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Development of the Modern State
Oil was discovered in 1936 by the U.S.-owned Arabian Standard Oil Company, which later became the Arabian American Oil Company (Aramco). Commercial production began in 1938. Saudi Arabia is a charter member of the United Nations. It joined the Arab League in 1945, but it played only a minor role in the Arab wars with Israel in 1948, 1967, and 1973. An agreement with the United States in 1951 provided for an American air base at Dhahran, which was maintained until 1962. Ibn Saud died in 1953 and was succeeded by his eldest son, Saud, who soon came to rely on his brother, Crown Prince Faisal (Faisal ibn Abd al-Aziz ibn Saud), to administer financial and foreign affairs.
King Saud at first supported the Nasser regime in Egypt, but in 1956, in opposition to Nasser, he entered into close relations with the Hashemite rulers of Jordan and Iraq, until then the traditional enemies of the Saudis. He opposed the union in 1958 of Egypt and Syria as the United Arab Republic and became a bitter foe of Nasser's pan-Arabism and reform program. When, in Sept., 1962, pro-Nasser revolutionaries in neighboring Yemen deposed the new imam and declared a republic, King Saud, together with King Hussein of Jordan, dispatched aid to the royalist troops. The Saudi family deposed Saud, and Prince Faisal became king in Nov., 1964.
Relations with Egypt were severed in 1962, but after the defeat of Egypt by Israel in June, 1967, an agreement was concluded between King Faisal and President Nasser. According to the agreement, the Egyptian army was to withdraw from Yemen and Saudi Arabia was to cease aiding the Yemeni royalists. By 1970, Saudi Arabia had withdrawn all its troops, and relations with Yemen were resumed. Saudi Arabia also agreed to give $140 million a year to Egypt and Jordan, which had been devastated in the 1967 war with Israel. In view of Britain's withdrawal from the Persian Gulf area, King Faisal pursued a policy of friendship with Iran, while encouraging the Arab sheikhdoms that had been under British rule to form the United Arab Emirates. King Faisal, however, maintained claims to the Buraimi oases, which were also claimed by the Sheikh of Abu Dhabi.
In 1972 the government of Saudi Arabia demanded tighter rein on its oil industry as well as participation in the oil concessions of foreign companies. Aramco (a conglomerate of several American oil companies) and the government reached an agreement in June, 1974, whereby the Saudis would take a 60% majority ownership of the company's concessions and assets. The concept of participation was developed by the Saudi Arabian government as an alternative to nationalization. King Faisal played an active role in organizing the Arab oil embargo of 1973, directed against the United States and other nations that supported Israel; as U.S. oil prices soared, Saudi revenues increased. Relations with the United States improved with the signing (1974) of cease-fire agreements between Israel and Egypt and Israel and Syria (both mediated by U.S. Secretary of State Henry Kissinger) and by the visit (June, 1974) of President Richard M. Nixon to Jidda.
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