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AMERICA AND MIDDLE EASTERN OIL
The quest for energy starts with the mythical Prometheus, who stole fire from the gods to help shivering humans, and runs through to the modern struggle to ensure oil supplies to a global economy, whose lifeline is black crude. One American official asserted in 1944, referring to the Persian Gulf, that the “oil in this region is the greatest single prize in all history.”1 He could not have known what travails would await America, especially after it assumed responsibility from Great Britain in 1971 for the security of the Persian Gulf, a region that includes Iran, Iraq, Saudi Arabia, Kuwait, Oman, Qatar, Bahrain, and the United Arab Emirates. Nor could he have known how the use of cheap oil would at once drive the global economy and allow for industrialization and bring unforeseen problems for human beings the world over.
This chapter explains the rising role of oil in American foreign policy toward the Middle East and, in doing so, illuminates key signposts of the rise of the oil era in the Middle East. This enables a better understanding of what role American actions may play in motivating terrorism and how those actions are perceived and misperceived. We cannot understand the story of the petroleum triangle without a sense of America’s role and of the broader rise of the oil era.
Oil has played an increasingly dominant role for America, drawing it into the region over time.2 However, not all American actions have been driven by oil to the same extent, even though popular accounts may suggest as much. The 1990–91 American-led reversal of Iraq’s invasion of Kuwait was far more about oil than the 2003 invasion of Iraq—although Washington would probably not have invaded Iraq in 2003 were it not for a chain of oil-related previous events. Iraq’s invasion of Kuwait in 1990, which was fundamentally tied to the eight-year Iran-Iraq War (1980–88), shaped the events that contributed to the U.S. invasion in 2003.3 Washington would not have had a case against Saddam were it not for the sixteen UN resolutions that Iraq had violated, and these resolutions were issued in response to Iraq’s violations of UN Resolution 687 imposed after the 1991 Gulf War. And had Saddam not invaded Kuwait, Washington may never have had reason to fear that he could threaten American and global interests. In fact, that invasion was also linked to oil. Were Kuwaiti oil reserves not so inviting and had Iraq not fought with Kuwait over a host of oil issues, including drilling rights and quota-busting, an Iraqi invasion of Kuwait would have been less likely.
Middle Eastern Oil Discovered
In 1907, a large petroleum field was discovered in Iran. It was the opening salvo of the oil era in the Middle East, although its rapid development would come during World War II and thereafter—at a time when the globalization era was taking off in earnest. By May 1933, Washington and Riyadh made an agreement that would fashion their oil relations for the century. Standard Oil Company of California (SOCAL), founded in 1870, struck a sixty-year contract giving SOCAL the exclusive right to explore and produce oil from Saudi Arabia’s Eastern Province. By 1938, the Arabian American Oil Company (Aramco), as it would later be called, first discovered oil in commercial quantities.4
The Persian Gulf became vital during the two world wars. The Allies viewed Iran in particular as a vital conduit for sending arms to Russia during World War I, and both the Suez Canal and the petroleum fields of Persia were perceived as critical to Allied interests. Defeating the Ottoman Empire, which had allied with Germany, meant penetrating the Middle East, much of it under direct or indirect Ottoman influence despite the weakening of the Ottoman Empire in the late nineteenth century.
In the years preceding World War I, the discovery of oil allowed Britain to shift its coal-fired navy to one that was oil-fired, allowing it greater speed, power, and maneuverability. Britain had no oil, but it did manage to exploit Iran’s burgeoning capabilities, establishing the Anglo-Persian Oil Company in 1909 (renamed the Anglo-Iranian Oil Company in 1935 and then British Petroleum in 1954), which discovered significant oil fields in Iran. Oil allowed Britain to maintain mastery of the oceans. For its part, the United States believed it was self-sufficient in 1917 but within a few years started to become nervous that it would exhaust its oil supplies.5
During World War II, the oil of the region was vital to the entire Allied war effort. Unlike in World War I, armies required far greater mobility and that resulted in one hundred times the use of gasoline.6 Oil proved crucial to mechanized warfare on a global scale, raising the specter of oil as the key fuel of the century. Had the Nazis successfully invaded the Gulf area, their control of the oil fields could have shifted the course of the war, because Germany had become oil-constrained by 1943.7
The Soviets occupied Iranian Azerbaijan in 1941 in the effort against Adolf Hitler, only to withdraw belatedly in 1946. Later, during the Cold War, perceptions of ongoing Soviet interest in the warm waters of the Gulf triggered Western states to secure the Gulf zealously from their erstwhile wartime ally while also jockeying among themselves for political and economic influence.
After World War II, the United States challenged Britain’s key role in commercially exploiting the oil resources of the region, in conjunction with the Saudis. By 1944, U.S. output of the share of known reserves in the Gulf would for the first time overtake all competition.
Oil factored prominently during the Cold War. The West feared that Moscow or some of its clients in the Middle East would gain control over oil resources. Thus, a driving goal was to prevent this outcome. U.S. policy in various forms was to deny Moscow access to Gulf oil supplies and regional influence. In 1949, American decisionmakers even developed a plan, described in National Security Council directive NSC 26/2, to destroy the Gulf oil fields and prevent a Soviet seizure, if necessary.8
Countries and OPEC Assume More Power over Oil
The nature and role of outside powers in the Persian Gulf changed over time, but so did the behavior and fortunes of local actors in a way that politicized oil, further drew Washington into the region, and contributed to problems generated by the oil era in the Middle East. The American overthrow of Iran’s popular prime minister, Mohammad Mossadegh, was related to oil. Iran nationalized oil in 1951, after the Shah of Iran was effectively stripped of his powers by the parliament in 1950. That left the Anglo-Iranian Oil Company without portfolio and threatened to make insecure a resource critical to Western fighting capabilities.9 Washington also feared that Mossadegh was uncomfortably disposed toward the Soviet Union in a period when the Cold War was especially frigid. A U.S.-organized coup put the pro-West leaning Shah back in power in 1953, an act that has muddied U.S.-Iranian relations until the present day and contributed to the perception that Washington was seeking to exploit the region’s oil resources. If Iran could kick British Petroleum out of Iran prior to the coup against Mossadegh, the thinking went, other countries in the region might follow suit, stripping the major oil companies of much largesse and influence. In fact, in the 1950s and 1960s, power slowly shifted from businesses to states in the control and pricing of oil. This would tie oil to politics even more. In the first half of the century, the world oil market was dominated by seven major oil companies, known as the Seven Sisters, composed of Exxon (the old Standard Oil of New Jersey), Texaco, Royal Dutch/Shell, Mobil, Gulf, Standard Oil of California (Chevron), and British Petroleum (there were also a few independents, most of them American). The world’s proven and exploitable reserves were controlled under contract or owned outright by these companies, but with Iran’s nationalization of oil in 1951, this slowly changed.
Back in 1938, the future Aramco first discovered oil in large quantities in Saudi Arabia. Between 1945 and the 1973 Arab oil embargo, the price of oil was posted largely by the big oil companies rather than being determined by the market. The price was based on the need to accommodate the interests of both oil-consuming and oil-producing countries. Historically, all international oil contracts were conducted at a fixed price between the so-called upstream producers and the downstream refiners and retailers, but that would change. By 1960, power began to shift in earnest to oil-producing nations. Decolonization and nation-building pushed many of these states to assert rights over their own resources. OPEC was formed in 1960 in this context, initially by Saudi Arabia, Kuwait, Iran, Iraq, and Venezuela, but later expanded to include Algeria, Ecuador, Gabon, Indonesia, Libya, Angola, Nigeria, Qatar, and the United Arab Emirates.
Few members thought that it would last, much less become a major institution on the global stage. But it proce...