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Bombings May Curb Investment in Saudi Arabia

But experts don't expect the terrorist attacks to trigger a major pullout by U.S. firms.

May 14, 2003|Evelyn Iritani, Peter Pae and David Streitfeld | Times Staff Writers

The terrorist attacks in the Saudi capital of Riyadh are unlikely to cause many U.S. companies based there to pull out, especially since many of them are oil or defense concerns accustomed to operating in troubled regions, business experts said Tuesday.

But they warned that the bombings could deter prospective investors, striking a blow to the Bush administration's newly launched campaign to develop a free-trade zone in the Middle East within the next decade.

"This has to be a major concern of any corporation of significance which is pondering investment or operations in much of the Middle East and possibly other countries as well," said Gary Hufbauer, senior fellow at the Institute for International Economics in Washington. "This really raises the challenge of trying to attract companies there."

Executives in Riyadh were warned by U.S. officials last week that terrorists were planning attacks against the U.S. community, which includes representatives of more than 500 corporations. In some cases, companies added guards and security gates to their facilities. Nevertheless, nine suicide bombers shot their way into three expatriate housing compounds Monday and triggered explosives that killed at least 29 people, including the bombers.

Seven U.S. citizens were among nine employees killed at a facility housing Vinnell Corp., a subsidiary of Los Angeles-based defense contractor Northrop Grumman Corp.

On Tuesday, the U.S. Embassy in Riyadh advised Americans in a message on its Web site that they "should evaluate their own security situations, and should consider departing Saudi Arabia."

Between 35,000 and 40,000 Americans live in Saudi Arabia, including 12,000 in Riyadh. The expatriates include those working for the Saudi state oil company and related businesses, construction, technology and accounting firms, the health-care industry, schools and nongovernmental organizations.

But the $20-billion U.S.-Saudi trade relationship is dominated by the kingdom's rich oil resources and the close U.S. ties to the Saudi military. Ninety-five percent of U.S. imports from the kingdom are crude oil, and the bulk of U.S. exports are aerospace and military equipment and supplies for the oil industry.

The kingdom is also home to firms that support the oil and defense companies. There are banks that handle the billions of dollars flowing back and forth. There are engineering companies, computer software firms, telecommunications businesses and soda bottlers.

All tie Saudi Arabia and the United States to each other, illustrating the march of economic globalization and the penetration of non-Islamic influences in the birthplace of Islam.

As the relationship has expanded, Saudi Arabia is believed to have spent more than $6 billion on military advice, support and medical services provided by U.S. companies.

Many of the major U.S. firms with large operations in the kingdom -- including Boeing Co., Raytheon Co., Exxon Mobil Corp., ChevronTexaco Corp. and Procter & Gamble Co. -- declined to discuss security issues, fearful of divulging any information that would further endanger their employees or their operations.

"When there are events such as this, we review our security measures and improve them where appropriate," said ChevronTexaco spokesman Fred Gorell. "But anything that has to do with security, the location of our employees or families, then we don't comment." No ChevronTexaco employees were injured in the blasts.

Chicago-based Boeing, which has employees in Saudi Arabia working on the AWACS -- or Airborne Warning and Control Systems -- and F-15 fighter jet programs, has evacuated its personnel and suspended all travel to the country for now. Spokesman Bob Jorgensen said three employees were slightly hurt by flying glass during one of the explosions, at the Jadawel compound, where other defense companies such as Northrop and Lockheed Martin Co. also house their workers.

McDonald's and Kentucky Fried Chicken have also set up shop in Saudi Arabia, where their sales have been hurt by anti-American boycotts triggered by the U.S.-led invasion of Iraq.

David Hamod, president of Intercom International Consultants in Washington, said the boycotts were sporadic and not representative of Saudi consumers. But he acknowledged that U.S. companies are increasingly viewed as vulnerable targets for critics of the United States.

"American business is on the front line in promoting U.S. goods and services around the world, and when you're out in front, you're exposed," said the consultant, who works with U.S. firms in the Middle East.

One U.S. investment manager who handles money for leading Saudi families said the use of suicide bombers had triggered anxiety in Riyadh because it marked a substantial ratcheting up of terrorist strategies. He expressed concern that there would be a pullback by major U.S. service firms.

Aliso Viejo-based Fluor Corp., which has about 300 employees in Saudi Arabia, is overseeing the development of an $800-million petrochemical processing plant in the city of Jubayl. "We'll continue to work there, and follow the recommendations of various agencies about what they believe is safe or not safe," Fluor spokesman Jerry Holloway said.

Bechtel Group, which has offices in Riyadh and Khobar, is leading a multi-decade project to build a city from scratch on the Arabian Gulf.

Citing security concerns, a spokesman declined to say how many of his firm's 1,000 employees in the Middle East are in Saudi Arabia or what the impact of the bombings would be on its operations.


Times staff writers James Gerstenzang and Elizabeth Douglass contributed to this report.

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