Oil and Security in the Arabian Gulf

Abdel Majid Farid

• Publisher: Taylor & Francis
• Year: 2020
• Print ISBN: 9781138657755
• eBook ISBN: 9781000639292
• Edition: 1
• Topic: Social Sciences
• Subtopic: Regional Studies
• Index: Social Sciences

The issue of security in the Gulf has an importance which goes far beyond the regional location of the area. It is enough to note that instability in the area may result in the interruption of oil supplies to the rest of the world. This book, first published in 1981, considers some of the challenges facing the region following recent developments such as the fall of the Shah and the proclamation of the Islamic Republic in Iran, the Soviet presence in Afghanistan, the formation of an American task force to intervene in the area, the failure of the Camp David agreement and the Iran-Iraq war.

Part One:
Oil and Security in the Arabian Gulf

1 What do Oil Producers want
from the Consumers?

Sheikh A. Al-Tariki

For the last 25 years we in OPEC have been disputing and discussing with the consumers, and in the past we have accused them of setting prices too low because they were the ones who were buying the oil. Formerly the major oil companies were the only oil buyers from the Gulf ports. Oil companies bought the oil, but posted the price they wished to pay. We have had many disagreements in the past about this. They have bought at $1.75 a barrel, but have stated $1.43 in their books for income tax purposes. We have accused them of cheating us with regard to prices.

Now the picture has changed. Now we are the ones accused of setting the price too high, trying to disrupt Western civilisation and attempting to starve the Third World by endangering their economies through impossibly high prices. Once we asserted that the consumers set the prices too low for the sake of their high discount. Before 1950 we in Saudi Arabia used to get between 23 and 43 cents a barrel. Now it is said that it is we who are raising the price to an unreasonable level even though up to September 1979 the real price that we got for our oil per barrel was less than the price we used to get in January 1973, due to the effect of inflation on purchasing power.

For a quarter of a century we have been fighting, each trying to protect his own best interests. What we need now is cooperation.

I am convinced that a formula like the one recently presented to OPEC as a means of fixing the price of oil is beneficial to everybody. I think the consumers should study it and agree to it, probably with some modifications. This formula will influence and determine the price of oil in the future.

The price will depend on three factors: the rate of growth in the industrialised West, the value of the dollar in relation to a basket of around 21 other currencies, and the rate of inflation. According to this calculation, the price will never increase by more than 10 per cent; 7 per cent of this increase is due to inflation and the only real change is 3 per cent. If at any time the price goes up more than 10 per cent OPEC is willing to take $3.37 billion to put into the OPEC fund to help the poorer nations. I think this is really fair, although some people at the Financial Times think differently. If the OPEC people and the consumers get together, the formula could be modified to suit both. It will also benefit the consumers, in that it will be possible to predict the price of oil for the next few years, by calculating the increase.

What we are trying to achieve through cooperation between producer and consumer is stability, and I think this formula could help create it. After all, we are all oil producers from the Third World, and we want to use our oil to help the Third World, tying our aid to the rise in prices.

But a market for our oil is not the only thing we want from the West. As one of the developing nations, we need the knowhow and expertise of the West. In 1980 OPEC had a surplus of $115 billion. But this is not riches. We in the OPEC countries may have money, but we pay more for everything: Iran and Iraq for example, what will replacing war damage cost them? Building in Saudi Arabia costs three times as much as building in Frankfurt or in London, as the whole workforce, technicians, engineers, skilled and unskilled labour, has to be brought in.

The energy the world is consuming at present is equivalent to 137 million barrels of oil per day. Of this, oil itself represents 63 million barrels a day. Yet the percentage of oil reserves in relation to other sources of energy is only 3.8. Clearly, our oil resources will eventually run out and we are concerned about what will happen when this occurs. Mr Connally, when US presidential candidate, said that Middle East oil is the blood of Western civilisation. We need something for this; we need Western expertise to develop our nations.

We are not interested in making vast profits but want to start development within our nations — agriculture being our main interest. Right now, 30 million children are dying every year in the Third World due to lack of food. In the Arab world we have great potential for agriculture. We want to develop this in countries like Iraq, Syria, Morocco, Algiers, Tunisia and in the highlands of the Nile. We want to use the money from our oil to help the Third World and to cooperate with the West.

We are concerned about energy and although we are willing to sell our oil we would like to encourage other nations to produce coal. There are sufficient coal supplies for 200 years; OPEC oil can only last another 41 years. What will happen then?

In the Arab world we can use a great deal of refining capacity, and can expand the pertrochemical industry and related manufacture. We are burning gas from 2–3 million barrels a day because we have no way of conserving it. Other nations are buying in gas; we are wasting it. We need the help of the industrialised world to conserve this natural wealth which is being lost.

We are very concerned that the desert should not go back to being a real desert when the oil has been depleted. The media is always accusing the Arab world of being greedy, but we are trying very hard to talk to the West and come to an agreement. The OPEC formula, I feel, with a little modification, is beneficial to both consumer and producer.

Without the cooperation of the West, life will go on as it is. Resources will be wasted and the Arab nations will have little future. With the OPEC formula, modified to suit both parties, cooperation and benefit will be achieved by the OPEC people and the Western consumers. Only some form of cooperation can be of benefit to us all.

2 The Iranian Revolution in International Affairs: Programme and Practice

Fred Halliday

Introduction: Consequences of a Revolution

The problem of assessing the international impact of the Iranian revolution can be divided into two parts: first, the problem of identifying what the policies of the new government have been and the degree to which it has been capable of putting them into practice; and second, the problem of identifying what the unintended or at least unofficial consequences of the revolution have been, the shock waves and enthusiasms that such an event has generated elsewhere and the counter-measures that its opponents have taken. In neither case is it yet possible to draw up more than a very preliminary balance-sheet. Official policy always presents problems as revolutions take time to evolve stable post-revolutionary governments capable of implementing consistent international policies; but in the Iranian case, the degree of uncertainty at the centre has been exceptional. The factionalism, the instability of personnel, the protracted approach to forming a new permanent government, the very insecurity of the regime itself and its vulnerability to internal pressures, make any assessment of its foreign policy and oil policy more than usually difficult.

This lack of certainty applies even more to the second, unofficial, set of consequences. In the immediate aftermath of the Shah’s fall, both the Iranian revolutionaries themselves and their opponents abroad tended to exaggerate the impact of the change of regime. Such optimism and alarm are common enough after revolutions; yet in 1979 and 1980 the Iranian revolution did not spread to other countries, the international oil market absorbed the loss of Iranian supplies and the Russians did not take over in Iran. The two major consequences were the subtraction of Iran from the pro-Western alliance system and the diffuse ideological encouragement that Iran gave to some other radical Islamic movements in the region. However, the continuing political confusion in Iran itself was liable in the longer-run to produce new international crises, and the hostage seizure of November 1979 and the outbreak of the Iran-Iraq war in September 1980 brought two of these about. Time alone will tell what the longer-term consequences of the Iran-Iraq conflict will be, for Iran, the Gulf region, and the world; but whilst the Iranian revolution did not have the effects which many had foreseen, it has none the less set in motion processes that affect much of the Middle East.

A New International Economic Policy?

One area of obvious importance to Iran’s foreign policy has been that of oil, and the changes which have resulted from the breaking of the agreement under which a consortium of Western firms had privileged access to Iranian supplies. Much of the rhetoric of the Iranian revolution has stressed the negative character of Iran’s ties with the West, and the new regime has been able to implement a new policy in this regard. However chaotic its implementation, this policy, in the period up to the Iraqi invasion, did have definite results, one positive, the other negative. The positive result was that the lessening of Iran’s ties with the outside world and a reduction of oil output from over 6 million barrels a day to under 2 million gave a boost to previously thwarted sectors of the domestic economy. In particular, agricultural output rose by considerable amounts in the 1979–80 period, with cereal production going from 2.5 million tons to over 4 million tons. This reflected a lifting of domestic price controls, a reduction in imports and a move of population back to the land. Non-oil exports also rose somewhat (from $643 million in 1978 to $788 million in 1979–80) whilst imports fell (from $14,423 million to $9,717 million in the same period). The reduction of dependence on oil therefore had a certain stimulating effect on the economy. On the other hand the often facile pursuit of an anti-imperialist autarky weakened an economy that necessarily depended for its prosperity on a level of international linkage: over 40 per cent of the raw materials and a higher percentage of the components of Iranian industry come from abroad; the neglect of the secondary recovery programme in the oil fields could permanently damage the resources; and the mismanagement of the economy has led to shortages and inflation, in addition to the irrécupérable abandonment of many useful industrial projects.¹

Leaving aside the chaos of the revolution itself, and the political divisions at the centre, this negative consequence is also the result of a perilous belief in the automatic benefits of ‘de-linking’ and the dangers of any form of ‘dependency’. Whilst international economic influences on Iran had many negative consequences in the past, it can be doubted how far this new policy furthers that reorganisation of Iranian society that its protagonists most desire. Not all foreign investment or foreign trade or the use of foreign technicians necessarily involves ‘dependence’ or ‘underdevelopment’: rather, the question is, who controls the terms of such a relationship? Indeed a doggedly autarkic economic policy can have even more negative effects, especially where it possesses an industrial sector such as the Iranian one, which has been constructed through a high level of integration with the world market, for capital goods and raw materials alike. Much Iranian economic thinking seems to be shaped by a fervent belief in autarky, a belief reinforced by Iran’s charged political dealings with the USA and the nationalist fervour these have provoked. Whether such a level of confrontation and ‘de-linking’ benefits the mustazafin, or poor masses, remains to be seen.²

The International Consequences: Beyond the Nixon Doctrine

The international military and alliance system into which Iran was integrated prior to the revolution rested upon an accumulation of arrangements. One set dated from the mid-1950s and in its updated form, the Central Treaty Organisation, involved Iran in military ties with the USA, Britain, Turkey and Pakistan. CENTO was primarily directed against the USSR, but also enabled the West to supply its regional allies with military support for the purposes of internal political control. Despite the fact that friction with the USSR declined after the Shah’s agreement with the Russians in 1962, following a trade-off in the wake of the Cuban missile crisis, Iran remained an important part of the USA’s global military posture vis-à-vis Russia. Its armed forces were designed to play a limited, ‘tripwire’ role in any future war with the USSR, and the USA also acquired in the 1970s a number of electronic listening posts along the Iranian-Soviet frontier which were used to monitor radio and air traffic inside the USSR, and which would have had at least a short-term use in the event of a world war. Following the 1962 agreement, however, and even more so following the British withdrawal of most of its overt forces from the Gulf in the 1968–71 period, Iran played a regional role as an opponent of revolutionary and other insurrectionary forces. Under the terms of the Nixon Doctrine, announced in July 1969 as a means of legitimating the US withdrawal from Indo-China, but applied in a positive sense to Iran, selected Third World states were to play an increasingly direct military role, with US political and logistical support.

The record of Iran’s Nixon Doctrine role is a mixed one. Despite the collapse of the Iranian armed forces as the main support of the Shah during the revolution, it would be a mistake to underplay the military role which these forces played in the previous decade. Iran participated in successful counter-insurgency operations in the Dhofar province of Oman and the Baluchistan province of Pakistan. Perhaps the largest-scale operation was the confrontation with Iraq in which the Shah engaged from the late 1960s until 1975, using both Iranian forces directly and also acting through manipulation of the Kurds. Even the USSR became concerned at one point, when, in 1976, the Shah acquired an airborne surveillance force and air-to-air missiles; these were seen in Moscow as a violation of the 1962 agreement. On the other hand the system was afflicted with several major problems. There remained some enmity between Iran and Saudi Arabia, especially as the latter was no match militarily, although equal to Iran in financial power. Indeed the Shah flaunted his military superiority over the Arabs: even though he abandoned the claim to Bahrain in 1970 he provocatively asserted Iran’s claim to dominate the Gulf and in 1971 seized three Gulf islands as a recompense for Bahrain. For this reason no permanent alliance system of Gulf security was ever created; the Iraqis were the most outspoken critics of such a project, but the other Arab states shared reservations.

Even if a Gulf security system had been in existence, it is doubtful whether it could have done anything to save the Shah. Moreover, the Shah’s attempts to reassert a traditional Iranian dominance over another neighbouring area, Afghanistan, had other perilous results; it backfired dramatically in 1978 as left-wing forces took power in response to an attempt by then President Daud and the Iranians to suppress them. The Shah’s regional policies were therefore, despite their successes, already in difficulty on both Iran’s eastern and western frontiers before the Iranian revolution itself.³

The official policy of the new Iranian government has been in the first instance one of renunciation. Iran has withdrawn from CENTO and the organisation has now been terminated. Iran has cancelled all military agreements with the USA, and has abrogated, without Soviet agreement, the 1921 treaty with the USSR. Iran has broken all political and commercial ties with Israel, South Africa and Chile. It claims that its policy is one of non-alignment, and those, like President Bani-Sadr, who claim sympathy with Mosadeq have revived the latter’s concept of ‘negative balance’. Whatever else, these policies have had significant international effects, because Iran has definitively ceased to play either of the two roles allotted to it under the Shah’s agreements with the USA. It is certainly not now part of the Western alliance system directed against the USSR; and it is not willing to play a counter-revolutionary role in the Middle East at the behest of Washington.

In assessing the political impact of the revolution outside Iran, it is often hard to be certain where the official stops and the unofficial starts, especially since there is considerable dispute inside Iran about what is ‘official’. Radio broadcasts directed against Iraq or Saudi Arabia obviously must enjoy some official support. The seizure of the American hostages was not official in that it was almost certainly not agreed to by Khomeini prior to its taking place and was directed against the then government of Mehdi Bazargan; yet Khomeini had prepared the ground by a vigorous denunciation of America and it became an act which the subsequent official representatives supported. Indeed it became for a time the centrepiece of Iran’s new foreign policy. Conversely, although many government officials, as well as Khomeini, make foreign policy statements on a variety of issues, the effect of these is often minimal in terms of follow-up by state bodies. In the realm of these declaratory postures one is dealing with a world where the official and unofficial are interwoven, where unofficial initiatives can influence state policy, and where apparently formal pronouncements remain unimplemented. In this sense, of course, foreign policy is merely following the pattern which most domestic policy has also followed in the post-revolutionary period. Four issues that have arisen in such a way are Palestine, Afghanistan, the Gulf, and the call for an extension of Islamic revolution to neighbouring countries.

All Iranian political factions appear united in their support for the Palestinian resistance, and Iran has installed the PLO in the former Israeli mission building in Tehran; while no details have been established, it would seem that Iran now provides some financial support to the PLO, and the Palestinians have felt that the Iranian revolution is a moral and political boost to them, especially at a time when their overall situation has been subject to increasing pressure. Iranian support has also seemed to have the added benefit that it has not involved the political pressure that support from the Arab countries has involved. Yet this support has been more circumscribed than many expected. De...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Table of Contents
• Preface
• Acknowledgements
• Part One: Oil and Security in the Arabian Gulf
• Part Two: The Gulf War: Background and Consequences
• Conclusion: Analysis of Policy Implications The Arab Research Centre
• Index