Protecting Resources

excerpted from the book

Imperial Alibis

by Stephen Rosskamm Shalom



Some Crude History

Much of the world's proven oil reserves are located in the limited area of the Persian Gulf (called by Arab nations the "Arabian Gulf," and by those who try to keep their gazetteers politically neutral, simply "the Gulf").

Less than 4 percent of U.S. oil consumption comes from the Gulf, but, according to the official argument, Western Europe and Japan are extremely dependent on Gulf oil and hence if the region fell into the hands of a hostile power, U.S. allies could be brought to their knees, and U.S. security would be fundamentally and irreparably compromised. If one examines the history of U.S. policy in the Gulf, however, protecting the oil interests of Western Europe and Japan never seemed to be one of Washington's foremost goals.

As far back as the 1920s, the State Department sought to force Great Britain to give U.S. companies a share of the lucrative Middle Eastern oil concessions The U.S. Ambassador in London-who happened to be Andrew Mellon, the head of the Gulf Oil Corporation (named for the Mexican, not the Persian/Arabian, Gulf)-was instructed to press the British to give Gulf Oil a stake in the Middle East.' At the end of World War II, when the immense petroleum deposits in Saudi Arabia became known, Secretary of the Navy James Forrestal told Secretary of State Byrnes, "I don't care which American company or companies develop the Arabian reserves, but I think most emphatically that it should be American." And it wasn't the Russians that Forrestal was worried about. The main competition was between the United States and Britain for control of the area's oil.

In 1928, Standard Oil of New Jersey and Mobil had joined British and French oil interests in signing the "Red Line Agreement," under which each pledged not to develop Middle Eastern oil without the participation of the others. Nevertheless, after World War 11 these two U.S. firms (together with Texaco and Standard Oil of California) grabbed the Saudi concessions for themselves, freezing out the British and French. When the latter sued on the grounds that the Red Line Agreement had been violated, Mobil and Jersey told the court that the agreement was null and void because it was monopolistic.

In the early 1950s, oil was used as a political weapon for the first time-by the United States and Britain and against Iran. Iran had nationalized its British-owned oil company which had refused to share its astronomical profits with the host government. In response, Washington and London organized a boycott of Iranian oil which brought Iran's economy to the brink of collapse. The CIA then instigated a coup, entrenching the Shah in power and effectively un-nationalizing the oil company, with U.S. firms getting 40 percent of the formerly 100 percent British-owned company. This was, in the view of the New York Times, an "object lesson in the heavy cost that must be paid" when an oil-rich Third World nation "goes berserk with fanatical nationalism."


One former Defense Department official has estimated that it cost U.S. taxpayers about $47 billion in 1985 alone for military expenditures related to the Gulf; former Secretary of the Navy John Lehman put the annual figure at $40 billion. What could be worth these staggering sums?

These expenditures have not been necessary for the survival of the West. In the extreme, according to former CIA analyst Maj. Gen. Edward B. Atkeson, if all Gulf oil were cut off, the elimination of recreational driving (which in the United States accounts for 10 percent of total oil consumption) would reduce western petroleum needs to a level easily replaceable from non-Gulf sources. Even in wartime, Atkeson concluded, Gulf oil is not essential to western needs. And in a protracted global conflict, one can be sure that oil fields would not last very long in the face of missile attacks.

The billions of dollars, however, are a good investment for the oil companies, given that they are not the ones who pay the tab. To be sure, the multinationals no longer directly own the vast majority of Gulf crude production. But they have special buy-back deals with the producers, whereby they purchase at bargain prices oil from the fields they formerly owned. For example, according to former Senator Frank Church, U.S. firms have a sweetheart arrangement with Saudi Arabia, notwithstanding the nominal nationalization of their properties.... Radical regimes want to sell oil as much as conservative ones do, but a change of government in any Gulf state might eliminate the privileged position of the oil companies.

The internal security of regimes like Saudi Arabia depends heavily on outside, particularly U.S., support. Many Saudis believe that in return their country has set its oil production levels to please the United States, to the detriment of their nation s long-term interests. At times, this has meant selling oil beyond the point at which the proceeds could be productively invested, an economically irrational strategy particularly given the fact that oil in the ground appreciates in value. More democratic or nationalistic governments in the Gulf may not be so willing to sacrifice their own interests. And such governments will also be less willing to accommodate a U.S. military presence or to serve as U.S. proxies for maintaining the regional status quo.

And thus for more than 40 years, through many changed circumstances, there has been one constant of U.S. policy in the Gulf: support for the most conservative local forces available, in order to keep radical and popular movements from coming to power, no matter what the human cost, no matter how great the necessary manipulation or intervention.

Imperial Alibis