then made it profitable for reserves to be used, and these ran down, falling to one million barrels as against an output of over 11 million. If for whatever reason prices suddenly rose, then there would be no American reserve with which to flood the market and bring prices down again. In March 1971 the Texas authority for oil allowed full- capacity use for the first time. Imports followed. The world was in effect becoming dependent upon Middle Eastern oil — demand had risen to 21 million barrels per day, and the Middle East, producing 13 million barrels more, was therefore in the position of meeting two thirds of the rise in demand — despite the emergence of other fields, in Nigeria and Indonesia. Besides, alternative fuels were either undeveloped, or under attack.
Various ideas had already appeared for the use of wind or solar power: they involved much trial and error and great expense at a time when oil was cheap. The fact that there were oil reserves in Alaska was known, but by now the environmentalists were at work and the technology, given the geology and climate, was exceedingly difficult and expensive. In 1972 human genius went into a discovery that there were reserves under the oceans — the North Sea, for instance — but, again, there were environmental fears, as an oil slick destroyed thirty miles of Californian beach. In 1972 the Club of Rome — an informal but weighty international group, supposed wise men of the world — issued a warning called
The final element in all of this was financial: the dollar. The Shah, for instance, had embarked upon a colossal attempt to modernize Iran and turn it into something commensurate with the Indo-European (as distinct from Arab or Turkic: ‘Iran’ instead of ‘Persia’ is itself something of an artifice, since it refers to ‘Aryan’, as in blue-eyed, blond, etc.) origins of the Persians, as he understood them. In 1971 he had even staged a great ceremony, inviting anyone interested, at the old capital of Persepolis, complete with Peacock Throne and elaborate use of tiles and gold. His view of the history of Persia was a hard-luck story: on the one side elaborate white clothing, dignified attitudes, elegant and moving poetry, imposing architecture, and on the other side (mainly) Turks, bringing to the work of destruction a glee that civilized Persians could not have been expected to resist, the more so as their potential allies had stabbed them in the back. That the modern-day Turks had made a considerable success of national independence and Westernization was another tiresome element: the Shah would show the Middle East how it could be done. Now, the dollars with which he had been doing his accounts were proving unsafe. Prices per barrel of oil were low enough, in any event — $2 — and inflation was already proceeding in the West at a noticeable pace. The Kuwaiti oil minister said, ‘What is the point of producing more oil and selling it for an unguaranteed paper currency?’ Indeed.
OPEC was by nature divided. But this time agreement was easy enough, and there was a ready excuse to hand. One thing worked on the surface in the Arab world, advancing the anti-Zionist argument. Israel: the great enemy of the Arabs; seemingly successful only because of American support; oil properly used would create such trouble in the West that it would just stand by and let Israel be crushed. So long as oil-producing Arab countries were ruled by pliant monarchies, such arguments remained largely hot air. However, in Libya there was a coup against one such monarch; an army officer, Muammar al-Gaddafi, came to power, in 1969, with the intention of extracting as much as he could from the oil companies who exploited Libya’s high-quality oil. He could quite easily play one country off against others — particularly, his neighbour and former colonial master, Italy, could be used — and into the whole picture there now crept a malignant figure, Armand Hammer, whose appearance at anything generally meant trouble. He had made money out of revolutionary Russia, and profits from that let him buy up coal and oil in America, when prices were at their lowest in the Depression. His company, Occidental Petroleum, no doubt benefited from advance notice of Soviet sales, as these would affect prices on offer in particular markets; and Hammer in return offered services to the Communist Party. Later on, Robert Maxwell did much the same. Unlike Maxwell, Hammer was not found out: though in reality he, too, had built up a mountain of debt, which was concealed by apparent philanthropic activities (they did not extend to his sister-in-law, who had borrowed $15,000 from him; in his will he gave instructions that every cent was to be re-extracted). Hammer had already built up a Libyan connection, perhaps through his Soviet allies, and Gaddafi wanted to have a better deal. Libyan oil supplied a third of the European market, and Hammer allowed him 55 per cent of the profit — a decisive breach of the fifty-fifty principle that soon had Iranian and Venezuelan feet tapping (September 1970). As the dollar declined, there were further demands for price rises, and the position of OPEC became quite strong, since America was now a net importer, and by April 1973 the surplus capacity within the USA was down to a week’s consumption.
At this point, the various oil countries began to threaten even a form of nationalization — ‘participation’, i.e. a share of the oil resources previously covered by concessions. The companies resisted but were not supported by their own governments — the time for gunboats, or even covert operations of the type that had overthrown Mossadegh, was past, and the Americans relied on the Shah. In fact Libya went ahead with nationalization: Hammer was thrown out. It was upon this tense scene that the Israeli-Arab war (Yom Kippur) of October 1973 broke out.
Nasser himself had died in 1970. His successor, Anwar Sadat, was deeply cunning (and during the Second World War had had a minor role as a German spy against the British). It was now obvious that the Middle Eastern oil producers had a very strong case for raising the oil price. In real money, as against paper dollars, they were getting much less than before, and world demand was pushing hard against capacity. Nasser himself had left Egypt in a calamitous condition. He had detached it from the Western world, led it into a disastrous war with Israel in 1967 (with lesser campaigning thereafter) and, with ‘Arab socialism’, driven out the creative minority of Greeks and many of the Coptic Christians who had allowed trade to flourish. He had also taken up a Soviet alliance, and there were 20,000 Soviet citizens, including advisers, in the country; these advisers were often very robust in saying what they thought of Egyptian ways. In July 1972 Sadat had them expelled, though he continued the close relationship with Moscow. But how could he escape from it? If the USA supported Israel, then, given public opinion in the Arab world (which appeared to believe that everything wrong was the Jews’ fault), there was no chance. He must make the Americans force the Israelis to negotiate seriously as to a settlement of Arab-Israeli problems. How? The answer seemed to be, a war. Won, it would end the existence of Israel. Not won, but sufficiently alarming, it would force some movement. Maybe, talking to Kissinger, he realized that he had an equally devious possible partner. The game was in effect to use Soviet help to make any further Soviet connection unnecessary, and solve the Palestinian problem that bedevilled Israel’s relations with Egypt and so deprived Egypt of the link that she needed in order to become a rival to Iran. In the winter of 1972-3 Sadat came up with a scheme for a surprise attack on Israel, in concert with Syria, and told no-one except King Faisal in Saudi Arabia.
The Saudis had by now become the oil producer of reserve — that is, if they produced more of their potential, oil prices would fall, and if not, not. Earlier, that ‘switch’ position had been America’s. Faisal also approved of Sadat, whereas Nasser had been a threat to the monarchies — not a man to support. Religion, the sacred position of Mecca, the ancient glories of the caliphate, in many quarters a vainglorious belief that Arab civilization, so long despised as useless, would triumphantly return, white horses included, to down the infidel and particularly the Jewish enemy (Mohammed’s first target 1,400 years before, as it happened) — all of it really about those paper dollars. In mid-September 1973 OPEC met in Vienna and advanced a new deal with the oil companies, which were to lose their property substantially: an ultimatum followed. Then on 6 October the oil companies nervously offered a price rise of 15 per cent at Vienna; and OPEC demanded 100 per cent. That very day, Egyptian and Syrian troops had launched their surprise attack on the Israeli lines.
