Foreign Relations of the United States, 1969–1976, Volume XXXVII, Energy Crisis, 1974–1980

52. Airgram From the Ambassador to Saudi Arabia (Akins) to the Department of State¹

Jidda, April 13, 1975.

A–23

SUBJECT

• War for Oil

The attached paper was written to be given as a speech in the United States. Many Arabs, particularly Saudi Arabs who were most intimately threatened in the various articles on occupation of Arab oil fields,² believed that the U.S. Government inspired the articles, that it was preparing the U.S. public for a new war. This Embassy believed the speculation should be stopped by a forthright condemnation of the idea of invasion. The Department, however, believed that it might stimulate more public doubt on the subject and suggested that the paper be submitted as an airgram or given as a classified talk to a Washington audience. It is herewith submitted. It could be given later as a speech.

The military aspect of invasion has been discussed with the American military officers in Saudi Arabia. The action of Iran which is crucial in many of the invasion articles, has been discussed with the Iranian Ambassador in Saudi Arabia. The technical aspects of destruction of the oil fields have been discussed with Aramco staff. The conclusion, of course, is my own.

Akins

Enclosure No. 1 ³

[Omitted here is a table of contents.]

WAR FOR OIL: ARMAGEDDON AS FUN CITY

I. Introduction

Secretary of State Henry Kissinger in an interview in January said the United States would react with force if we were being strangled by a cutoff in oil deliveries. The question was hypothetical, but no one could maintain that there could have been any other response than the one he made. To have intimated that we would simply allow ourselves to be “strangled” would have called for his immediate impeachment. Secretary Kissinger in a subsequent interview said that he obviously had not meant there could be military action just to bring down oil prices.

The implications of the first remark nonetheless were noted with concern in most of the Organization of Petroleum Exporting Countries (OPEC) and in Europe. Many of them condemned the Secretary and the United States for this “provocation.” Saudi Arabia made no public statement and no representations to us. Saudi officials told us in private discussions that they understood what the Secretary meant and they trusted us. In spite of significant differences of opinion and actions on the Middle East problem they regarded their friendship with us as a cornerstone of their foreign policy. They knew we knew this and they knew Saudi Arabia was too important to the United States and its allies for us to jeopardize this close association.

The invasion issue would probably have been quietly forgotten had it not been picked up, embellished, and presented to the world in five separate articles, all of which were widely quoted and discussed in the United States, Europe, and the Middle East. The first was in a prominent journal of intellectual opinion; it appeared shortly after Secretary Kissinger’s statement and was reproduced in the Sunday edition of Washington’s morning newspaper. Then there were two articles in widely-circulated American newspapers which were based on “sources” inside the Pentagon. Then in mid-February, the Sunday edition of another major newspaper carried a detailed account of how many actions could be taken against OPEC short of war but that even war could be carried out if necessary and occupation of Arabia should be easy. Most recently and most provocatively was the lead article in the March issue of a literary magazine. Some of the articles and the related commentary concentrated on military action against all the Arabs, some against the Arabs of the Persian Gulf, but a common theme to all of them was the necessity of occupying Saudi Arabia. Some insisted this move be taken immediately as the West was already being “strangled” by the high oil prices; all five articles agreed this would be done in time of war. And all five agreed that only Saudi Arabia had enough oil to force down world oil prices. The premise, on which all the articles were based, was that the high price of oil is the main problem the world’s economy faces today; that inflation and unemployment are caused by the price of oil and that there is no way we could or should cooperate with the OPEC countries. This being accepted, the authors continued that we have the right to take the oil, that we could take it with a minimum of difficulty, that supplies would be disrupted for only a very short time, that Saudi Arabia and its OPEC allies would be powerless to react, and that the Soviet Union, because Saudi Arabia was a “friend” of the United States, would not intervene or allow its Middle East allies to intervene.

Invasion, it was argued, would be simple, cheap and easy. Furthermore, it would be morally justified. In fact, it is a moral imperative for us to take over Saudi Arabia, produce its oil and sell it for almost nothing. The world’s inflation would then be cured; unemployment would end; and we would devote ourselves to the task of finding new energy sources when the Saudi oil would finally be exhausted. The losers would clearly be the Saudis. To some, the dispossession of six million Saudis would be regrettable, but—it would be argued—a small price to pay for world happiness. The 200 million living in other OPEC countries: Indonesia, Iran, Venezuela, Nigeria, Algeria, would of course also be hurt but they would not be invaded. Their loss of income would just be one of life’s difficulties to which they would have to adjust.

The January article was answered by I.F. Stone in the New York Review of Books February 6. In his essay “War for Oil,” Mr. Stone condemned the immorality of the invasion proposal and details how it could lead the world and particularly the United States to disaster. The invasion proposal, as such, was attacked by Terence McCarthy in the March issue of Ramparts. His thesis was that the United States, unable to discipline itself into facing its internal economic problems, would attempt an external solution. It would try to seize the Arab oil fields, restore its own prosperity, and reduce Europe and Japan to vassalage. It would also run the very real risk of a nuclear war in which the Soviet Union, because of its still fairly primitive society, would be the relative winner.

I gave a press interview in Jidda in early March in which I characterized those who call for war as being criminally insane.⁴ The interview was widely quoted in Saudi Arabia and the Arab world and Prince Fahd, now the Saudi Crown Prince, said this went a long way toward defusing the issue. Secretary Kissinger in Riyadh on March 19 said again that war for economic reasons was impossible, that our policy was “cooperation not confrontation.” His statement was quoted in the Arab world, but was lost in the United States in the flurry over the deterioration of Southeast Asia.

The feeling of unease in the Middle East continued. True, the polls and letters to the editors in the United States strongly condemned the invasion idea, and the articles by Stone and McCarthy were favorably quoted. Yet even those who opposed a war for oil assumed that it was a possibility. Some even publicly expressed their fears that the United States was preparing its people for a new military adventure. This fear, unfortunately, was shared by many in the Middle East—some even in Saudi Arabia.

There was another flurry of excitement in the Middle East—particularly in Saudi Arabia—at the time of the death of King Faisal. We were alleged to be alerting the Seventh Fleet, to be preparing our citizens for evacuation, to be spreading the story of disturbances in the Kingdom in order to justify occupation of the oil fields to prevent sabotage.⁵ No matter that there had been no disturbances.

The main reason for this continuing fear of war is almost certainly that there has been no strong, detailed condemnation of the invasion concept by a member of the American Administration, no analysis of why it could bring only disaster to the United States and to the world, and why it could not be considered for both moral and practical reasons. This is what I intend to do.

II. The Flaws in the Basic Premise and the Moral Issue

There can be no doubt that the sudden rise in oil prices by 400 percent has contributed to the world’s current economic ills. But it is conveniently forgotten that the world faced a serious inflation before the massive oil price increases of 1974; that unemployment was large and growing; that wages were growing faster than productivity; in short, that we were living beyond our means. Imported energy helped our economic expansion for over twenty years. It enabled us to escape the consequences of increasing real wages faster than productivity increased. Oil was very cheap. Its price, even in current dollars, declined from 1950 to 1972 and its 1972 price in constant dollars was half that of the early 1950’s. The oil producing states increased their incomes only by allowing production to grow faster than real prices declined. All of the oil producers, by 1970, had come to realize that their oil reserves were finite, in some cases quite small; all could see when their oil production would start to decline and all had begun to think of how to increase income per barrel. All, that is, except Saudi Arabia which was and is unique.

It is a truism to state that oil is a wasting asset, that once used it is gone forever. But most consumers chose to ignore this; they compared the profit on a barrel of oil with the profit on a bushel of wheat and they seemed convinced that the comparison was valid. The oil producers, on their side, believed they must maximize their income, invest their money and prepare to face the post-oil age.

With the shortages caused by the Arab oil boycott in late 1973, all OPEC countries saw what the world would pay for oil. The Shah of Iran announced that OPEC would no longer subsidize the industrialized West. The era of cheap oil, he said, was over forever. OPEC took advantage of its new knowledge to increase oil prices, some say to intolerable levels.

It would surely have been far better if the world had agreed to a gradual increase in oil prices, but the consumers before 1973 were not willing to consider such ideas. Our professional soothsayers told us oil prices were low of necessity and would go even lower. We believed them and we did nothing to develop alternative sources of energy. But can it be pretended that the current high cost of oil is the sole source of our economic problems? Or can anyone seriously think that a forced reduction of oil prices could miraculously solve all our problems? To think so is to share the fairytale beliefs of certain academicians newly converted to the dubious pleasures of militarism. Alan Greenspan, the President’s chief economic advisor put very well recently: We had inflation before the oil price increases and we would still have it if oil prices decline. Inflation, he said, is a productivity problem, not a commodity problem.

No discussion of price gouging would be complete without some reference to our own role in food exports. The same magazine which in March carried an article calling for the immediate invasion of Saudi Arabia carried in its February issue an article which asserted that our monopoly of food exports was more complete than OPEC’s in oil and much more damaging to the underdeveloped countries. Wheat prices go up by 400 percent; rice by 300 percent; soybeans by as much and we speak only of “market forces” of “supply and demand” but the effect on the consumer is as brutal as that caused by any cartel.

Even if oil prices were as crucial to the world’s economy as is pretended, and even if food prices or declining productivity were irrelevant, could we seriously propose invasion, an act of international brigandage so contrary to our national traditions and repugnant to our religious heritage? Senator James McClure of Idaho asked in January if our Viet-Nam venture would have been justified in the eyes of the New Hawks if we had said we had gone to South Asia to appropriate its rice to feed the world’s poor.

To say that we have the right simply to take oil or any commodity because its price is too high, as our authors have suggested, threatens the relatively stable political order the United States has hammered together since the Second World War. After a successful seizure of the Arabian oil fields—why not foreign deposits of bauxite, lead, zinc, tin, chrome, and other resources in short supply? Even renewable resources such as rubber, cotton and food would seem fair game. To postulate that the United States and only the United States would be allowed dispensation for such imperalistic action would be naive. Yet one writer who purports to be a “defense consultant” concluded his article calling for invasion of Arabia by asking why we needed to spend $85 billion a year for our Armed Forces if we were not going to try to get something out of them. Presumably he had never heard of Defense or of Deterrence.

There are ample recent historical precedents for aggression of this sort, but they are not ones we should be quick to quote. Japan went to war to establish its “Greater East Asian Co-prosperity Sphere”; that is, to secure access to land, tin, rubber, rice and oil. Hitler said he had a “right” to Poland because the efficient Germans could use the land more effectively than the “lazy Slavs.” Hitler also found the concentration of wealth in the hands of Jewish merchants an intolerable burden to Aryan pride. While neither the Japanese nor the Nazis pretended to benefit the entire world, the parallels between their actions and these new proposals are close enough to be uncomfortable.

Senator McClure commented on his amazement at the call for invasion and wonders why it had not been soundly denounced in the United States, particularly by those who deplored our Viet-Nam war. Why, he asked, is every newspaper in the country not beseiged with letters decrying the immorality of such an idea? He and others have commented on the curious transformation of Viet-Nam doves into Middle East hawks.

The entire idea of invasion by the United States should be laid to rest solely by the moral argument. There should be a wave of indignation, of outrage that the idea is considered and even justified by respected intellectuals. Invasion for economic reasons is something one would expect to read only in standard communist propaganda describing the moral bankruptcy of America. Unfortunately, the idea continues to be discussed; and the conclusion in some parts of the world—at least Europe and the Middle East—is that someone may be trying to soften up the American people for a new war; that American morality—at least as publicly expressed—has been blunted. If such is the case, and I am certain it is not, then it would still be necessary for us to examine carefully how United States interests would be affected by such a war before advocacy of war be translated into policy.

[Omitted here are sections on “The Reactions of Others to Invasion,” “The Invasion and its Costs,” “Saudi Actions and Reactions,” and “The Length of the Cutoff and the Consequences.”]

VII. The Alternatives to War

This Armageddon scenario is postulated because it is alleged there are no alternatives. It is alleged that capital accumulation in the OPEC countries will be so enormous the world will not be able to adjust to it. The New Hawks heap scorn on those who say the problem can be handled in the context of normal trade, banking and investment.

Yet the alternatives to war are in fact straightforward and not at all esoteric. They would entail some transfer of real wealth, but this would not be the first time in history this had happened. They could entail some temporary leveling off in increasing standards of living, but this need be only of short duration. Charles Shultz, now with the Brookings Institute, wrote in the Washington Post the end of January that “over the Seventies we might have expected real consumption per capita to grow by 30 percent; the higher oil prices, when fully paid for, will reduce this to 27 or 28 percent. Important, yes. But worth a Middle East War?” Robert Roosa, Carroll Wilson and three non-Americans, in an excellent article in the January issue of Foreign Affairs, pointed out that high oil prices are a form of forced saving—a means of capital accumulation—and they suggest how this could be put into productive use in Europe, Japan, and the underdeveloped world. A proposal for an OPEC mutual fund would bring the money into the areas where it was needed, would supply capital for new ventures, would create a new wealth, and we would have a no-lose situation. Professor Richard Cooper of Yale even thinks there is an excellent chance “this second great Arab eruption into Western history will, in the end, leave both the West and the Middle East more sound and secure than ever before.”

The Arabs would profit through their investments and the developed world would also profit through a renovation or the expansion of its industry and increased employment. Some of the new American industry might be partially owned by foreigners, but this would not be a new experience in our history. Nor should it be objectionable to a country which itself has made such massive foreign investments.

The figures of surplus OPEC funds have been grossly exaggerated. We have heard of capital accumulations or unspent money of $1.2–$1.6 trillion in the next decade. The most recent U.S. Treasury studies indicate it will be more in the order of $300 billion. Some of this will be invested in the United States, some will be invested elsewhere. If we are lucky enough to entice half of it to the United States, i.e., $150 billion, this would amount to less than 4 percent of the $4 trillion of new investment we need in the next decade.

While some OPEC countries might be able to gain positions of influence in a few companies, their accumulated capital scarcely would permit a “take over of American industry.” Some American companies do not find Arab or OPEC capital to be in any way offensive or dangerous and are now trying to get Saudi capital into the States. While relatively little has come yet, there is no doubt it will come unless legal obstacles are placed in its way.

Saudi Arabia has already agreed this year to place enough in Treasury notes and FNMA issues to cover more than half our balance of payment deficit—scarcely action of an enemy country. I would not venture to say how much longer they will continue their investment in view of the provocative statements and articles coming out of the United States. Not very long if the invasion threats are taken seriously. I hope, however, we can end now all speculation that the United States could consider invasion of an oil producer merely to bring down oil prices—or indeed for any other reason than actual “strangulation” in its precise meaning: that is, we are dying and we take desperate action, no matter how dangerous, to save ourselves from death. Scarcely a description of the gasoline shortages of the winter of 1973–74, or of the economic situation in the world today—even if our problems could all be ascribed to high oil prices.

VIII. Conclusion

There are several crucial questions which need to be asked about all those who are advocating confrontation—economic or military. We need to know their motives. Why are they proposing risking the destruction of the Western alliance, even nuclear war? Why are they advocating a policy in which the only conceivable winners would be the two great communist nations? And neither of them could “win” a nuclear war, any more than could we. Why the concentration on the Arabs as the enemies when other countries in OPEC have been fully as anxious to maximize their income from oil? And why the concentration on Saudi Arabia, one of our closest friends in the Middle East? What interest do the advocates of aggression have in damaging relations with the Arabs in general and Saudi Arabia in particular? And why do they so resolutely reject the cooperative approach which has been advocated and described by Secretaries Kissinger and Simon, and by Messrs. Roosa, Wilson and Cooper? Is it simply to deprive the Arabs of their “oil weapon,” and remove pressure on Israel? This hardly seems possible, as even Israel could not “win” in such a world catastrophe. Perhaps these New Hawks have no motive at all; their guiding light may be simply malice and stupidity.

If the New Hawks are trying to frighten the OPEC countries into submission or into a dramatic reduction in their oil prices, they have not succeeded. If they are simply trying to disturb or destroy American relations with OPEC, with the Arabs and especially with Saudi Arabia, they have been somewhat more successful—primarily because, until now, there has been no detailed rebuttal of the war call. And they also seem to have put a fright into all those—in OPEC as well as the developed world—who know the ultimate victor in such an adventure would be Russian imperialism but nonetheless believe invasion is possible simply because they question America’s sanity.

Fortunately, the world can relax. The arguments for invasion fall of their own weight. Those who understand the difficulty in preparing a major secret operation are appalled at this call to war; they are joined by those who know how an oil field is operated and who know the ease of its destruction and the difficulties in its restoration and by responsible political scientists who know what would happen in a Europe or a Japan deprived of oil for several years. In short, everyone who knows anything of the military, of our system of alliances, of the difficulties in producing oil after oilfield installation has been destroyed, concludes that talk of invasion for economic reasons must be one gigantic bluff perpetrated by writers of distorted and immoral imagination, of varied degrees of sanity and with varied motives but with no authority.

The United States is governed by moral men of good will. But “morality” is a subjective characteristic and we cannot expect the world to assume the United States, for moral reasons, would recoil from an imperialistic war. Self-interest is more objective and the world should know that we are governed by rational men who are not bent on committing national suicide.

The American public shows no tendency whatsoever to follow the New Hawks to Armageddon. The initial reaction in January to the invasion proposal seems now to have been one of pure disbelief. It was this troubling silence to which Senator McClure addressed himself. But as the stories of invasion continued and enlarged, American outrage has grown. If the provocateurs were launching trial balloons, they must have been surprised at the rapidity with which they were pricked. Let us now put this story to rest. We should not forget it, as it illustrates how fragile peace is; and it illustrates how we could be drawn into another disaster for “noble” motives. This time, however, we’ll look more critically at the consequences than we did in Viet-Nam.

1. Source: Washington National Records Center, OSD Files: FRC 330−78-0058, Box 70, Middle East 381, 1975. Confidential. Drafted by Akins on April 5. Repeated to selected posts in the Middle East, Europe, and the Far East and to COMIDEASTFOR, USMTM Dhahran, and USCINCEUR. A stamped notation reads: “Dep Sec has seen.”
2. See Document 30.
3. Drafted by Akins on March 1 and revised on March 30.
4. In an interview with Robert D. Kaplan almost 2 decades later, Akins said: “I remember when a large number of reports appeared in the American media about the United States occupying the Arabian oil fields. I gave a TV interview saying that ‘anyone who thinks that should happen is a madman, a criminal, and an agent of the Soviet Union.’ Well, it turns out that Kissinger was the briefer behind those reports (it was Kissinger’s way of making the Arabs nervous). Had I known that, I obviously would not have chosen the words I did. I may be brazen, but I’m not suicidal.” (Robert D. Kaplan, The Arabists: The Romance of an American Elite, p. 176) This incident and the views expressed in this paper helped lead to Akins’s recall from his post in August 1975. Kissinger’s August 20 letter to Prince Saud informing him of Akins’s recall from Saudi Arabia is scheduled for publication in Foreign Relations, 1969–1976, volume E–9, Documents on Middle East Region; Arabian Peninsula; North Africa, 1973–1976.
5. A July 19, 1973, analytical summary of contingency plans in the event of instability in Saudi Arabia, requested by Kissinger on July 12, 1973, is scheduled for publication ibid.