Newsweek International 2006-04-03 19:20:28Quick, name a leader whose every word can roil or calm the markets from Tokyo to Wall Street. Now that U.S. central bank boss Alan Greenspan is retired, and his successor is still settling in, that description may best apply to Saudi Oil Minister Ali Naimi, who has in fact been described as the Greenspan of oil. "Naimi chooses his words carefully because he realizes the impact they have," says Frank Verrastro, an energy expert at the Center for Strategic and International Studies in Washington. "He knows the industry intimately. He knows whom to talk with to get things done." Naimi is, in effect, the world's central banker of oil, chief lord of its oil cartel and guardian of its largest oil reserves. Though deliberately low profile, Naimi is widely regarded as the most influential Saudi oil minister, ever. Where the Fed uses the U.S. money supply to stabilize world markets, the Saudis use vast oil reserves. When Hurricane Katrina cut U.S. refining capacity, Naimi soothed markets by quickly declaring that Saudi Arabia would make up the shortfall. In March 2003, with war raging in Iraq, Riyadh announced it was ready to tap its excess capacity of 2 million barrels per day to ensure a steady supply. A Stanford grad in geology who jogs every morning, Naimi works easily with Westerners, but is as fiercely independent as any central banker. He has built up Saudi oil exploration skills in a country once dependent on American or European expertise. "Those oil wells are his babies, and he treats them that way," says Verrastro. Under King Abdullah bin Abdel Aziz, he has become the monarch's top economic adviser. Where Greenspan taught even soft-money Democrats to embrace stable prices, Naimi is the first leader of OPEC to persuade its members that stable oil prices benefit them, too. Born to a poor family, he was raised among Aramco tanker trucks and drilling rigs. As a 15-year old clerk, according to Aramco lore, he vowed he would one day take the helm, which he did in 1984. When he became Oil minister in 1995, OPEC was in trouble. Members were defying production caps as oil prices sagged. "Naimi's performance has been fantastic," says Leonardo Maugeri, a senior vice president of Italian energy giant ENI. "Few people know how difficult it is to impose discipline over OPEC, and he did it." Of course oil prices have since risen sharply-but in contrast to previous oil shocks, few blame a greedy OPEC. Naimi is seen as a trustworthy and authoritative voice on the real state of the oil supply. In April 2004, with oil prices nearing $40 a barrel, Naimi began voicing concerns about supply bottlenecks at the "downstream," or refining end of oil production. So did Greenspan. Their remarks intensified a buying spree of shares in oil refiners. Naimi knows volatile prices could inspire a new conservation movement in the West, with dire consequences for his country. Falling oil prices deflated Saudi per capita incomes in the '70s and '80s, and rising prices are a big reason that Saudi incomes are rising again today. Seeking to calm Western fears about the reliability of Middle Eastern oil supplies, Naimi last May made the most candid remarks ever heard from a Saudi oil minister about the kingdom's plans, vowing to both build up spare capacity and boost production. In an interview, Naimi shows clear irritation with the subsequent speech by President George W. Bush, calling on America to beat its "addiction" to Middle Eastern oil. "We have always maintained spare capacity," he says. "Whenever there is instability that threatens oil supplies, there is always a bailout from the so-called 'unstable' Middle East, where people are doing their best to meet the world's needs." The higher the price-oil closed last week at $64 a barrel-the greater Saudi Arabia's clout becomes. Saudi oil revenues could hit $305 billion this year, up from $63 billion in 2001. Yet this windfall would be far larger if Riyadh did not keep huge reserves to steady the market. Some analysts now wonder: at what point do the cost of reserves outweigh the political gain of being the world's central bank for oil? Naimi insists that Saudi plans to spend $50 billion by 2010 on new production capacity will maintain its role as the global source of last resort. Naimi, 71, is also the last of a cosmopolitan generation that rose on merit, rather than filial ties to the monarchy. He came of age at Aramco when it was still an American finishing school for oil technocrats and engineers. That period ended with the nationalization of Aramco in the early 1970s. "Naimi is from the last generation that was exposed to different ways of doing things, both in Saudi Arabia and the U.S.," says Edward Chow, an oil consultant and former Chevron executive who has worked closely with Aramco. "What happens after him? There are probably a lot of princes who would like his job." But there are few who can match his savvy in protecting Saudi oil interests. Maugeri, for one, believes Naimi vowed to reopen Saudi fields to American exploration in 1999 as a way to pressure OPEC members to obey quotas. Once oil prices were rising again, says Chow, Aramco began to reassert its grip on exploring Saudi fields. A spokesman for Naimi denies the oil ministry has tried to block foreign exploration. Yet foreign companies have downsized ambitions, and are now pursuing modest bids to process natural gas. That leaves Naimi with a firm hold on even future reserves in his oil bank.