10    Belated Opening of the US Oil File

William Krehm

The Wall Street Journal (4/02, “In Quest for Energy Security, US makes New Bets on Democracy” by Andrew Higgins) has scored a woefully belated coup. Under the Freedom of Information Act it obtained a document that, had it come to light a year ago, could have saved hundreds of American lives. It is a confidential 34-page cable sent in April 1975, by the US ambassador to Saudi Arabia, James Akins. In this he “denounced as ‘criminally insane’ an idea then floated in the media: America should seize the Saudi oil fields to break an Arab oil cartel and ensure cheap energy for the US. Scoffing at America’s ‘New Hawks,’ he warned that any attempt to take Arab oil by force would lead to a world-wide fury and a protracted guerrilla war. This did not go down well with Washing-ton. Discussion of a military strike never got beyond the planning stage, but the idea terrified the Saudis, who laid plans to booby-trap oil wells.

“A few months later Mr. Akins was out of a job. He believes that his memo ‘was basically the cause of [his] being fired.’”

Policy-making in an Ideological Cloud

The article resumes other documents released from the American and British secret archives. They add up to an amazing record of misfire, and describe the ideological cloud in which the leaders of these countries did their thinking. Underlying it all was the ever more powerful thirst of the US for oil that guaranteed a head-on clash with other cultures.

“The episode highlights America’s struggle with a quandary that has tormented it for decades: how to deal with countries America doesn’t trust and that don’t trust America, but that can dictate the fate of America through their control of oil. For a half century the US has veered between confrontation and cajolery to secure a steady flow of fuel at a stable price from the Persian Gulf. The US has jumped from country to country in search of reliable friends.

“Often it has stumbled: the shah of Iran was overthrown. Saddam Hussein mutated from prickly partner to foe. The House of Saud still stands, but wobbles, both at home – where a divided ruling family staggers between reform and reaction – and in Washington, where people ask how an ally could spawn 15 of the 19 Sept. 11 highjackers.

“While many Arabs believe last year’s invasion of Iraq was an oil grab, there’s no evidence that the US plans to hold on to the Iraqi oil fields or put them up for sale. Still, with the US occupation, the quest for a solid ally in a region holding two-third of the world’s known oil reserves has begun afresh. Indeed, occupation officials have recommended a strong, state-controlled Iraqi oil sector, even if that means limited investment opportunities for the US oil companies. Washington’s goal in Iraq was reducing terrorism by seeding a democratic government in place of a dangerous tyrant.”

“Washington now seeks change by prying open closed political systems. No Gulf producer is a democracy. Of the world’s oil reserves, only 9% are in countries rated ‘free’ by the US research group Freedom House.

“Since 1970, America has scoured the world for other supplies to reduce its dependence on Gulf states. It has poured money into fuel cells and other technologies.

“Much oil has been found and the US has become more efficient in its energy use. But none of this disturbs a hard truth: America’s economy depends on some of the world’s most anti-American nations. By 2020, the federal Energy Information Agency expects the Persian Gulf will account for 54% to 67% of world oil exports, up from around 30% now.

“The White House believes giving Iraq democratic rule can help a dependence for oil ‘on countries that don’t particularly like us.’ Whether America’s initiative works in Iraq, whose oil reserves are second only to Saudi Arabia’s, could also have an impact on the Saudis. A big unknown is whether the ‘democratic revolution’ Mr. Bush promises spreads to the doggedly undemocratic kingdom.

“When invading Saudi Arabia was considered in the 1970s, the US decided it wouldn’t even apply strong political pressure on the despotic Gulf states behind the embargo. Secretary of State Henry Kissinger said at the time that pressure could cause instability and ‘open up political trends that could defeat economic objectives.’

“[But], in a speech last fall citing the absence of freedom in the area, Mr. Bush said ‘it would be reckless to accept the status quo.’

“Also out to overthrow the status quo, however, are America’s enemies in the region. Democracy, if it really takes hold there, could amplify the voice of America’s foes. Anger at Western use of Arab oil has been a theme for decades of populist rheto-ric, both secular and Islamist. Just last month, Osama bin Laden, in a tape played on al Jazeera TV, denounced the US occupation of Iraq, spoke of the oil market as ‘the biggest theft in history.’ In 1998 the Saudi-born el Qaeda leader said oil ought to cost $144 a barrel, quadruple the present price.”

Fighting Wars with Other Countries’ Oil

“In the early 1940s, Interior Secretary Harold Ickes wrote a gloomy article warning, ‘If there would be a World War III, it would have to be fought with somebody else’s oil.’ And geologist Everette Lee DeGolyer, returning from Saudi Arabia, reported that ‘the center of gravity of world oil production is shifting to the Middle East.’

“Franklin D. Roosevelt, though seriously ill, made a stop on his journey home from the 1945 Yalta Conference to meet the Saudi king. Their encounter on a battleship in the Suez Canal established bonds that, for more than a half a century would tie the two countries: oil and security. It also raised an issue that would divide them – establishment of a Jewish state. The king suggested the Jews get land in Germany.

“America’s wish to keep Persian Gulf oil secure took a violent turn in Iran. In 1952, the CIA carried out a British plot to topple an Iranian leader who had nationalized the Anglo-Persian Oil Co. At first the US had no enthusiasm for an idea it saw as the last gasp of Britain’s empire. Christopher Woodhouse, an official the UK sent to Washington to lobby for the plan, wrote later how he helped win over the US: ‘I emphasized the Communist threat to Iran.’

“The resulting coup against Mo-hammed Mossadegh brought back the exiled Iranian shah, Mohammed Reza Pahlavi, who promptly invited US companies to join a consortium to run Iran’s oil industry. Washington poured in arms, turning Iran into a Cold War bulwark against the Soviet Union.

“On prices, however, Iran’s and Americans interests diverged. The shah became a truculent hawk in the Organization of Petroleum Exporting Countries. Said James Schlesinger, secretary of defence in the mid-1970s, ‘It was a great disappointment to Kissinger and Nixon, who thought the shah was a pal of theirs.’

“Saudi Arabia also disappointed. On October 17, 1973, Mr. Kissinger met with other top US officials to discuss the Yom Kippur Arab-Israeli war and the possibility of oil-supply disruptions He reported on a meeting held earlier in the day with the Arab envoys, and describing the Saudi foreign minister as a ‘good little boy,’ he predicted confidently: ‘We don’t expect an oil cutoff in the next few days.’ Minutes later, an aide rushed in with a bulletin: Saudi and other oil producers had announced an immediate cut in output. Prices leapt 70% overnight and later quadrupled. The US sank into a recession.” As usual, Mr. Kissinger considerably oversold his diplomatic magic.

“Mr. Nixon launched a plan to end all imports by 1980. It flopped: imports rose 40% by the target date. Mr. Kissinger turned to the Soviet Union for help, offering wheat in return for oil. The ‘bushels for barrels’ plan fizzled.”

Lobbying for a War Against the Saudis

“Behind the scenes, officials mulled a more robust response to Arab cuts. Ambassador Akins says he knew something was afoot after a barrage of articles appeared championing war against Saudi Arabia. Particularly belligerent was one in Harper’s under the pen-name Miles Ignotus. Titled ‘Seizing Arab Oil,’ it argued that ‘the only countervailing power to OPEC’s control of oil is power itself – military power.’

“Its author was Edward Luttwak, a hawkish defence expert then an adviser to the Pentagon. Mr. Luttwak says he wrote the piece after consulting with several like-minded consultants and officials in the Pentagon, including Andrew Marshall, who remains head of the Defense Department’s in-house think-tank.

“Mr. Luttwak says they wanted to demonstrate the merits of ‘maneuver warfare,’ the use of fast, light forces to penetrate the enemy’s vital centers. ‘Last year’s invasion of Iraq,’ he says, ‘was the accomplishment of that revolution.’”

Mr. Schlesinger says that the Pentagon concluded that “the only difficulty would be sabotage.” Remarkable then, that the same Pentagon should have shut its mind to that perceptive conclusion when it came to last year’s Iraq adventure.

One of several recently released British intelligence reports dealt with the same theme. “One outlined a ‘dark scenario’ under which US policy-makers would use force ‘despite their Vietnam experience. This would, of course, be a highly dangerous policy with only slim chances of success.’ Military action, the UK intelligence committee warned, would provoke Arab sabotage and leave American European allies ‘badly torn.’”

Tony Blair, obviously, pays as little heed to his intelligence, as the Rumsfeld group does to theirs. And we are reminded of George Bernard Shaw’s remark that Britain and the US are separated by a common language.

“While weighing ways to punish Arab oil producers, Washington played down the Iranian shah’s price aggressiveness. Iran’s anti-Soviet stance trumped its unhelpfulness on energy. The US Defense Intelligence Agency gave an upbeat assessment of the shah’s prospects in September 1987, saying ‘he was expected to remain actively in power over the next 10 years.’ Three months later he fled a country in chaos, with Americans held hostage, and with Ayatollah Khomeini in power. World oil prices tripled.

“With Iran ruled by stridently anti-American militants, Washington tilted toward Iraq, which also had a new leader, Saddam Hussein. The Baath Party to which he belonged had first grabbed power after a coup backed by the US against the government of Abdul Karim Qasim, whom the US saw as dangerously leftist. Among his sins he had hosted a meeting that set up OPEC.

“When Mr. Hussein invaded Iran in 1980, Washington, after a period of aloofness, provided Iraq with satellite pictures and other help when it faced defeat.

“A 1988 national security directive enshrined the wooing of Iraq as policy. ‘Normal relations with the Hussein regime,’ it said, ‘would serve our long-term interest and promote stability in both the Gulf and the Middle East.’ But Iraq invaded Kuwait in 1990, and began moving troops toward Saudi Arabia. Once again, a partner had become an enemy.”

All the while, however, there is another great enemy richly installed within the gates, undermining the world of stable prices and steady growing supply that Washington aspires to. The Wall Street Journal (5/02, “OPEC Appears Unwilling to Increase Its Output” by Chip Cummins) writes: “Hedge funds and other speculative investors have been buying oil and other commodities amid signs of global economic growth. Their purchases appear to have exacerbated the recent run-up in crude prices. OPEC officials have worried that if demand eases at the same time as these investors reverse their buy orders, prices could tumble.”

Another example of unbridled zeal is the cooking of their books by some of the largest oil companies exaggerating oil reserves still in the ground. That has begun receiving attention from US prosecutors – with traumatic effect on the stock market quotations of the conglomerates involved. But this is merely an extension of the drive for exponential growth that a financial system on steroids imposes on public companies.

Obviously there was a deeply traumatic relationship between the US and UK governments and their inability to see what is in front of their noses. That calls to mind the device of official economists to declare entire areas of reality “externalities.” Could that logical distemper have spread from economic theory to military and foreign policy?

William Krehm

— from Economic Reform, April 2004