The year kicked off well, with the signing of the Vietnam Cease Fire Agreement and the first American POWs coming home from North Vietnam.
But on May 7, 1973, in a bold-faced lie to the American people, Richard Nixon categorically denied all knowledge of the “second-rate” burglary at the Watergate.
Three months later - to the day - a Federal investigation was opened on allegations, with possible criminal overtones, that Vice-President Spiro Agnew had taken a $10,000 bribe.
On September 2, presidential adviser Henry Kissinger completed the successful mini-coup which sent Secretary of State William Rogers into retirement and moved Kissinger from the White House to the big office at State.
On October 6, Egyptian troops stormed across the Suez Canal and Syrian troops invaded the Golan Heights.
Four days later Agnew resigned in disgrace.
Six days after that, as Israeli tanks crossed the Suez and the British called for a ban on all arms sales to the Middle East, the Nixon administration announced a $2.2 billion arms sale to the Israelis.
Within 24 hours, Arab producers cut oil supplies to the rest of the world, claiming the embargo would last until Israel withdrew from the occupied territories.
On 22 October, a United Nations proposal for a ceasefire was agreed by Israel, Egypt and Jordan, although it was marred by frequent violations on all sides.
On December 6, Gerald Ford was appointed Vice-President of the United States and would, within a matte of months, become America’s only never-on-an-election-ballot president.
One week later, in a bid to help conserve fuel, British Prime Minister Edward Heath called for the three-day work week.
And ten days after that, on December 23, Iran announced that the price of Persian Gulf oil was being doubled.
1973 was one helluva year.
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As far as Zaki Yamani is concerned, oil and politics have always gone hand in hand. It was that way for the Arabs under colonial rule. It was that way once they achieved their political independence. But until October 1973 none of the Arab states had ever really managed to convince anyone else of that.
Now the world was different.
In the six years since the June War there had been both an overwhelming change in the structure of the oil industry and a growing dependence of the world’s economies on Middle Eastern oil. The Arab-Israeli conflict sharply focused the world’s attention on the Middle East. The Arabs found themselves uncharacteristically united in cause. And on October 17, 1973, when the Arab oil ministers finally reached for the oil weapon, this time it worked.
Although these days Yamani objects to the use of the word “weapon.”
“Why do you refer to it as the oil weapon? Why don’t you think of it the way we did, as a political instrument? A weapon is used to hurt people. A political instrument is used to make a political point and hopefully effect political change. We did not believe in the use of oil as a weapon because we knew that this was not the best way for true cooperation with the West, notably the United States. But King Faisal saw American policies in the Middle East as being so very one-sided. He said to the West, on several occasions, that he wanted the United States to negotiate on Israel’s behalf to find a solution to the Palestine situation and the Israeli occupation of Arab territories seized in the June War six years previous. Oil as a political instrument was saved as a last resort measure only to make that happen.”
In September 1972, in a speech to the Middle East Institute in Georgetown - next door to Washington DC - Yamani suggested that by 1980 his country could be pumping 20 million barrels per day and that it would be more than enough to satisfy even the thirstiest American requirements. His point was, Saudi Arabia might be willing to assure a steady supply of oil to the States if in return he could obtain from the United States an exemption from oil import levies, a privileged status for Saudi investments and access to oil activities downstream.
It was heralded by the oil press as a unique proposal worth considering.
However, as Ian Seymour of the Middle East Economic Digest explains, “This never to be repeated offer met with a surprisingly lukewarm reception in Washington, where officials made it clear that such a deal would be politically unacceptable in the form proposed and the matter was never followed up.”
Still, that oblique reference to the economic might of a nation which could produce 20 mbd was supposed to serve as an early hint that Saudi Arabia understood how to mix oil and politics.
A couple of months later, when Yamani was interviewed by Newsweek Magazine, he reinforced the idea that it was due time the United States realized his country held a special position in western economic affairs. “Don’t forget that Saudi Arabia has the jewel in its hand.”
His spoken message was, with its enormous oil reserves and production capabilities, Saudi Arabia could, if it wanted to, guarantee stability in the market. Left unsaid was, Saudi Arabia could just as easily destabilize the market if it had due cause.
In that interview, Yamani was asked straightforwardly about the potential threat of the oil weapon. His answer carried a between-the-lines warning. “We do not believe in using oil as a political weapon in a negative manner. We think that the best way for the Arabs to use their oil is as a foundation for real cooperation with the West, mainly the US. We think of using Arab oil positively rather than negatively.”
Alongside that interview, Newsweek published a general feature on Saudi Arabia, noting that the kingdom was “now ready to assume first-class citizenship in the Arab world.”
To which they added, “And the man responsible for that is Sheikh Yamani.”
On the same day the Newsweek interview appeared, the highly informed and well-respected Petroleum Intelligence Weekly published an interview with Yamani’s Deputy Petroleum Minister, Prince Saud ibn Faisal - the king’s son.
A handsome man with a black goatee, a black moustache and his father’s piercing eyes, Prince Saud was born in the kingdom in 1941. Western educated, he earned an economics degree from Princeton. When he returned with his diploma in the mid-1960s, the king called Yamani into his office and said he wanted Saud to work for him.
“But,” the king added, “no favors.”
So Yamani gave Prince Saud a job in the outer office, as one of several assistants in the ministry’s secretariat.
Some months later, at a Petromin board meeting, with the junior assistants sitting at the far end of the room, a sensitive matter came up which Yamani decided was not for the ears of his secretariat. He asked them all to leave. Without any hesitation, the king’s son joined the others and left the room.
“That’s the way Faisal raised his children,” comments one of the men who was there that day. “Prince Saud did not eventually become Deputy Petroleum Minister simply because he was royal. Faisal insisted first that he learn how to do the job. And the old king knew that the best place in the world to learn everything about the oil business was under Yamani’s wing.”
Today Prince Saud is Saudi Arabia’s Foreign Minister and clearly the most influential of Ibn Saud’s grandsons. He is often considered to be the brightest, most competent man in the government. Articulate, western-wise, shrewd and charming, he inherited much of his father’s bearing and manner.
During those years under Yamani’s wing, he also inherited his master’s touch for dealing with the press.
Saud told Petroleum Intelligence Weekly, “You always hear that you can’t separate oil from politics. I simply do not see why not.”
Taken as a whole, and with the benefit of hindsight, their public statements seemed to be casting the die.
And the Saudis were not alone.
On January 6, 1973, the Kuwait National Assembly unanimously passed a recommendation that oil be used as a political weapon against Israel. The parliament called on other Arab countries “to freeze all existing oil agreements with western companies the moment the armed struggle against the Zionist enemy is re-launched.”
Somewhere towards the middle of the month, the White House appeared to take some notice. John Ehrlichman, Nixon’s chief domestic aide - soon to emerge as a major conspirator in the Watergate scandal - scheduled a trip to the Gulf. Evidently someone in the White House was hoping that Ehrlichman could somehow mollify the Saudis and all this oil weapon talk would go away.
James Akins, then on loan to the White House from his job at the State Department as Director of the Office of Fuels and Energy, contacted Aramco’s Mike Ameen, asking him in confidence to hand deliver a message to Yamani. Ehrlichman’s trip was to be kept top secret. The State Department would not be advised of it. As long as Kissinger was directing the nation’s foreign policy from his White House office anyway, his people saw no reason at all to play by the State Department’s rules. At least, not until Kissinger actually got the Secretary’s title to match his already assumed responsibilities. Akins wanted to be certain that Yamani arranged audiences for Ehrlichman with Faisal and the Saudi Minister of Finance. Akins wanted Ameen to tell Yamani it was very important that he take Ehrlichman under his wing and see to it that Ehrlichman was given the message, “We Saudis love you people but your American policy is hurting us.”
At the same time, John O’Connell, a senior vice president with Bechtel - where Treasury Secretary George Shultz had been his boss - approached SoCal to see if Aramco would brief him on the Middle East situation as the oil companies perceived it. Because Bechtel has long had heavyweight financial commitments throughout the area, O’Connell was keen to be sure that his interests there were protected. Aramco chairman Frank Jungers cabled Socal’s Middle East director Jones McQuinn in San Francisco with all the information anyone would want to know.
Oddly enough, Jungers prefaced the information with the sentence, “Briefing material, which follows, should be typed on plain paper with no attribution or Aramco identification.”
In the cable, Jungers made reference to Anwar Sadat’s mid-1972 expulsion of Soviet advisers from Egypt. Labeling it an attempt to bring about a peaceful resolution to the dispute with Israel, Jungers observed, “USA, paralyzed by excesses of presidential campaign, was unable (or unwilling) to take advantage of what was probably most promising opportunity for resolution of this problem since the establishment of state of Israel 24 years earlier.”
He then outlined current events. “Syria is escalating its press attacks on USA. In Baghdad recently, President Bakr addressed a seminar on use of oil as a weapon and said, ‘We can now use Arab oil in all our battles against our imperialist enemies.’ International conference of Arab trade unions in December called for complete economic boycott of USA and urged Arab governments to begin destroying and striking at American interests throughout Arab world. Economic Council of Arab League met in Cairo last month to discuss use of Arab oil as weapon against USA and an Egyptian newspaper called for Arab people to adopt attitude of ‘positive hostility’ toward US interests and US individuals throughout Arab world.”
Acknowledging that similar situations had in the past been largely ineffectual, Jungers felt that pressures for Saudi Arabia to change its pro-US policy were strong and growing even stronger. “Last September, Petroleum Minister Yamani made a bold and imaginative proposal for what would amount to a special economic relationship between Saudi Arabia and USA. It took considerable political courage for Yamani to make such a proposal and although he has been severely criticized for it in other Arab states, he has repeated it and clarified it several times.”
However, Jungers felt the Saudis could resist whatever pressures the Arab world levied against them unless there should be a renewal of the Arab-Israeli war or if an overreaction by the Israelis was followed by some blatantly pro-Israel response by the United States.
“If either of these things should happen, it is possible that Saudi Arabia might be forced to decide to cut off oil exports to USA and Western Europe. With financial reserves amounting to three or four years’ annual income, Saudi Arabia is quite capable of doing so and surviving, if driven to it by us and Israeli actions.”
According to a very reliable source, O’Connell passed that message on to Shultz, who then circulated it to “the proper authorities.” One assumes that means the White House - perhaps to Richard Nixon or, more likely, to Henry Kissinger – or, at the very least, to William Rogers still at the State Department.
No action was taken.
In March, the Emir of Kuwait called a press conference and publicly restated his country’s policy. “When the hour comes, we will use our oil as a weapon against Israel. That is our irrevocable position.”
His warning was published in the United States.
No action was taken.
In April, Faisal dispatched Yamani and Saud to Washington to convey a very specific message. The king wanted the top American officials to know, “We would like to cooperate with you. We are friends. But you must do something for the Arab-Israeli conflict. You must make a move. Do not allow it to stay like this. The status quo is not acceptable to us. You must do something to resolve the conflict, otherwise we will be forced to withdraw our cooperation with you and use oil in this dispute.”
The status quo as both Yamani and Faisal perceived it was the Nixon administration’s continued indifference to the Middle East conflict.
Yamani and Saud met separately with George Shultz, William Rogers and Henry Kissinger. They very carefully explained the situation to each of them. They relayed the king’s message and were well received by Shultz and Rogers.
Kissinger’s reaction, however, struck Yamani as being most odd.
“He was only concerned to know if I’d talked about this with any other officials. I said yes, Shultz and Rogers. He wanted to know what I said to them. I answered, exactly what I’m telling you. Then he asked me not to discuss it with anyone again. It was obvious that he didn’t want anyone to know about my talks with them. I left the White House with the impression that the message I had conveyed to Kissinger would not reach Nixon. He seemed more concerned with hiding my talks and watering down my message than with what I had to say.”
Just before Yamani left Saudi Arabia, King Faisal specifically asked him not to have any contact with the American press. But the meeting with Kissinger worried Yamani so much that he took a decision against Faisal’s wishes. “I leaked the reason for my visit and the message I had come to deliver, to the Washington Post.”
The following day, Yamani flew to London on board a Mobil Oil Company private jet. As soon as they landed, a confidential memorandum from Aramco senior vice president, J. J. Johnston, who accompanied Yamani, was dispatched to the chief executives of the four Aramco parent companies. It illustrated Yamani’s concern for Saudi-American relations.
Johnston wrote, “He (Yamani) said that he saw Kissinger and Shultz. He told us that his principal point to all of the officials that he talked to was the terrible danger in US policy.... He said that there were many officials in Saudi Arabia already who were very much opposed to increases in production and for various reasons many of them were in favor of limiting production, some because they felt it was a wasting of the national asset, others because they felt it merely enabled the US to continue its present policy of support to an unfriendly State and just for this reason he was meeting a good bit of criticism. He had therefore said to all the officials he talked to that in the face of continued US policy the government might well, despite its desire to maintain good relations with the companies and with the United States, find it absolutely essential to limit production.”
By any other name, “absolutely essential to limit production” sounded like the oil weapon.
That same day, the Washington Post printed the story, that Yamani had come to town with a specific warning from King Faisal.
“The leaked story raised some interest,” Yamani says. “Other journalists contacted the State Department to check on it. But when they were asked about my visit, the State Department spokesman replied, ‘Yamani doesn’t represent the king’s view or his country’s view.’ The State Department said I was there representing my own personal view.”
In June, two journalists - one from the Christian Science Monitor and one from the Washington Post - came to Saudi Arabia. Yamani arranged a brief audience for them with the king.
Faisal repeated to them the same thing Yamani had said to Kissinger, Rogers and Shultz. “We are friends and we want to cooperate with the United States, but unless you change your attitude and make it more even-handed regarding the Middle East, unless you start doing something to solve this problem, we’re afraid we cannot continue our current policy of cooperation.”
Yamani claims that after the interview, over lunch with him, both journalists asked that he confirm what they’d heard through the interpreter. He assured them the king’s message was correctly translated.
Almost as soon as their stories were published, a State Department spokesman announced that the views expressed in those stories did not represent official policy in Saudi Arabia. Again they said these were Yamani’s views.
A few evenings later, Yamani was alone with Faisal in his office. It seems that the king enjoyed listening to the news from the BBC and the Voice of America. When he heard the State Department’s disclaimer, he smiled and said, “If I don’t represent the official view of Saudi Arabia, who does?”
Some weeks after that, a CBS Television crew requested an interview with Faisal. Yamani encouraged him to accept the invitation in order once more to explain to the American public the official policy of Saudi Arabia.
The king did just that.
Says Yamani, “It was only after CBS interviewed Faisal on camera and showed him saying those words that the State Department was forced to admit these were not merely the petroleum minister’s personal views.”
Still the Nixon administration refused to believe that an embargo was a real possibility.
At least they didn’t act as if they believed it.
James Akins, who eventually left the Office of Fuels and Energy at the State Department to become Ambassador to Saudi Arabia, claims to have been the only voice in the administration wilderness who saw that Faisal meant business.
“They weren’t taking it seriously. They assumed that he was bluffing. I’d known Faisal a long time and I knew he didn’t make idle statements. He’d made these statements from the very beginning of 1973. The first messages were sent through Yamani who made this point very explicitly to the American administration. It’s not that Faisal was forced to do it. It was something he felt he had to do. He was an Arab leader and he felt that Arab issues were at stake.”
According to a former CIA executive, “No one took James Akins’ view of the situation seriously because none of it checked out. When reports came into the intelligence service they were verified with the Israelis who were supposedly more knowledgeable about the Middle East than any of us were. Our analysts got the usual assurances from the contacts that the CIA maintains. The Israelis assured us there was nothing to worry about.”
There are those who believe that Nixon didn’t concern himself with the political ramifications of oil and the Middle East because all of this landed on him smack in the middle of the Watergate crisis and the President’s brain was overloaded with his own survival.
Yamani is one who thinks that played a significant role. “I saw the effect of Watergate on Nixon. Yes, I think his mind was elsewhere. I think he was too far gone into Watergate to care about anything else. At one point Prince Fahd, who was then Deputy Prime Minister, and I came to Washington together to try to reason with the Americans. We met with Nixon but he was very tense. Neither of us felt that we could deal with him. We both got the distinct impression that serious discussions with Nixon at that point would have been too difficult.”
Another school of thought has it that the administration’s ambivalence derived from the miscalculated assumption that oil simply wasn’t very important.
James Akins is among those enrolled here. “Kissinger at that time wasn’t very interested in oil. Neither Nixon nor Kissinger. For the whole administration it was too novel an idea. You couldn’t get people to focus on it. We’d never done anything like that before. Furthermore, there were no problems. Everyone thought the price of oil was going down forever. Everyone thought there was a permanent glut of oil in the world.”
A third theory is that Americans have always had a tendency to believe that Saudi Arabia has no place else to go but west, that the Saudis couldn’t and wouldn’t ever turn to the Russians, that they have to depend on the Americans for defense and commerce. The conclusion therefore becomes, in the end, there’s no need to worry about them.
That idea comes from several sources, including Sir James Craig, a former British Ambassador to Saudi Arabia. “The reason the Nixon administration did not heed Faisal’s warning was because the Americans always took the attitude that Saudi Arabia was a staunchly anticommunist state and that, by definition, made it pro-American. The Americans believed that Saudi Arabia was safe.”
Akins agrees. “That’s frequently said about many countries. That’s certainly true of Saudi Arabia. It’s true of Jordan. It’s true of Switzerland. It’s true of Ireland. It’s true of a lot of other countries.”
But James Schlesinger, a former US Secretary of Defense, Energy and head of the CIA, isn’t convinced that’s quite the case. “That we don’t have to worry about the Saudis because they have no place to go is a conviction that was surely not universal. It tended to be said by those who were pro-Israel for reasons of protecting Israel. Jim (Akins) puts it too forcefully, I think. He makes things that are ambiguous and grey seem clearly black and white. There was that sentiment around. But it was a partial sentiment. It was not, by and large, the universal sentiment. I don’t think for a moment that Kissinger was guided by such a sentiment. I know full well that he wasn’t. Kissinger’s understanding was clearer than that. There was deep concern that the Saudis could go elsewhere.”
In fact, Schlesinger feels, the Saudis can go, and to some extent, have gone elsewhere. “They’ve distanced themselves from the Americans. More important than that, they cannot be seen to be associated with the Americans because it undermines their position in the Arab world and undermines the position of the royal family within the country. It’s a very complex thing. To say they have no place else to go is clear overstatement because these things are shades of positions. By contrast, to say that they have a clear alternative to go to deal with the Russians is wrong, clearly wrong, too. It’s a question of how they posture themselves and how willing they are to support us and collaborate with us and trust us. That’s where they have to go.”
Yamani happens to believe that the “can’t go anywhere else” attitude did indeed play a role. “Yes, I think it was one of a complex series of factors that led the Americans to take Saudi Arabia for granted up to October 1973. But after October 1973 they had to deal with us on another basis.”
If it is accepted that the Americans took the Saudis for granted, the question then is, was it Nixon? Or Kissinger? Or both?
Now Akins answers, “It wasn’t Nixon so much. Nixon’s position was quite different from that of Kissinger. The point I made in my review of Kissinger’s book, the second volume, is that Kissinger tells how Nixon wanted to move on peace in the Middle East, how he wanted to put pressure on Israel to withdraw, and how Kissinger very cleverly subverted Nixon. He was able to do this because of Watergate. This is an extremely revealing book. In fact, my conclusion in the review was that the real tragedy of Watergate is that we lost an opportunity for peace in the Middle East. It comes through very clearly how Nixon wanted to go in one direction and how Kissinger was able to frustrate Nixon. He was able to get away with it. Nixon had a very good understanding of the Saudis and a very good relationship with Faisal. I showed this review, by the way, to Nixon and asked him if this was essentially correct and he said, ‘Don’t change a single word.’”
Running directly parallel to the Arab’s threatened use of the oil weapon was OPEC’s concern that oil prices were too low and that the Tehran/Tripoli Agreements should be abandoned.
Throughout the first few months of 1973 the market was hardening. Prices were pushing against their imposed barriers towards an increase. A devaluation of the dollar in February adversely affected producers’ incomes and by March they were demanding compensation from the oil companies for their exchange rate losses. The companies stalled as long as they could. But in the rising tide of Arab militancy they were forced to make a deal. In June, an agreement was reached which redefined the formula OPEC used to establish prices and oil was suddenly 12 percent more expensive than it had been.
By September, with prices still edging up, OPEC called for a renegotiation of the Tehran/Tripoli Agreements. The radical three - Algeria, Iraq and Libya - had been asking for just such a renegotiation since the dollar’s devaluation. But Saudi Arabia and Iran would not agree.
Now, with world-wide inflation at 7-8 percent, plus a huge increase in oil company profit margins far above those outlined in the original deal, Saudi Arabia decided something had to be done.
Iran held out.
So Yamani went to Tehran to convince the Shah and Dr. Amouzegar that the time had come for new talks with the oil companies.
“By that point,” Yamani says, “the Tehran Agreements were either dying or already dead. The world situation had changed in the two years since we had negotiated those agreements and they had to be extensively revised.”
The Shah and Dr. Amouzegar were sympathetic to the idea, so the talks were reopened.
On October 8, with the war two days old, the oil ministers of Saudi Arabia, Iran, Iraq, Kuwait, Qatar and Abu Dhabi met in Vienna to face a team of five men representing the oil companies. It was headed by Exxon’s George Piercy and the Frenchman Andre Benard from Shell.
The oil ministers wanted to take the price from around $3 a barrel to twice as much. Piercy and Benard tried to hold out for a 15 percent increase. Yamani came down to around $5. Piercy and Benard went up to 25 percent. And there they sat - $1.25 apart.
“It was a very delicate moment,” Yamani says. “Two very separate issues were at stake. One had political implications. That was the war and the question of oil as a political instrument. The other was the price of oil. The problem was that these two issues could be easily confused as being the same. I did not want to alienate the companies. I needed to keep them with us. I did not want to mix politics and oil prices.”
But that was easier said than done.
Piercy and Benard dug in to make a stand. They claimed that the market simply did not justify such severe price hikes.
The oil ministers found themselves entrenched on the other side. They claimed that the current prices were much too low and that, because the game had changed, the rules needed to be changed too.
Having seemingly reached an impasse the meeting ground to a halt.
Yamani stayed on another two days, urging the oil companies to improve their offer. Dozens of telexes from Piercy and Benard were fired off to London and New York. But just after midnight on October 12, when no further instructions were forthcoming, the two men went to Yamani’s suite at the Intercontinental to ask for a postponement. They told him they could do nothing more at this point.
By dawn Yamani was gone.
When OPEC met four days later in Kuwait, the six Gulf oil ministers took it upon themselves unilaterally to raise the price of oil by a staggering 70 percent, to $5.12.
Not quite a dozen years into Yamani’s ministry, the oil producers had permanently reversed the trend.
“I realized the political and economic impact of the date as soon as it happened,” says Yamani. “For the first time the producers faced the consumers of the major industrialized countries without anyone in the middle. The sixteenth of October was the demarcation. It was the day that OPEC seized power. The real power.”
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