Middle east oil is in competition with Russian oil exports. Russian penetration of this region remains a danger. In the 70s and 80s western companies were expanding oil production in Libya. Oil has become the most important commodity in the world. Industrial countries have lost control over determine terms of oil trade and OPEC determines world crude oil prices. Jimmy Carter declared the Persian Gulf a “vital interest to America”. The world interests and US interests are Middle Eastern centered: politics, industry, and oil; and this has caused escalating security tensions. Oil tankers carry a larger tonnage than all other commercial shipping. Today, oil payments comprise the largest periodic transfers in international financing systems, paid in dollars. The multinational oil companies have prospered over the last few decades. The world’s energy resources look something like this: Great Britain (Northern Sea), West Germany (Brown coal), Canada (oil and tar sands), US in the “empty quarter” (Coal and Shale), and France (Nuclear). Japan and West Germany rely on remarkable productivity to earn monies to pay for their oil consumption. America produced 1/3 of the world energy and consumed one fourth of it. American expertise and technology opened the riches of the Middle East Oil.
Europeans first came to the Middle East as imperil intruders and colonial conquerors. European intellectual development came to be dedicated to an avid exploration of the unknown, an appreciation in change and of unity of diversity, and a relentless ambition to convert knowledge to power. Power in turn could be of two kinds: power over men through development of the Arts of War and skills of human organization, and power over nature through advances in technology and industry. Europeans translated their age of absolutism and age of nationalism too Middle East soil. Imperialism helped make modernization, as “world-wide” phenomena. Modernization defined as “widening control over nature through closer interaction among men”. National self-government had become exportable.
1906 Britain imposed a written constitution in Egypt. 1907 Britain and Russia divided Iran in two spheres: British took the SE portion, Russia the N, and a third zone acted as a “buffer zone”.
On the “Day of Atonement”, 1973, Egyptian forces attacked the Suez Canal and Syrian forces cross the crest of the Golan Heights. Israeli threw massive forces against the Syrian front protecting the heavily populate Hulan plain settlements, at the same Israel pushed back Egypt across the Sinai Desert.
In the 1970s, Sadat wanted to move independent of the Soviet Union. Egypt’s defeat by Israel in 1956 and 1967 allow Soviet military to increase sales to Egypt making them dependant on Soviet weapons. Egypt dreamed of leadership among the Arab nations, Islam, and Afro-Asia. The Arab oil ministers planned oil production cuts expecting raising oil prices. Sadat was determined to disprove Israels invincibility. Also, immediately after the 1973 invasion, US commenced a massive airlift of arms into Israel. Oct 7, the Arab countries initiated an oil embargo. Nixon moved $2 billion of weapons to Israel. The airlift of American arms to Israel’s Sinai front, Oct 14, directly provoked Arab states to cut back production and embargo the United States and the US was compelled to choose between adequate oil supply and support for Israel and they choose to support Israel and force a cease fire. Oct 24, the US forced Israel to accept a cease-fire and Egypt cooperated, because Egypt did not want to engage in war with the US. Dec 22, Iran held an auction where oil sold for $17 a barrel.
OPEC revenue soared from $14 billion in 1972, $23 billion in 1973, and $96 billion in 1974. OPEC demanded a 70% price increase and reduced oil production by 13%. The OPEC tightening of supplies quintupled their income and they demanded Israel withdraw from occupied territories.
Saudi International reserves were $14.3 billion by 1974 and $49.6 billion by 1976. Saudi tended to emphasize Arab rule over the old city of Jerusalem with its mosque of Omar. Saudi was concerned over the increased flow of Soviet weapons to Cairo, Baghdad, and Damascus.
America’s media dramatized the prospects of an Arab oil weapon. Middle East experts in the state department endorsed the doctrine of “balance of power” and pushed for recognition of resolution 242, “Palestinian State”. The Palestinian state legitimized Arab claims to land and was case against Israel. Major oil companies provided the funding for the media claim of an oil crisis. The oil companies feared the wave of nationalism spreading over the Middle East from Algeria too Libya. This wave of nationalism threatened too undermine the whole structure of Middle Eastern oil and retreat was not possible, as domestic oil production levels had dropped.
On Apr 18, 1973, Nixon terminated a 14-year program of import restrictions. These import restrictions had protected America from a flood of cheap imported goods. By 1980, OPEC had decrease oil production by 14% and by 1981 OPEC had $265 billion.
During the Iran-Iraq war, each side attacked each other’s oil installations causing a sharp drop in oil production. Nigeria and Libya also experience a drop in oil production and cut oil production by half to prevent prices from falling from all time high. When governments are paralyzed by revolution or when two or them are at war, the prices rise even more steeply – all by itself in response to market pressures. The Iran revolution flooded OPEC countries with money.
Oil rich Gulf Company’s risks were enormous as oil prices rose sharply. Sharp climbs in oil prices meant lower sales and represented a powerful incentive for companies too make a huge investment into alternative fuels. The world companies would be forced to spend hundreds of billions of dollars on alternate energy and would be unlikely to switch back too oil, even if the price dropped; essentially making oil worthless.
The rise in oil prices caused the 1975 recession and OPEC oil production dropped 10% and Saudi dropped by as much as 17%. Oil companies could not set price or determine customers; they were downgraded to a profit sharing technician, whose job was to pump the oil and ship it.
It would be foolish too ignore the Russian threat too Middle East oil. Any disruptions Middle East oil production represents vulnerability in the West’s oil supply. The US is Saudi Arabia’s major trade partner. A huge Saudi financial surplus is invested in dollar denominated securities. Saudi maintains a commitment to global capitalistic growth. Fortunately for us, Saudi has preferred to see a steady and gradual climb in the price of oil and now a sudden spike and shock in the price, as in the 1973 OPEC price revolution. In 1960, when Turkey broke with the Soviet Union, it transformed into a democratic multiparty system and when Egypt broke with the Soviet Union under Sadat, Egypt made peace with Israel and offered a de facto alliance with the US.
In the 80s, the Israeli Labor party encouraged Israeli settlements on the West Bank. No major group has expressed any willingness to accept, a separate Palestinian state on the West Bank and in Gaza.
The US will lead from strength; Israel has the science and technology leadership in the Middle East; autonomy for the West Bank and Gaza will be established; PLO and Jordan will become a part of peace negotiations; Arabs and Israelis have begun testing each others willingness for negotiation; the Palestinian state does not pose a military threat to Israel; the US can not bring peace too the region as a whole nor can it remove the danger of Russian penetration of the region; Israelis will devote more of their energies to the tasks of peaceful development; the price of oil will not stabilize but the US will be able to defuse some of the regional turmoil that tends to escalate oil prices; the US must guard against delusions of omnipotent grandeur and sudden fits of dejection and despair; OPEC does not have us over a barrel; there is no master plan that will bring permanent peace too the middle east; the US can reduce the likelihood of regional wars and revolutions with their risks to the supply of oil; the US need to reduce it dependence on oil imports dispelling any notions of an "oil weapon"; and the US aim for the Middle East should not be uniformity or American domination, but a pattern of peaceful pluralism.