The Oil Kings

Burgeoning oil revenues had swelled the ranks of the Iranian middle class. A growing economy absorbed their energies and channeled their ambitions into making money rather than demanding political reforms. But an economy experiencing dynamic growth was accompanied by shortages of consumer goods, skilled labor, and affordable housing in the cities. The Shah’s wife and court minister brought these matters to his attention.

Senior court officials took their concerns to Kermit Roosevelt, the hero of Operation Ajax, when he made one of his frequent visits to Tehran in the early 1970s to lobby the Shah to buy more fighter aircraft. One former Iranian ambassador confided to Roosevelt “that he thought there was a growing gap between the government and the people of Iran. He said that the Shah’s personal influence holds the government and the people of Iran together. He found inflation a serious problem and believed the credibility of the government was badly eroded.” Roosevelt relayed the concerns of the former diplomat and others in a memorandum that he addressed to Kissinger’s attention.

Two events occurred in the autumn of 1973 that reminded the Shah of his own mortality. In early October a terrorist plot to either kill or kidnap the Shah, Queen Farah, and Crown Prince Reza at an awards ceremony in Tehran honoring the movie industry was foiled. At around the same time—the exact date is unknown—the Shah noticed swelling around his abdomen. He made a self-diagnosis of a swollen spleen, probably the result of “some sort of blood disorder,” but chose not to share the news with his wife or anyone else at court apart from Alam. In November the Shah summoned Prime Minister Hoveyda, the speaker of parliament, top court officials, and the commanders of the armed forces to Niavaran Palace. When Alam arrived at the secret conclave he was surprised to see the queen at her husband’s side. The court minister was further startled to hear Mohammad Reza Shah deliver his political will and testament. Apparently alluding to the recent attempt on his life, the Shah began his remarks with a warning: “God alone determines the hour of our deaths, but we live in an age in which the instruments of death are wielded by terrorists and subversives. At any moment my life may be snatched from me.” He announced that in the event of his premature death, “and until the Crown Prince attains legal age, authority is to lie with Her Majesty the Queen and the members of the Regency Council.” He ordered the armed forces to obey his wife’s commands if that day ever came: “Their orders may come from a woman or a man of tender years, but they are to be obeyed with no less respect. The safety of all your lives may depend on it.”

No one said a word. The room, recalled Alam, fell into “absolute silence as His Imperial Majesty finished; everybody too electrified to utter a sound. I myself was so overwhelmed that I could think of nothing, save that I no longer wish to live a single moment once the Shah has gone. Pray God that I die before my beloved Shahanshah.” The Shah was preparing his inner circle for a coming storm—but what? And from where?

I SHALL DEFEND OUR ACTION BEFORE THE ENTIRE WORLD

The Shah never hid from his Western allies his intention to force through one final increase in oil prices when OPEC ministers reconvened in Tehran on December 22, 1973. Iran’s habitual big spender needed to raise the money to pay for $5 billion in new military equipment. He decided that market conditions might never be as favorable to the producers as they were now. The combined effects of the war and the embargo had led to panic buying and squeezed all excess capacity from the market. Prices were about to spike. The Shah knew that Nixon and Kissinger were anxious to appease him at a time when Iran was refueling the carrier Hancock, supplying Israel with oil, and ignoring the Arab oil embargo. The Shah also knew that Watergate had crippled Nixon’s ability to back up any demands with the threat of force.

The Nixon administration’s inept handling of foreign economic policy played a crucial role in the disastrous sequence of events that unfolded that December. On the 6th, Federal Reserve Bank chairman Arthur Burns attended a meeting at which President Nixon and his economics team discussed the crippling impact of the oil embargo. In his diary, Burns described Nixon at the meeting as a broken man. The president was “listless; looked sad; his mind elsewhere; shook his head now and then, but he was clearly not interested.” Nixon perked up only when Burns proposed a crash energy program that the Fed chief dubbed Project Independence and which he envisioned would be “on a scale comparable to [the] Manhattan Project and the Space program . . . that will free us from dependence on Arab blackmailing sheiks.” Nixon loved it. He made clear, however, that he and not William E. Simon, the administrator of the Federal Energy Office and the White House official in charge of coordinating the administration’s response to the oil crisis, should receive credit for announcing the new initiative. “President expressed concern about Simon,” wrote Burns. “He indicated that he wanted to make major policy pronouncements himself.” Burns also recorded that Treasury Secretary George Shultz, supported by others in the room, “urged a sharp increase in oil prices and reliance on market to equate demand & supply” to combat the effects of the oil embargo and reliance on oil from the Middle East. Nixon’s economics team still underestimated the potential for another price jolt to inflict widespread damage on the economy. Burns did not think highly of Shultz, whom he caustically described as having “not the slightest understanding of international economics or finance! What a pity that this quiet, persuasive, but woefully ignorant ideologist, has such influence with the President.”

The incoherence of the Nixon administration sent mixed signals to oil producers and consumers alike, which resulted in another, deadlier misunderstanding. The Shah decided to test American resolve when he told Ambassador Helms that he planned to increase the price of oil to the point where it reflected the price of other sources of energy. Helms left their meeting assuming that the Shah meant to raise the price of a barrel of oil by the hefty sum of one or two dollars. In fact, the Shah meant to raise the price by seven dollars. How did this miscommunication happen? Despite his fluency in English, the Shah did not always express himself clearly on the subject of oil prices. Here is his reply to a journalist when he was later asked to justify the $7 a barrel price increase:

So we charged experts to study what prices we should put on oil. Do you know that from oil you have today 70,000 derivatives? When we empty our wells, then you will be denied what I call this noble product. It will take you $8 to extract your shale or tar sands. So I said let us start with the bottom price of $7; that is the government intake. Suddenly everybody started to cry foul.

If the words “that is the government intake” are removed it might appear as though the Shah wanted oil to go up in price from $5.11 to $7 per barrel. What he actually meant was that the Iranian government’s “take” or profit per barrel would be $7 in addition to the posted price of $5.11. The distinction between the dollar price per barrel and the profit margin per barrel was lost in translation. Ambassador Helms similarly misunderstood the Shah’s intention. The British ambassador later told Alam that he too had misunderstood the Shah’s explanation of $7 income for every barrel of oil sold. This helps explain Kissinger’s belated admission many years later “that he had assumed that the Shah might hike oil prices by a dollar or two a barrel to pay for his weapons.”

In Paris on December 19, three days before the OPEC summit, France’s foreign minister, Michel Jobert, told Kissinger that the French government “could not understand the American Government’s attitude toward the Shah of Iran. It was clear, he said, that the Shah was going to push for another major oil price increase by exploiting the current embargo, induce shortage and yet the United States acted as if it considered the Shah to be a friendly country with the same interest . . . these artificial prices would be used as a pretext to justify higher overall OPEC prices.” But Kissinger brushed aside Jobert’s complaint. The French believed that Kissinger “underestimated the economics and overestimated the Middle East political problem in the terms of time sensitivity.” Oil prices “were more immediately vital to the French.” President Georges Pompidou wanted Nixon to know that he was prepared not only to join the United States in holding the line against further oil price increases—he also extended an offer “to join us in military intervention.” James Akins, the American ambassador in Saudi Arabia, raised the alarm too. The Saudi government appealed to Washington through the ambassador to restrain the Shah and “use our influence for moderation with all the OPEC nations.” Kissinger went through the motions of issuing a general appeal for restraint to the governments of Iran, Saudi Arabia, and Venezuela but otherwise made no effort to exert American leadership, perhaps because he suspected that Jobert and Saudi Arabia’s Yamani were trying to drive a wedge between Washington and Tehran. What happened next seems to have genuinely taken him and everyone else in the United States government by surprise.

The Shah opened the December 22 Tehran oil producers’ meeting from the fortified Ministry of Finance building in Tehran. He reminded the delegates that “we are establishing the prices ourselves” without interference from Western governments or oil companies. He urged them not to raise the price of oil to the point where it hurt the industrial nations whose capital was essential for their own development. But he also inveighed against wasting oil for use in “power generation, moving ships or heating homes. Oil must be reserved for use in more sophisticated industries such as petrochemicals.” He recommended they adopt his own price formula which was “a price comparable to the price of coal oil derived from shale or other sources such as coal gasification or coal liquefaction.” It was the same pricing formula he had mentioned to Nixon and Kissinger in July. The Shah ended his remarks by assuring the delegates that if they adopted his proposal he was “quite prepared to bear the consequences. I shall defend our action before the entire world, confident that my nation will support me.”

The Shah won over the delegates and turned out to be as good as his word. The next day at a press conference in Niavaran Palace Iran’s leader shocked the world when he announced that Persian Gulf oil producers had agreed to more than double the price of a barrel of oil from $5.11 to $11.65, thereby ensuring themselves a profit margin of almost $7 per barrel. “The industrial world will have to realize that the era of their terrific progress and even more terrific income and wealth based on cheap oil is finished,” he declared.

They will have to find new sources of energy, tighten their belts. If you want to live as well now you’ll have to work for it. Even all the children of well-to-do parents who have plenty to eat, have cars, and run around as terrorists throwing bombs here and there—they will have to work too. We don’t want to hurt the industrialized world. We will be one of them soon. What good will it do if the present industrialized world is crushed and terminated? What will replace it?

This last, massive hike in prices for the year meant that the price of oil had risen 470 percent in the space of twelve months and that the economic wealth of OPEC members had rocketed by the then astronomical sum of $112 billion—an amount that represented the largest single transfer of wealth in history. Iran quadrupled its oil revenues to $20.9 billion and total petroleum income over the next five years was projected to climb to $98 billion. Iran’s gross national product was on target to expand an astonishing 50 percent a year. In fact, the empire of Iran had just been launched into the ranks of the wealthiest nations on earth.

The Shah had his $5 billion. For the rest of the world the Shah’s oil coup was a disaster. In some countries national treasuries emptied practically overnight. America’s bill for foreign oil imports soared from $3.9 billion to $24 billion in one year. “Among other things, this means that the woolen mills of Lancashire, the auto plants of Bavaria, and the electronic assembly lines of Japan will have to produce and sell four times as much as they did a year ago to meet the cost of the oil they use,” reported The New York Times. France calculated that the combined effect of the fourfold increase in the price of oil in 1973 would lead to a rise in unemployment from 2 to 6 percent, a 10 percent increase in the cost of living, $2 billion in additional fuel costs, the erasure of its trade surplus, and the devaluation of the franc. Spain’s $500 million trade surplus was turned into a $3.1 billion deficit.

“In pushing up prices beyond what is tolerable to western economies [the Shah] is aware of the strains he is imposing,” concluded The Economist. “In apparently changing his colors he may now feel he is running with the tide of world history and that Iran must rely on its own strength to keep off the Russians.” The magazine also noted the domestic pressures on the Shah and his unending quest to erase the taint of the 1953 coup. “Even after 20 years, the ghost of Mossadegh, the politician who laid claim to the mantle of Iranian nationalism and outbid the Arabs in challenging the West, still haunts the Shah.”

When they realized the enormity of what had happened, the Nixon White House was thrown into a panic. “The oil increase to us is $10 billion,” CIA director Colby told his colleagues on December 28. “Two can play at this,” replied Admiral Moorer of the Joint Chiefs. “Maybe we should raise the price of our stuff to the Shah.”

“We are,” Defense Secretary Schlesinger assured him. From now on the Shah would foot the bill for all research and development costs associated with the weapons systems he bought from the Pentagon. “We had a policy in the Department of Defense in which the United States paid the research and development costs of developing new equipment,” recalled Schlesinger. “We were engaging in sort of charitable activities in the sense that we were loading onto the Navy Department or the Air Force Department all of the charges for these equipments when some of the clear beneficiaries were overseas clients. And there was no need in the wake of the ’73 oil prices run-up to engage in charitable activities.” Iran’s already high defense expenditures were about to go through the roof.

Arthur Burns attended a second White House meeting on January 8, 1974, to discuss the economic and financial aspects of the crisis. The participants realized they had been snookered by the Shah. “Kissinger had nothing to contribute about oil problem,” Burns observed. “In fact, no one did—apart from the contribution I left in my memo on Abuses of Economic Power. Kissinger talked wildly—we should agree to nothing; we should not even talk to [the French?]. Not at all helpful.”

Three years earlier Nixon had secretly given the Shah permission to push hard on oil prices. Even if he blasted the Shah in public, what would be the use? If the news leaked that he had approved the oil price hikes now wreaking havoc on the world economy, his presidency would be further imperiled. Privately, Nixon appealed to the Shah to reconsider. “The diplomatic response was to try to bring pressure to bear on the Shah not to raise the prices,” recalled Helms. “This is what the State Department was trying to do.” Helms presented Alam with a letter to give to the Shah expressing Nixon’s alarm.

The Shah had left town for his ski vacation and Helms and Alam talked about what had happened. “As I recall, His Imperial Majesty granted you an audience,” Alam said, “in which he would certainly have explained that oil prices can only be set in accordance with the price of alternative energy sources. I know for a fact that His Imperial Majesty made this point to the British ambassador.” Helms admitted that this was true. “In that case, what’s your objection? Our approach seems perfectly rational.” According to Alam, Helms replied that “he had no objection and that he had sent a detailed report to Washington.”

Helms then asked Alam if he could raise “a rather impertinent question.” American diplomats had learned that the majority of the Arab oil ministers who attended the Tehran conference, and in particular Saudi Arabia’s Sheikh Yamani, had opposed the price hike but had felt disinclined to challenge the Shah. Alam subsequently learned from the Shah that the Saudis had suggested a profit margin per barrel of $6. But Abu Dhabi, Kuwait, and Iraq had all pushed for a profit margin of $9. The Iranian view was that the Shah’s pricing formula represented the middle ground and that it was unfair to characterize him as a price hawk. Alam explained the pricing formula to Helms, noting that “the U.S. ambassador has begun to realize the true implications of the Arab proposals, which has really put the wind up him.”

In his letter to the Shah, Nixon urged his ally to reconsider the price increase because of the possible destabilizing impact it would have “on the world’s economy and the catastrophic problems it could pose for the international monetary system. Not only will it result in raising the prices of manufactured products but it will have severe repressive effect on the economies of oil consumers which could cause a world-wide recession and which would eventually benefit no one, including the oil exporters.” The Shah simply ignored Nixon’s request. “I was involved in delivering these messages to the Shah, but he was having none of that,” said Helms. The Shah’s attitude was simple and uncompromising: “I’ve tried in the past to get oil price rises and the American and British companies wouldn’t give them to me. Now I’ve got them and you’re going to have to live with them.” The Shah was deeply offended by the criticism leveled at him by his allies in the West. He dismissed Britain’s ambassador Peter Ramsbotham as an “idiot” when the envoy begged for restraint and instructed Alam to give him a dressing down.

Nixon and his aides later came under severe criticism for allowing the Shah to get his way on oil prices. But did they have any choice? Decades later, Secretary of Defense James Schlesinger confirmed that U.S. officials feared crossing the Shah at a time when “relations between the United States and the Saudis in the case of the Nixon administration were somewhat tenuous. They became extremely tenuous because of the decision to provide Israel with aid sometime in October ’73 which led to the oil embargo and which fed the Shah’s economic ambitions. He was the one that was pushing the price up to $12 a barrel. The Shah was our ally.” Schlesinger’s naval task force relied on Iranian fuel supplies to keep the pressure on King Faisal to end the embargo.

And as a result we were ambivalent about the Shah because we didn’t want to fight him on energy prices. We didn’t want to fight him on the point of energy prices [to the point where] we alienated him, right? On the other hand, it was plain that the run-up in prices was not in the interest of the United States or the Western world. That was the problem. At the same time we wanted him as our ally in the political conditions in the Middle East so we didn’t want to go so far as to alienate him and lead him to be hostile to the United States.

The best explanation Henry Kissinger gave for what happened came in a secretly recorded telephone conversation with newspaper reporter Jack Anderson in 1975. The enterprising Anderson had somehow gotten his hands on a classified summary of Kissinger’s December 1973 meeting with France’s foreign minister Jobert. Kissinger at first claimed to have no recollection of the event. “I just—you know, I just can’t remember that,” he blustered. “I would have to check my records.”

“Well, there is even a charge here that they offered to join us in military intervention,” Anderson persisted.

“Oh, that is totally—that is totally—that, I know, is total nonsense.”

“I will read it exactly the way it said: They raised the issue of joint U.S. military action—just raised the issue—references to this French proposal were made at the Embassy level and were reflected in the cable traffic. I don’t have the cable traffic—what I have is a summary of it that comes from the State Department or from people in the State Department.”

Kissinger’s memory suddenly improved: “Well, look, Mr. Anderson, it is a very complicated issue, but this conversation, even if it would possibly turn out to be true, which I can’t confirm—I’ll have to look to see whether I can find a copy of this memo or an equivalent of it,” he said. “Because you know, it does sound plausible to me.” Kissinger proceeded to explain that the United States had been desperate for Iranian oil to keep flowing at full capacity during the embargo, telling Anderson that “at a time when we were facing an embargo for us to take on the Shah who was our only supplier of oil in that area was not the most intelligent thing to do . . . the geopolitics are not irrelevant and it’s not irrelevant to have one country that won’t join an embargo and that might be available in case of a Middle East conflict but that is not the only consideration.” Kissinger added that in December 1973 there was a high risk of another war in the Middle East. The United States was under an oil embargo. “You have to look at our strategy in light of that period . . . . And not wanting to add Iran to the embargoing countries is not the worst—it is not a senseless judgment.”

American impotence was separately reinforced when the Shah informed the administration that he would authorize an increase in Iranian oil production to alleviate fuel shortages in the West only if the United States supplied him with construction materials such as cement, steel I-beams, reinforcing rods, copper sheeting, and aluminum. On two fronts—oil pricing and production—the Shah was now playing a very hard game with the White House. The Iranian leader had the Nixon administration—and the economies of the Western industrialized world—over a barrel. The irony was this: in July 1973 Kissinger had been told that the Shah would be highly unlikely to join any oil embargo because Iran’s economy could not afford the loss in revenue. The memo from the State Department concluded that the Shah’s military buildup would “enable Iran to deal from a position of strength,” though it did not say against whom. Kissinger either ignored or disregarded the analysis. Some in Washington now wondered whether the Shah’s newfound petropower actually enabled him to deal with the United States from a position of strength. The Shah is “definitely using oil as a lever” a top U.S. official told The Washington Post. He added that it was “a touchy matter” in the White House.

YOU ARE GOING TO GIVE ME GAS OR I WILL KILL YOU

On February 9, President Richard Nixon met at the Western White House in San Clemente with Kissinger, Shultz, and William Simon, whom everyone now knew in shorthand as the White House “energy czar.” They were coming out of another hair-raising month in which the United States had experienced the geopolitical equivalent of a power system failure. In Southeast Asia, Europe, the Mediterranean, the Persian Gulf, and throughout the Middle East the administration was on the defensive. The president had flown out to California on a commercial flight as a cost-saving measure. Nixon tried to lighten the mood when Kissinger pointed out that even a small country like Uganda had turned against them. “Look at Amin,” he complained in reference to the murderous Ugandan dictator Idi Amin. “He used to be ours and the Kenyans bought him.”

“The problem with Amin is not something he ate but someone he ate,” Nixon cracked. “I’m sorry for the Africans, but it will take a long time.” They had more critical issues to deal with than Amin or Uganda—like trying to prevent the collapse of law and order at home and save the industrialized world from bankruptcy.

Americans were experiencing oil shock. It began over the New Year’s weekend when motorists in New York City fought one another with fists and knives outside gasoline stations and a man in Albany walked into a gas station with what looked like a hand grenade and left with all the gas he could carry. Service station attendants armed themselves as holdups and assaults proliferated across the country. “You are going to give me gas or I will kill you,” one was told. Fully laden gasoline trucks were hijacked. Police reported a rash of suspicious automobile fires as car owners found ingenious ways of disposing of their gas guzzlers and claiming the insurance value on their cars. Motorists in Hawaii slept outside gas stations to hold their place in line. A strike by independent truck drivers angry over fuel prices and scarcity led to food shortages, which in turn triggered panic buying at supermarkets in the Midwest. Bitter clashes with strikebreakers resulted in three shooting deaths and many injuries, “and there have been scores of fist fights, slashed tires and smashed windshields.” Truckers besieged the town of Streator (pop. 16,000) in Illinois and prevented trucks from entering the city limits. The town’s biggest employer was forced to close its doors and frenzied residents mobbed stores to stock up on provisions. The governors of eight states called out the National Guard to patrol highway overpasses and truck stops and to escort convoys of trucks laden with food.

The Federal Energy Office monitored FBI reports of shootings and growing social unrest around the country. “The key during that period, the most intense motive was the survival of sectors of the country that were desperately short of oil, shutting down plants, shooting prices up, doing all sorts of bizarre things,” recalled Frank Zarb, one of the officials charged with responding to the emergency. Zarb tried and failed to persuade House speaker Carl Albert to shut off the lights on the dome of the U.S. Capitol as a cost-saving measure. By early February gas lines in the nation’s capital stretched for two miles. “I went into a line for an hour this morning to get some gasoline,” Kissinger’s deputy, Joseph Sisco, complained to his boss. “Getting gasoline is a small problem if you are not Secretary of State. The line was around the block twice, can you believe that? While sitting in the line I was thinking about you yesterday and thinking it would be nice to get this shortage over.”

Kissinger shared Sisco’s sense of frustration. “If I was the President,” he joked with Brent Scowcroft, “I would tell the Arabs to shove their oil and tell the Congress we will have rationing rather than submit and you would get the embargo lifted in three days but I am not the President [under] this god-damn constitutional amendment.” (Kissinger was referring to the Constitution’s proscription against foreign-born citizens becoming president.) Not all the side effects of the fuel shortages were bad. After the national speed limit was lowered, traffic deaths fell 25 percent, pedestrian deaths by 30 percent, and the number of schoolchildren killed annually in automobile accidents dropped from ninety-eight to fifty-seven.

The pressure on the president and his administration to ease the energy crisis was intense. The man tasked with restoring order to the nation’s fuel supplies, William Simon—universally known as Bill—was a forty-six-year-old former Wall Street bond trader, close friend of Nixon’s former attorney general, John Mitchell, and protégé of George Shultz at Treasury. Simon was a Wall Street moneyman. Within nine months of starting work at the investment house Salomon Brothers in 1963 he became one of seventeen partners and was responsible for managing government and municipal bond trading. With his slicked-back hair, granite jawline, and signature square eyeglasses, Simon publicly exuded the confidence of the well-heeled establishment man. His subordinates knew him as a bully in the office, a man who “terrified” his staff and worked them like draft horses. One time he walked past a trainee whose desk was cluttered with papers. Simon saw the mess and barked, “Clean off your desk. It’s a [expletive] pig sty.” The trainee was so busy he still had not cleaned his desk when Simon returned from lunch. “And Simon leans over and, with the back of his arm, he just sweeps all the junk off that desk and onto the floor,” recalled the trainee. “And then he says, ‘See. See how easy it is to clean off a desk.’ ” Having Bill Simon as your boss made life “generally miserable.”

Simon was a die-hard Nixon man who believed the country needed saving from the excesses of liberalism. During the 1968 presidential campaign he contributed $15,000 of the $100,000 donated to Nixon’s campaign by Salomon partners. In December 1972 he was rewarded with the post as Shultz’s deputy at Treasury. A year later Nixon chose him to run the Federal Energy Office and coordinate the allocations of fuel supplies across the country. Simon was unsettled when Nixon told him that his post would be like “Albert Speer’s position as armaments overlord in the Third Reich.” But he quickly emerged as the public face of the energy crisis, hailed by Time magazine in a cover story as “A Fitzgerald Hero in Washington,” and “one of the freshest and most appealing faces in Washington.” He relished the attention and the challenge. He worked till ten o’clock each night and his long-suffering wife, Carol, the mother of their seven children, admitted to a reporter that she and the kids hardly ever saw him—half an hour a day at most, including weekends. It was reported that on weekends he thought nothing of shocking his children out of their sleep by emptying buckets of cold water over them. Bill Simon loved his job and he hero-worshipped Nixon, using adjectives to describe the president that would have astonished Pat Nixon, such as, “fun, charming, enchanting and witty.” The admiration was not mutual. Nixon and Kissinger generally held Simon in low regard and dismissed him as an intellectual lightweight. Nixon had scrawled over Simon’s initial job application, “NO! East Coast Establishment! Other options?” After a January 23, 1974, cabinet meeting Nixon phoned Kissinger to gossip. “I thought that Simon was a wipe-out,” he complained.

“A disaster,” repeated Kissinger.

“I felt I had to say a few things, didn’t you?”

“You saved him,” said Kissinger.

“At the cabinet meeting—just running the Goddamn thing. They’re all so weak. What they need is leadership. What was your feeling?”

“Exactly,” chimed Kissinger. “As you said, they’re weak. You certainly got it across to them.”

Bill Simon and Henry Kissinger were bound to cross swords handling the domestic and foreign policy repercussions of the oil shock. Kissinger’s great mistake was to underestimate Simon’s capacity for ruthlessness and his love of a good scrap—played by Wall Street rules, of course, which meant no rules at all.

Kissinger was still having no luck in persuading King Faisal to lift the embargo. “He has himself locked in concrete,” Kissinger told Nixon on February 5.

“He’s really locked in concrete,” Nixon agreed. “Until Syria has disengagement, there’ll be no lifting the embargo.”

“We are there on a roller-coaster,” said Kissinger. “We have their solemn assurance in writing that they would lift the embargo. This is not our imagination.”

Another leader frustrated with the Saudis was President Sadat of Egypt. Having emerged from the war with his stature enhanced throughout the Arab world, Sadat was ready to embark on his quest for a lasting peace with Israel. He distrusted the Soviets and wanted to improve ties with Washington. But he couldn’t move until Faisal ended the embargo. The day after Nixon’s talk with Kissinger, the Egyptian foreign minister in Cairo invited the U.S. and Saudi envoys to his office and, Kissinger told Al Haig, “in the presence of our ambassador called in the Saudis and gave them hell, and now they’re pulling back.”

On February 7, Nixon held a thirty-five-minute meeting with Saudi ambassador Ibrahim al-Sowayel in the White House Map Room. Nixon told the ambassador that he understood King Faisal was in a bind and unsure of how to proceed. Nixon knew that the king feared rousing the animosity of radical elements at home and abroad if he was seen to be dishonoring the Arab cause. Yet Faisal was also worried about the impact the embargo and the price increases were having on the economies of Saudi Arabia’s trading partners. “I know your government wants to normalize the situation, but you feel you can’t get out in front of the Algerians and the Syrians.” Nixon came close to offering an apology for not working harder in his first term to help reduce tensions in the Middle East. He wanted Faisal to know that “I am determined now that the Middle East be settled.” He told the ambassador, “I am the first President since Eisenhower who has no commitment to the Jewish community, and I will not be swayed.” Nixon was not exaggerating when he said he would not bow to pressure from Israel or its supporters in the United States when working to reach a regional peace settlement. The war had still been raging when he had phoned Kissinger and told him that once the fighting had ended, “what ought to happen is that even though the Israelis will squeal like stuck pigs—we ought to tell [Soviet Ambassador Anatoly] Dobrynin—we ought to say that the Russians—that Brezhnev and Nixon will settle this damn thing. That ought to be done. You know that.”

Nixon told Ambassador Sowayel that his efforts to reach a settlement “are being hampered and will be seriously jeopardized if the embargo is the issue . . . . It makes it terribly difficult to move as quickly as we want, with the embargo. I understand it, but with lines at the gas stations, and so on, I don’t want our people to start blaming the Arabs.”

WE ARE GOING ALL OUT NOW WITH THE SAUDIS

In an attempt to learn more about the Shah’s thinking on a range of issues, over the Christmas holiday season American newspapers republished his interview from a month earlier with Italian journalist Oriana Fallaci. In an instant the Shah’s carefully cultivated image as a friend to the West, a benevolent ruler, and a loving family man was shattered. His views on women (“You’ve never produced a Michelangelo or a Bach. You’ve never produced a great cook”), democracy (“I don’t want any part of it, it’s all yours, you can keep it, don’t you see? Your wonderful democracy”), and dissent (“Those guilty of homicide, certainly. They are shot. But not because they’re Communists, because they’re terrorists”) caused a sensation. Many Americans decided they had never really known the Shah at all, and what they knew of him now they didn’t much like. “The sugar-coated image of the Shah of Iran (as regularly presented in the U.S. press) has suffered a telling blow, via the excellent interview you published,” one woman wrote the editors of the Los Angeles Times. “I have recently returned from an extensive tour of Iran. The so-called White Revolution has been a dismal failure. Most villages have neither electricity nor running water; illiteracy stands at 72%. The slightest political dissent results in arrests and torture by the dreaded secret police. The slums of Tehran compare to those of Calcutta, while the wealthy live lives of incredible luxury.” “His values are undignifying and based on sand,” declared another angry reader. “May Allah protect the Empress Farah.” “I could not believe how he disgustingly put down women,” wrote a third.

Stung by the criticism, Mohammad Reza Shah went on the CBS News program 60 Minutes to defend himself to interviewer Mike Wallace. The program, which aired on Sunday evening, February 24, only compounded the damage. The Shah appeared tense and ill at ease. Angered by a question about corruption in Iran he struck back, accusing U.S. oil companies of breaking the embargo and smuggling oil into the United States by rerouting tankers “two or three times” in mid-ocean. He spoke of oil “being sold for one destination and ending up somewhere else.” He declared that the United States was in fact “not short of oil” at all and was importing more petroleum than ever before. The Shah’s comments “created tremors in Washington,” reported The New York Times, because they implied the Nixon administration was manipulating the embargo for domestic political reasons.

Bill Simon was summoned to Capitol Hill the next day to answer the Shah’s charges before the House Ways and Means Committee. He arrived distinctly out of sorts. The abrupt summons had disrupted his busy schedule. Hurrying to make it to the Hill on time, he gashed his head on the edge of his car door. His request to receive medical attention and stitches was turned down by the committee chairman. With his head bandaged, Simon spent the next five hours “in considerable pain and discomfort, bleeding profusely as various congressmen screamed at me,” as he put it. He faced them down and angrily threw the Shah’s allegations back at them. He described the Shah’s views on the embargo as not only “irresponsible and just plain ridiculous” but “insane.” Later he bitterly recalled having to listen to Congressman Charles Vanik of Cleveland laud the Shah and implicitly question his own expertise in the field: “Are you telling me the Shah of Iran, the world’s most renowned oil expert, doesn’t know what he’s talking about?”

“That’s what I’m telling you,” Simon retorted. He fared no better before a Senate subcommittee.

“I’ll say this Mr. Simon,” said Senator Henry “Scoop” Jackson. “We will have to dig a big bomb shelter for you by April if the lines are longer.” Jackson’s comment had a bite to it. Simon’s rambling estate in northern Virginia was already under twenty-four-hour Secret Service protection because of death threats leveled at the energy czar by enraged Americans. When the Simon family attended a college football game, agents scoured the crowd for a stalker they knew to be sitting several rows behind.

“I remember the Secret Service being very present in our lives,” said daughter Katie Simon. “I remember the Secret Service taking me to McDonald’s one day before school.”

Two days after his testimony on Capitol Hill “well-placed sources” contacted the offices of the Associated Press in Washington to say that Simon had “made a major mistake” by denouncing the Shah and had hurt his chances of succeeding George Shultz as secretary of the treasury. A second article appeared in The Washington Post warning the administration that Simon’s comments had provoked “consternation and anger” in Iran. The Shah had been in contact with Ambassador Zahedi “several times.” There was talk of recalling him from Washington. President Nixon took the extraordinary step of publicly and privately disassociating himself from Simon’s remarks. He apologized to the Shah in a letter noteworthy for its contrition.

Simon now understood that the Shah had powerful supporters in the nation’s capital, in the media, on Capitol Hill, and in the White House, although he knew nothing about Nixon’s and Kissinger’s secret history of dealings with the Iranian leader. For him the incident was a lesson in how raw power really worked in Washington. It was also the beginning of his remarkable, quixotic crusade to rid the corridors of power of Pahlavi influence in Washington. Simon was an idealist who believed that morality mattered in foreign policy. The Shah appalled him. “The Shah, in my opinion, was not only an uninformed, misinformed, irrational megalomaniac given to hallucinating, he was also duplicitous,” he later said.

The Saudis, by contrast, were proving to be much more receptive to overtures from the White House. In early March, Nixon offered Faisal the equivalent of a grand bargain to end the embargo and start a new chapter in U.S.-Saudi relations. In return for resuming oil exports, boosting oil production, and holding firm on prices, the United States was prepared to fulfill the king’s long-cherished goal of sealing a separate military and economic alliance with the United States. On March 7, Kissinger explained the proposed pact to Deputy Secretary of Defense Bill Clements: “We are going all out now on the Saudis. I worked it out with the King. We had to pick the right moment and we are going to send out a military mission and an economic mission . . . . It may take us another three or four weeks to get it worked out. We don’t want to seem over anxious. The King liked the idea and we are now exploring it.” He added that the Saudis “have learned a good lesson on the embargo. They may put it on again but never again with the other Arab states.”

Kissinger phoned Nixon on Monday the 11th to tell him that “as you know, Mr. President, we had approached the Saudis on bilateralism and their response has been so enthusiastic, in fact so wildly enthusiastic that I can’t help but believe this must affect their decision at the embargo.”

“Yes. Well, that’s the way we want to deal.”

“Absolutely,” agreed Kissinger. He explained that what the Saudi royal family “was getting out of it is a military relationship and a long-term economic relationship . . . And the commitment of the U.S. strategically to help them against their enemies in Iraq and South Yemen and so forth.”

“And internally as well.”

“Yes, that’s right,” said Kissinger. “That response has been amazing.”

What Nixon and Kissinger were offering the Saudi leadership was a special, even unique, relationship. In return for resuming the flow of oil at an affordable price, the United States would help the Saudi rulers crush their political opponents at home and ideological foes abroad. U.S.-Saudi relations were about to undergo a profound seismic shift. No longer would the Shah be expected to defend Gulf oil from the radicals. The Americans would shield the Saudis until they could defend themselves. The United States was choosing to become directly and intimately involved in Saudi Arabia’s internal governance, its foreign policy, and its economic development. Faisal had been right to hold out for a better deal. On that same day in Tehran, upon hearing reports that the Saudis were about to cut a deal with Nixon, the Shah told a guest not to worry. “Washington relies on Zaki Yamani,” he declared. “But not even a hundred Yamanis could interrupt the flow of events.”

The oil embargo was lifted at a meeting of OPEC in Vienna on March 18. The Saudis also announced an immediate boost in their oil production by one million barrels a day. When Iran proposed raising oil prices by a further 5 percent, Yamani declared that Saudi Arabia would sooner pull out of the cartel. The other delegations reacted angrily but were powerless to prevent the world’s swing producer from using its reserves as leverage against them. A week later Saudi oil production was back at its pre-embargo level of 8.3 million barrels a day and Yamani announced that his government had decided to expand its production capacity to 11.2 million barrels a day by the end of 1975, an increase of 37 percent over its current rate.

The impact of the embargo and the monthly 5 percent production cutbacks became the focus of a great deal of subsequent debate. The embargo initially targeted the United States and the Netherlands for their strong support of Israel. West European states and Japan were eventually exempted from the embargo because they rushed to cut private deals with Middle East governments or issued public statements designed to mollify Arab concerns about the return of Israeli-occupied territories. Portugal, Rhodesia, and South Africa were also targeted by the cartel. Oil producers Iran, Nigeria, and Venezuela profited from the panic when they rushed to try to fill the gap in supply. Iraq’s Saddam Hussein also increased his country’s oil production by arguing that the embargo was actually an American-Saudi plot to weaken Europe and Japan to increase their dependency on the United States. Nonetheless, as industry analyst Daniel Yergin has pointed out, the loss of even 9 percent of the 55.8 million barrels of oil consumed each day by the free world was “made even more severe because of the rapid rate at which oil consumption had been growing—7.5 percent a year.” With no spare capacity in the market, even the loss of a few million barrels was enough to dislocate supplies worldwide. Panic, hoarding, and clumsy government efforts to allocate fuel supplies also played their part in the crisis.

SOMEONE HAS TO TALK TO THE SHAH

In Washington and elsewhere, the Shah’s policies were causing a great deal of concern. In the early evening of March 29, 1974, Kissinger hosted a top-level meeting of administration officials and oil executives to discuss the next moves on Middle East peace talks and the oil crisis. It was the latest in a series of briefings the secretary held with petroleum industry leaders to coordinate administration policy with their concerns. The presidents and chairmen of Texaco, Standard Oil of California, Exxon, Mobil, Amerada Hess, Atlantic Richfield, Continental Oil, and Gulf Oil were in attendance. An old Washington hand, John McCloy, was also there. The law firm he represented, Milbank, Tweed, Hadley & McCloy, handled negotiations between the oil companies and Arab governments. Kissinger began by assuring his guests that the written transcript of their conversation “isn’t going to go anywhere, except into my own personal files. If it makes you nervous, we will stop . . . . You may not realize what an achievement it is in this building to keep notes from being made in 500 copies.” Then he made a typically acerbic crack at the expense of Bill Simon, who was sitting in with them. “You know everybody, don’t you? Do me a favor and say you don’t recognize Simon.” Laughter. “That’s the only thing that will instill a measure of humility in the czar.” More laughter.

After briefing the oil executives on the latest developments in the Middle East peace talks, Kissinger learned that the recent doubling in the price of oil had been one increase too many: consumers in the West and elsewhere were cutting back their imports of foreign oil and implementing tough conservation measures. These measures were placing pressure on OPEC’s pricing structure—and cutting into oil company profits. The industry was also in agreement that the high posted price of oil was driving up the rate of inflation amid panicked efforts by oil-consuming nations to enter into barter deals with oil producers. Consumers were anxious to recoup the cost of their fuel bills and secure long-term and guaranteed access to supplies of Middle East oil. Taiwan wanted an oil-for-refinery agreement with the Saudis. Poland had agreed to supply Libya with tankers and industrial equipment in return for oil shipments starting in 1980. Argentina was bartering grains and meat for oil from Libya. France was in talks with Iraq to conclude a twenty-year contract to supply it with 5.6 billion barrels of crude, and with the Saudis to swap weapons and industrial goods in return for three years of oil. Iraq had agreed to supply Japan with 320,000 barrels a day in a ten-year deal that would see Tokyo offer Baghdad a $1 billion credit to build a natural gas processing plant, a refinery, a petrochemical plant, a fertilizer plant, and an aluminum plant.

The barter deals were affecting the world economy by holding prices up everywhere else. Inflation had risen because of the explosion in fuel and commodity prices. “This reflects a sharp acceleration in the last three months, when, particularly under the initial impact of higher oil costs, the increase expressed at an annual rate was of the order of 16%,” reported the Organisation for Economic Co-operation and Development. Between a quarter and one third of inflation was blamed on rising energy costs, which in turn “kicked up the prices of countless oil-based products, including fertilizers, petrochemicals and synthetic textiles.” In 1974 the inflation rate in the United States climbed as high as 12 percent. Rates of inflation doubled in Western Europe with France and Belgium registering 16 percent, 18 percent in Great Britain, 25 percent in Italy, 32 percent in Iceland, and Greece at 33.4 percent. Japan reported a 24 percent rate of inflation. Inflation of 55 percent blew unchecked through Argentina. The oil shock also had a devastating toll in many corners of the Third World. Africa’s combined $10 billion fuel bill all but erased the $11.4 billion it received in aid from the industrialized world. In Asia, rice harvests collapsed 40 percent in Sri Lanka because farmers had to pay 375 percent more for fertilizer. The social fabric of many countries was beginning to tear. The barter deals were only making matters worse, setting a floor price below which oil would not fall.

American oil company executives had another immediate concern: they worried they were being pushed out of the Persian Gulf oil market. Exxon’s Ken Jamieson complained to Kissinger, Simon, and their aides that “more and more oil that was Aramco oil is being diverted to these other countries on government-to-government deals. So we are losing effectively oil that was under our control before.” The oil producers “are attempting to use this device to establish a market price,” agreed Gulf Oil’s B. R. Dorsey.

Jamieson explained that “the price problem is more critical than the supply problem” and that “Our judgment is the one who has really been pushing the prices the worst is the Shah.” He urged the White House to bring pressure to bear on the Iranian leader.

“He is also the hardest one to push,” agreed Kissinger. “He is a tough cookie.” He added, “Simon is our specialist in treating with the Shah.”

“If the posted price went down, the barter deals would go down,” explained William Tavoulareas, the president of Mobil Oil. “So would the price at which they sell. That would work.” When Kissinger asked how prices could be forced down, Tavoulareas answered, “Someone has to talk to the Shah.”

Kissinger assured the group that he planned to see the Shah “next time I go out there.” What he did not tell them was that neither he nor Nixon retained any influence over Iranian oil policy or had any leverage to influence the Shah’s behavior.

The Saudis, said Jamieson, favored a price reduction and an increase in their oil production to flood the market and break OPEC’s pricing structure.

“Faisal has dead aim on the Shah in this deal, Henry—I guarantee you,” Deputy Secretary of Defense William Clements warned Kissinger.

Simon was all for it: “[The Saudis] don’t have to reduce the posted price—just raise the [level of their oil] production and let the market take care of it.”

Chairman Robert Anderson of Atlantic Richfield emphasized that the oil market was softening and that the Shah had overreached. A recent price auction held by the Saudis had generated offers only as high as between $9.50 and $11.50 per barrel, significantly lower than the Shah’s $17.40 from December. Kuwait had canceled its auction because it reported bids between only $8.50 and $10 per barrel. Oil liftings at Iran’s Kharg Island were averaging less than 300,000 barrels a day. The market had started to settle down, an indication that if it were left undisturbed prices would start to drop. But instead they were being held up artificially by the Shah, who had already committed future oil income to pay for $5 billion in future U.S. weapons systems.

Jamieson and his colleagues urged the administration to enter into bilateral trade pacts with Saudi Arabia and Iran instead of barter deals. It was in the American national interest to increase the oil producers’ economic dependency on the United States. Bilateral deals, explained Clements, “will sop up this available resource that they have over there, either in money or manpower or time to handle the arrangements and the deals. They can only take on so many of these things . . . if we started in some serious move, like through technology, industry, this sort of thing, just sop up whatever was available over there in that regard, it would help.” Separate bilateral deals between the United States and Iran and Saudi Arabia would give Washington a bigger say in how both countries ran their economies and how much they charged for their oil. The United States could also soak up billions of dollars in petrodollars to stabilize its own financial situation and improve its trade balance with the Gulf states.

“I think the more inter-dependent the two countries become, the better chance you have of getting to be more reasonable on price,” agreed Mobil’s Tavoulareas.

Deputy Secretary of State Kenneth Rush made the perceptive observation that the barter deals and bilateral trade pacts worked out between the industrialized West and oil producers in the Persian Gulf “will involve a lot of [Americans] going in there.” He assumed, wrongly as it turned out, that a flood of expatriates into the region “would draw us closer to them.” No thought was given to the possibility that the influx might instead arouse anti-American sentiment.

I WANT THEM FINISHED IN MY LIFETIME

Nixon and Kissinger had encouraged the Shah’s dream to transform Iran into a regional military powerhouse. A classified U.S. analysis noted:

The desire of Iran’s leadership to revive the splendors of the ancient Persian Empire and to become politically and economically co-equal with England and France before the end of this century is well known. Geographically, the USSR in the north, and a growing, competitive Arab presence to the west precludes the expansion of an Iranian sphere of influence. However, Iran can increasingly be expected to try to attain a more important position to the east in Afghanistan and Pakistan, in the Indian Ocean, and in international forums.

With a vast supply of petrodollars and U.S. weapons pouring in, there seemed to be nothing to stop the empire of Iran and its Shahanshah from dominating not only the Persian Gulf and the land bridges into Central Asia but even extending Iranian influence down along Africa’s east coast, and driving deep into the Indian Ocean.

“Iran is not a volcano now,” the Shah assured a visitor to the palace who asked about the country’s political stability. “The Iranian air force ought to be strong enough to protect the whole area from the Persian Gulf to the Sea of Japan. India is going to collapse. India and Pakistan will become natural markets for Iranian industrial projects, but I shall have to protect Pakistan against Indian aggression.”

The imperial family retreated to Kish over the Persian New Year in March. On April 8, the Shah broke from his vacation to fly to Bandar Abbas with Asadollah Alam and Ambassador Helms. From there they boarded the U.S. aircraft carrier Kitty Hawk, which had joined the naval task force stationed off the coast of Oman. The task force mounted naval exercises for the Shah’s benefit.

The Shah of Iran basked in his new stature as one of the world’s most important statesmen. “In the 33rd year of an often uncertain reign, Mohammad Reza Pahlavi has brought Iran to a threshold of grandeur that is at least analogous to what Cyrus the Great achieved for ancient Persia,” declared Time, which in 1974 dubbed Iran’s leader the “Emperor of Oil.” “But I have so many aspirations,” the Shah confided to Alam. “To be first in the Middle East is not enough. We must raise ourselves to the level of a great world power. Such a goal is by no means unattainable.”

On Tuesday, April 9, just six days after hearing the Shah utter those words, Alam drove from his residence on Kish to the summer palace. Expecting the Shah to be in good spirits, he was troubled to be met outside the royal quarters by General Karim Ayadi, the Shah’s personal physician, who asked him to send for Professor Jean Bernard, a leading French hematologist. The request, Ayadi insisted, was urgent. Dr. Jean Bernard, who practiced at a leading cancer institute in Paris, was treating Alam for a type of incurable blood cancer whose true dimensions had been concealed from the patient. It was not unusual in Persian medical culture for doctors to protect their patients from the trauma of learning news of incurable or terminal illnesses. Avoidance was intended as a mark of respect and a gesture of humanity. Alam knew he was ill but did not know that he was slowly dying. Alam was shaken by the news that something might be wrong with the Shah, although the monarch displayed no trace of emotion or distress. As they drove to the airport the Shah asked Alam about the progress of hotel construction on the island. “They must hurry up,” he said, “I want them finished in my lifetime.”

In fact, the Shah—like Alam—had cancer. The Shah’s curious behavior on the island of Kish—his unruffled demeanor and calm fatalism during a medical emergency—suggests two possible scenarios. One is that he was genuinely unconcerned about his health and had no foreboding of a fatal illness. The second scenario, and the version later accepted by the queen, was that the Shah already knew about his cancer and that he had already had several weeks to absorb the initial shock of diagnosis by his physician. “I was told that Professor [Karl] Fellinger had informed the Shah in 1974 about his health problem,” she remembered. “I think that the Shah knew when the first French doctors first visited Tehran to treat him.”

The queen’s account is confirmed by Dr. Fellinger. As was their custom, in early 1974 the Shah, Shahbanou, and their children traveled to Switzerland for a ski holiday. It was the Shah’s habit to break away from his vacation to fly to neighboring Austria for his annual medical checkup. Dr. Fellinger was a world-renowned internist, the “Doctor of Kings” whose patient roster included the rulers of Saudi Arabia, Afghanistan, and Morocco, in addition to the Shah. It was in Vienna in Dr. Fellinger’s consultation rooms that the Shah was first diagnosed with lymphoma, a form of blood cancer that was treatable but at the time incurable. Dr. Fellinger later recalled how the Shah’s personal physician, General Ayadi, who accompanied the king to Vienna, emphasized to him the need for total secrecy. Some posit that Fellinger and Ayadi conspired to keep the Shah in the dark about his illness. While this possibility cannot be ruled out, the likeliest scenario is that the Shah did know and that he and Ayadi decided to keep it secret for as long as they could. The Shah’s life was thoroughly compartmentalized and it made sense that he would treat his lymphoma as a state secret for fear of what might happen if his domestic opponents, Iran’s ambitious neighbors, and the leaders of the great powers—including the Americans—learned that he was now marking time. The Shah immediately began covering his tracks, ending his association with Dr. Fellinger, and in 1975 switched to an internist in Switzerland. Medical visits to Austria were now out of the question. “Had he gone to a hospital in Vienna, the test results could not have been kept secret,” recalled an aide.

What prompted the Shah to seek medical attention for the swelling in his abdomen, and why did he consult French specialists? It seems likely that by early April 1974 General Ayadi realized he needed help. Perhaps the swelling in the Shah’s abdomen had increased, or perhaps the king felt unwell. At least one foreign newspaper reporter who interviewed the Shah around this time commented on his wan appearance. Ayadi’s panicked decision to summon expert help on April 9 may also have been hastened by the death in Paris five days earlier of President Pompidou after a lengthy and secret battle with Waldenström’s disease, a form of lymphoma. The Shah and Alam had been deeply impressed with Pompidou’s quiet determination to stay in office despite his terminal diagnosis. Pompidou’s condition was kept from the French people but quietly acknowledged in diplomatic circles. Secretary of Defense Schlesinger had alerted the National Security Council on September 5, 1973, when he brusquely announced, “Pompidou is dying.” The Nixon administration began an intensive study of the French president’s illness and how it might affect American-French relations. Visiting London on February 26, 1974, Kissinger confided to Britain’s foreign secretary, Sir Alec Douglas-Home, that the White House “had an analysis made. Our people give him eighteen months to three years. He is deteriorating and increasingly susceptible to infection. He is taking massive doses of Cortisone which bring out the personality traits of stubbornness.” Pompidou was dead in six weeks.

The Shah intended to follow Pompidou’s honorable departure from the world scene. The French specialists summoned by Asadollah Alam flew out of Orly Airport in great secrecy and arrived in Tehran on May 1. Dr. Bernard and his young protégé, Dr. Georges Flandrin, were initially told that it was Alam who needed their services. The French doctors were instructed to bring their own medical equipment because once in Tehran they were to have no contact with local medical specialists. At Mehrabad Airport “two cars with flashing lights were waiting for us at the foot of the gangway, and we shook hands with some gentlemen we had never met but whose faces we would regularly see at our arrivals in Tehran,” recalled Flandrin. The cars took them to Alam’s house. It was there they learned “that we would be taking care of his ‘boss’s’ health—that is the word he used with his best smile.” Alam’s own health problems turned out to be the perfect alibi. If anyone spotted the doctors entering or leaving the palace, their questions could be directed to the court minister. Flandrin and Bernard were driven to Niavaran and ushered into the king’s study. Flandrin took note of Mohammad Reza Shah’s soft voice, his fluency in French, and his athletic physique. The Shah lifted his shirt to show them how he self-diagnosed his swollen spleen. The French doctors went about their work knowing nothing about the Shah’s consultation earlier in the year with Dr. Fellinger in Vienna. They believed they were making a diagnosis for the first time.

The doctors made an immediate diagnosis, the same as Fellinger’s from earlier in the year, and left the Shah alone while they talked to General Ayadi and informed him of the Shah’s lymphoma. Then it was their turn to be shocked. Ayadi told them that “as far as he was concerned, His Majesty had to be told that everything was fine!” The word “cancer” must not be mentioned in his presence. An intense conversation ensued. The doctors reminded Ayadi that although the Shah’s overall health appeared good, the blood disease “would ultimately become malignant”—they had to tell him something. Bound by their instructions from Ayadi, Flandrin and Bernard “felt they could not act otherwise.”

When they returned to Paris the doctors asked Ayadi to monitor their patient. “As is the rule in similar medical situations, we had decided to begin with supervision but no treatment,” recalled Flandrin. They settled on a diagnosis that they hoped would satisfy General Ayadi’s desire not to unduly alarm the king yet not compromise their own medical ethics: the Shah was told he had Waldenström’s disease—the exact same disease that had just killed Pompidou. Any remaining doubts that the Shah might have had about the state of his health were surely settled when he learned this. It hardly seems plausible that the Shah did not understand the message. According to Dr. Flandrin, at this stage only five people knew about the Shah’s health crisis: the Shah, Bernard and Flandrin, Ayadi and Alam. But if Alam ever learned of the Shah’s diagnosis for lymphoma he never let on in his diaries.

One consequence of the Shah’s diagnosis was that those who worked alongside him began noticing subtle changes in his leadership style. “We have to prepare the grounds for the crown prince,” he said one day to a surprised confidant. Officials remembered the Shah hurrying their projects along. “The Shah is pushing,” they complained. “We have the equipment but we don’t have the people.” The Shah also became less concerned with how his actions would be received in Washington. When Kissinger let it be known he would not be coming to Tehran in April 1974, the Shah was dismissive. “To hell with Kissinger,” he told Alam. “Pay him no attention and tell Ardeshir Zahedi that he’s to avoid offering any sort of invitation or giving any hint that we’re expecting a visit.”

In the spring of 1974 Iran’s supreme leader and his closest aide had both contracted incurable cancers. Shakespeare could not have imagined a more exquisite tragedy of state: unbeknownst to each other, the empire’s two most experienced helmsmen were mortally ill. It brought to mind another empire whose fate rested to a large extent on a secret illness—Russia’s ill-fated Romanov dynasty and the deadly hemophilia suffered by Czarevitch Alexei, son and heir of Czar Nicholas II.

THE FIRST EMPIRE FALLS

In April 1974 an event occurred thousands of miles away from Iran in Europe, one that at the time appeared to have no connection whatsoever with the fate of the Shah and the House of Pahlavi. An army rebellion deposed the government of Premier Marcello Caetano in Portugal and declared an end to forty years of right-wing authoritarian rule. The centuries-old Portuguese empire had finally come crashing down. A close look reveals that oil prices had claimed their first head of state. The financial foundations of Portugal’s tottering dictatorship had suddenly been blown apart by raging inflation and a simultaneous collapse in the country’s overseas oil revenues.

Oil had been discovered in Portugal’s colonial enclave of Cabinda in Angola in 1968. Cabinda oil was low in sulfur and thus especially attractive to the United States and Canada, which paid premium prices to satisfy strict new clean air regulations. Portugal resorted to buying cheaper and dirtier oil from the Middle East for domestic use. That arrangement abruptly fell apart when Lisbon agreed to Nixon’s request during the October crisis to fly military supplies destined for Israel through the Portuguese Azores. Arab governments retaliated by stopping all fuel shipments to Portugal, in turn forcing Lisbon to curtail its own petroleum exports to North America. As a consequence the government relinquished hundreds of millions of dollars in sorely needed oil revenues. Even the doubling of oil prices didn’t help stanch the financial hemorrhaging—Portugal’s $400 million in income from petroleum was more than wiped out by the $650 million annual cost of defending its rebellious colonies in Africa. Inflation ignited by high energy costs elsewhere in Europe sapped the economy and demoralized Portuguese society.

“Discontent over unchecked inflation, about 20 percent last year, and one of the highest in Europe, has been general,” observed The New York Times. “Few seemed to make any connection between the spectacular rise in living costs and the war [in the rebellious Portuguese colony of Mozambique], but inflation contributed to general dissatisfaction and the feeling that the Government should have been worrying more about conditions at home and less about the African colonies.”

The ripple effect continued. Portugal’s new ruling military junta took a hard turn to the political left, suddenly raising the specter of a radical socialist state in Western Europe. The Portuguese Azores, the islands viewed as crucial springboards for American aerial power in North Africa and the Mediterranean, had been lost to the Pentagon. With hopes of establishing a U.S. naval presence in Portuguese Mozambique also dashed, the Shah once again proved his value to Washington with his intention to build a $200 million military base at Bandar Abbas and a giant $600 million naval base at Chabahar, located at the mouth of the Persian Gulf. American and Iranian naval officials held talks to consider ways in which the United States could secure an “option” to operate out of Chabahar in the event of another regional emergency such as a coup in Saudi Arabia or a second oil embargo.

The Shah had no way of knowing that his own fate was tethered to the outcome of the chaotic scenes that would play out on the Iberian Peninsula over the next two and a half years.