Commentary Magazine


Oil

The idea of using oil as a political weapon against “imperialism” and Israel is not new to the Arab world. Radical Arabs have advocated such a course for many years, but recently threats to starve the West into submission and ultimately to destroy it have been gathering momentum and have been attracting a great deal of publicity. Last May, Colonel Qaddafi of Libya spoke of oil as a “weapon of Arab self-defense.” King Faisal of Saudi Arabia, who had shown great care in the past not to mix oil and politics, has let it be known that his country will be unable to expand oil production beyond the present level unless Washington changes its policy toward Israel. And the Shah of Iran, during his recent visit to Washington, also tried to impress on the administration that a change in American policy toward Israel would make it much easier to safeguard a steady oil supply at reasonable prices.

In consequence of all this, pressure has already begun to be exerted on Israel and more will no doubt be forthcoming, perhaps even heavy pressure. Yet the truth is that if Israel gave in to all the Arab demands, or even if Israel ceased to exist altogether, the major oil producers would still not supply oil a cent cheaper, nor would they supply more than they think compatible with their best interests. In order to understand why this is so, and what it implies for the future, we have to examine the peculiar nature of the international oil business, as well as the politics of the oil-producing countries themselves.

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I

In theory, the three dimensions of the international oil business—economic, fiscal, and political—should intersect, but if they ever do, they rarely seem to produce a coherent result. Usually they simply do not add up. This is why one reputable oil economist, Professor M. A. Adelman of MIT, can proclaim that there is no oil shortage in sight but rather a vast surplus that will continue to 1985 and beyond, a surplus that should ensure virtual price stability; while an equally reputable expert, Walter J. Levy, can express great alarm about the price of future oil supplies and indeed about their absolute availability. Both are arguing from roughly the same set of facts, but each is looking at a different dimension of the oil business.

According to textbook economics, the size of fully proven oil reserves in the Persian Gulf, 367 billion barrels, should indeed, as Professor Adelman claims, result in a buyers' market with plentiful supplies. For even by 1985, worldwide imports from the Gulf are unlikely to exceed 15.5 billion barrels a year, including just under four billion barrels a year for the United States. In other words, even if it is assumed that not one additional barrel of reserves will be added to the proven fields in Saudi Arabia, Iran, Kuwait, Iraq, and the sheikhdoms, Persian Gulf oil would suffice for twenty-three-and-a-half years of world demand at 1985 rates of consumption. Moreover, every oilman with experience of the area believes that the 367-billion-barrel reserve figure is much too low an estimate.

In physical and economic terms, then, Professor Adelman is clearly right: there is plenty of oil; and since operating costs amount to about 5 per cent of the sale price, or at most 10 per cent in the less prolific fields, the price of oil should not increase even if there should be a 400-per-cent growth in demand. Indeed, the price of oil could even go down—if, that is, the owners of the different oil fields were to compete with each other to capture greater shares of the market.

Walter J. Levy's projection of worldwide demand for Middle East oil is somewhat higher than Adelman's, but it is not over the data that they disagree. Levy simply believes that economic facts will not matter. Having observed the oil business since the 30's, Levy sees no reason to think that the restrictive “cartel” structure of the industry will change. The only difference is that instead of a company cartel, the industry will become a “host-country” cartel (to use a term which is now obsolescent, since the “hosts” are getting rid of their guests, and going into the production end of the business on their own, or at least taking the profits). And, Levy argues, if the Organization of Petroleum Exporting Countries (OPEC)1 does indeed continue to function as an effective cartel, the physical surplus of oil will be irrelevant, since the “host” countries will restrict supplies and charge whatever the market will bear.

All but two of the Persian Gulf producers (Iran and Iraq are the exceptions) do not even need the additional cash flow that more abundant oil sales would generate. Thus, Levy points out, there may be no way of inducing them to produce additional oil, and certainly they will have no incentive to lower prices in order to sell more oil. For the Sheikh of Abu Dhabi, or even for the Saudis, an ever greater surplus of cash would simply make them more attractive targets for insurrection or external attack; in the Saudi case, spending money for large-scale economic and social development would create a new class of detribalized ex-Bedouins who would no longer tolerate a monarchy that is still alien to most Arabians two generations after the Saudi conquest. As it is, much of the money paid to these countries by the oil companies has been deposited at very low interest rates in Swiss Franc/-DM accounts, or invested in depreciating dollar bonds.

According to Adelman, it is the U.S. State Department that is primarily responsible for the present crisis and the new-found strength of OPEC. It is the State Department, he points out, that has supported the “majors” or, as their enemies like to call them, “the seven sisters” (BP, Shell, Jersey or Exxon, Stancal or Chevron, Texaco, Gulf, and Mobil) in their appeasement of OPEC. And it is the State Department that has persistently discouraged any talk of meeting blackmail with sanctions.

Adelman's solution is to induce the “majors” to give up the production end of the business. This would turn them into marketing companies, which would have every incentive to buy oil at the cheapest possible price in order to maximize their “downstream” profits. Adelman asserts that this would weaken OPEC's “host-country” cartel, and that the latter could even break up as its members begin to underbid each other in order to sell their oil.

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Levy, however, foresees precisely the opposite happening. He points out that with a short-sighted unilateralism that is also painfully evident in East-West relations, the developed nations of the world are competing with each other in courting the favor of the tin emperors, kings, emirs, sheikhs, and self-appointed presidents of the Persian Gulf. Thus the Japanese have chosen to advertise the fact that they would never support any use of military force or even political pressure on the oil producers, and most European powers agree. This means that the internally fragile and quite defenseless mini-states of the Gulf would be allowed to wage what would amount to economic warfare against the West (to which Japan belongs in this context), while the West in turn would abide by a self-denying ordinance that would deprive it of any means of exerting countervailing pressure. Levy thinks that in the absence of an adequate incentive—and mere money will not suffice—only a political entente among the consumer nations can bring the energy economy of the West into balance by posing the ultimate threat of force.

Neither Levy nor Adelman nor any other reputable energy economist believes that there is a substantial alternative to OPEC oil over the next decade, and indeed into the 1990's. To look at one example of a much-advertised alternative, fuel extracted from the tar sands of Canada, it would take a capital cost on the order of $60 billion—with many more billions needed for feeder lines, storage systems, and trunk pipelines, not to mention environmental damage—to supply all projected U.S. import needs for 1985. In the Middle East the comparable costs would be less than one-tenth as much, and with no environmental damage to speak of—even if it mattered in the wastes of Arabia.

The long-term prospects of atomic energy, on the other hand, are now considerably brighter than even a few years ago. Until recently all reactor systems planned were based on the use of nuclear fission, which is not very efficient, requires a great deal of uranium, and also involves the major problem of radioactive waste disposal. The process of nuclear fusion, in contrast, could provide a literally unlimited supply of heat for conversion into electricity; and deuterium, on which the process will ultimately be based, provides an inexhaustible fuel supply. But major scientific as well as technological problems remain to be solved. Progress since the middle 60's has been impressive and the speed of technological advance will largely depend on the financial allocations made, but the scientific unknowns are just that, and more money for more research could simply be wasted. At present the Atomic Energy Commission's fusion research budget is only $90 million annually. Significantly, some leading oil companies, including Gulf and Shell, have gone nuclear in recent years. Hardly anyone expects that nuclear energy will contribute more than 15 per cent of total U.S. energy supply by 1985 or much more than twice that at the end of the century—though much depends on the priority assigned to energy self-sufficiency. At the cost of one year's growth in the GNP, even present technology could supply all the general energy and all the synthetic fuel needed.

As for the “realistic” self-sufficiency program for the U.S. now being promoted by the “major”-supported National Petroleum Council (NPC), which calls for 90-percent self-sufficiency by 1985, this is both expensive and environmentally undesirable. Among other things, this program entails the construction of 435 nuclear (fission) plants (of one million kw each) as well as seventy assorted shale-extraction, coal-gasification, coal-liquefaction, and geothermal plants. The program assumes, moreover, a 37-per-cent increase in domestic natural-gas and oil production, in addition to a 176-per-cent increase in coal output—all by 1985. Even if one is disenchanted with the environmentalist lobby and its professional alarmism, it is obvious that the NPC program would result in serious environmental damage—not to mention a substantial increase in energy prices to the consumer.

Obviously, if the oil business were like any other industry—dominated, that is, by economic considerations of profits and costs—the currently projected energy needs of Europe and Japan (which the NPC program would not help to satisfy), and those of the United States, would cause no alarm, any more than the projected need for imports of luxury automobiles and Scandinavian “hostesses” into the Persian Gulf causes alarm to the OPEC nations. But while there is no Organization of Automobile Exporting Countries and no international cartel for blondes, there is an Organization of Petroleum Exporting Countries, and one that is fortified both by the solidarity of shared victories and the well-founded expectation of still greater successes in the future. Not prone to selling themselves short, OPEC spokesmen like Sheikh Yamani of Saudi Arabia have threatened to destroy Western industry and Western civilization unless OPEC's demands are met. Yamani was speaking for the gallery, but other Arabs seriously see matters precisely in these terms.

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When OPEC was founded thirteen years ago, few observers expected that this timid alliance of conservative states would become the Frankenstein monster of the oil world. Like any bona-fide international body, OPEC acquired a headquarters building, a (Venezuelan) Secretary-General, a well-paid staff of ministerial protégés, and an even better-paid staff of consultants ready to turn out elegantly-bound reports at a moment's notice. But unlike many other organizations similarly equipped, OPEC also had a clear purpose, in fact only one purpose: “price stability,” or in other words, high oil prices.

Being a cartel, OPEC could be no stronger than the weakest of its members, and its membership included, as it still does, some of the most fragile states of the world; Kuwait was still a British protectorate, Iran and Saudi Arabia were submissive clients of the U.S. and all but one, Iraq, were effectively dominated by the production consortia established on their soil. Even the fairly erratic Iraqis were careful not to go too far, and for all their bombast they refrained from nationalizing the production acreage of the Iraq Petroleum Company. In fact, OPEC was so fragile a creature that it only survived because the “majors” adopted toward it the policy they still pursue, of mild public opposition and strong private support. For once they had absorbed the shock of seeing the natives joining in a common front—as they themselves had been doing for decades—the “majors” realized that OPEC could be used as a decisive weapon in their fight to keep prices high in the face of aggressive competition from the “independents,” the “nationals” (such as ENI of Italy and Petrobras of Brazil), and the Russians.

The one thing the “majors” did not anticipate in OPEC's early years—when it could have been easily destroyed—was that some power other than themselves could make use of the organization. Nor, in fairness, did anyone else anticipate the emergence of the once complaisant Shah of Iran as the aggressive leader of OPEC. (Qaddafi has made more noise, but it is generally recognized that the Shah has had the real leverage—including the ability to unleash, or cut off, the Libyans.) It was the Shah's persistent and finally successful attempt to achieve a quantum jump in his oil revenues that transformed OPEC into the powerful cartel of today.

Engaged in a large-scale program of economic development and land reform, with a prudently commensurate expansion of his army/police repressive base, the Shah began to press the Iranian consortium for a rapid increase in output and hence in his own tax revenues. But the interlocking ownership structure of Gulf oil meant that the partners in the Iranian consortium had no incentive to lift more oil there at the expense of growth elsewhere in the Gulf. The lead company in Iran, BP, whose share of the output amounted to 40 per cent, was already “long” on crude and did not want more in Iran. It preferred to “offtake” more in Kuwait, where its share was 50 per cent, or in Abu Dhabi, where its share was only 23.75 per cent but where its profits per barrel were also higher. Jersey (Exxon) was in a similar position. Its share of Iranian output was only 6 per cent while it had 30 per cent of Aramco liftings in Saudi Arabia, and Aramco rules penalized partners who did not take their full share of a production increase.

After toying with an “economic” solution (i.e., a tax cut), the Shah tried the political highroad: he threatened retaliation unless the consortium agreed to lift much more oil at a rapid and specified rate. At the same time he skillfully defused opposition from other Gulf producers (whose own production growth would thereby be curtailed) by propounding a new criterion, based on Iran's large population and vast development needs and, more to the point, by promising the political support and security assistance of a strong Iran to the weak states on the Arab side of the Gulf.

In this first confrontation, the pattern of events that has now been followed all the way to expropriation was set: the U.S. State Department strongly urged the “majors” to be conciliatory; the French announced their willingness to “help out” Iran if the consortium should show a fight. From Italy to Japan the irresolution and disarray of the consumer nations were made very evident. That the Libyans should have gone on to limit output (1970), raise taxes (repeatedly), and finally expropriate BP (in 1972) and its U.S. “independent” partner, Hunt (in 1973), surprised no one. It is indeed undeniable that, as Professor Adelman claims, the State Department's oil officials have gone out of the way to stress the strength of the “host” countries' bargaining position and counsel appeasement, while pouring cold water on any genuine effort at consumer nation cooperation.

Like the “majors,” OPEC believes in maximizing profits per barrel, instead of maximizing revenues on expanded sales—as many naive entrepreneurs persist in doing outside the oil business. Thus, even if the kings and sheikhs of Araby are persuaded, no doubt by means of suitable political concessions, to raise output to the required level, the price of Gulf oil is likely to increase from the present $I.80-$1.95 to $3 or even $4 per barrel (FOB). For the developed countries, this will mean a vastly increased outflow of currency, and it is bound to cause severe financial problems.

It is for all these reasons that Walter J. Levy, no friend of Israel and hitherto a consistent supporter of accommodation with the “host” countries, declared at the March 1973 Euro-American Amsterdam Conference that the world energy equation cannot be balanced if the sanction of force is removed. So far, however, no form of genuine cooperation among the consumer nations has materialized, while the prospect of forceful cooperation remains very remote.

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II

Because the oil industry is not dominated by economic considerations, the countries which have most of the proven reserves and the extra capacity to supply oil—Saudi Arabia, Iran, and the Persian Gulf emirates—become very important in any consideration of what the future holds. There is every reason to assume that by the end of the decade all oil fields and installations will be nationalized, or that there will be something like 100-per-cent participation on the part of the producer countries. In any case, the local governments will almost certainly be in effective control of operations, and the question of who will be in power in Ryadh, Teheran, Kuwait, and Abu Dhabi is therefore crucial.

It was widely believed until recently that the Arabs (to put it crudely) would have to sell their oil anyway, since they could not drink it. This is true to the extent that the more populous countries such as Iran will need all the money they can get for their ambitious domestic development plans. But it is only partly true of Saudi Arabia, which has been able to make use only of 60 per cent of its oil income this year. To the mini-states like Kuwait, which has already put aside some $6 billion in investments, a billion dollars more or less does not really matter. Colonel Qaddafi or the Kuwaitis rightly argue that since oil prices constantly rise, a barrel of oil in the ground is worth more than a barrel on the market. Libya's present production is only about half of what it was in 1970. Kuwait's producing capacity is now 200 million tons a year, but its government (following the Libyan example) has cut production this year to 150 million, and the Kuwaiti opposition—Kuwait having a parliament of sorts—demands a further cut to 120 million. As for the smaller countries like Abu Dhabi (population 55,000), which a few years hence will produce as much oil as Kuwait does at present, it is difficult to think of any convincing Western argument that expansion of output to match Western demand will be worth their while. If they cannot drink oil, they cannot eat gold either. Once they have collected their first few billion dollars, the smaller Middle-Eastern countries can cut production or stop it altogether for a lengthy period without suffering major harm.

Nature has certainly been most unjust in distributing the oil fields of the Middle East; they should have been located in poor countries like Egypt which desperately need capital. But they are not, and these vagaries of nature will almost certainly have far-reaching political consequences. For however great the riches these small or thinly populated countries will amass, they will remain weak and hence exposed to danger. In less enlightened ages, these states would have been taken over by their more powerful neighbors, or at least held to ransom, just as rich medieval cities had to pay tribute to robber knights and highwaymen. In our day more subtle methods are applied, such as take-over by proxy. This does not entirely rule out direct superpower intervention, should the situation in the Middle East get out of control altogether; it would not be the first time the Middle East has been divided into spheres of influence. Such high-handed action could even be justified (pace Senator Fulbright) in Marxist-Leninist terms. For if monopolies are not tolerated any longer in any advanced country, and if the super-rich are heavily taxed or even expropriated, there is no valid reason to accept an anomalous state of affairs on the international scene, provided of course adequate compensation is paid to the former owners and the oil is made accessible at cheap prices to all countries.

Such a course of action may seem far-fetched at the present time. But what if the situation should seriously deteriorate over a number of years? Meanwhile, it is far more likely that the countries concerned will retain their independence but that they will be shaken by major internal convulsions and that the Persian Gulf will gradually become one of the main danger zones in world politics.

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III

Among the states in this area, Iran is the strongest and most stable, but the vacuum created by Britain's withdrawal from most positions east of Suez has had immediate repercussions on Persian policy. Iran's defense budget has increased twenty-fold since 1968, and the Shah's shopping list during his recent visit to Washington included one of the biggest helicopter fleets in the world and F-14 aircraft; elsewhere the Persians are acquiring Chieftain tanks and missile-firing ships. Five years ago Iran felt reasonably secure, maintaining excellent relations with the Soviet bloc, the West, and most of its neighbors. Today it feels threatened from several directions: the breakup of Pakistan, the coup in Afghanistan, Indian designs in the Persian Gulf, Iraqi intrigues and aggression have contributed to this change.

Not all of these dangers are immediate or constitute an overwhelming threat to Iran's security. India, that colossus on feet of clay, is much too absorbed in internal affairs to pursue an active foreign policy, far away from its own borders. Iraq, Iran's main foe, will go exactly as far as the Russians permit; and the Russians do not seem eager at the moment to risk a major crisis in the Gulf. But this may change at some future date, and the Shah has mended his fences with the Saudis and the smaller oil-producing states in the Gulf. Nevertheless, there remains a good deal of traditional suspicion between Persian and Arab: the Arabs know that while the Shah has been making sympathetic noises regarding their grievances against Israel, they can count on his active help about as much as on Venezuela. On the other hand, the Gulf states may accept Iran's help in an emergency, but they would be of no help if Iran itself were in danger.

Concerning Iranian economic progress in recent years and the prospects for further advance, there is no doubt. But such progress on its own does not guarantee political stability. The extreme Left and extreme Right continue to oppose the Shah's policy, and there are separatist tendencies in Khuzistan (fostered by the Iraqis from across the border) and in other parts of the country. Manifestations of open hostility to the regime are restricted on the whole to Persian students in America and Western Europe; SAVAK, the political police, has been able to prevent, with a few exceptions, the emergence of terrorist gangs on the Turkish pattern. Yet if there is no strong opposition to the regime, there is no widespread organized support either, simply because political activity on the domestic scene has been discouraged. The danger to the present regime is a military coup on the Arab pattern.

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The Iraqi rulers compete with Colonel Qaddafi for the role of chief troublemaker in the Middle East. But while Qaddafi's Islamic fundamentalism has made him the hero of at least some Arabs outside Libya (and is considered to be an extenuating circumstance by others), few Arabs have anything but distaste and suspicion for the dictatorship in Iraq. The fact that the Communists have now become partners in the national coalition has not made the regime any more popular inside the country or in the Arab world. The ruling stratum consists of some 2,000-3,000 army officers and party officials which for a number of years showed remarkable cohesion, correctly assuming that if the regime should be overthrown, their fate, in the best Iraqi tradition, would not be an enviable one. More recently there have been conspiracies and executions involving the secret police chief and other leading figures; the period of relative quiet seems to be over.

Iraq has one major asset other than oil—Soviet support. Seen from Moscow, Iraq is now the most promising country in the whole area, and it has replaced Egypt as the cornerstone of Soviet Middle Eastern policy. The Soviet Union has for many years supported Iraq's claim to Kuwait; Kuwait, nominally at least, was part of the Vilayet of Basra under the Ottoman empire, even though the Turks never really exercised full sovereignty. Following the conquest of Kuwait, Iraqi oil production (and oil revenues) would treble, and it would get a much more secure foothold in the Persian Gulf. The Iraqis tried, halfheartedly, last March; they will probably try again. Kuwait is too big a prize to be given up easily.

Of Kuwait's 700,000 inhabitants, the majority are not locals but Palestinians, Iraqis, and others without whose technical and administrative skills the city-state would soon collapse. Kuwait has a little army of some 8,000 men on whose expansion no less than $500 million are now spent; it has bought Phantoms from the United States and three squadrons of fighters from Britain. It pays some $200 million yearly to Egypt, Jordan, and al-Fatah as a way of expressing sympathy with the cause of Arabism, and, incidentally, to assure its survival. But it remains highly vulnerable. The native Kuwaitis have become rich (one-family apartments for $300,000 are no longer a rarity), whereas the foreigners who do the work are treated like servants. An outside threat of attack coupled with a rising from within would find the country quite defenseless. Kuwaiti oil revenues are at present about $2 billion, making it the country with the highest standard of living in the world, with the exception of Abu Dhabi—in theory at least. By the end of the decade revenues will be at least three times as high, making the attraction for a would-be invader well nigh overwhelming.

Kuwait has survived so far owing to the delicate balance of power in the Persian Gulf with Iran, Iraq, and Saudi Arabia directly involved and the big powers discreetly in the background. The same goes a fortiori for the mini-mini states like Abu Dhabi, Dubai, the Sultanate of Oman (population 750,000), and Qatar with 115,000 inhabitants. They are all “nice little oligarchies” (to quote a recent writer) governed by ruling families with countless cousins, nephews, and especially uncles who among them occupy all key positions. Coups are of course frequent.

The West and Japan could manage, if necessary, without the oil from the Gulf principalities; they could do without Iraq and Libya. But Saudi Arabia is crucial for the simple reason that Saudi reserves are estimated at present at 160 billion barrels, 25 per cent of total world proven resources, with much of the country as yet unexplored—compared with 50 billion in the United States and 25 billion in Libya. When Lee Dinsmore, former U.S. Consul General at Dhahran, appeared at the House hearings on U.S. interest in the Persian Gulf last year, the first question he was asked by the chairman, Lee Hamilton (D. Ind.), was: “Mr. Dinsmore, how stable is the Saudi Arabian government today?” Mr. Dinsmore, tongue in cheek: “The regime of Saudi Arabia is as stable as it has ever been.” Hamilton: “Are there sources of discontent in the country?” Mr. Dinsmore: “If there are sources of discontent in the country, they did not talk to American diplomats.”

This seems to be a very fair description of the prevailing state of affairs, even though it is not very enlightening. Following Egypt's eclipse, Saudi Arabia's importance in Arab affairs has increased. But the political base of the regime is as narrow as it ever was. While King Faisal is a great improvement over Saud, his predecessor, the country is still run by the royal family as if it were its private property, with an inner core of some 500 princes of varying importance; together with their retainers they may count 5,000. The oil industry employs altogether 15,000 people out of a population of 5,000,000. But there are 700,000 foreigners, including many Yemenites, Egyptians, and Palestinians. Reluctant concessions to the modern world have not so far transformed the Saudi Arabian desert into the paradise promised by Ahmed Zaki Yamani, the influential oil minister. Newspapers, the two local universities, and social clubs are under strictest supervision; in comparison with Saudi Arabia, autocratic Kuwait is a permissive society, an anarchist's Utopia. But strict controls have not been sufficient to quench the spirit of rebellion. There have been five attempted coups in recent years mainly involving the Saudi air-force. At least two of them seem to have been serious; they resulted in dozens of arrests and the grounding of the whole air force.

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IV

Given the nature of the international oil business and the internal instability of the Middle Eastern members of OPEC, what are we to make of the threat to stop the oil supply altogether or to cut it drastically unless Arab political demands are met? There are no certainties in the Middle East, and to foresee all contingencies is clearly impossible. But the following general propositions seem at present more likely than not:

  1. There will be no common action on political issues among all members of OPEC. Some of them will restrict or cut back production; but on the other hand, forecasts for the rate of increase in Western consumption may have been exaggerated. Nationalization will continue and there will be constant pressure for higher prices for oil and oil products. Whether the producers will be guided by prudence in their course of action is not certain. It is certain, however, that if the FOB price of a barrel of Gulf oil should approach five dollars in the not-so-distant future, the consumer nations will initiate massive crash programs to develop alternative sources of energy instead of the present half-hearted projects.
  2. If the “conservative”2 forces should stay in power during the critical ten-fifteen years ahead, they will need the West at least as much as the West needs them, not for economic reasons but to ensure their political survival. They will be under growing pressure from their enemies within and without (Iraq, South Yemen, and in the background, more discreetly, the Soviet Union). The polarization of forces in the Arab world is bound to reduce the importance of the Arab-Israeli conflict. The “conservatives” will stress that their anti-Israeli fervor is second to none so as not to be outflanked by the extreme slogans of the more “radical” regimes. A growing part of their income will be devoted to financing various anti-Israeli activities. Considering the magnitude of the sums involved, Israel will thus be subjected to substantial harassment in many fields. But, paradoxically, the prolongation of the Arab-Israeli conflict is the most effective insurance for the survival of the “conservative” regimes for at least some time to come. While the “Israeli danger” overshadows all other issues, they will enjoy immunity from direct attack. Pan-Arabism and “national solidarity” will prevent the “radicals”—except the most extreme among them—from launching an all-out attack against the “conservatives.”
  3. So far as the prospects of the “radical” forces in the area go, Iran and Saudi Arabia are the key countries. A successful coup in Iran would cause the fall of Kuwait and Abu Dhabi in no time and would make the situation of the present regime in Saudi Arabia highly precarious, to say the least. A successful coup in Saudi Arabia would not, on the other hand, endanger Iran because of the essential weakness of the country. A “radical” victory in Iran or Saudi Arabia could cause a drastic cut or even a temporary stoppage of oil supplies to the West, not necessarily to achieve any specific political or economic aim, but to demonstrate to the world the power and the intransigence of the new regime. However, such action would be effective only if it were supported at the same time by several major producers, and this for a variety of reasons is unlikely to happen. A “radical” regime in Iran would still depend on oil revenues for the economic development of the country. An ambitious Saudi military dictator would still want to have the means to assert his influence at home and abroad. Furthermore, there is no solidarity among the “radicals.” On the contrary, a “radical” Saudi (or Iranian) regime would be no friendlier toward the Baghdad Ba'athi leadership than King Faisal. Quite possibly it would follow an even more aggressive political line, just as King Farouk got along much better with the late Hashemite kings of Iraq than Nasser did with those who succeeded the Hashemites. In the mini-states on the Persian Gulf just about anything can happen, including the seizure of power by a few dozen determined gangsters. In view of the smallness of these city and (village) states, their capacity for mischief making is probably limited.

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To summarize, then, oil supplies from the Middle East are likely to continue under the present or almost any alternative management. But there is no certainty, and given the inherent instability of the area, reinforced by the influx of vast sums of money during the next few years, the risk that supplies may be affected is too large for comfort. Temporary stoppages are quite possible, and they might cause a great deal of harm. An embargo seems less likely than a fall in production or even total stoppage following a war in the Persian Gulf or the Arabian Peninsula or internal warfare. In the meantime, a Western military presence will be more effective in securing the flow of oil than political measures, which are unlikely to affect the internal situation in the oil-producing countries. However, since the days of cheap oil are over anyway, the only sensible course of action for the industrialized nations is to take immediate steps to reduce their dependence on Middle Eastern oil as much (and as soon) as possible.


Footnotes

1 OPEC is made up of Abu Dhabi, Algeria, Indonesia. Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and Venezeula.

2 The term “conservative” is used in this context with the greatest reluctance. “Right” and “Left” clearly make no sense in the Middle East, but the use of terms such as “conservative” and “radical” is not much more helpful; a radical in present conditions can be a Maoist or a Quaddafitype Muslim fundamentalist. The dividing line is between old-style autocracies, mostly monarchies, and military dictatorships using populist slogans. The social origin of the rulers is not the same, but power in either case is concentrated in the hands of a very small number of people with no intention whatsoever of letting “the masses” share it.

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