Saudi Arabia is a huge expanse of sand, where villages and towns dot the map like tiny, isolated islands in the sea. It is a largely unpopulated, treeless land where there are said to be 150 species of butterflies. It is the birthplace of Islam. It is the traditional home of Islam. And the laws of Saudi Arabia are the laws of Islam.
No one is quite sure just how many people live in Saudi Arabia. A census is accomplished with aerial photos. The census taker multiplies the number of roofs he sees by the average number of people he reckons live beneath each roof. When it comes to nomads, some get counted once. Some get counted two or three times. Some never get counted at all. There have been times when the government has claimed as many as 8.4 million people in the country. Other estimates have put the population as low as 5 million.
The point is that Saudi Arabia’s real strength in the Gulf and its place in the world are dictated not by population but rather by the land it occupies and the fact that under much of it lies an unfathomable reserve of crude oil.
Ibn Saud often said that the man who controls the oil beneath the sands of Saudi Arabia has the power to control war and peace in the region. It was his son Faisal who was first fully to understand that.
As a child, Faisal was not offered any formal education. He was taught to ride a horse like a Bedouin, to recite the Koran by heart, to shoot a rifle and to wield a sword. But his father sent him abroad on official visits while still a teenager and he mingled with the statesmen of the day. At the age of 24 he was named Foreign Minister, a post he continued to hold through Ibn Saud’s reign.
An austere man, with a somber, almost mourning-like expression and questionable health - in addition to a blood disease that required regular transfusions, he also suffered from stomach ulcers which kept him from a regular night’s sleep - Faisal was a devout Moslem. Unlike has father and brothers, he was basically monogamous, living most of his life with his third wife.
Yamani describes Faisal as a gentle man, who never shouted, who never said anything nasty. “If he didn’t like someone or something he’d simply turn his face away and you could tell that he’d reached his limit.”
Despite Faisal’s always-stern public demeanor, Yamani claims the king actually had a sense of humor. “In his private rooms, sometimes he’d have lunch or dinner with intimate friends and then you would see his humor. He could be very funny. But in public he was always very regal.”
Although Faisal didn’t speak English, Yamani says he understood it well enough so that anytime an interpreter mistranslated something, Faisal would correct him. “He read all the time and he was curious about everything. You could discuss anything with him. He travelled in the West but I don’t think he ever felt at home in the West. In many ways I found him to be extremely brilliant. When it came to dealing with other people, I used to think he had the ability to read minds. He was that perceptive. Of course as a human being he had his faults. But as I said, he had that special quality of being regal. He was very unique.”
A great traditionalist, Faisal was at the same time modem enough to establish television in the kingdom, despite condemnation by the religious leaders. He created schools for girls, also against religious advice, and believed so strongly in the formal education he never had that he sent his own sons to the West for degrees from Princeton, Harvard, Oxford and Cambridge.
It was Faisal who “invented” Yamani.
At the end of 1957 he summoned the young lawyer to his home in the mountain village of Taif. As Yamani recalls, “It came totally out of the blue. At the time I didn’t even realize he knew who I was.”
Yamani was escorted into the Crown Prince’s small office. Faisal shook hands with him. Then there was a long pause. Faisal looked at Yamani and waited. Not knowing what else to do, Yamani sat down.
Faisal just kept staring. So now Yamani stood up.
“I want you to work for me as a legal adviser,” Faisal said. “Have you got any conditions?”
Yamani thought fast. “I don’t think that anyone who could have the opportunity of working for you would have any conditions.”
Faisal liked that.
And Yamani was hired on the spot.
By the mid-1950s, Faisal had come to understand that Saudi Arabia’s fledgling oil economy required a different sort of bureaucrat to help solve the myriad of newly created problems in banking, currency and budgeting. As part of his plan to clean up the nation’s rampant administrative disorder, the Crown Prince merged the Ministries of Finance and Economy, created the Office of Petroleum and Minerals and appointed a brash young western- educated technocrat named Abdullah Tariki to be Director General.
Over the next five years Saudi oil revenues climbed towards the $300 million mark. And Aramco became the single most powerful entity in the Kingdom.
Notes a former Aramco executive, “What we did for Saudi Arabia is a story that’s never been told. We brought them into the world. We buried them. Oil was almost just a sideline. I’ve never seen anything so paternal. We helped eradicate malaria. We set up hospitals. We set up camel troughs for the Bedouins. We started a farm to take care of the table for the royal family. Something like 40 percent of our work force were Shia from the Eastern Province and they loved Aramco because the government wasn’t doing a-damn thing for them. The government used to refer to them as ‘the dogs.’ It was Aramco who went out to the oasis and cleaned it up and gave them home loans. People used to say, we wish that Aramco would run the government. When King Fahd was Minister of Interior he got very upset with us. He said, ‘Aramco is getting too much credit.’ Those were his words. Can you believe that? He was upset because too many people knew what Aramco was doing.”
Fahd and a lot of other Saudis were upset because the more Aramco accomplished, the more arrogant they grew about their accomplishments. It was also widely known throughout the Middle East that many of Aramco’s senior executives had direct links to the CIA. In fact, until the international construction company Bechtel came along, Aramco was America’s main listening post in that part of the Gulf.
It’s no coincidence then that, as Aramco grew in stature, Tariki became more and more militant, modeling much of his thinking on Perez Alfonzo’s experiences with the oil companies in Venezuela.
He explained, “The discovery of oil in the middle of the desert gave us a great opportunity to build a better life. When the Americans came to Saudi Arabia, King Abdul Aziz treated them as friends. The idea that a company would always be out for what they could get and that they would look at the government as something to be exploited whenever possible, this never occurred to him. It didn’t occur to King Saud either. So the oil companies went right on exploiting him. It only stopped when they realized that a small character like me could make the king agree to what I wanted.”
First, Tariki wanted Aramco to become an integrated company, one that would handle petroleum from the well all the way to the petrol station. Then he wanted more Saudi control over Aramco and participation in the company’s profits.
“The oil industry in my country was not controlled by my country,” Tariki continued, “It was controlled by foreigners. They didn’t take Saudi Arabian oil to the markets as a Saudi Arabian company. I wanted Aramco to be run from Saudi Arabia.”
As support for Tariki’s ideas gained ground in the royal court, Aramco made minor efforts to appease him. They opened a headquarters in Saudi Arabia. But the seat of the company’s power remained in the United States because that’s where the four owners were.
By the late 1950s, Tariki vocally shared Perez Alfonzo’s spirit of nationalism. Drawn together as patriots, they both believed that their countries’ natural resources belonged to the people and not, by divine right, to the foreign companies that originally found the oil.
However, the concept of nationalization, while very much on Tariki’s mind, was not yet a viable one. He knew it. And so did the Americans. The softer term he chose to use was “integration.”
He said, “We could’ have nationalized the oil companies then even if we had tried. We had to cooperate with the West
because that’s where our markets were. But it was time to begin making changes.”
That’s when Perez Alfonzo sold Tariki on the idea of creating an organization of petroleum exporting countries.
Says George Ballou, a retired SoCal executive, “Perez Alfonzo put the bug in Tariki’s ear. The Venezuelans were very anxious to organize the Middle East so that the Arabs would not become serious competition for them. Perez Alfonzo had an advanced degree in sophistication where oil matters were concerned. He helped to bring the Saudis up to speed.”
At Tariki’s insistence, the Arab League Economic Council convened its first “Arab Oil Congress” in Cairo. Two non-Arab delegations were invited to attend. One was Iran. The other was Venezuela.
The whole thing probably would have wound up a non-event had Shell and British Petroleum not played their cards so clumsily. Without consulting the producing nations, they sparked off a round of severe price cuts, blaming the situation on market forces. It was too much for the fiery likes of Perez Alfonzo and Tariki. And a bond of open defiance was soldered between the two.
The congress called for 50/50 participation agreements with the oil companies. Of course the Arabs lacked both the technical know-how and the financial resources to press the issue. But unofficially, and surrounded in secrecy, Perez Alfonzo and Tariki steered the meeting into what was known as “The Gentlemen’s Agreement.” Saudi Arabia, Venezuela, Iraq, Kuwait and the UAR established the Oil Consultative Commission, intending to meet at least once a year and discuss problems of mutual interest.
High on their list of priorities was the very structure of the industry. It’s a business with huge fixed costs and negligible variable costs. Put another way, the greatest expense is getting the first barrel out of the ground. The production of an additional barrel costs next to nothing. Perez Alfonzo and Tariki both knew it was therefore in the interests of the oil companies to grant discounts on the posted price so they could sell this additional barrel instead of leaving it underground. But such discounts were entirely at the expense of the producing countries.
The two men spent much of late 1959 and early 1960 crying foul. Unable to change the system from within, they rallied the call for a cartel which could somehow force a showdown with the oil companies.
Until Tariki arrived on the scene, the major ministries in Saudi Arabia were Finance, Defense and Commerce. Yet by 1960, he’d transformed the oil directorate into a full-fledged ministry and became such a power that he could make the nationalization of Aramco a cause celebre and help turn the Organization of Petroleum Exporting Countries into a reality.
As founding fathers, Tariki and Perez Alfonzo were determined to see OPEC unify the oil policies of member countries and lay down the best means of safeguarding its members’ individual and collective interests. Although no one in 1960 imagined OPEC would one day become a force which could raise prices by creating artificial shortages. In 1960 OPEC was thought of by the member states merely as a defensive instrument.
“The oil companies took us seriously,” Tariki insists. “They had to. Believe me, everybody was afraid of OPEC.”
Good try. But not quite.
It’s true that the major oil companies resented OPEC. And, yes, a handful of the more farsighted oil executives in the West prophesied that such a grouping could, in fact, one day become more than the toothless tiger it was then. But that’s where OPEC-phobia ended.
The truth is, not a lot of people cared.
Even if Tariki and Perez Alfonzo considered it a major step, OPEC’s birth announcement was missed by just about everyone else in the world in 1960. Especially in the United States and Western Europe, where front pages were filled with the American presidential race between John Kennedy and Richard Nixon as it entered the home stretch. OPEC’s arrival looked like yet another unimportant collective of basically powerless interest groups.
Shortly after the formation of OPEC, Faisal resigned and Saud returned to full power. Among Saud’s supporters were the politically motivated “Free Princes” led by a younger brother, Prince Talal. Tariki found himself attracted to their spirit of nationalism, but Saud put up with them only until he felt strong enough to govern without them. When he dumped them, Tariki was the only so-called “liberal” who remained on the Council of Ministers.
According to Yamani, Tariki was invited to stay simply because Saud couldn’t find anyone else for the job. “I’d been a Minister of State in the Council while Faisal was Crown Prince and Prime Minister. When he left, I did too. I returned to my law practice and taught an introductory course of law at the University of Riyadh. The conflict between Saud and Faisal which had been created by the Free Princes continued for some time. It came to a held when Prince Talal and the others quit and went to live in Egypt. No one knew it then, but King Saud had wanted to get rid of Tariki and offered the job to me. I apologized and did not accept.”
Six months later, after that next cabinet resigned, a new coalition was formed. Saud was King and Prime Minister. Faisal was Crown Prince and Deputy Prime Minister. And this time, Tariki was shown the door.
He’d placed all his eggs in the wrong basket. He’d alienated too many people. So he quickly removed himself from Saudi Arabia.
An interesting thing about the Saudi royal family is that, even after Tariki left the country to live in exile, he still continued to receive his monthly pension as a former government minister.
An interesting thing about Faisal was his unswerving conviction that the best person to follow Tariki’s rabble-rousing act had to be the soft-spoken young lawyer from Mecca named Ahmed Zaki Yamani.
What started as a working relationship between Faisal and Yamani, evolved step by step over the years, ending in a deep and warm friendship. In fact, it was the single most important male friendship in Yamani’s life.
It was also a friendship that changed the course of history, at least in the Middle East.
“The confidence we shared was built slowly,” Yamani says. “He was the boss. I worked for him. But he came to treat me like a son. And to a great extent I thought of him as a father. I loved and respected him very much.”
Even Abdullah Tariki was willing to admit, “Faisal was very impressed with Yamani and grew to trust him more than, maybe, anybody else in the Kingdom. Yamani was very bright. There is no doubt about that. Perhaps later on Yamani became arrogant. But he wasn’t arrogant as a young man. At least he wasn’t arrogant towards me. But then I was much bigger than him.”
Some Americans who knew Yamani in the late 1950s claim he had a nickname. Although Yamani himself doesn’t remember this, they swear that he was referred to as “Camille.” Perhaps no one called him that to his face. It appears to be a reference, albeit fairly obscure, to a French actor. And according to those Americans, the reason they used the term was because in many ways they thought of him as an actor. In many ways, they claim, he was always acting.
Such a remark comes as a genuine surprise to Yamani. “This is the first time I’ve heard this. Camille?” He shrugs and shakes his head. “Maybe it was said behind my back. But I’m surprised because by nature I’m very quiet.”
That quiet nature was just one of many major changes in style that took place in March 1962 when Faisal appointed Yamani to take over at the Ministry of Petroleum.
“Yamani had just become minister,” says George Ballou.. “I met him in San Francisco when he attended his first board meeting of Aramco. No one knew who he was. Come to think of it, no one knew much about Saudi Arabia in those days, either. Their role in the world oil scene wasn’t anything like what it eventually became. So Zaki arrived in San Francisco and none of us really knew what to expect. But he wasn’t anything like Abdullah Tariki. He was very quiet and very personable. The first or second night he was there someone in Aramco wondered if anybody had arranged dinner plans for Zaki. We discovered that no one had. Well, we were having a family birthday party at home but I figured I couldn’t just leave Zaki on his own like that because it would have been rude. So I invited him to the party. He enjoyed himself so much he came back to the party several years in a row.”
In 1962 Ballou points out, Yamani wasn’t being lionized. He was also less sophisticated in those days, But in other ways he hasn’t changed all that much. “He’s still basically a very nice man. He had lived in New York City and in Boston so he’s been tuned into the West for a long time. He was, even then, the epitome of charm.”
It seems as if everybody who’s ever met him has a favorite Yamani story.
One friend who’s known him for years recounts, “Yamani was in the States and heard that an old friend was in a California hospital, so he took a day to fly out to see him. Now, this guy happened to be wealthy enough that he didn’t have to worry about money. But, rich or not, like most people who find themselves in an expensive private clinic, complaining about the prices is a common pastime. Yamani listened while the fellow told him how ridiculously expensive it was to be a patient there. That same day, without saying anything to anybody, Yamani paid the man’s bill.”
While John Bruton, as Energy Minister for the Republic of Ireland, met Yamani only once. “I went to Saudi Arabia to cancel some long-term contracts. I arrived in Jeddah to find Yamani’s private Gulfstream jet waiting to bring me to Riyadh. Then in Riyadh, I found Yamani waiting at the airport to greet me. Being the Minister of Energy of a small country I was in awe of this world figure. But he was informal, casual and urbane. There was some sort of OPEC meeting going on with ministers shuffling in and out of Riyadh. His business with them was important while he was only seeing me out of courtesy. Still, he met me at the plane, talked at length with me and then saw me off at the airport. He spent three hours with me. That’s what really struck me. The trouble he went to for me.”
Mike Ameen, a former Aramco executive, is one of the many people who agrees that Yamani’s open, relaxed personality was a significant change when he became minister. “Tariki was way ahead of his time because he wanted to go all the way downstream. But the Saudis weren’t ready to get into that. The real problem was that Tariki was also very political and had a terrible temper. Instead of just talking, Zaki was quiet and got things done. He was diplomatic and soft-spoken. He thought about other people. He’s always been the sort of person who knew how to go about getting something done without upsetting everyone in his way.”
Comments about “legendary charm” are met with an embarrassed smile. However, Yamani isn’t quite so shy when it comes to discussing his views on the change of ministerial styles from the Tariki years.
“We might have had the same objectives, but Abdullah Tariki and I were two different people. The first thing I needed to change was the way he treated Aramco. He either used to look down on them or ignore them completely.”
To put a barrier between himself and Aramco, Tariki had dictated that the company’s executives could not address the minister directly because they were not on the same level. When they had business with him they had to write to the Director General in Dammam who would send all the mail to Riyadh, where an answer would be prepared. That answer would be then returned to the Director General who’d sign the correspondence before sending it to Aramco.
That was the first thing Yamani changed. Mail was now to come directly to him.
Another Tariki rule was that when the chairman of Aramco wanted to meet the minister, he’d first have to request an appointment, then wait several days before a meeting would be arranged. More often than not, when the chairman showed up, Tariki would keep him waiting.
That was the next thing Yamani changed. “When the Aramco chairman wanted to see me, he was granted an appointment immediately and never kept waiting. I remember that when I said this is how we were going to operate, the secretaries were amazed. They told me, this is not the way these people should be treated. But I told them this was the way I would treat them.”
As he grew more confident in his job, Yamani also began to find his own identity in the fledgling OPEC cartel.
“OPEC was an organization that no one had ever heard of in 1962. When it was created, the oil companies fought the whole idea of it violently. They refused to recognize the word OPEC. They refused to talk to OPEC. They even refused to send correspondence to anything called OPEC.”
It was obvious that, if OPEC was going to survive much longer, it had to be taken seriously by the world’s major oil companies. So Yamani decided, if the mountain won’t come to Muhammad, OPEC had somehow to impose its presence on the oil companies.
He wasn’t quite sure how to go about it until a situation arose at the end of 1962 that seemed tailor-made.
A group of oil producers were due to negotiate certain royalties with a group of oil companies. Yamani, representing Saudi Arabia, was basically concerned only with Aramco. He knew that if he told the four Aramco partners that they were going to face ministers representing OPEC, they’d instantly say, we have nothing to do with OPEC. So he got the other producers to agree to let Saudi Arabia negotiate with all of the oil companies on their behalf.
“I called the companies in to talk to Saudi Arabia. Because it was Saudi Arabia they were meeting with they had to come. Then I got some OPEC members to sit next to me as Saudis. I told the oil companies who they’d be dealing with, but always under the banner of Saudi Arabia. Frankly, there was nothing much they could do about it. They were talking to Saudi Arabia but they were finally seeing OPEC.”
Yamani had opened the door.
Registered in accordance with a United Nations charter, the Organization of Petroleum Exporting Countries was originally based in Geneva. But the Swiss would not grant them ambassadorial status. So Yamani proposed OPEC move to Vienna. He now admits there were two good reasons for the suggestion. Not only would the Austrians give OPEC the diplomatic recognition Yamani felt the organization should have, but this way he’d be just down the block from the best opera in the world.
*****
On June 4, 1967, with tension mounting between Israel and Egypt, the Syrians, the Iraqis and the Egyptians demanded that, should war break out, all Arab oil fields be shut down.
The very next day Israel attacked Egypt.
That Syria, Iraq and Egypt should have made such a proposal only one day before the Six Day War was hardly the coincidence it then appeared to be.
Yamani notes, “The Israeli attack on Egypt was expected. But no one knew when or where. President Nasser had been warned ahead of time by the Americans. He was the one who told us that Israel would start a war.”
Nor was their call to use oil as a political weapon an original idea.
Oil was already center stage in Iran when the Mossadeq regime was overthrown in 1953, the Shah was returned to the Peacock Throne and the Iranian oil operations were turned over to an international consortium. In 1956, when Abdel Nasser nationalized the Suez Canal, oil was again a political theme. The Egyptians blocked the Canal, the Syrians blew up the Iraqi pipeline to the Mediterranean and the US had to “oil lift” energy to Europe.
However, in the eleven years between Suez and the June War, European dependence on Arab oil had nearly tripled. Syria, Iraq and Egypt now believed that the West needed Arab oil more than the Arabs needed to sell their oil to the West. So, at a meeting of Arab oil producers in Baghdad, they called for a boycott.
Yamani was less than enthusiastic. “A complete shutdown is impossible,” he tried to make his Arab colleagues understand, “and a partial shutdown is useless.”
The Syrians were furious that Yamani should say such things. And one of their senior delegates shouted at him, “You will be eliminated.”
It was the first of many serious death threats that Yamani would receive over the years.
Yamani knew the Syrians would do whatever they felt they had to in order to save face. He also knew that he would lose face unless he stood up to them. So he deliberately eyed the man who’d made the threat and answered as calmly as he could, “I will make it easy for you. I will tell you exactly when the best time to do it is. I will be coming back to my hotel from a club just after midnight. I will be alone. That is the best time for you.”
The others at the table were shocked.
The Syrians stormed out of the meeting.
Yamani’s friends in the group begged him to leave right away for Saudi Arabia.
But Yamani felt he had to prove his point. He went to the club as scheduled, and left just after midnight as promised. True to his word he walked back to his hotel alone.
Obviously the Syrians didn’t make good on their threat.
However, Yamani doesn’t believe for a minute that his own bravado saved him. Instead, he thinks, it was the prevailing climate of humiliation in the Arab world. “Their superiors figured it just wasn’t the time to do such a thing.”
Now Yamani tried to caution his colleagues, “If we do not use the oil weapon properly we are behaving like someone who fires a bullet into the air, missing the enemy and allowing it to rebound on himself.”
That’s exactly what happened. Having badly misread the world situation, the Arab militants shot themselves in the foot.
To begin with, the Saudis weren’t all that interested in the embargo. Diplomatic relations between Saudi Arabia and Egypt were at an all-time low because of the war in Yemen. At the same time they couldn’t really afford to turn off their oil because they needed the associated gas that comes with oil production. If they stopped pumping, they’d have no natural gas to run their electricity generators. Neighboring Kuwait would suffer a similar fate, and they’d also be without water because without electricity, the desalination plants would have to shut down.
Anyway, the United States, as prime target of the boycott, was then immune to such things. In those days America’s oil requirements could be totally filled by western hemisphere oil. At the same time, Venezuela saw no reason whatsoever to join the Arabs. Nor did Iran. The two of them promptly made a fortune filling the rest of the world’s needs. Before long, even Libya turned its back on its Arab brothers by increasing exports to West Germany.
No quota ceilings had been imposed on the Arab producers. They did not speak coherently with one voice. They did not create any sort of oil shortage.
The oil weapon was an abject failure.
However, the Arabs learned some vital lessons from their mistake. One of them was that the Arab producers themselves could never count on non-Arab producers to stand by them. And that gave credence to the existence of the Organization of Arab Petroleum Exporting Countries.
It was Yamani’s idea.
“I felt that such an organization could serve two purposes. One was a political objective. Until this point, Arab oil had always been considered within the framework of the Arab League. That didn’t seem right to me because so many countries who did not have any oil were influential in decisions passed by the Arab League. When they met in Baghdad in June 1967 and then again in August 1967 to discuss the possibility of using oil as a weapon, the few oil producers there were subjected to serious pressure from Egypt and Syria. This is where we first discussed the embargo and this is when the idea of an Arab oil organization came to my mind. I mentioned it to the Kuwaiti oil minister and told him that we had to think seriously about establishing an organization where Arab oil producers could talk about oil alone, without anyone else interfering.”
The Kuwaiti liked the idea so Yamani went to discuss it with Faisal.
“I didn’t take the idea to the Iraqi government at that time because they were very radical. I didn’t even want them to know about this yet. First King Faisal had to approve the idea. Then I wrote the by-laws. I gave a draft to the Kuwaitis who accepted it. And I gave a draft to the Libyans who also accepted it. It wasn’t until 1968 that we sent the draft to the Iraqis, who then rejected most of the items in the by-laws and categorically refused to join with us.”
But, before long, they realized that Yamani had structured the organization in such a way that they could not possibly accept.
Admits Yamani, “We didn’t want them to join in the beginning. Our idea was to establish OPEC as a commercial entity and not the political one that the Iraqis envisioned.”
Algeria, Abu Dhabi, Bahrain, Dubai and Qatar were admitted in 1970. Iraq joined a year later. By the time the Yom Kippur War broke out in October 1973, OPEC had its act together.
That’s when Yamani convinced the others, oil as a political weapon is finally a viable option.
*****