The Oil Kings

Andrew Scott Cooper

• Publisher: Oneworld Publications
• Year: 2011
• eBook ISBN: 9781851688692
• Topic: History
• Subtopic: Middle Eastern History
• Index: History

Oil Kings offers the first inside look at how an oil crisis was manipulated by Alan Greenspan, Donald Rumsfeld, and President Ford (hoping to secure his re-election), helping to precipitate the fall of the Shah of Iran in 1979. Andrew Scott Cooper reveals the fatal struggle between the "oil kings", both Middle-Eastern and American, as they jockeyed for power, playing games that led directly to the rise of Iran's radical anti-American theocracy, which still exists today. An intrepid investigative reporter, Andrew Scott Cooper is the first to access newly declassified papers, and to interview key people who formulated US foreign poilicy in that period. Carefully connecting up the dots, he brilliantly reconstructs the history of that vexed decade when the modern world was changed forever.

Part one

GLADIATOR
1969–1974

“If someone wraps a lion cub in silk,
A little whelp, who’s not yet tasted milk,
It keeps its nature still, and, once it’s grown,
Fights off an elephant’s attack alone.”

—Abolqasem Ferdowsi, The Persian Book of Kings

Chapter one

A KIND OF SUPER MAN

“Your Majesty, you’re like the radiant sun
Bestowing light and life on everyone:
May greed and anger never touch your reign
And may your enemies live wracked with pain.
Monarch with whom no monarch can compete,
All other kings are dust beneath your feet,
Neither the sun nor moon has ever known
A king like you to occupy the throne.”

—Abolqasem Ferdowsi, The Persian Book of Kings

“I like him, I like him and I like the country. And some of those other bastards out there I don’t like, right?”

—President Richard Nixon, 1971

FIRST AMONG EQUALS

They came to bury Caesar. In the spring of 1969 the funeral of Dwight David Eisenhower, the great wartime commander, Europe’s liberator from Nazi occupation, and America’s two-term president, proved an irresistible draw to a generation of world leaders who owed their freedoms, fortunes, and in some cases their lives to the soldier-politician from Kansas. On March 30, millions of television viewers in the United States watched as a stately procession of crowned heads and dignitaries including King Baudouin I of Belgium, King Constantine II of Greece, Grand Duke Jean of Luxembourg, Lord Louis Mountbatten of Great Britain, and President Ferdinand Marcos of the Philippines gathered in the Capitol Rotunda in Washington to pay their respects. Two faces in the pantheon of greats stood out. Onlookers were touched to see a stooped seventy-eight-year-old President Charles de Gaulle of France shuffle forward to salute his wartime comrade’s bier. The other statesman familiar to Americans was the Shah of Iran, the fabulously wealthy emperor whose lavish titles were matched only by his three brilliant marriages. Standing erect in elevator shoes, still trim at age forty-nine, his hawkish features resolute, His Imperial Majesty Mohammad Reza Shah Pahlavi, King of Kings, Light of the Aryans, and Shadow of God, radiated the majesty of the fabled Peacock Throne and shouldered the weight of 2,500 years of Persian monarchy. Wearing a ribbon-slashed military tunic topped off with enough gold braid and orders of state to ornament a Christmas tree, the Shah looked for all the world as though he had just stepped out of a Habsburg drawing room at the Congress of Vienna.

Mohammad Reza Shah’s decision to attend Eisenhower’s funeral was not driven by sentiment toward the man who intervened to save Iran’s Peacock Throne in 1953. “I pointed out that it will provide an ideal opportunity to meet the new American administration and he agreed,” wrote Asadollah Alam, the Shah’s closest adviser and minister of the imperial court. Alam kept a series of secret diaries in which he recorded daily life at the Pahlavi court. Richard Nixon had been sworn in as America’s thirty-seventh president less than ten weeks earlier and the Iranian king was anxious to reaffirm their long-standing acquaintance.

If the Shah’s Ruritanian splendor seemed misplaced in the year of Woodstock, the Apollo moon landing, and the Manson Family murders, the empire of oil he had reigned over for twenty-eight years made him the man of the moment in the Nixon White House. “The Shah is clearly the most important person in Iran,” the State Department advised President Nixon in 1969. “By Iranian tradition any Shah is a kind of super man whose position and prerogatives have even mystical significance. This Shah adds to this tradition the weight of his enormous political sagacity, his intelligence and cunning, his ability to get things done as an executive.” At Eisenhower’s funeral the Shah was treated as first among equals. His scheduled private meeting with the president ran over by a half hour. During the funeral ceremonies in the National Cathedral the Shah was seated prominently in the front row beside Nixon’s elder daughter, pretty blond Tricia. Tricia’s sister, Julie, had recently married David Eisenhower, Ike’s grandson, and received from the Shah a stunning blue and maroon Persian rug as a wedding gift. At a glittering dinner the Nixons hosted for their foreign guests it was the Shah and de Gaulle who “stole the show,” observed Alam. “None of the others got a look in.”

ONE BIG GASOLINE BOMB

Mohammad Reza Shah Pahlavi was a hard man to say no to in the spring of 1969. Everything had turned in his and Iran’s favor in recent years. The United States was mired in a punishing land war in Vietnam, one that had bitterly divided the American home front and exposed the perils of trying to enforce a Pax Americana on the unruly outer edges of empire. Nixon had promised to end the war and draw down the American presence in East Asia. The problem for Washington was that Great Britain had made a similar pledge to pull out of the Persian Gulf by the end of 1971, leaving the Asian continent’s western flank vulnerable to seizure or subversion from radicals and mischief makers aligned with the Soviet Union. The cash-strapped British were ending more than a century of gunboat diplomacy in an area that held two thirds of the world’s known petroleum reserves. Oil from the Persian Gulf accounted for one third of the petroleum used by the free world and 89 percent of the oil used by the U.S. military in Southeast Asia. The region’s booming oil industry generated $1.5 billion in revenue for the United States economy and employed twelve thousand American expatriates. The pitiful reality was that the U.S. naval presence in the Persian Gulf consisted of a seaplane tender and two destroyers “assigned an area from Malaysia to South Africa.”

The Persian Gulf’s topography made it uniquely vulnerable to sabotage. The Gulf was located at the crossroads between the Middle East and Southwest Asia, a jagged gash of water separating Shi’a Iran in the north from its Sunni neighbors to the south. Oman, perched at the mouth of the Gulf, was torn by a rebellion fanned by leftist South Yemen. The pro-Soviet regime in power in Iraq was embroiled in fratricidal purges while it sharpened the knives against Kuwait next door. Saudi Arabia’s ruling Saud dynasty trembled and tottered even as postage-stamp-size sheikhdoms clung to its coastline like fingertips clutching at a robe. Afghanistan and Pakistan were sinking under the waves like grand old liners taking in water at the heads. Oil was the prize. Fifty-five percent of NATO Europe’s oil and a staggering 90 percent of Japan’s petroleum supplies came from the Persian Gulf. If the Gulf was blockaded the lights would go out from Tokyo to Rome. Every day tankers laden with 25 million barrels of oil left ports in Iran, Iraq, Kuwait, and Saudi Arabia headed for the Arabian Sea and the Indian Ocean, bound for Rotterdam, Cape Town, and Singapore. Before reaching open water they had to pass through a tight choke point called the Strait of Hormuz, a razor-thin artery only twenty-one miles wide at its narrowest point that could be “interrupted by a few mines thrown over the side of a fishing dhow or by guerrilla attacks on the endless parade of tankers.” Every thirty minutes a tanker passed through on its way to market. President Nixon and the Shah of Iran had talked about the fact that the whole of West Asia needed shoring up before it collapsed and took the free world’s oil lifeline down with it. The greatest fear of Western military planners was that Soviet paratroopers would swoop in and seize the Strait of Hormuz during a regional crisis. “The Gulf is one big gasoline bomb,” warned an oil industry expert. “It could blow up anytime, especially now that the British are leaving.”

President Nixon and his most influential foreign policy aide, National Security Adviser Henry Kissinger, were anxious to secure Persian Gulf oil fields and shipping lanes once the British sailed for home. In July 1969 Nixon traveled to South Vietnam to rally the troops. During a stopover on the island of Guam he described his vision for how Washington could reduce its physical presence in Asia and avoid future land wars without compromising its national security. His remarks were later burnished for posterity as the “Nixon Doctrine” and they became Nixon’s contribution to the formulation of American foreign policy during the Cold War.

Vietnam had exposed the limitations of American power. Under the Nixon Doctrine the United States would simultaneously draw down in Asia even as it ramped up its support for proxies willing to guard freedom’s forts from Tehran to Sydney. The United States would provide these allies with the weapons and the training they needed to do the job on its behalf. “The U.S. is no longer in a position to do anything really helpful,” explained a White House official. “That would be ‘imperial.’ We’ll just have to rely on the people who live there and maybe it will go all right.” When it came to defending the mountainous approaches to Central and West Asia, patrolling the warm waters of the Persian Gulf, and propping up the gateway to the Arabian Sea and the Indian Ocean, the only likely candidate for the role of American centurion was the Shah of Iran. Richard Nixon and Henry Kissinger were “dealing with the Vietnam drawdown and the reactions of the American people to Vietnam, and it drove the administration to look outside for gladiators,” recalled James Schlesinger, the future secretary of defense who inherited the complexities and contradictions of their Iran policy. “We were going to make the Shah the Guardian of the Gulf. Well, if we were going to make the Shah the Guardian of the Gulf, we’ve got to give him what he needs—which comes down to giving him what he wants.”

The decision to delegate authority and power to the Shah in West Asia seemed logical and practical at the time. The Shah believed that Iran’s future lay with the non-Communist West. He intended to replicate Japan’s success in pulling off an economic miracle in the aftermath of the Second World War. “His goal was to make Iran a modern major power before he died; that was what made him move,” recalled Armin Meyer, who served as President Lyndon Johnson’s ambassador to Iran in the late 1960s. “He openly talked of Iran becoming the ‘Japan of West Asia.’ ” By 1969 the Shah was widely regarded outside Iran as a force for stability, a champion of progressive reform, and the bold leader who broke the power of Iran’s feudal landowning aristocracy and conservative religious establishment to give women the vote and land to the peasantry. He appointed Western-educated technocrats to run Iran’s government and economy even as he concentrated real power in his own hands.

The Shah admired the West for its technological advances and prosperity while distrusting its motives where Iran’s oil was concerned. In 1941 Great Britain and the Soviet Union had invaded and occupied Iran to prevent the country’s oil fields and rail links from falling into German hands. The Allies forced the Shah’s father, Reza Shah, to abdicate in his son’s favor and live in exile. For the remainder of the war young Mohammad Reza Shah reigned but did not rule. The monarchy’s prospects were bleak. The end of war in 1945 did not bring peace to Iran. The Shah barely survived threats to his life and throne from right-wing religious fanatics and left-wing political extremists. Relations with Iran’s northern neighbor the Soviet Union, with whom it shared a 1,250-mile border, were especially problematic. Moscow initially resisted evacuating its troops from Iran and tried to split the country by stirring up secessionist sentiment in the north. For the rest of his life the Shah remained deeply distrustful of Russia and its intentions toward Iran, whose vast oil reserves placed it on the front lines in the new Cold War.

The next great crisis involved Iran’s former colonial overlord Great Britain. The British government had pulled out its troops but clung to the lucrative monopoly it had exercised over Persian oil reserves since the turn of the century. Iranians of all political stripes cheered when in 1951 Prime Minister Mohammad Mossadegh defied British threats and nationalized Iran’s oil industry. Mossadegh was a charismatic leader whose nationalist instincts later raised the hackles of Prime Minister Winston Churchill and President Eisenhower. The political alliance that Mossadegh forged with Iran’s Communist Tudeh Party hinted at a creeping Soviet takeover of Persian oil fields. Churchill warned Ike that the West could not allow an unstable Iran to fall into Stalin’s hands. He advocated the overthrow of the Mossadegh government. President Eisenhower opposed direct military intervention and settled on a plan of covert action. In August 1953 the White House approved Operation Ajax, a joint conspiracy carried out by Iranian royalists with the support of the U.S. and British intelligence services. The lead American in the field was the Central Intelligence Agency’s Kermit “Kim” Roosevelt, grandson of President Theodore Roosevelt. Within the CIA, Roosevelt reported up the ranks to the agency’s chief of operations in the Directorate of Plans, a man named Richard Helms, who would play a crucial role in Iran in future years. “I just know that he would have been generally under my jurisdiction,” was how Helms later modestly described their association. “I think it was agreed that Roosevelt would lead the field operation and that the British and American officers would work under him on this.” As the coup unfolded Helms followed events by the flow of cables that arrived from Tehran.

The coup plotters succeeded almost in spite of themselves. At one point the Shah lost his nerve and fled Iran with his second wife, Queen Soraya, in a small plane. Yet the conspirators carried the day after intense street fighting erupted in Tehran. Mossadegh was overthrown and arrested and the Shah returned to Iran in triumph. Predictably enough, Operation Ajax left a mixed legacy. Many ordinary Iranians assumed the United States had replaced Great Britain as the foreign power now pulling the strings, controlling their king and Iran’s oil riches. The Shah never quite succeeded in removing the taint of illegitimacy or puppetry. Pahlavi loyalists were unhappy too, bitterly complaining with some justification that the CIA later rewrote history by exaggerating its part while downplaying the Iranian contribution. Richard Helms would only admit that the CIA played a “rather important” role in bringing the coup about because “otherwise things would never come to a boil. I don’t mean to, and I’m not interested in making generalizations, but organizing groups of people is not big in Persian life.” Helms’s view was that the CIA had acted as facilitator, cheerleader, and rainmaker for a powerful coalition of anti-Mossadegh groups whose elements included influential religious leaders, politicians, merchants, and generals. Helms insisted that he had not been “intimately involved in the planning.”

The success of Operation Ajax led to American overconfidence in Iran. U.S. officials miscalculated when they concluded that the Shah understood that he “owed” the United States and that he would instinctively toe Washington’s line rather than look after his own national interests. Only later did it become apparent that the Shah didn’t see it that way at all. “The CIA felt they had sort of a proprietary interest in Iran, because they had helped get the Shah back,” explained Douglas MacArthur II, who served as President Nixon’s first ambassador to Iran from 1969 to 1972. The spy agency’s own confusion about the legacy of Ajax was reflected in the two code names it assigned the Shah, almost certainly without his knowledge. Was the Shah “Ralph” and our guy in Tehran? Or was he “No. 1” and the imperious Shahanshah to whom U.S. officials deferred for the next quarter century? The agency never could decide.

For the first fifteen years after the coup U.S. officials kept a close eye on Iran. Presidents Eisenhower, John F. Kennedy, and Johnson worried about the Shah’s propensity for diverting money toward the military rather than developing the country’s economy and infrastructure. They feared another social explosion unless poor Iranians saw their lives improve. Liberals were particularly skeptical of the Shah and of Iran’s future. At a closed-door session of the Senate Committee on Foreign Relations in June 1961 Senator Frank Church frankly shared his low opinion of the Shah. “I just think it is going to be a miracle if we save the Shah of Iran,” he said. “All I know about history says he is not long for this world, nor his system. And when he goes down, boom, we go with him.” Church’s colleague Hubert Humphrey voiced similar pessimism about the Pahlavis when he said, “they are dead. They just don’t know it. I don’t care what revolution it is. Somebody is going to get those fellows. They are out. It is just a matter of time.”

One of the main reasons for their concern was that during the Shah’s reign military expenditures never accounted for less than 23 percent and often up to one third of the national budget. The Johnson administration in particular was determined to hold the line on the Shah’s tendency to overspend on armaments. In the mid-1960s Washington erected a fiscal firewall to ensure that the Shah’s appetite for military equipment did not drain too much capital from Iran’s civilian economy. The firewall was named after General Hamilton Twitchell, who headed up the U.S. military mission to Iran. “The basis of the Twitchell Doctrine was that the Shah’s military procurement program should be completely coordinated with the training program, and only equipment come in that Iranians could operate and maintain,” said Ambassador Meyer, noting that at the time “there was a strong feeling in Washington that the Shah should not spend money on military equipment.” Controlling the flow of arms to Tehran “maintained our relationship,” he said. “Our whole relationship with the Shah, I think, depended on the military side of things. If we had left it to the Shah, during my days, the sky would have been the limit. He wanted everything. . . . I was always trying to talk him out of equipment.”

Keeping arms sales in check also helped Washington retain influence in Iran. Supplying the Shah with too many weapons might strengthen him to the point where he could pull away and pursue an independent foreign policy. “The Iranians were forced to go through an annual economic review,” recalled Meyer. “It was a rather humiliating thing for them to do, before they could buy—buy—fifty million dollars worth of military equipment.” The Shah, who always kept a wary eye on his northern border, was “a little annoyed” at having to do it but “he realized he had to do it to get the equipment. He wanted to stay with us, although he needled us by buying a few Russian trucks and things of that kind during that period.”

Even if a future president diluted or scrapped the Twitchell Doctrine, a secondary dike existed to block a potential flood of defense expenditures by the Shah. Following Operation Ajax the Eisenhower administration established a consortium of Western oil companies to manage the most lucrative 100,000 square miles of Iran’s oil fields. During the negotiations Ike sent Vice President Richard Nixon to Tehran to impress upon the reluctant Iranians the fact that economic aid would not resume until the foreign oil industry was allowed back in. British Petroleum eventually took a 40 percent stake in the new consortium and Royal Dutch Shell 14 percent. A second 40 percent stake went to Standard Oil (Esso), Socony Mobil Oil, Standard Oil (California), Gulf Oil, and Texas Oil Company (Texaco), the remainder parceled out to an agglomeration of U.S.-owned companies. As a face-saving gesture to the Shah the companies declared that “the oil assets belonged, in principle, to Iran.” Yet the members of the consortium split their profits fifty-fifty with the Iranian state and it was they and not the Shah who set crude oil prices and determined whether oil production would increase or decrease.

That Iran did not have full control over its own purse strings posed a problem for the Shah. The Pahlavi dynasty, Iranian economist Jahangir Amuzegar once observed, rested on “oily legs.” Oil was the Shah’s greatest source of strength and also his Achilles’ heel. Petroleum revenues gave the Pahlavi state its lustrous sheen of prosperity, not to mention its veneer of legitimacy. The Pahlavi elite understood that “oil revenues are the foundation on which the present system maintains its stability.” The thinking was that a rising tide of oil wealth would lift all bo...

Table of contents

• Cover
• About the Author
• Title
• Copyright
• Dedication
• Contents
• Introduction
• A Note on the Use of Iranian Imperial Titles
• Part one: Gladiator
• Part two: showdown
• Epilogue: The Last Hurrah
• Acknowledgments
• Notes
• Bibliography
• Index