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The Role of Oil in the Middle East Conflict

Oil discovered in the Middle East (Iran)May 26, 1908 – Oil discovered in the Middle East (Iran)

“The smell of gas continues and it can be seen rising from the hole in the sunlight.” So recorded George Reynolds – British engineer, accomplished linguist and fine horseman – shortly before a 25-metre-high fountain burst from the ground on May 26, 1908. Middle East oil had been discovered.

British top the list in Iran’s search for scapegoats, Financial Times, May 7, 2002.

Sykes-Picot Agreement, 1916

It is accordingly understood between the french and British governments-

That France and great Britain are prepared to recognize and protect an independent Arab states or a confederation of Arab states (a) and (b) marked on the annexed map, under the suzerainty of an Arab chief. That in area (a) France, and in area (b) great Britain, shall have priority of right of enterprise and local loans. That in area (a) France, and in area (b) great Britain, shall alone supply advisers or foreign functionaries at the request of the Arab state or confederation of Arab states.
That in the blue area France, and in the red area great Britain, shall be allowed to establish such direct or indirect administration or control as they desire and as they may think fit to arrange with the Arab state or confederation of Arab states.

That in the brown area there shall be established an international administration, the form of which is to be decided upon after consultation with Russia, and subsequently in consultation with the other allies, and the representatives of the sheriff of mecca.

That great Britain be accorded (1) the ports of Haifa and acre, (2) guarantee of a given supply of water from the tigres and euphrates in area (a) for area (b). His majesty’s government, on their part, undertake that they will at no time enter into negotiations for the cession of Cyprus to any third power without the previous consent of the french government.

That Alexandretta shall be a free port as regards the trade of the British empire, and that there shall be no discrimination in port charges or facilities as regards British shipping and British goods; that there shall be freedom of transit for British goods through Alexandretta and by railway through the blue area, or (b) area, or area (a); and there shall be no discrimination, direct or indirect, against British goods on any railway or against British goods or ships at any port serving the areas mentioned.

That Haifa shall be a free port as regards the trade of France, her dominions and protectorates, and there shall be no discrimination in port charges or facilities as regards french shipping and french goods. There shall be freedom of transit for french goods through Haifa and by the British railway through the brown area, whether those goods are intended for or originate in the blue area, area (a), or area (b), and there shall be no discrimination, direct or indirect, against french goods on any railway, or against french goods or ships at any port serving the areas mentioned.

That in area (a) the Baghdad railway shall not be extended southwards beyond Mosul, and in area (b) northwards beyond Samarra, until a railway connecting Baghdad and aleppo via the euphrates valley has been completed, and then only with the concurrence of the two governments.

That great Britain has the right to build, administer, and be sole owner of a railway connecting Haifa with area (b), and shall have a perpetual right to transport troops along such a line at all times. It is to be understood by both governments that this railway is to facilitate the connection of Baghdad with Haifa by rail, and it is further understood that, if the engineering difficulties and expense entailed by keeping this connecting line in the brown area only make the project unfeasible, that the french government shall be prepared to consider that the line in question may also traverse the Polgon Banias Keis Marib Salkhad tell Otsda Mesmie before reaching area (b).

1921-1922 Excerpts from Churchill’s Papers

Mesopotamian Oil

In considering the future profit which may be drawn from the Mesopotamian oil fields, it is necessary always to bear in mind the capital charges which are accruing. Every year we go on at the present rate of expenditure of £1,000,000 a year at 5 per cent to what Mesopotamia will ultimately have to produce in order to yield a profit. Even if the oil-fields bear out our most sanguine hopes, we are burdening them to an intolerable extent with capital charges, and what would be a thoroughly good business for the British Empire, if developed gradually and thriftily is being daily deteriorated by the sterile charges which are mounting up.

– Churchill Cabinet Memorandum CAB 24/106

A Message for Feisal Regarding Oil Interests

…must proceed in [a] lawful & regular manner in regard to their treaty obligations under the Covenant of the L[eague] of N[ations] & special undertakings like the Anglo French oil treaty. US are making difficulty under pressure of oil interests & if they join with the French against the Feisal regime we shall have serious difficulties on the Council of [the] L[eague] of N[ations]. These difficulties might well become insurmountable unless we follow absolutely correct procedure.

– Churchill to Cox, 20 August 1921 Chartwell 17/16

1933 – Founding of Aramco

Meanwhile, America had become entangled in the Middle East despite its isolationist tendencies. For example, in 1933, a joint venture between Standard Oil of California and Texaco received a 66-year oil concession in Saudi Arabia. The company became the Arab American Oil Company, known as Aramco. Hundreds of billions of American dollars were being invested in the Middle East, with huge fortunes being realized. Thus, the oil companies became entangled in the region’s conflicts and nervous about possible nationalization. James Forrestal, soon to be secretary of the navy, explained the connection between oil and America’s security-

The prestige and hence the influence of the United States is in part related to oil resources, foreign as well as domestic. It is assumed, therefore, that the bargaining power of the United States in international conferences involving vital materials like oil and such problems as aviation, shipping, island bases, and international security agreements relating to the disposition of armed forces and facilities, will depend in some degree upon the retention by the United States of such oil resources.

Background of the Middle East Conflict, Part 3, Wendy McElroy, December 2003.

Oct. 16, 1938 – Ibn Saud is told of the discovery of oil in Saudi Arabia

Though there was still a shortage of cash in Ibn Saud’s treasury the hope of an income from oil in the hope of an income from oil in the future had become far stronger. The concession which the King had given in July 1933 to the Standard Oil Company of California for the eastern part of the Kingdom resulted in the announcement to him by Mr. W.J. Lenahan on the 16th October, 1938 of the discovery of oil in commercial quantities and the sending away from Ras Tanura, on the eastern coast, of the first consignment of Saudi oil in May 1939. In this case Ibn Saud’s instinct had for once been wrong. He had never counted upon it and never until then believed in it. He had always asked that the geologists might search for water too, thinking that in the end it might be the more important result of their exploration. He was immensely relieved by the news brought to him by Bill Lenahan, the company’s representative in Jedda, and he cheerfully made the journey to Ras Tanura seven months later for despatch of the very first oil to leave his Kingdom.

Excerpt from Faisal, King of Saudi Arabia, Gerald de Gaury, London- Arthur Barker Limited, 1966.

Apr. 5, 1945 – Letter from President Roosevelt to King Ibn Saud

Your Majesty will recall that on previous occasions I communicated to you the attitude of the American Government toward Palestine and made clear our desire that no decision be taken with respect to the basic situation in that country without full consultation with both Arabs and Jews. Your Majesty will also doubtless recall that during our recent conversation I assured you that I would take no action, in my capacity as Chief of the Executive Branch of this Government, which might prove hostile to the Arab people.

Nov. 6, 1947 – Reverend Dr. Theodore Jackman, executive director of the Palestine Research Institute quoted in Palestine Question, San Francisco Chronicle

“And we can’t expect too much from the United Nations, because it is being deliberately packed by countries that have no right to belong,” he said. “Yemen, which was just admitted to the U. N., is a slave-trading nation. Saudi-Arabia, valuable to us because of her oil deposits, has a ruler who keeps slaves.”

Nov. 10, 1947 – Mufti Implies Arab Fight On Even U.S. Force- Says Partition of Palestine Will Be Resisted, U. S. Oil Interests May Suffer, United Press, NY Herald Tribune

Q.—If the American government continues to support Zionism will the Arabs oppose American oil interests in the Middle East and will British interests suffer the same fate?

A.—The Arabs have repeatedly declared that they will resist aggression by all means at their disposal. With this end in view they are determined to sacrifice both life and property, physically and economically, as would any other people when it finds itself faced with the danger of extinction.

Dec. 19, 1947 – Ibn Saud Says He’ll Protect Americans, Associated Press, San Francisco Chronicle

CAIRO, Dec. 19 (AP)—The Saudi Arabian Legation issued a communique tonight emphasizing King Ibn Saud’s intention to prevent any attacks upon Americans in his kingdom that might result from the Palestine partition plan.

The communique also stressed that the King would urge the U. S. and Great Britain to abandon the United Nations Palestine decision. It said he would warn them of the “serious consequences” partition might bring.

A representative of companies interested in the pipeline to run from American oil concessions in Saudi Arabia to the Mediterranean said in Cairo that work had been suspended on the western end of the project because of unrest in the Middle East. American employees of the Trans-Arabian Pipeline Company were withdrawn from Trans-Jordan recently following attacks on one of their convoys.

Apr. 4, 1948 – Palestine and U.S. (editorial), St. Paul Pioneer Press, by Constantine Brown

THE ZIONISTS and other ardent advocates of Palestine partition appear to be blind to the political reasons which prompted the administration to withdraw its support for the immediate creation of a Jewish state. Some frustrated spokesmen for partition-at-any-price lay the blame publicly on oil interests which, they say, have prevailed over humanitarian interests in those administration quarters which decided at the eleventh hour to reverse themselves. Others blame certain officials of the State and Defense departments whom they accuse of anti-Semitism.

The truth-and the most prominent American Zionist leaders ought to be aware of it-is that the tense situation created by the USSR in the world has become so threatening that any attempt to enforce the decision of partition at this time would jeopardize the security of the United States, of which the American Zionists and their non-Jewish friends are citizens…

The oil of Saudi Arabia-which the Zionists and their friends have described as a gigantic speculation intended to fill the pockets of the Standard Oil stockholders-is in fact important not to those persons but to the security of the United States itself.

The air strips of Saudi Arabia will be of enormous importance if war comes. Airplanes can be operated only if we have almost inexhaustible oil and gasoline supplies. These the Arabian oil fields can provide. Without them we would have to send oil and gasoline by tanker across seas infested by enemy submarines.

July 10, 1948 – Arab Oil Remains Potent Weapon in Palestine Dispute, Associated Press, San Francisco Chronicle

CAIRO, July 9 (AP)-Talk of United Nations sanctions against the Arab nations to make them stop fighting the new state of Israel revived speculation today on what use the Arabs may make of their most potent weapon-oil.

Always present is the Arab threat to suspend the flow of oil to the United States and the European Recovery Program. The present state of world tension makes the weapon even more potent.
Saudi Arabia alone is the largest single supplier of oil for the U. S. Navy. That makes King Ibn Saud a big question mark of the Middle East.

Ibn Saud now receives more than $20,000,000 a year in royalties on 400,000 barrels a day produced by the American-owned Saudi Arabian Oil Company. A year ago most Americans believed he would not give up this income for the sake of Palestine because he needed-and still needs-American dollars. Since then, however, Arab feeling has heightened. Ibn Saud recently entertained his old enemy, King Abdullah of Trans-Jordan, and they pledged all possible means toward Arab victory in Palestine.

The Middle East as a whole is due to provide some 119,000,000 barrels of oil for the European Recovery Program this year. In 1951 the area is relied upon to supply 320.000,000 barrels for European recovery.

1937 – Arab Oil Embargo

During the October 1973 Arab-Israeli War, the Arab members of the Organization of Petroleum Exporting Countries (OPEC) announced an embargo against the United States in response to the U.S. decision to re-supply the Israeli military during the war. Arab oil producers also extended the embargo to other countries that supported Israel. The embargo both banned petroleum exports to the targeted nations and introduced cuts in oil production. Several years of negotiations between oil producing nations and oil companies had already destabilized a decades-old system of oil pricing, and thus the Arab oil embargo was particularly effective.

Implementation of the embargo, and the changing nature of oil contracts, set off an upward spiral in oil prices that had global implications. The price of oil per barrel doubled, then quadrupled, leading to increased costs for consumers world-wide and to the potential for budgetary collapse in less stable economies. Since the embargo coincided with a devaluation of the dollar, a global recession appeared imminent. U.S. allies in Europe and Japan had stockpiled oil supplies and thus had a short term cushion, but the longer term possibility of high oil prices and recession created a strong rift within the Atlantic alliance. European nations and Japan sought to disassociate themselves from the U.S. Middle East policy. The United States, which faced growing oil consumption and dwindling domestic reserves and was more reliant on imported oil than ever before, had to negotiate an end to the embargo from a weaker international position. To complicate the situation, Arab oil producers had linked an end to the embargo to successful U.S. efforts to create peace in the Middle East.
To address these developments the United States announced Project Independence to promote domestic energy independence. It also engaged in intensive diplomatic efforts among its allies, promoting a consumers’ union that would provide strategic depth and a consumers’ cartel to control oil pricing. Both of these efforts were only partially successful.

The Nixon Administration also began a parallel set of negotiations with Arab oil producers to end the embargo, and with Egypt, Syria, and Israel to arrange an Israeli pull back from the Sinai and the Golan Heights. By January 18, 1974 Secretary of State Henry Kissinger had negotiated an Israeli troop withdrawal from parts of the Sinai. The promise of a negotiated settlement between Israel and Syria was sufficient to convince Arab oil producers to lift the embargo in March 1974. By May, Israel agreed to withdraw from the Golan Heights.

U.S. Department of State

Jan. 14, 1982 – U.S. Mideast Policies under Fire, JTA

American policy, Tucker observed, is dominated by a fear of losing access to Persian Gulf oil. That fear, he said, stems from a weakening of U.S. power in the area, and an attempt to rely on “surrogate” states to protect the oil’s flow. Now, an attempt to build up Saudi Arabia as a replacement for Iran and Washington’s chief surrogate has led to a policy of yielding to Arab demands and a “slow but steady backing away” from an emphasis on negotiations, such as in the Camp David accords, Tucker said. He warned there would be more and more strains in U.S. Israeli relations in the future if the present American policy orientation continues.

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