Saudis use contracts to lure support from US business

Quietly, Saudi Arabia is threatening to cut US firms from lucrative contracts if the companies do not persuade Congress to approve sales of military hardware to the Middle East kingdom, report US officials.

At stake for American business interests, hint the Saudis, is the US share in "post-oil" economy over the next five years, with particular emphasis given to building private industry.

This new Saudi drive began after the apparent success of American business in helping President Reagan with his economic drive in Congress.

Because the "basic bedrock" US-Saudi relations is private business, the Saudis believe they can use the lobbying clout of American corporations to put tremors under reluctant US lawmakers.

"Good politics is good business," warned Sheikh Ismail Abu Dawood, president of the Council of Saudi Arabian Chambers of Commerce and Industry in an interview. "The efforts of businessmen from both countries will bring a friendlier relationship in diplomatic relations."

This summer the Reagan administration will ask Congress for an "enhancement" package -- mainly bomb racks -- for the 60 F- 15 fighters purchased by Saudi Arabia. And still on the Saudi shopping list are the sophisticated radar planes known as AWACs -- an issue that has yet to be addressed by US lawmakers.

Saudi Arabia's ambitious "post-oil" development program includes $30 billion for education, $16 billion for electrification, $11 billion for health, $6.5 billion for housing, $8.5 billion for industrial complexes, $7 billion for ports , $4 billion for potable water, and many other projects.

Last year, the US exported $5.7 billion in goods and services to the Arab nation, the eighth largest market for the US. Currently, 425 US firms and some 40,000 Americans work in Saudi Arabia, with many more Americans employed in support jobs back home. A reduction of just $1 billion in US-Saudi trade would cost an estimated 30,000 to 40,000 American jobs.

The new Saudi assertiveness in warning US businessmen not to take them for granted represents a fundamental change, note US officials. Instead of adjusting its oil production levels or shifting its vast financial wealth in money markets, the Saudis can easily open or close lucrative trade deals as a diplomatic carrot-and-stick.

In the mid-1970s, Saudi Arabia's need to spend its new wealth brought a swarm of international businesses into the country. American contractors, for instance, already have built $24 billion worth of roads, buildings, and other structures in the desert state.

Last year the Saudis imported $30 billion in goods and services, and will top that with an estimated $39 billion this year. The US share, now about 20 percent, has begun to level off, and perhaps drop due to increased competition from other nations and from such US-imposed constraints as the Foreign Corrupt Practices Act.

The State Department's Saudi Arabia experts anticipate "silent" pressure on Congress from businessmen who feel they would lose Saudi business if the arms sales are not approved.

"If Saudi Arabia denies contracts to US firms who do not lobby hard enough, there could be potential trouble," says Karl S. Reiner, Saudi specialist in the US Department of commerce.

But the Saudis may be mistaken in believing that US business can get what it wants on Capitol Hill, says a State Department official.

If the Saudis receive the military equipment, however, would there be more trade for US companies?

"Undoubtedly," says Mr. Abu Da wood.