declared peaceful ones.

The Sunni royals also worry about a shift in the regional balance of power after the 2003 overthrow of Saddam Hussein’s Sunni-based regime in Iraq, where Shi’ite factions now dominate.

TRADE

The kingdom has been buying U.S. weapons and other goods for decades but has in recent years boosted trade with Japan, China and European countries. The United States remains Saudi Arabia’s biggest trading partner but its market share in imports fell to 14.23 percent in 2009 from 19.7 percent in 2000.

Asian firms have won deals as part of a $400 billion Saudi investment plan to diversify the oil-dominated economy. European firm EADS last year secured a huge border security deal. U.S. Defense Secretary Robert Gates did not sign any big deals on his last two visits, diplomats says.

“No doubt U.S. products have been losing market share mainly to Asian and European competitors but the trade ties can’t be easily separated in importance from the overall geo-political umbrella defining the ties between the two countries,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh.

Reporting by Ulf Laessing; Editing by Mark Heinrich

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