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Just 72 hours after a bitter confrontation at the OPEC meeting in Vienna on 18 September which resulted in Iran, Libya and Algeria splitting away from the other ten members, Iran announced full mobilisation of its armed forces. At the meeting where Iran's enmity towards her neighbour Iraq and to a lesser extent Saudi Arabia was not muted, Iran wrecked OPEC's chances of a united pricing policy by pushing up her oil prices to $35.37 per barrel. To add pressure, say several sources, Iran stepped up its offensive against Iraq over their 1975 border treaty dispute.

Saudi Arabia is not about to insist on getting the improvements to its F-15s on order for the United States just yet - but it definitely intends to obtain the equipment in the end. The news says a great deal about the kingdom's relationship with the United States at present and reflects on an unstated preference in Riyadh for Jimmy Carter over his Republican opponent for the US Presidency, Ronald Reagan.

Crown Prince Fahd's warning earlier this month that the Arabs might resort to a jihad against Israel was disturbing news in Western capitals - and in Washington particularly. It was no doubt meant to be. The Saudis are bitter that their pro-Western moderation (both political and economic) has brought such little tangible return in the field of the Arab-Israeli conflict. Nowhere was this more evident than the recent Israeli law declaring Jerusalem an indivisible part of Israel. The question of Arab Jerusalem and the Islamic Holy Places has always been one of the most sensitive aspects of the conflict in Saudi eyes.

The letter from two thirds of the United States Senate to President Carter urging him to refuse the sale of extra fuel tanks and multiple ejection bomb racks for Saudi Arabia's F-15 has jolted the kingdom's foreign policy and led to a public dispute between the Washington administration and the Saudi ruling family. The Saudi ambassador to Washington Sheikh Faisal al-Hejelan has accused the United States of putting Israel ahead of its real interests in the Middle East and has hinted strongly that Saudi Arabia might buy its arms elsewhere.

For the first time, the Saudis want weaponry which is unequivocally aggressive in nature. That is the import of the request by Defence Minister Prince Sultan to the United States for the provision of long-range accessories on 60 F-15 fighters already on order for delivery by 1982. Predictably, the request has come under fire from Israel which, extracted assurances from Washington when the F-I5 sale went through in 1978 that the Saudi aircraft would be given minimal aggressive capability against the Israelis. Not surprisingly, the Israeli press has recently devoted its attentions once more to the "threat" from Saudi Arabia's north-western air base at Tabuq, which is capable of accommodating the F-I5.

Petromia governor Abdul Hadi Taher does not hold out a rosy picture for OECD consumers of Saudi oil who do not have direct supply contracts. But if all his figures and commitments are taken at face value, Saudi Arabia is left with little option but to push up production over the next five years and use the additional capacity Aramco is creating.

OPEC's twin-base price system after the Algiers conference still leaves the organization in an untidy mess, but less so than before. The Saudis believe that market pressures are working through to prices (at last) so with unexpected conciliation they braced themselves to accept a $4 per barrel rise, albeit postponed. They may yet get their unified price by the year-end.

The Saudi state budget for the fiscal year 1400/1401 beginning on 15 May 1980 was endorsed by a special session of the Council of Ministers on 14 May. Planned expenditure is put at 245 billion riyals, and both the size and sectoral breakdown seem to contradict some of the guidelines to the five year plan announcement earlier in May.

Piqued again by OPEC's failure to move back towards unified oil prices, the Saudis have boosted their own price by $2 and let it be known that they will continue lifting an extra 1 million b/d indefinitely. The fight is now on again for the next level of oil prices, with the Saudis lined up against the hawks. The Saudis appear this time to have every intention of winning.

There seems little doubt that the Saudis have speeded up their capacity expansion programme to permit sustained output of 12 million b/d by next year. That does not mean they will actually produce as much initially, but there is plenty of pressure to increase output substantially. If they do, then they will have no choice but to spend a lot of money developing additional reserves.

Final 1979 trade statistics for most of the major OECD countries provide a preliminary idea of how trade with Saudi Arabia developed during a year in which the kingdom's oil revenue jumped with successive price rises. Imports appear to have fallen off once again by as much as half, while Saudi Arabia's trade surplus as a percentage of tot a! trade turnover is now hovering around 30%.

Mobil has become the first foreign joint venture partner to agree with Sabic on the construction of a giant ethylene plant, the kingpin of the Saudi petrochemical development plan. By doing so it has stolen a march on its competitors, even though such key matters as input prices and oil entitlements have yet to be decided upon. Shell is expected to be the next ethylene partner to sign.

President Giscard d'Estaing's five-hour visit to Riyadh at the end of his tour of the Gulf states and Jordan has been described as of special significance by Prince Saud, the Foreign Minister. But political agreement is not helping France's growing trade deficit with the kingdom, and French trade officials see few ways to reverse the trend.

The new Saudi five year plan not surprisingly emphasizes urban improvement and low cost housing in recognition of the growing strain on existing facilities created by rapid urbanization and as part of a continuing programme of wealth distribution. Progress in tackling the obvious housing problem during the current plan has been mixed, and various logistical obstacles need to be overcome.

As OPEC members debate the possibility of production cuts to maintain price levels in 1980, the West lives in hope that Saudi Arabia will maintain current output levels. The Saudis do not enjoy over-producing because it shortens the life of their reserves and impairs relations with the rest of OPEC. But if Aramco is to expand capacity, the Saudis may not be able to cut back.