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Prasad Sri Peddu
July 30, 2006
Global Energy in Crisis
Merchants of War
(How U.S. Oil and Weapons industries drive U.S. Foreign Policy
in the Middle East resulting in greater instability and insecurity)
The Fall and The Rise
Since the official fall of the Soviet Union, on Christmas Day in 1991, the United
States has emerged, in its own valuation, as the lone superpower. With the easing of
persistent and imaginary threats of warfare that characterized the Cold War, the United
States had the grand opening to pave a road to peace and stability across the hemispheres.
It stood to pass through the gates of the millennium as the unassailable military and
economic power, with the capacity to exercise restraint on the mass militarization of the
world and to put an end to its high-handed foreign policy paradigms practiced, most
notably, in the Middle East.
However, more than a decade after the fall of its arch nemesis, i.e., communist
Russia, the United States, continuing an imperious brand of foreign policy, has built a
reprehensibly poor image and a degraded opinion-base in the Middle East and the greater
part of the globe. Survey after survey shows an expanding global public driven against
American interests as the United States is ranked high among nations threatening global
stability and security.1
1
See: http://people-press.org/reports/display.php3?ReportID=185. Two months after the U.S. invasion of
Iraq in March 2003 The Pew Research Center reported, “Favorable opinions of the U.S. have slipped in
nearly every country for which trend measures are available. The belief that the U.S. pursues a unilateral
foreign policy… has only grown in the war’s aftermath. Negative views of the U.S. among Muslims,
which had been largely limited to countries of the Middle East, have spread to Muslim populations in
Indonesia and Nigeria. Muslim populations surveyed express worries that the U.S. might become a
military threat to their countries.” Contrary to the U.S. and Israeli perception “most Muslim populations
think U.S. policies bring less stability to the Middle East.”
See: http://people-press.org/reports/display.php3?PageID=796. A year after the Iraq War, mistrust of
America in Europe widens and anger in Muslim countries persists as “large majorities in every nation
U.S. Foreign Policy: Barrels and Bombs
The United States’ foreign policy, burgeoning from and spiraling around oil trade
and weapon proliferation, has invariably contributed to the rising insecurity in the Middle
East and beyond. This paper shall examine U.S. foreign policy and the influence it yields
in the Middle East via oil and weapon trade, often under the banner of national security
and free trade doctrines. In other words, U.S. oil and weapons industries drive U.S.
foreign policy in the Middle East resulting in greater instability and insecurity in the
region and beyond. The focus of the paper shall remain on the countries of Saudi Arabia
and Iran from the post-WWII era to the vanishing days of communist Russia.
The factors that contribute to the current American standing in the Middle East
are historical and emergent. Through the first half of the 20th century the United States
vied for strategic and tactical positioning with traditional European powers, in gaining
access to the vast oil deposits of the region formerly known as the Ottoman Empire.
Relations with fiefdoms and dictatorships resulted in rotating friendships governed by the
pumping of oil and the sale of weapons. Algeria, Egypt, Iran, Iraq, Kuwait, Lebanon,
Libya, Saudi Arabia, Syria and other nations of the greater Middle East and North Africa
fell out of favor of U.S. foreign policy when the objectives of the multinational oil and
weapons companies shortchanged.
Oil: King Among Commodities
Historically speaking, Daniel Yergin, in his epic book The Prize states that
Washington’s decision to enter World War II, in essence, rested on a new outlook on the
global order of trade and security, centered on the prime commodity of oil. He writes,
“Oil was recognized as the critical strategic commodity for the war and was essential for
surveyed (except the U.S.), believe that, America pays little or no attention to their country’s interests in
making its foreign policy decisions.
2
national power and international predominance. If there was a single resource that was
shaping military strategy of the Axis powers – Germany, Italy and Japan – it was oil.”2
He declares, “The shortage of liquid fuel was Japan’s Achilles’ Heel.”3 The enormous
distances covered by sea, by all sides involved, placed a great price and strain on the
production and distribution of oil.
Securing Saudi Arabia
Though Saudi Arabia faced no direct threat from the Axis powers and had little to
no dealing with the United States at the onset of WWII, the American government,
realizing the petroleum potential, made the safeguarding of the kingdom a fundamental
part of America’s national security and foreign policy paradigm. Michael Klare, in his
book Blood and Oil states, “The Land-Lease Act of 1941 gave President Roosevelt the
authority to sell, exchange, lend, lease or otherwise transfer military equipment to “any
country whose defense the President deems vital to the defense of the United States.””
Thus, on February 16, 1943, President Roosevelt declared that, “the defense of Saudi
Arabia is vital to the defense of the United States.”4
The United States, which single-handedly fueled5 a global war by tapping into its
own vast discoveries of the late 1920s and early 1930s, quickly realized that there was a
run on this prime commodity. A policy statement released by the State Department in
2
Yergin, Daniel. The Prize: The Epic Quest for Oil, Money, and Power. Free Press. 1992.
p. 395.
3
Yergin. The Prize, Chapter 18. “In mid-January 1942, with the Japanese closing in, (American) crews in
the outlying oil fields” (of Balikpapan, on the Island of Borneo) “destroyed four decades of industrial
creation in less than one day.” pp. 352-354. Similar oil field destruction was carried on in the East Indies.
Japanese oil tankers were among the favorite targets for U.S. submarines. “By the first quarter of 1945
imports (into Japan) had disappeared” crippling the Imperial Navy’s war effort. p. 357-358.
4
Klare, Michael T. Blood and Oil: The Dangers and Consequences of America’s Growing Dependency
on Imported Petroleum. Henry Holt and Company, LLC. 2004. p. 33.
5
Klare. Blood and Oil. “Between the attack on Pearl Harbor in 1941 and the defeat of Japan in 1945, the
United States contributed six billion out of the seven billion barrels of oil that the Allied forces consumed.
p. 28.
3
April 1944, codified in the Foreign Petroleum Policy of the United States,6 was,
according to Yergin, the “conservation theory” giving the United States government the
mandate “to control and develop ‘extraterritorial’ (foreign) oil reserves in order to reduce
the drain on domestic supplies, conserve them for the future, and thus guarantee
America’s security.”7 This paradigm commanded America’s foreign policy for
generations to come.
Following the allied success8 of WWII, the Untied States, with the steady
crumbling of the British Empire, looked to reconfigure ‘Western’ positioning in the
Middle East. The historic and unprecedented meeting between President Franklin D.
Roosevelt and Saudi Arabia’s King Abdul Aziz Ibn Saud, in mid-February 1945 in the
Suez Canal Zone in Egypt, laid the foundations for the free flow of oil from Saudi Arabia
with the direct intervention of the United States government, in a policy termed as
“solidification”9.
In order to counterbalance unending British influence in the region, King Saud
reassured President Roosevelt of supporting American oil interests in return for the
military protection of – vast oil reserves of – Saudi Arabia, distressing the British Prime
Minister Winston Churchill. The New York Times foreign affairs correspondent, C. L.
Sulzberger, summed up America’s intentions succinctly: “The immense oil deposits of
Saudi Arabia alone make that country more important to American diplomacy than
6
Klare. Blood and Oil. p. 30.
Yergin. The Prize. p. 395
8
Klare. Blood and Oil. Petroleum played a critical role in Allied victory. “Oil-powered weapons – tanks,
airplanes, submarines, aircraft carriers, troop-transport ships, and armored troop carriers – dominated the
theaters of war.” “If the internal combustion engine was the heart of the modern military machine, its life
blood was oil.” p. 28.
9
Yergin. The Prize. p.397
7
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almost any other smaller nation.”10 Thus, protection – of some 262 billion barrels, or
one-fourth of proven world reserves under Saudi Arabian soil11 – is guaranteed at any
cost, including with the use of American military might. Further, the head of the State
Department’s Division of Near Eastern Affairs informed President Harry S. Truman in
1945, “In Saudi Arabia, the oil resources constitute a stupendous source of strategic
power, and one of the greatest material prizes in human history.”12 The United States
government13 was deeply involved in providing security and expanding opportunity – for
profit making – to multinational private oil conglomerates by simply implementing its
foreign policy mandates. As a result, the heavy reliance on a single source of export
commodity – i.e. oil – has left Saudi Arabia vulnerable14 to shocks and to a diversifying
global market. In addition, the Saudi Royal Family, far from being a democratically
elected government, continues to receive personal and territorial protection15 from the
10
Yergin. The Prize. p. 404 - 405.
Klare. Blood and Oil. p. 26.
12
Klare. Blood and Oil. p. 32.
13
Pelletiere, Stephen. America’s Oil Wars. Around the depression years, the California-Arabian Standard
Oil Company (CASOC) struggled to get their oil production to the market. To alleviate pressure on the oil
company and to profit from the oil business, first hand, Washington entertained the idea of buying CASOC,
a move if materialized would have duplicated the practice of the British Empire. To Pelletiere, this is
“further evidence of the power of business to coerce the U.S. government.” p. 41.
14
See https://www.cia.gov/cia/publications/factbook/geos/sa.html. With a population of 27 million, Saudi
Arabia has a GDP – PPP (2005 est.) of $338 billion. The petroleum industry accounts of 75% of budget
revenues, 45% of GDP, and 90% of export earnings. With petroleum and petroleum related products
accounting for 90% of export commodities, the competitive advantage of the oil-based economy of Saudi
Arabia will face severe challenges with the emergence of alternative sources of fuel and transportation.
15
Klare. Blood and Oil. In April of 1957, under the Eisenhower Doctrine, Saudi Arabia received a large
consignment of modern weapons from America. Further, the U.S. Department of Defense strengthened the
Saudi Arabian National Guard, which is under the direct control of the Royal family, with modern weapons
and training, whose primary objective is to protect the ruling regime from internal revolt. p. 41.
11
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United States government, from both foreign and domestic adversaries,16 destabilizing
economic interests17 and political freedoms of the people living in the region.
U.S. Foreign Policy Afloat
Each subsequent American administration – Truman, Eisenhower, Nixon, etc. – in
form and function, ensured oil access and distribution through U.S. foreign policy that
closely tied national security concerns of producing countries to those of consuming
countries, invariably dispatching millions of dollars worth of sophisticated, as well as
crude, weapons to protect oil-rich nations in the Middle East. Previously, the
concessionary arrangements18 that states such as Iran and Iraq entered into with major oil
companies and foreign governments grew contentious. Beginning in the 1930s, in Iran
and Iraq, a growing movement towards nationalization of the oil industry swept across
the Gulf invariably butting heads with giant foreign oil companies and rising tensions
among foreign governments vying for larger chunks of the concession pie.19 All the
while, the automobile age in America flourished increasing demand for foreign supply of
crude.
Klare. Blood and Oil. “When Iraq invaded Kuwait in August 1990 and positioned its forces on the
Saudi Arabian border, the Bush Administration cited the Roosevelt – Ibn Saud meeting as part of the
justification for its decision to send American troops to the kingdom. p. 36.
17
See https://www.cia.gov/cia/publications/factbook/geos/sa.html. Saudi Arabia has a population growth
rate of 2.18% (2006 est.), one of the highest in the world; it is estimated (as per 2004) that it has an
astonishing 25% unemployment rate with nearly 40% of the population aged 14 or below.
18
Hiro, Dilip. The Iranian Labyrinth: Journeys Through Theocratic Iran and its Furies. Nation Books.
2005. The Concession Syndicate started in Iran in 1905, and with the signing of a convention in August
1907, divided Iran into three sections: Russian-influenced zone in the north, British-influenced zone in the
south and a neutral zone in the middle. p. 187. Through the early 1920s the British and the Russians were
keen to keep America out of the Iranian concession pie. p. 191. At the start of WWII, Britain and Russia,
with the threat of Iran falling into the hands of Germany, justified the duel-occupation.
19
Pelletiere Stephen. America’s Oil Wars. Praeger Publishers. 2004. Pelletiere states that, the British
government dominated oil activity in both Iran – owning 56% of Anglo-Persian Oil Co. (APOC) stock –
and Iraq – by setting up the Iraq Petroleum Co. (IPC) under the ‘mandate’ system after World War I.
Towards the end of WWI, the British government warned American companies hovering over the region in
search of concessions, prompting the American government to enact “the Open Door policy, ensuring
freedom of access for American business everywhere.” p. 35.
16
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In addition, U.S. foreign policy, in the decades after the last Great War, was
devised based on real and perceived threats – from Russia – in the form of communism
sweeping over the Middle East. Arab nationalism during the years of the cold war also
weighted against the interests of multinational oil companies letting Washington take a
forceful and committed role in the oil and weapon economy. According to Klare, “it was
this recurring cycle of crisis, reassessment, and response that produced the three great
presidential edicts of the early cold-war era: the Truman, Eisenhower, and Nixon
doctrines.”20
The Iranian Struggle
In an attempt to secure natural resources under the domain of the national
government, in September 1944, the Iranian parliament (Majlis), under the leadership of
Muhammad Mossadegh, – Prime Minister of Iran (1951-53) – passed a resolution
ordering all officials to halt talks with foreign oil companies vying for Iranian oil
concessions.21 To the average Iranian, especially to the worker in the oil industry, who
often lived and worked in severely exploitative and squalid conditions, this
nationalization22 movement meant a stop to the chronic foreign intervention and ushered
in a new era of self-determination of the Iranian oil business. While oil remained
America’s prime interest in the Middle East, the threat of the spread of communism23
from Russia, emboldened U.S. foreign policy towards Iran.
With the British embargo on Iranian oil, as a consequence to the nationalization
process, the American government felt the squeeze during the height of the Korean War
20
Klare. Blood and Oil. p. 38.
Hiro. The Iranian Labyrinth. p. 192.
22
Yergin. The Prize. In 1951 Mohammed Mossadegh executed the nationalization law. The AngloIranian oil company, a major subsidiary of the British government, was “legally abolished”. p. 455.
23
Yergin. The Prize. With the North Korean invasion of South Korea in June 1950, the U.S. desperately
prepared “contingency plans for responding to a Soviet Union invasion of Iran.” Iranian oil accounted for
40% of total Middle Eastern production, including, being a major supplier of aviation fuel. p. 454.
21
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in 1951, and proposed an oil consortium24 that would be controlled by a number of
companies, including American. This enraged the British. Nonetheless, Washington
feared that, if Mossadegh fell, the Soviets would sweep through Iran. With the economy
in shambles25 and poverty rising, Mossadegh, in the fall of 1951, appealed to the United
Nations and the United States26. Yet, Iran received little assistance from the Americans;
all the Iranians could offer was oil that was embargoed by the British. Iran was in a state
of chaos. A frequent feature of American strategy in ensuring the flow of crude has been
to weaken or replace regimes, which are often politically unstable, as in the case of Iran
half-a-century ago.
Further, Washington and Moscow clashed over the status of Iran, the leading oil
producer in the post-WWII era27, resulting in the Truman Doctrine, which strived for and
succeeded in neutralizing Russia’s influence in Iranian affairs, most significantly in the
region of Azerbaijan.28 This early Cold War success elevated the United States
geopolitical posturing in the region “with the oil fields of Saudi Arabia and the other
Persian Gulf producers as the ultimate prize.”29 Betting in favor of American oil
Yergin. The Prize. “In the U.S., acting under the Defense Production Act of 1950, and with antitrust
exemption, nineteen oil companies formed a Voluntary Committee to coordinate and poll supplies and
facilities. It worked closely with a similar British committee.” p. 464.
25
Yergin. The Prize. Before nationalization, oil exports had generated two-thirds of the country’s foreign
exchange and half of the Iranian government revenues. Under the embargo there was no oil revenue for
two years and inflation was rampant. Law and order was collapsing. p. 467.
26
Yergin. The Prize. During the Truman Administration “there was also an ingenious plan under which
the World Bank would take over oil operations in Iran as a sort of trustee” until the embargo ended and the
consortium took full control. p. 466.
27
Pelletiere. America’s Oil Wars. Oil fueled the recovery of Europe after WWII. To Pelletiere “it was the
driver of the whole capitalist system,” replacing the great traditional energy source, coal. p. 66.
28
Klare. Blood and Oil. With the United States beefing up its navy in the Eastern Mediterranean, Stalin
chose to diffuse the crisis, as Moscow withdrew all of its forces from Iran in May 1946. p. 39.
29
Klare. Blood and Oil. On March 12, 1947, in his famous Truman Doctrine speech, the president revealed
“unstinting American assistance to any nation – especially Greece, Turkey and Iran – threatened with
Communist subjugation.” p. 39 - 40.
24
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companies’30 interests by advocating for the free flow of oil from the Middle East to an
expanding American economy, U.S. foreign policy deepened its commitment to the
security of the region through weapons trade.31 Washington’s official stance suggested
that American national security depended on how well it could secure the production and
distribution of crude from the Middle East.
Unable to strike a favorable oil deal through the concessions system, the British
and the American governments approved of a plan to overthrow Prime Minister
Mossadegh – via a coup known as ‘Operation Ajax’. However, the botched Operation, in
August 1953 – initial months of President Dwight D. Eisenhower’s administration32 –
surprisingly turned into a popular uprising, led by the trade unions comprised of oil
workers, that spilled into the Iranian streets and forced the Prime Minister out of power.
Within a few months, the U.S. government was looking to bolster the positioning of
American oil33 companies in Iran. Consequently, Mossadegh’s attempts to break the oil
monopoly through the nationalization experiment and the Iranian efforts towards selfdetermination – of the oil under its soil – reached an agonizing collapse.
Pelletiere. America’s Oil Wars. Oil is what originally drew the Americans to the Gulf. The oil system,
which the United States controlled through its foreign policy mandates, influenced – and frequently
initiated – the control of production, thus influencing the price, making the American venture in the Middle
East profitable. p. x.
31
Klare. Blood and Oil. The Mutual Defense Assistance Agreement of June 18, 1951 authorized the sale
of American arms and combat gear and the deployment of the U.S. Military Training Mission (USMTM) to
Saudi Arabia. The USMTM helped train the first Saudi army units and helped build the Royal Saudi Air
Force and delivered the first set of modern combat planes to the kingdom. p. 40.
32
Pelletiere. America’s Oil Wars. Eisenhower’s Secretary of State, John Foster Dulles, helped promote
the idea that compartmentalized the post WWII world into adherents of democracy and communists. p. 56.
33
Yergin. The Prize. Iranian oil was back in business in October 1954. Iran’s National Iranian Oil
Company owned the nation’s oil fields and facilities, in principle. In practice, it could not tell the U.S. led
consortium what to do.
30
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American Oil Monopoly in the Middle East
Yergin asserts “with the establishment of the Iranian consortium, the United
States was now the major player in the oil, and the volatile politics, of the Middle East.”34
In an attempt to secure unrestricted flow of oil from the Middle East, as a direct result of
Eisenhower’s35 edict, the United States government sought to prop up friendly36 local
powers – often pitting neighbors against one another – and by providing military support
to those countries with large petroleum reserves. Pelletiere asserts, “the concessions were
run on a carrot-and-stick basis.”37 Kings, dictators and democratically elected leaders in
the Middle East were often motivated to help, knowing the enormous financial and
political benefits their assistance would garner from the United States. In the event they
dared to disagree with the oil companies these rulers often faced enormous consequences
further destabilizing the country and the region. Ultimately, as was the case with Prime
Minister Muhammad Mossadegh, power and position was rendered indefensible when
American foreign policy was challenged.
With growing costs and casualties from the Vietnam War, President Richard
Nixon was caught in a precarious position in advancing American intervention into the
34
Yergin. The Prize. p. 477.
Klare. Blood and Oil. The Eisenhower Doctrine, first relayed in a presidential address on January 5,
1957, authorized the United States government to use military force to defend oil rich Middle Eastern
countries from the threat of ‘Soviet expansionism’ and to provide military hardware to pro-American
regimes. p. 41.
36
The analysis presented in this essay titled ‘Merchants of War’ focuses on the Middle Eastern nations of
Iran and Saudi Arabia, from the post-WWII era to the fall of communist Russia. These nations are but a
small share of the American interest in the post-WWII Middle East. Shimshon and Nitzan. “Putting the
state in its place”. In 1958, under the Eisenhower doctrine, Israel became a ‘strategic asset’ recognized for
its pro-Western posture and as a potential logistical base. Thus, in 1958, the United States made it first
military foray into the Middle East. In 1960 President John F. Kennedy, promoted a ‘military balance’
between Israel and the Arab states, invariably propagating the regional arms race. In 1966, during the
height of the Vietnam War, the Untied States began sending Israel heavy assault weapons, including tanks
and aircraft, for the first time. p. 621-622. Each subsequent administration procured Israel with large
amounts of weapons through official U.S. foreign policy orders.
37
Pelletiere. America’s Oil Wars. The oilmen, particularly during the days of the British and thereafter,
were not too pleased to see rulers acquire strong militaries. As long as oil-rich nations were defenseless,
their defense invariably rested on the shoulders of the British Empire. The nationalization process of the
oil companies in the Middle East started primarily to distance from this dependence. p. 38-40.
35
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Middle East through the late 1960s and early 70s. With the British withdrawal from “east
of Suez” in early 1971, ending a century of British domination in the Gulf, the United
States was at a crossroads. The essential question in Washington’s mind, according to
Klare is weather America should be the new regional hegemon.38 Instead Nixon’s
Doctrine endorsed full military and economic assistance to Saudi Arabia and Iran39,
provided they furnish their own manpower for self-defense of their oil resources and
guard the ‘free world’ from Russia’s communism. Saudi Arabia and Iran are the two
pillars40 that America projected in the early 1970s in an effort to secure greater
responsibility of the region, control Gulf security and assure the free flow of oil, from
these two countries, to the west.
Arms on the Barrel
Simultaneously, the first quarter century of the post-WWII era saw, in the United
States, an unprecedented expansion of investment and sales in the aircraft industry –
eventually known as ‘aerospace’ – and the marshalling in of missile technology and
aerial surveillance that would set the standard in the way military might is measured
around the world. The military/industrial complex, with massive subsidies from the
United States government, evolved into a profit-making, multi-billion41 dollar enterprise.
38
Klare. Blood and Oil. p. 42.
Klare. Blood and Oil. Billions of dollars worth of weapons reached Iran and Saudi Arabia. For instance,
“Iran received 190 F-4 Phantom combat planes, 80 F-14 air-superiority fighters, and 460 M-60A1 tanks;
Saudi Arabia got 60 F-15 Eagle Fighter planes, 200 AH-1S attack helicopters, and 250 M-60A1 tanks.”
Thousands of American military advisors and technicians were deployed to assist, as Iran and Saudi Arabia
were ill-trained and ill-equipped in operating and maintaining such high-tech weaponry. By 1977, as many
as 6,250 in Iran and 4,140 in Saudi Arabia were serving in such capacities. p. 43-44. Pelletiere puts the
number of American military personnel, trainers and arms contractors in Iran between 50,000 to 60,000. p.
73.
40
Klare. Blood and Oil. Saudi Arabia and Iran have been historical rivalries based on religious differences.
Saudi Arabia practices a rigid form of Islam, Wahhabiism, which has had traditional hostilities with the
Iranian Shias. p. 23-24.
41
Pelletiere. America’s Oil Wars. At the onset of WWII, President Roosevelt set a target of building
50,000 planes a year; there was $16 billion in wartime sales and a peak employment of 1 million. By 1947,
sales had plummeted to $1 billion and employment hit a low of 237,000. The Cold War brought a massive
39
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According to Stephen Pelletiere in his book, America’s Oil Wars, Mohammad
Reza, the last shah of the Pahlavi dynasty in Iran, is who “practically single-handedly
opened the Gulf to the arms dealers. The shah42 bought copious amounts of weapons43,
and in the process, managed to so ingratiate himself with Washington that by the 1970s
he had himself anointed by Richard Nixon as America’s Policeman in the Gulf.”44 The
shah was not the lone client of the United States in the arms purchase spree, giving the
Middle East its own Arms Race. Thus, war and violence has been a mainstay in the
Middle East from the time of Nixon to today.
From the early 1970s, Weapondollar-Petrodollar coalition of giant, mostly
American based armament and oil companies45, whose trading nucleus46 was set in the
Middle East, created an atmosphere of continuous instability and energy crisis. This
reoccurring phenomenon of instability and insecurity, often resulting from direct U.S.
foreign policy parameters, turned the Middle East region, since 197447, into the world’s
largest market for imported arms. Shimshon and Nitzan argue that reoccurring energy
conflicts in the Middle East helped oil companies’ long-term profitability stay well above
boost in investment and profits to the aerospace business with the industry reaching $15.8 billion in sales in
1965. p. 52-53. “By 1969, aerospace companies accounted for $120 billion in yearly sales. Seventy-five
percent of the top one hundred government contractors were in the Fortune 500.” p. 60. Nonetheless,
Washington would guarantee weapon’s companies profits and bail them out whenever necessary. The web
of companies dealing with the Pentagon is a who’s who of 20 th and 21st century multi-national enterprises.
42
Pelletiere. America’s Oil Wars. “In negotiating arms purchases, the Shah of Iran, was careful to stress
that the weapons would be used to repel Soviet aggression. p. 50.
43
Klare. Blood and Oil. It is estimated that in the 1970s alone, the Shah of Iran spent $14 billion on
modern American arms. p. 44. Any windfall in oil money was spent on buying large quantities of
weapons.
44
Pelletiere. America’s Oil Wars. p. 34.
45
Bichler, Shimshon and Jonathan Nitzan. “Putting the state in its place: US foreign policy and differential
capital accumulation in Middle East ‘energy conflicts’.” Review of International Political Economy. 3:4
Winter 1996: 608-661. Shimshon and Nitzan’s empirical examination was focused on sixteen leading
American defense companies and six of the world’s largest non-government oil companies. p. 610.
46
Pelletiere. America’s Oil Wars. The Israelis transferred weapons seized from the Arabs in the 1973 war
to the Kurds in 1975 by way of Iran. p. 60. United States replenished and reimbursed the Israeli military.
This helped the Israeli arms industry to flourish, as it became one of the top illicit arms traders for the
Pentagon. p. 91.
47
Shimshon and Nitzan. “Putting the state in its place”. p. 610.
12
the big economy’s48 average. In addition, the arms race in the Middle East helped
alleviate the pressure on American weapons companies, in the post-Vietnam era, as
military spending slumped at home. In sum, conflict kept oil prices high, and high oil
prices allowed the Middle Eastern nations to purchase weapons, promoting an openended ‘oil-for-weapons’ industry in the United States.
The OPEC revolution of 1973 saw a massive windfall in profits to oil-rich nations
of the Gulf. With the rising price of oil the shah of Iran saw himself, sitting on a treasure
chest49 and naively believed that he could control more than Iran in the Greater Gulf.
Shah’s extended family and high-ranking officials under his domain, amassed fortunes
most notably from arms deals with America, as corruption was rampant and the black
market for arms was thriving.
Relative Calm in the Storm
The fall of the shah in 1979 provided the final evidence towards the failure of the
Nixon Doctrine in the Middle East. President Jimmy Carter, facing a declining economy
at home, after the Vietnam debacle, altered U.S. foreign policy briefly, by cutting arms
sales to the Middle East. This severely effected the shah’s primary link to the United
States and temporarily put the American military/industrial complex under tremendous
strain. With the blunders that lead to and emerged from the American embassy crisis50 in
Tehran, the Carter administration “abandoned reliance on local surrogates, and decreed
Shimshon and Nitzan. “Putting the state in its place”. ‘Big economy’s average’ is indicated by the
average net rate of return for the Fortune-500 group of companies. p. 612.
49
Until the onset of the Iran-Iraq war in 1980, Iran had not fought a war. However, the shah spent
enormous amounts of money on expanding the military strength of the Iranian Imperial Palace.
50
Hiro. The Iranian Labyrinth. President Carter responded by banning imports of Iranian oil and freezing
Iran’s estimated assets of $12 billion in U.S. banks. Further Washington considered attacking Iran’s Kharg
oil terminal, imposing a naval blockade, and mounting air raids against Iran. Klare asserts, “the fear of an
American attack on Iran was one of the main reasons for the Soviet march into Afghanistan. p. 248-49.
48
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the United States with the prime responsibility of defending51 the Middle East. From the
other side, Ayatollah Khomeini, declared to end Iranian dependence on petroleum
exports, yet any vision of diversifying the Iranian economy came to an abrupt halt with
the Western economic sanctions52 that followed the American embassy crisis in 1979-80.
Ironically, Iran continued to earn more foreign exchange with less oil exports, as price
spiked in the aftermath of the embassy takeover (November 1979) and with the invasion
from Iraq (September 1980), increasing Iranian dependence on oil money at a time of
Western economic boycott.53 The overall Iranian economy suffered as the rial devalued,
inflation rose and unemployment spiked. In the years after Carter’s administration, news
emerged54 of American-Iranian secret deals55 to release hostages and speculation
surrounded the Iranian militaries infiltration by American agents.
Divide and Conquer
Following the OPEC Revolution, Saudi Arabia’s treasury flowed in Petrodollars,
which were, naturally, invested in the United States. The prime client to these massive
investments was the Untied States weapons complex, as Saudi Arabia replaced Iran as the
number one overseas purchaser of arms. At the same time, Washington felt that Saudi
Arabia, which received uncompromising American attention, was seen as being too weak
to assume the role of the regional policeman. Yet, Iraqi President, Saddam Hussein,
51
Klare. Blood and Oil. President Carter declared that access to Persian Gulf oil was a vital interest and
that the United States was prepared to use ‘any means necessary’, including military force, to secure the
region. p. 46.
52
Hiro. The Iranian Labyrinth. On August 10, 1979, Iran cancelled three-quarters of its pending $12
billion worth of orders for U.S. weapons. p. 245.
53
Hiro. The Iranian Labyrinth. p. 197-198. In 1982, oil provided 98 percent of Iran’s foreign earnings.
54
Hiro. The Iranian Labyrinth. A secret memorandum by Zbigniew Brzezinsky, the U.S. National
Security Advisor, to Cyrus Vance, Secretary of State, revealed American recommendations to ‘destabilize’
Ayatollah Ruhollah Khomeini’s regime through Iran’s neighbors with the immediate goal of instating ‘a
modern’ government in Iran. p. 250.
55
Hiro. The Iranian Labyrinth. Carter promised that if the American embassy hostages were released his
administration would airlift American arms and spare parts that Iran had already paid for, in essence
nullifying the embargo on Iran. p. 251.
14
secured the backing of Saudi Arabia (and Kuwait) before launching the “longest
conventional war of the twentieth century”56 against Iran in 1980. Exploitation of Saudi
Arabian status and role in the Middle East, Hiro suggests, may have twisted Riyadh to
encourage Baghdad to attack Iran, due to the command of Carter’s foreign policy. 57
Saudi Arabia and the Untied States were condemned by Khomeini for allowing the
infidel American troops to run amuck in the sacred lands of Mecca and Medina. Thus, a
historical religious rift that existed among the largest countries on either side of the
Persian Gulf, i.e. Iran and Saudi Arabia, deepened with the collusion58 of American
foreign policy in Middle Eastern oil and geopolitical affairs of the region.
The Rise of the Hawk
What followed President Jimmy Carter’s loss of the American presidency, in
1980, set the stage for an unfathomable rise in the military/industrial complex from the
penultimate decade of the 20th century to the present day. In an attempt to defeat the Evil
Empire, i.e. the Soviet Union, Ronald Reagan promoted an arms buildup that spanned
across the Earth and into the stratosphere (Star Wars). Reagan reversed Carter’s cutbacks
on defense by launching a crusade against the communists with an estimated price tag of
$2 trillion59 on arms buildup, during his eight years (1980-88) in office. The great
56
Hiro. The Iranian Labyrinth. Through out the Iran-Iraq War, Washington was routinely supplying
satellite and high-resolution reconnaissance pictures of Iranian troops to Riyadh, knowing that the Saudi
Kingdom was transferring these to Iraq. p. 217-219. Iran retaliated by hitting ships serving the ports of
Kuwait and Saudi Arabia, which were aiding Iraq financially, logistically, and intelligence-wise, in the
Lower Gulf. p. 223-224.
57
Carter hoped this would win the release of the U.S. embassy hostages and strengthen his reelection bid.
Carter’s calculation backfired as he lost the presidential election.
58
Hiro. The Iranian Labyrinth. In a decade’s time, on June 25, 1996 a 4,600 lb. (2,000 kg) bomb exploded
outside the perimeter of the Khobar residential complex, in eastern Saudi Arabia. The CIA linked this
incident to the November 13, 1995 car bomb (220 lb., 100kg) blast in the parking lot of the Saudi National
Guard training center in Riyadh run by the United States. Washington alleged that Tehran’s Islamic
Revolutionary Guards Corps trained the perpetrators of these incidents. Hiro indicates that many close to
the investigation found no evidence of Iran’s involvement in the Saudi attacks.
59
Pelletiere. America’s Oil Wars. p. 75. A massive buildup of the Israeli war machine happened during
this time.
15
laissez-fair champion, Reagan, opposed OPEC and even tried to dismantle it, including
by waging price wars60 on oil.61 All the while, the United States supplied intelligence to
both sides in the Iran-Iraq war, severely undermining rules of engagement, increasing the
body count on both sides and diminishing the prospects for any timely peace settlement
in the region. Washington was motivated to keep the war going which helped the illicit
arms trade flourish through Israel.62
Reagan invariably wanted to project American power63 into the Middle East64, to
intimidate (and bankrupt) the Soviet Union into the largest arms buildup the world has
seen to date. He reinvigorated Nixon’s failed doctrine and supplied the Saudi Kingdom
with its largest weapons shipment65 until that time. The Saudis demanded the best
weapons from the American arsenal to balance the free-flow of oil from the largest
producer to the largest consumer of crude. Klare asserts that the Central Intelligence
Agency (CIA) benefited from Saudi Royal family’s financial support, to conduct
Reagan’s price manipulations were the prelude to George H.W. Bush’s collusion with Saudi Arabian
King Fahd. Pelletiere. America’s Oil Wars. Around the 1990s the two leaders sought to keep the price of
oil in the range of $14 to $17 a barrel. “The U.S. could ensure an international price low enough to
accommodate American interests but high enough to provide the revenue needed to the Saudis, which in
turn enabled them to buy American arms and defense.” p. 119-120.
61
Pelletiere. America’s Oil Wars. In retaliation, Saudi Arabia, in 1985, ran the price of oil down to a point
where the American Oil industry collapsed. p. 86. The oil business is no exception as Reagan once again
proved that the strongest survive and the weak perish in neo-conservative politics.
62
Pelletiere. America’s Oil Wars. The Iran-Contra affair is one such illicit arms trade scheme managed by
the United States.
63
Klare. Blood and Oil. Authorizing responsibility for combat operations in the Gulf, President Carter
established the Rapid Deployment Joint Task Force (RDJTF). On January 1, 1983, President Reagan
elevated the RDJTF and named it the ‘Central Command’, with the critical role of protecting the American
and its allies’ oil supplies.
64
Klare. Blood and Oil. Reagan pledged unyielding support to Saudi Arabia. On October 1, 1981, he
asserted, “there is no way that we [USA] would stand by and see [Saudi Arabia] taken over by anyone who
would shut off the oil.” p. 48.
65
Klare. Blood and Oil. The United States sold $8.5 billion worth of weapons to Saudi Arabia soon after
Reagan reached the White House. The package included “5 Airborne Warning and Control System
(AWACS) surveillance aircraft, 7 KC-135 tanker aircraft, 660 Sidewinder air-to-air missiles, 22 ground
radar installations, and a large array of air-defense and communications systems.” p. 47.
60
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“clandestine operations to overthrow the Soviet-backed regimes of Afghanistan,
Nicaragua, and elsewhere.”66
At Any Cost
George H.W. Bush stressed American energy needs and national security
concerns to press on Regan’s foreign policy edicts in the Middle East. With his well
documented proximity to the Saudi Royal family, Bush declared “the Sovereign
independence of Saudi Arabia is of vital interest to the United States” albeit, the nation is
a monarchy with no signs of democratic elections or an independent press. With the
demise of the Soviet Union on the horizon, the Bush administration deployed half-amillion American troops to protect Saudi Arabian oil (and to free Kuwait) from an
advancing Iraqi military in 1990-91. The neo-cons contested that, with one quarter of the
world’s proven petroleum reserves, not protecting Saudi Arabia67 is hardly a risk the
senior Bush can afford to take. America’s thirst for imported oil and the Saudi Arabia’s
hunger for protection has set off a dangerous and rapidly expanding arms race in the
Middle East.
Since the days of the Iranian revolution and the costly Iran-Iraq war, Saudi Arabia
and Iran emerged from polar paradigms of U.S. foreign policy. Nonetheless, resentment
among the masses in Iran, Saudi Arabia and the larger Persian Gulf highlight decades of
exploitive business and political practices evolving from carefully designed American
foreign policy. The reoccurring cycle of war and violence across the Middle East emerge
66
Klare. Blood and Oil. Among the Saudi-CIA beneficiaries was Osama bin Laden, who helped recruit
Islamic zealots to serve with the Afghan rebels, laying the foundations towards the rise of the Taliban and
Al Qaeda. p. 48.
67
Klare. Blood and Oil. Between 1991 and 1999, the United States provided Saudi Arabia with $40 billion
worth of modern arms, ammunition, and military services through the Foreign Military Sales program.
17
from an unshaken American rendezvous with oil and the subsequent appetite created for
sophisticated and deadly American weapons in defending the free flow of crude.
While oil remained the focus of American interests in the region, promoting,
propagating and protecting regimes and dictatorships that served the commercial and
political aspirations of, primarily American, oil and weapons industry was paramount in
the way Washington formulated its Middle East policy. Orchestrating national
movements, political coups, price wars and an Arms Race was achieved by the United
States via the “commercialization of the weapons trade and the politicization of the oil
business.”68
As a result, through the Cold War years, full-blown crisis has become a mainstay
in the oil-rich region of the Middle East pegging the lives of millions of people to the
Petrodollar-Weapondollar coalition of American companies. From Cairo to Bombay
instability and insecurity have been on the rise, as U.S. foreign policy enacted towards
any one country in the region, via oil and weapon trade, triggers a chair reaction of
deadly and volatile geopolitical paradigms. The most significant beneficiaries of such
open-ended hostilities have been the oil and weapons companies with massive windfall in
profits and uncompromising rise of power.
In sum, the United States foreign policy, as evidenced through the post-WWII
histories of Saudi Arabia and Iran, has contributed to the greatest security threat facing
the world today. The Middle Eastern arms race, in spite of the fading of communist
Russia in 1991, expanded at a shocking rate, triggered by American oil and weapons
companies and enforced by American foreign policy. History shall declare that this
group of companies and commanders are America’s Merchants of War.
68
Shimshon and Nitzan. “Putting the state in its place”.
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