Saudi Arabia has quietly taken steps to protect or even increase its already dominant influence in the world oil market in the face of growing uncertainty about the effect of a war in Iraq on global energy supplies and prices, according to U.S. and Middle Eastern officials and experts.

Saudi Arabia has reclaimed its position as the number one foreign supplier of crude oil to the United States in recent months and offered to further increase sales in December, the Energy Department reported. To keep competitors from taking away customers, the Saudis have boosted production by an estimated 1 million barrels a day above the quota set by the Organization of the Petroleum Exporting Countries, according to a New York industry analyst.

At the same time, the Saudi government has amassed a foreign exchange war chest in the range of $90 billion to $100 billion, enabling its economy to weather a prolonged period of low oil prices if Iraq´s production surges should Iraqi President Saddam Hussein be ousted in a U.S.-led military campaign.

If U.S. military action in Iraq goes awry, leading to the hoarding of higher-priced oil, only Saudi Arabia has sufficient spare capacity to calm markets, U.S. officials acknowledge. Within 30 days, according to the Energy Department, it could flood the market with as much as 2 million barrels a day from wells it is not now using.

All this has bolstered Saudi Arabia´s leverage just as some U.S. lawmakers and administration officials are intensifying pressure on the government in Riyadh to increase its cooperation in the war on terror. With Saudi oil still a mainstay of the U.S. economy and the Pentagon seeking Saudi permission to use Prince Sultan Air Base outside Riyadh in the event of a war with Iraq, the Saudis have considerable cards to play in their dialogue with Washington.

"The Saudis are the central bank of oil," said J. Robinson West, president of the Washington-based Petroleum Finance Co. "They provide stability and liquidity to the market. The more oil [the United States] can get from other countries, the less leverage the Saudis have. But they still play a critical role."

Saudi officials see it in much the same way.

"To say that you can marginalize Saudi Arabia in the oil market is like saying you´re going to marginalize the United States in the world economy," said Adel al-Jubeir, a senior foreign policy adviser to Saudi Crown Prince Abdullah, the country´s de facto ruler.

Such assessments provide a sobering starting point for those U.S. policymakers arguing that it is in the political and strategic interest of the United States to wean itself from Saudi and Persian Gulf oil.

In the wake of the Sept. 11, 2001, attacks, in which 15 Saudis participated as hijackers, the cause of diversifying U.S. oil supplies away from Saudi Arabia was taken up by members of Congress and a faction in the national security establishment that believes Saudi Arabia is an unreliable ally that exerts too much influence over U.S. foreign policy.

A controversial briefing by a Rand Corp. analyst for a Pentagon advisory board in July described Saudi Arabia as the "kernel of evil" in the Middle East. It concluded that a pro-Western Iraq could reduce U.S. dependence on Saudi energy exports and enable the United States to force the Saudi monarchy to crack down on the financing and support for terrorism within its boundaries.

Iraq holds the second-largest known oil reserves in the world. Some energy experts say it could raise its output of less than 2 million barrels a day to 5 million barrels by the mid- to late part of this decade.

Such a development could indeed create problems for the Saudis, said Larry Goldstein, president of the Petroleum Industry Research Foundation. "There just isn´t room in the market for 5 to 6 million more barrels a day. There isn´t enough demand."

Conrad Burns (R-Mont.), a member of the Senate energy committee, and Rep. Curt Weldon (R-Pa.) have called for increased U.S. energy investment in Russia, which has the world´s eighth-largest oil reserves, as an alternative to what Burns calls "terrorist oil" from the Middle East.

This would complement efforts begun by the administrations of presidents Bill Clinton and George H.W. Bush to diversify the United States´ sources of foreign oil away from Saudi dependence. The results of those efforts have been mixed.

Earlier this year, a senior State Department official told a congressional committee that Russia, the Caspian region, Nigeria, Canada, Venezuela, Brazil, and Mexico were on track to increase oil production by as much as 10 million barrels a day by 2010. Russia, a non-OPEC country that is the world´s largest oil exporter after Saudi Arabia, has increased its shipments by 800,000 barrels a day since 2000. Russian companies are eyeing traditional Saudi oil markets, including the United States.

This week, four major Russian petroleum companies -- Lukoil, Yukos, Tyumen Oil and Sibneft -- announced plans to build a $4.5 billion oil terminal and pipeline system centered in Murmansk to handle increased exports to the United States, as part of broader agreement between President Bush and Russian President Vladimir Putin to make Russia a more important energy partner. A feasibility study of the project won´t be ready until 2003 or 2004.

Russian oil exports are constrained by a lack of pipelines, the high cost of Siberian exploration and incompatibility with U.S. refineries. And a forecast released last week by the International Energy Agency predicted OPEC would increase its share of the global oil market from 38 to 54 percent by 2030.

"You always come back to the Persian Gulf," said Robert E. Ebel, who directs the energy program at the Center for Strategic and International Studies here.

Edward L. Morse of Hess Energy Trading Co. argues that, in the long term, Russia could challenge OPEC and the Saudis for markets in India, China and the United States. But he adds that the Saudis "are still in a position unparalleled to anyone else." One reason, he said, is that U.S. domestic energy policies have strengthened the Saudis´ leverage in world oil markets.

U.S. imports increased from 8 million barrels a day in 1990 to more than 11 million barrels in the first six months of 2002, according to the Energy Information Administration, the analytic arm of the Energy Department. The economic boom of the 1990s and Americans´ appetite for fuel-guzzling sport-utility vehicles contributed. But major energy legislation that died in the recent Congress proposed only token initiatives to reduce gasoline use and cut oil imports.

"In effect, we subsidized OPEC," Morse said.

Some experts say the Saudis could actually benefit from the lower oil prices that could result if Iraq boosts oil exports. Lower prices would increase global oil demand and, possibly, strengthen OPEC´s hand by squeezing out competition from high-cost producers and enforcing discipline inside the oil cartel.

Saudi Arabia´s growing foreign reserves, the fruit of several years of relatively high oil prices, will serve as a potent weapon in what many believe is a coming battle for supremacy in the oil markets, some experts believe.

"They give Saudi Arabia a cushion in running its oil policy," said Fareed Mohamedi, chief economist for Petroleum Finance Co. The country has run up a large government debt, much of it is in pension obligations that are not due to be paid for many years, but flush Saudi government bank accounts enable it to weather low oil prices for several years and still maintain government spending at current levels, he said.

Officials in Riyadh have also announced plans to sell state enterprises, such as utilities, which could further fatten government coffers.

On at least three occasions since 1980, the Saudi state oil company has used its spare capacity to flood markets and undercut competitors, according to Morse. To maintain their position in the U.S. market, the Saudis have also provided discounts of as much as $1 a barrel to refiners. Few other producers could afford to do that for long, according to industry experts.

The Saudis also keep a strong foothold in the U.S. market through investments in U.S. refineries and chains of gasoline stations. A senior Saudi official noted recently that his government could help U.S. customers weather war-caused shortages by drawing on about 30 million barrels stored at depots in this country or the Caribbean, and in stockpiles in Asia and Europe.

"Saudi capacity is a blunt instrument that makes policymakers elsewhere beholden to Riyadh for energy security," wrote Morse and James Richard, an energy expert at Firebird Management, in Foreign Affairs magazine. "It is the energy equivalent of nuclear weapons, a powerful deterrent against those who try to challenge Saudi leadership and Saudi goals." (© 2002 The Washington Post Company 11/30/02)