A ROLLER COASTER PERFORMANCE

Farming is alien to the desert habitat and the culture of its peoples. Scant rainfall of only 70-100 millimeters a year constrained Saudi food production and population growth. Until recent decades, little or no groundwater was extracted because pumping technology was not available. When Saudi Arabia became sufficiently oil-rich to purchase modern equipment and reclaim the land, large volumes of groundwater from mostly nonrenewable aquifers began to be extracted.

In the early 1960s, the Ministry of Agriculture and Water (MAW) started surveying groundwater resources. The effort was intensified in the 1970s using advanced tools and methods. The estimated volumes found by these surveys were alarmingly low to scientists, researchers, and others. In the early 1980s, however, two MAW studies concluded that considerably more groundwater reserves existed than had been previously estimated.[2] The studies of the 1980s were the justification needed by the government to embark upon an adventure to make parts the Arabian Desert green.

Having almost no expertise in settled farming, Saudi investors were induced by huge government subsidies to import the technology, equipment, seeds, fertilizers, engineers, and the farm workers required by these projects. As may be expected from a strategy declared in the name of food independence, wheat growing was emphasized. Within 12 years, between 1980 and 1992, wheat production grew 29-fold--from 142,000 tons in 1980 to 4.1 million tons in 1992[3]--making the Saudi desert the world's sixth-largest wheat exporting country.[4] Such a quantity was well in excess of the self-sufficiency requirement of a country of 17 million in population at that time;[5] or, the storage capacity of the government's Grain Silos and Flour Mills Organization of 2.38 million tons.[6]

To achieve this enormous growth, wheat-producing areas were increased by 857,000 hectares; or by 14-fold, from 67,000 hectares in 1980 to 924,000 hectares in 1992.[7] The overall irrigated surface increased during the same period by almost a million hectare.[8] To put the magnitude of this development in perspective, Egypt, with an estimated population of 58 million at that time, had an irrigated surface evolved over the centuries of 3 million hectares and wheat production of about 5 million tons.[9]

Beginning in 1993, however--under pressures from low oil prices since the second half of the 1980s, heavy spending on defense and security, the cost of the Iran-Iraq? (1980-1988) and 1991 Gulf wars, and the cost of maintaining the expensive lifestyle of some 4,000 immediate members of the Al-Saud ruling family--the government had to scale down its wheat-growing subsidy program.

Between 1981 and 1993, Saudi Arabia spent a total of $225 billion out of US$420 billion in total oil revenues on defense and security.[10] On the 1991 Gulf War, it spent $80 billion,[11] and on the Iran-Iraq War, it spent $25.7 billion.[12] Maintaining the ruling family is estimated to have cost $4 billion per annum during the 1980s,[13] and more in later years as the family grew. All this spending happened while Saudi budget deficits were at their peak, adding up to $130 billion between 1984 and 1992,[14] a period during which wheat subsidies reached their maximum too. Liquidity became so tight that the government had to delay (default) for a few years in honoring its financial obligations to thousands of suppliers, contractors, and farmers. The original amounts were eventually paid, without interest, in the form of medium term government bonds. The balance outstanding of these bonds as of the end of 2002 was $73 billion.[15]

Within four years, by the end of 1996, 76 percent of the new wheat-growing surface added between 1980 and 1992 were abandoned--650,000 hectares out of the 857,000 hectares.[16] Wheat production dropped during the same period by 70 percent, from 4.1 million tons in 1992 to 1.2 million tons in 1996.[17] By 2005, however, wheat production increased to 2.65 million tons.[18] On January 8, 2008, Reuters and other news agencies, quoting officials from the Saudi Arabian agriculture and finance ministries, reported that purchases of wheat from local farmers would be reduced by 12.5 percent, with the aim of relying entirely on imports by 2016.

On a related story, Saudi barley production between 1992 and 2000 showed similar steep fluctuations: In 1992, 62,000 hectares produced 417,000 tons of barley. In 1994, 316,000 hectares produced 2 million tons. Then, in 1995, a 55 percent drop in barley growing land to 145,000 hectares produced 794,000 tons, or 60 percent less barley than the previous year. By 2000, 26,000 hectares were left to produce 118,000 tons, for a drop of 94 percent from the 1994 level. Finally, by 2005, only 7,000 hectares of barley-growing land were left to produce a mere 47,000 tons of barley.[19]

The dramatic rise and equally dramatic fall of Saudi Arabia's cereal production reflected haphazard planning. The experience proved merely that throwing money to import the expertise and the machinery to extract mammoth volumes of water could make even a desert bloom, until either the money or the water ran out.

No accounting, however, has ever detailed the full cost of this adventure in terms of money or water.

THE FINANCIAL COST

For the sixteen years between 1984 and 2000, it may be estimated that the assessable cost of Saudi agricultural development could be put at about $85 billion,[20] representing 18 percent of the country's $485 billion in revenues from oil exports during the period.[21] This huge investment produced wheat at an average cost of more than US$500 per ton.[22] During the same period, the international market price for wheat averaged about $120 per ton.[23] When the waste resulting from abandoning the newly reclaimed and irrigated lands plus four unquantified government subsidies are added, the cost might more than double. The first unquantified subsidy is the government's price support to electricity and fuel, from which the farmers benefited. The second is the value of the concessionary borrowing terms on a total of $9 billion granted to 394,000 loans by the Saudi Agricultural Bank by 2000.[24] The third is the value of 1.67 million hectares of government land given away between 1980 and 1992 under the 1968 Regulation for Fallow Land distribution, and which was used in farming.[25] The fourth is the cost of the bureaucracy that the Saudi government had to employ in order to administer the new agricultural schemes.

THE WATER COST

If money has become of no concern in Saudi Arabia, water ought to have been. In the searing desert sun, the water needed to irrigate a hectare of land to grow agricultural produce is twice to three times the volume needed to grow the same produce under temperate conditions. Between 1980 and 1999, a gargantuan volume of water--300 billion cubic meters (m3), the equivalent to six years' flow of the Nile River into Egypt--was used in Saudi Arabia's agricultural adventure. Two-thirds of the water thus used is regarded as nonrenewable, according to estimates by the Ministry of Agriculture and Water (MAW).[26] At this rate, Saudi nonrenewable water reserves will sooner or later be depleted if the extraction does not stop.

That the 1993 scaling down in subsidies was designed to conserve water cannot be supported by the facts. Despite the dramatic drop in cereal production, agricultural water use remained strong. Between 1994 and 2005, while the overall irrigated surface declined by 31 percent, from 1.6 billion hectares in 1994 to 1.1 billion hectares in 2005,[27] water used in irrigation was reduced by 13 percent only, from 20 billion cubic meters in 1994[28] to 17 billion cubic meters in 2005.[29] Furthermore, between 1990 and 1994, average agricultural water use was 12,225 cubic meters per hectare.[30] Over the next five years, agricultural water use increased to an average of 15,230 cubic meters per hectare.[31] In 2005, the average climbed to 15,760 cubic meters per hectare.[32]

The rather marginal decline in agricultural water use between 1994 and 2005 and the persistent rise in the per hectare use of water was due to the fact that most of the water saved from growing fewer cereals was used to increase the growing of produce that requires greater volumes of water than cereals (such as animals, animal products, fruits, and alfalfa). Generally, 1,000 tons of water (1,000 cubic meters) is needed to produce a ton of wheat and 16,000 cubic meters of water is needed to produce a ton of red meat.[33] Alfalfa requires six times as much water to grow as wheat.[34] Five thousand tons of water is needed to produce a ton of chicken.

SAUDI EXPORTS OF VIRTUAL WATER

Saudi Arabia not only increased the production of water-using foodstuffs for domestic consumption, but it has also been exporting to neighboring city-states animals, animal products, vegetables, animal and vegetable fats and oils, beverages, and other high-water-using agro-commodities, though the export of alfalfa was stopped in 2000.

Foodstuffs are an encapsulation of water. Food is virtual water. Saudi food exports are synonymous with shipping away the country's finite water resources. For the five years between 1997 and 2001, the volume of Saudi water used to produce the exported foodstuffs averaged 2.5 billion cubic meters annually.[35] For the five years between 2002 and 2006, the value of Saudi foodstuff exports doubled in comparison with the value of foodstuffs exports during the previous five years.[36] If the composition of the exported produce did not change, it would be safe to estimate that Saudi water exports in the form of foodstuffs between 2002 and 2006 averaged 5 billion cubic meters per annum.

To put 5 billion cubic meters of water in perspective, Saudi Arabia, which ranked third in the world in the use of household water (286 liters per day), needed 2.2 billion cubic meters for drinking and household purposes in 2006, or less that a half of the water it shipped away.[37]

Generally, the volume of drinking and household water a country needs represents a fraction of its agricultural water needs. Of Saudi Arabia's 19.8 billion cubic meters of water used in 2006, householders used 2.2 billion cubic meters (11 percent), agriculture used 17 billion cubic meters (86 percent), and industry used 0.6 billion cubic meters (three percent).[38] Such ratios are more or less typical everywhere.

That during the ten-year period between 1997 and 2006, an arid Saudi Arabia exported around 37.5 billion cubic meters of its finite water endowment, most of which was nonrenewable, is breathtaking. That the export of virtual water continues today unabated is incredible.

A GUESSTIMATE OF SAUDI WATER AVAILABILITY

Estimates of the day when Saudi nonrenewable aquifers would become depleted vary. One estimate using the M. King Hubbert technique might possibly be a helpful guide.

Hubbert's theory, developed in 1956 for the oil industry, observed that in any large region, unrestrained extraction of a finite resource rises along a bell-shaped curve that peaks when about half the resource is gone.[39] Hubbert predicted correctly in 1956 that oil from the 48 American lower states would peak around 1969.[40] Hubbert found that a growth curve of the utilization of other finite natural resources should rise in a manner similar to those of the fossil fuels.[41]

Water extraction from Saudi Arabia's finite nonrenewable reserves has been unrestrained since the start of the country's foray into agricultural production in the early 1980s. The volume of water extraction from nonrenewable aquifers, according to the Saudi Ministry of Agriculture and Water, reached a peak of slightly more than 14 billion cubic meters in 1993 and 1994.[42] In 1995, the extraction volume dropped to 12.5 billion cubic meters, and in 1996, it dropped further to 12 billion cubic meters. In 2006, the overall volume of agricultural water use from all sources was 17 billion cubic meters.[43] If MAW's two-thirds/one-third estimate for the allocation between the renewable and nonrenewable water sources in Saudi Arabia were accurate, then the 2006 volume of water extracted from the nonrenewable aquifers would be some 11.3 billion cubic meters.

Using Hubbert's theory, the period starting 1993-1994 might signify the midpoint in the volume of Saudi nonrenewable water reserves. Since 1980 was the year when water extraction from nonrenewable sources started in earnest, it might be considered as the starting date of the aquifers' expected useful life. Up to that time water extraction from the nonrenewable aquifers was rather small--3.2 billion cubic meters in 1980.[44] Prior to 1980, nonrenewable water extraction was less than the 1980 level for two reasons. The first reason is that the cultivated surface was considerably smaller. In 1973, the year oil prices quadrupled, the entire cultivated land in Saudi Arabia was less than one-half of the 1980 cultivated surface--286,000 hectares in 1973 as compared to 609,000 hectares in 1980.[45] The second reason is that during the 1970s there were not the government subsidies or the private capital that could underwrite the cost of investing in the expensive machinery needed for deep groundwater extraction and land reclamation on a large scale; thus, leaving groundwater reserves undisturbed. As for the pre-1973 age, poverty was abject.

According to Saudi Ministry of Agriculture and Water, the aggregate volume of water extracted from the nonrenewable aquifers between 1980 and 1994 was 140 billion cubic meters.[46] Hubbert's theory suggests that the volume of Saudi nonrenewable water before the heavy extraction had started was likely to be around 280 billion cubic meters and that the remaining volume of water around 1994 was 140 billion cubic meters. On this basis, such a volume would last for 10 years, if the average extraction would be 14 billion cubic meters per annum. If, on the other hand, the average extraction would be 10 billion cubic meters per annum, then the volume would last 14 years.

Already, there is evidence of water quality degradation along with dwindling volumes of previously abundant aquifers. Natural springs, which discharge many aquifers, have dried up in most parts of the western, central, and eastern regions along with seawater intrusion in areas of the east coast. Also, due to poor quality sanitary and drainage systems as well as the unmonitored use of inorganic fertilizers and pesticides, the water quality in most aquifers has become brackish.

The Saudi government's embarrassing abandonment of a strategy propagated for 30 years as its proud achievement could be an indication of serious trouble with the country's nonrenewable groundwater sources. Such an announcement could not have been possible unless the condition of the nonrenewable aquifers has reached perilous levels in terms of quality and quantity. The Saudi action lends credibility to Hubbert's guesstimate that the day of reckoning is near.

THE IMPOSSIBILITY OF SAUDI SELF-SUFFICIENCY IN FOODSTUFFS

Saudi Arabia's food independence is impossible to sustain. Saudi renewable water resources are insufficient and the country's population growth is among the highest in the world. Between 1975 and 2004, the Saudi population grew by an average annual rate of 4.1 percent; compared with Arab countries, 2.6 percent; developing countries, 1.9 percent; OECD countries, 0.8 percent.[47]

The Saudi population is forecast to increase from its size in 2006 of 24 million to reach 40 million in 2025.[48] Given such a high rate of growth and, regardless of how large Saudi water reserves might be, Saudi food independence is impossible to sustain in the long-run. It is only a matter of time before irrigation exhausts the recoverable contents of the aquifers.

An individual needs about 1,000 cubic meters of water each year to raise the food requirement of that individual.[49] The composition of diet determines the volume of water embedded in food. The more meat, especially red meat, a diet contains, the more water embedded in food is consumed.

Saudi Arabia's population of 24 million people in 2006 would need an estimated 24 billion cubic meters of water for self-sufficiency in foodstuffs. Despite using mammoth volumes of water over the past three decades and spending huge amounts of money, Saudi full self-sufficiency in foodstuffs remains as elusive as ever. In 2006, Saudi agriculture used 17 billion cubic meters of water from all sources, leaving a gap of 7 billion cubic meters, or 30 percent, to be imported. Between 2002 and 2006, Saudi foodstuffs imports added up to $35 billion--an average of $7 billion for each of the five years involved.[50] During the previous five years (1997-2001), Saudi food imports added up to $24 billion, an annual average of almost $5 billion. As Saudi Arabia's population grows, the water sufficiency ratio will correspondingly decline and food imports will increase.

As the Saudi population reaches 40 million around 2025, Saudi water consumption embedded in foodstuffs would reach 40 billion cubic meters. Even if--and this is a very big if--the volume of irrigation water were to remain unchanged from the 17 billion cubic meters in 2006, the proportion of food produced domestically to total Saudi food requirements would be 43 percent. Under the more likely scenario, however, as Saudi nonrenewable aquifers get depleted and Saudi agriculture becomes reliant on renewable water sources only, the ratio of Saudi food self-sufficiency in 2025 would be 12.5 percent--given MAW's estimate of the country's renewable water sources of about 5 billion cubic meters per annum.[51]

POSSIBLE REASONS FOR GREENING THE SAUDI DESERT

Why did Saudi Arabia pursue expensive agricultural development in the desert despite persistent and large budget deficits during the early 1980s and 1990s? Was it to achieve food independence, settlement of the Bedouins, or enrich the ruling elite? Or, was it to show how Saudi wealth could help humankind overcome food shortages and draw attention to the newly found Saudi wealth? The answer is probably a combination of all these factors, but with a special emphasis on the enrichment of the ruling elites.

Food Independence

Desert agriculture is not an intuitive choice for an economist. However, food independence in Saudi Arabia has a nationalistic appeal. It conveys a message of control over the country's own political and economic destiny.

The misguided belief that home production was a means of securing the Saudi economy was successfully constructed by those making Saudi rural policy and water policy. Propagated in the national discourse?as a well-planned strategy to insulate the country from the risk of a possible wheat boycott by oil-consuming, food-producing countries, desert irrigation was turned into a sacrosanct belief. The strategy might have been prompted by threats in the U.S. media to withhold food supplies as leverage against unacceptable oil export and pricing policies following the 1973 oil boycott and quadrupling of oil prices.

While independence in foodstuffs is a politically attractive slogan, it is a flawed policy. Wheat--indeed all foodstuffs--is not critical for national security. The inability to import, for example, desalination equipment, spare parts, and engineers by a country like Saudi Arabia would have much greater damaging repercussions than wheat and meat boycott.

Desalinated water has become the lifeblood of Saudi communities. Most of the drinking and household water supplied to the country's ten largest cities is desalinated. In 2006, Saudi Arabia supplied from giant desalination plants on its east and the west coasts 1.1 billion cubic meters of drinking and household water out of a total drinking and household water requirement of 2.2 billion cubic meters (in 2006).[52]

The problem with Saudi water availability is not household water. It is agricultural water. The government's latest action to abandon wheat growing altogether and import instead all of its wheat needs by 2016 is too little and too late. If Saudi Arabia is serious about protecting its nonrenewable water endowment, the growing of most of its red meat, poultry, and fruits should be abandoned.

Settlement of the Bedouins

Ostensibly, in an effort to settle the Bedouins, the Saudi government promulgated in 1968 the Regulation for Fallow Land Distribution. However, between 1968 and 1980 the total land distributed under the new law was 7 percent of the size of the land distributed during the following 12 years (1980-1992), the years during which the agricultural boom reached its peak.[53] If the purpose of the regulation was to settle the Bedouins, the size of the distributed land between 1968 and 1980 should have been much greater. Such history suggests that the 1968 Act was implemented more in the interest of agricultural production than the settlement of the Bedouins.

Enriching the Ruling Elites

The Saudi ruling elite is composed of four groups. These groups support the thousands of people in the ruling family in return for privileges and benefits. The four groups are: the Wahhabi religious establishment, the Bedouin tribal leadership, the major merchant families, and the military class. The first group lends the regime religious legitimacy, preaching on every turn:?"Obey God and obey the apostle and obey those of authority among you" (the Koran, 4:59), along with attributed prophetic sayings like: "Hear and obey the emir, even if your back is whipped and your property is taken; hear and obey" (Sahih Muslim Hadith collection). The second and third groups control the rank and file members of the business and tribal communities. Such a structure is particularly important in a country with no civil society organizations, labor unions, political parties, student and women associations, social clubs, and the like. The military class defends the regime against local dissent.

It is thought by some that Saudi desert agriculture was a scheme to enrich these groups, their families, and clients. There are three observations that tend to support that theory.

The first observation is the large scale of the wheat project. Between 1985 and 1993, Saudi wheat production grew well beyond domestic needs and the country's storage capacity. By 1992, Saudi Arabia became the world's sixth-largest exporter of wheat. Had the objective been meeting local demand, the quantities would have been considerably smaller.

Second, the early participants in desert agriculture were investors, not farmers. They were absentee owners with little or no experience in farming. They had to be financially sound, with substantial landholdings. The promise of high financial returns from government subsidies to wheat growing enticed some of the country's richest business families, mainly from the Riyadh and the Qassim Regions, to underwrite the risk of the new adventure. They imported the resources from around the world; not only the engineers, the mechanics, and the farm managers but even the unskilled laborers, along with the pumps, tractors, harvesters, seeds, chemicals, and fertilizers to construct and maintain the hundreds of those once famous giant 1,000-foot-arm pivot irrigation systems, which can be seen from the air on approaching Riyadh or the towns of the Qassim Region.

Third, the agricultural adventure did not start soon after the 1973 jump in oil prices. It was a decade until the program started in earnest.

While food independence and settlement of the Bedouins might have played a role in the Saudi government's drive toward food self-sufficiency, the early business investors became engaged in the adventure purely to enrich themselves.

Marc Reisner wrote in his Cadillac Desert: "Water flows uphill towards money."[54]

HOW THE DECISION TO SUPPORT DESERT AGRICULTURE WAS MADE

Saudi Arabia, an absolute monarchy, is non-representative and non-participatory in its governance. Foreign suppliers (in this case, of agribusiness) closely associate themselves with the powerful elites. Schemes such as food self-sufficiency in the desert, which are unsound both economically and environmentally, are attractively packaged with nationalistic slogans. In the absence of political parties, a free press, environmental groups, or any other concerned groups, such as egalitarian nongovernmental organizations, it is impossible to introduce a balancing economic or environmental perspective into water policy. Consequently, there has been no effective dissent against desert agriculture and its seriously negative economic and environmental policies. On the contrary, the Saudi government and its supporters at home and abroad competed to praise this folly as a judicious strategy that achieved amazing results.

Saudi Arabia's agricultural policy has been hugely beneficial to the Saudi entrepreneurs and to the foreign suppliers and their local Saudi sponsors. The oil economy and the nature of the Saudi political system provided the decision making context. The narrowness of the Saudi decision makers' coalition enabled the unsustainable water policies of the 1980s and 1990s. The Saudi experience is an extreme case of a politically determined ecological policy with the negative tendencies of poorly informed elite enjoying rentier economic circumstances.

The policy goal of irrigating even a portion of Saudi Arabia's foodstuffs requirements was economically and environmentally damaging to the Saudi economy. Food self-sufficiency is a very dangerous dream for countries like Saudi Arabia to pursue. That billions of cubic meters of water from mainly nonrenewable aquifers have been and continue to be "exported" as virtual water is particularly irresponsible.

The recent Saudi desert irrigation projects were an aberration in the history of desert agriculture. The population in the Arabian Desert has always been limited to a size that could be supported from mainly shallow wells and scant oasis waters. In 1961, the Saudi population was estimated at 4.2 million, 69 percent of whom were non-urban dwellers,[55] scattered and mostly roaming in search of pasture. The population's five and a half fold increase by 2006 to 24 million has been phenomenal. The rapid growth partly resulted from the October 1973 quadrupling of oil prices and the consequent expansion of the Saudi economy.

Although politically challenging, creating the most favorable conditions for efficient allocation of water resources requires that projects be selected purely on a rate of return on investment basis in economies operating without government subsidies. Had such a criterion been applied to assessing the economic feasibility of irrigation projects in Saudi Arabia, the approach of the government would have been rejected in favor of higher return projects. The rejection would have saved nonrenewable water reserves.

The end of inefficient farming is a good thing for Saudi Arabia. Aside from certain investors who will have to write-off the remaining useful life of their farming assets, abandoning Saudi desert agriculture will be beneficial to the economy. The high cost of growing crops in the desert will be avoided, and the Saudi economy will be able to benefit from the low priced food imports.

Nevertheless, alongside the tale of the Saudi ruling group that has accumulated enormous riches, there is the story of a policy that squandered tens of billions of dollars on the fruitless quest to make the desert bloom and, in so doing, wasted the nation's finite water inheritance without regard to posterity.