Monthly Archives: January 2019
Oil, Power, and War(2018) by Matthew Auzanneau, a history of oil from its discovery in 1859 to the present, might as well be the history of the world during that time – oil is that much of a force, that much of a driver, of everything we do. Because of its superior energy power, oil gave rise to many crucial aspects of modern capitalism, shaped the outcome of the First World War, and made the Second World War and some would say all subsequent wars necessary. It also, as you’ll see if you read on, perverted democratic politics, as countries and oil companies jostled for geopolitical and monetary advantage. If I had a dollar for every time I said to myself as I read this book, “See? I’m not a conspiracy theorist. Or if I am, my theories are valid. The rich do get together secretly, or at least privately, to plot the fates of the rest of us!” I could take you all out to lunch.
Finally, looking ahead, we need to be aware that, having pumped most of the planet’s easily obtainable crude oil, we’re on the verge of being forcibly weaned from our addiction to this master fuel and its various agricultural, medical, and other by-products (plastics, anyone?). About as much is being done about that as is being done about the other intimately related challenges hanging over our heads: climate change and economic/political collapse, since capitalism is as unsustainable as the fantasy of expecting cheap oil to flow forever.
See what you think. I’m posting these notes on Auzanneau’s book both here and in Resources/Nonfiction Books. It’s a long read, but nowhere near as long as the book itself.
The history of human use of oil is fascinating. The ancient Egyptians used it to preserve to preserve their mummies, and Greeks and Romans greased the axles of their chariots with it. And, as Auzanneau notes, “From the first steps of civilization, of agriculture and maritime trade in Mesopotamia, the drive to control hydrocarbons – like the need to control water access – was one of the major causes of war, because bitumen [asphalt, a sticky, semi-solid form of petroleum] was necessary for waterproofing irrigation canals and boats. Among all the different uses for oil, its military function became the most prominent long before the industrial era began. Greek fire, an incendiary weapon probably based on naphtha and quicklime and capable of setting the sea aflame, repelled naval and land offensives during the Arabs’ first siege of Constantinople, from 674 to 678 AD.”
Baku, on the eastern shore of the Caspian Sea (presently the capital and largest city of Azerbaijan) had hundreds of bitumen quarries, and by the 1830s “small refinery workshops supplying petroleum-derived paraffin, vaseline, oils and solvents. Oil refining offered an unlimited range of lubricants – from thick fats for locomotives to the lightest oils for watches. Paraffin from petroleum was well suited to making candles, and could be used as a coating to preserve meat. Most important of all, ‘lamp oil,’ a lightweight oil that burned with a soft, strong light, appeared in drugstores in major European cities. During the 1850s, dozens of distillation workshops were set up in Pittsburgh, New York, and Boston, producing tens of thousands of liters of lamp oil a day.”
In 1859 crude oil was first pumped from wells in Pennsylvania, Ontario, and Baku. The Pennsylvania oil rush accelerated the changeover from whale oil to petroleum for lubricants and lighting. “The American Civil War, the first mechanized conflict, primed the pump for amassing the fortunes of those who refined lubricants and solvents destined for armaments factories, railways, artillery equipment, or the wheels of the first armored warships. As early as 1865, congressman James Garfield, future 20thpresident of the United States, said, ‘Oil, not cotton, is king now in the world of commerce.’”
John D. Rockefeller, a trader of various commodities in Cleveland, first invested in oil refining in 1863. Three years later, understanding that the greatest profits were in marketing oil and reducing transport costs as much as possible, he entered into a secret agreement with railway magnate Jay Gould to finance the first pipeline system. “Railway owners became Rockefeller’s constant allies in his ascension toward the quasi-monopoly of oil sales in the US. The Standard Oil Company, registered in the state of Ohio on January 10, 1870, soon became the leading privately owned company on the planet, without owning a single oil well.” By fair means and foul, Rockefeller edged out competitors and fixed prices till he had the world’s largest refining company and controlled 90% of the industry in the US.
“Oil had physical properties capable of providing a staggering number of services. Incandescence came first. Lantern oil was the first cheap, efficient, abundant light source available to mankind. Thanks to the merchant marine and steam trains, it – along with sugar, tea, and coffee – penetrated the most isolated markets, increasing labor productivity and intensifying lifestyles. Petroleum was also a good source of heat, and fuel tanks quickly became commonplace in the cellars of homes and other buildings. It was also quickly adopted in a large number of industrial processes, in particular cement-making. The fluid property of oil was no less important. Unlike coal, laboriously mined from underground, crude oil springs out from its own pressure when oil fields are in their prime. And, like any liquid, it flows from tanks to reservoirs thanks to gravity, without having to be broken up and carried.
The distillation of crude oil made it possible to produce an infinite range of greases, oils, solvents, and detergents. Steam engines were improved, and paints, dyes, inks, cleaning supplies, pharmaceuticals, and cosmetics created. From the outset, Rockefeller and his competitors sold Vaseline (petroleum jelly) and benzine, an excellent solvent. The refinement of crude oil also became the most economical production source for glycerin, an ingredient in soaps, syrups, moisturizing creams, suppositories, and toothpastes. Combined with nitrates, it also accelerated the production of nitroglycerin for dynamite.” Fuel and fertilizer were soon to come.
“Hydrocarbons haven’t taken the place of coal, nor has coal replaced wood. The consumption of all three of humankind’s primary energy sources has grown, up to today. With the addition of oil, they form an intertwining spiral, multiplying their effects.” Coal began to be used when wood was in short supply, and its use exploded after the steam engine was invented to pump water from coal mines. Steam power and the mechanized manufacture of cotton cloth then created the Industrial Revolution, centered in England, because it had the most coal. After the petroleum industry was born, the United States had more horsepower than England, which had no oil. “The bottom line is that technical progress gives access to more energy, and this energy can meet more needs, including finding new sources of energy. More energy yields more complexity, which in turn calls for more energy, and so on. Capable of solving innumerable problems, the energy complexity spiral tends toward its own great problem – its physical limit.”
The Swedish Nobel family was made famous when Alfred invented dynamite in 1867. His brother Ludvig, one of the main suppliers of the Russian army, manufactured steam engines, cars, gun carriages, shells, mines, and rifles in St. Petersburg. Robert Nobel, involved in the oil industry in Baku, built a pipeline and ordered the company’s first tanker in the late 1870s, allowing the black gold market to become global. By the beginning of the 1880s, the Nobels and the Parisian Rothschilds had established themselves as the two biggest oil producers worldwide.
John D. Rockefeller engaged in a fierce price war in Europe that included corruption and sabotage to try to contain their advance.
In the 1890s, Londoner Marcus Samuel founded the Shell Oil company, and the Royal Dutch Petroleum Company was launched to drill for oil in Sumatra. In January 1901, “on Spindletop Hill, near Port Arthur and Houston – two small, isolated cotton markets on the Gulf coast – a formidable new source of crude oil was discovered. Shell’s emissaries signed a contract with the biggest producer.” Oil was also discovered in Oklahoma. “By investing heavily there and in Texas, the Mellons of Pittsburgh made their company, Gulf Oil, a small giant sitting at the foot of Standard Oil. The Texas Company, or Texaco, founded in 1901, was the second major company to mature in the Texas oil fields.
During the early years of the 20thcentury, Baku was the world’s leading oil producer and exporter. In 1901, Russia produced 233,000 barrels a day, compared with 190,000 from the United States and 11,000 from the Dutch East Indies. By the early 1880s, Standard Oil and Royal Dutch Shell had become the worldwide champion and the runner-up, respectively, of the global market, remaining secure in their leadership roles until the creation of OPEC (the Organization of Petroleum Exporting Countries) half a century later.”
In the fourth chapter of his book, “The Automobile: American Oil Regenerates Capitalism,” Auzanneau says that “at the dawn of the 20th century, it was as a source of mechanical power – fuel – that oil began to release its full energy. The production of gas-powered vehicles grew the fastest in the US, the land of abundant oil. In 1901, Henry Ford, a 38-year-old engineer helped create the Cadillac brand. The following year, the first assembly line was set up in Michigan by Ransom Olds, the founder of Oldsmobile. The Ford Motor Company was created in 1903. In mid-December of that year, the 12-horsepower gasoline engine the Wright brothers had installed in their plane inaugurated the aviation era. And in that same year, in Iowa, Charles Hart and Charles Parr made one of the first motorized vehicles to be called a ‘tractor.’ General Motors was founded in September 1908 in Flint, Michigan. The birth of the world’s largest automaker was greatly facilitated by a $6 million loan from John D. Rockefeller, to be reimbursed in shares. Two weeks later, Ford’s Model T, the first car to be manufactured in the millions, began production in Detroit. In 1914, in the United States, gasoline sales almost equaled those of kerosene, which was still surpassed by heating oil.”
In 1911 the 1890 Sherman Anti-Trust Act was invoked to force Standard Oil to separate into supposedly separate companies, including Standard Oil of New Jersey, Standard Oil of New York, and Standard Oil of Indiana. The 33 companies didn’t compete with one another, and John D. retained a quarter of their shares, becoming the world’s first billionaire in 1916. “British philosopher Bertrand Russell wrote in 1834, ‘Two men have been supreme in creating the modern world: Rockefeller and Bismarck. One in economics, the other in politics, refuted the liberal dream of universal happiness through individual competition, substituting monopoly and the corporate state, or at least movements toward them.’”
In Chapter 5, “The Tank: American Oil Feeds the Victorious Fighting Machines of the Great War,” Auzanneau discusses World War I in relation to oil. “It had become obvious that if the British Empire wanted to retain its supremacy – particularly that of its fleet – finding its own oil was imperative. In 1911 the Royal Navy had several dozen oil-powered destroyers and submarines, but its key assets, the battleships, still relied on coal. In 1912, it decided to launch the construction of super-battleships, equipped with 24 oil-fired steam boilers.”
In 1901 a German exploration team found what appeared to be a huge amount of oil in northern Iraq. Two years later, German industrialists joined in the construction of a Berlin-Istanbul-Baghdad railway across the Ottoman Empire. In 1908 another rich oil field was discovered in Persia, leading to the founding the next year of the Anglo-Persian Oil Company. British oil extracted in Persia was marketed by a company baptized British Petroleum (BP) beginning in 1916. “Still, not a single Middle Eastern drill site existed on June 28, 1914 when Archduke Franz Ferdinand of Austria was assassinated by a Serbian nationalist in Sarajevo,” kicking off World War I.
Tanks or armored cars, first developed by the French and the British, “played a decisive role in ending trench warfare, beginning in 1916 in the Battle of the Somme. The United States, which entered the war in 1917, manufactured more than 900 tanks under a license agreement with Renault. It wasn’t until March 1918 that the Germans brought their slow, massive, 30-ton tank to the battlefield. Besides the tanks, by then, the Allies had hundreds of thousands of trucks, cars, and motorcycles. Reconnaissance planes and bombers were also being used by both sides by the end of the war. Fuel for all these vehicles became as necessary as blood, but as early as 1915, Germany saw its industry hampered by a shortage of lubricants, and beginning in 1916, it was no longer able to secure access to oil. After peace was established with Bolshevik Russia on March 3, 1918, it hoped to access to Baku oil, but Britain sent an expeditionary force through Persia and expelled the Germans’ Turkish allies from the area. Thanks to Indian troops, the Brits also dominated Mesopotamia, advancing as far as Mosul by November 1918. Still, the Anglo-Persian Oil Company only met a meager part of the British army’s needs. As for France, in 1914 it was cut off from its supply sources in Russia and Romania. In sum, about 80% of the oil fueling the Allied war machine was American.”
Auzanneau then describes how the horror of the fighting led to mutinies and desertions, especially on the German side, as well as worker demonstrations. This, in combination with the Bolshevik revolution in Russia “placed the bourgeois social order of the Industrial Revolution at the edge of the precipice in Europe. “On November 5, 1918, the German emperor, Wilhelm II, called members of the Social Democratic Party of Germany (SPD) to meet with government authorities to negotiate an armistice. On November 7th, in Munich, the revolutionary council of soldiers and workers took the SPD reformists off guard and proclaimed the People’s State of Bavaria. Other labor councils took control of Berlin and several other large German cities when Wilhelm II abdicated on November 9th, the day after the armistice. On the same day, Friedrich Ebert, the SPD leader, who’d never stopped supporting the war, leaned on the military, police, and judges to put the Communist revolution in check. In January 1919, the German Social Democratic governments used the Friekorps, German volunteer units foreshadowing the Nazi militias, to crush the Spartacist revolution in Berlin, and the following spring the Bavarian Council Republic.
With profits from the war, Wall Street became the world’s foremost financial center, as two Republican presidents, Warren Harding (1921-23) and Calvin Coolidge (1923-29) lowered taxes on the rich and defended the private sector from government interference. The Federal Reserve opened the floodgates of cheap credit by setting low interest rates and allowing banks to loan money not backed by their own reserves. Millions of newly consumerist Americans went into debt, and skyscrapers were erected in Chicago, Detroit, and New York. The US was now a net oil importer, but the rapid exploitation of new oil fields off the coast of California allowed its economy to continue to accelerate. In the years of its oil boom, Los Angeles jumped from the tenth largest city in America to the fifth, rising from 500,000 in 1920 to 1.2 million in 1930. The 20thcentury’s first megalopolis was designed for the automobile, and as early as 1925, southern California had a car for every 1.6 inhabitants, a ratio not reached in the rest of the country till the end of the 1950s. Oil money funded the pipes needed to bring water to the city and to create Hollywood, the American ‘dream factory,’ and the California Institute of Technology (Cal Tech) in Pasadena. Half of California’s oil production was under the control of East Coast capital. Principal among these companies was Standard Oil of California (SoCal), created in 1900, when Rockefeller’s tankers still rounded Cape Horn to reach San Francisco.”
The Middle East’s post-World War I status was secretly agreed upon in December 1915 by Georges Picot, a French diplomat, and his British counterpart, Sir Mark Sykes. Britain was to get Palestine and Mesopotamia and France Syria and Lebanon. The Brits wanted Palestine as a buffer zone blocking access to the Suez Canal, and to that end supported Zionist immigration. When Hussein, the sharifof Mecca, began inciting the Holy City’s Arab population against its Turkish occupiers, the British sent T.E. Lawrence, a young intelligence officer, to enlist Arabs to the Allied cause by promising them independence and a throne in Damascus. When, after the war, these things didn’t happen, and there was an Iraqi insurgency, Winston Churchill, the British aviation secretary, “authorized the Royal Air Force to use mustard gas against the ‘recalcitrant natives.’ In the end, without the proper equipment in place, the British army couldn’t use chemical weapons, but rather its usual tactics – aerial bombardment and the torching of villages. After the deaths of 8,400, a less wasteful solution was adopted: creating a country and giving it a king – Faisal, chased from his throne in Damascus by the French. By design, Iraq was a divided nation, almost an illusion of a nation, invented in order to allow the British to reign over what lay under the ground within its borders.”
The heads of the three largest oil companies in the world, meanwhile, were negotiating the organization of a worldwide oil cartel that would make sure over-production didn’t cause the price per barrel to fall too low. “In August 1928, Henri Deterding of Royal Dutch Shell, Walter Teagle of Jersey Standard, and Sir John Cadman of the Anglo-Persian Oil Company met at Achnacarry Castle in the Scottish Highlands and agreed to freeze ‘the present volume of their business and their proportion of any future increase.’ They set production quotas and arranged it so that oil from Venezuela, Iran, and other countries could never be sold at a price lower than US oil.
The terrifying economic and financial crisis that broke out in October 1929 was, essentially a crisis of overproduction. In the United States, rapid productivity gains thanks to the abundance of oil and electrification, as well as the organization of mass production, caused a 33% increase in industrial production between January 1920 and January 1929. Avid confidence in a bright future encouraged the US to achieve a global level of debt that climbed to 300% of GDP, a level that wouldn’t be attained again until the 2000s. The banks loaned ten times more than what they had in their coffers, and people borrowed to invest in an overinflated stock market. The house of cards collapsed on October 24, 1929,” with full recovery only coming with the armaments manufacturing of World War II and the Cold War.
Auzanneau goes on to describe “the persistent alliance of ‘big oil’ and other corporate entities with Nazi Germany. Henry Ford signed many anti-Semitic pamphlets widely disseminated in the US and Germany, and in July 1938 received the highest Nazi distinction for a foreigner, the Grand Cross of the German Eagle.
Because of its stance against Bolshevism, Henry Deterding, head of Royal Dutch Shell, was also an ardent supporter of the National Socialist Party. In 1936, just prior to his retirement, he made the Nazi regime a gift of livestock and other agricultural products worth a million pounds. Torkild Rieber, president of Texaco, also advanced the cause of national socialism, secretly refueling Franco’s army during the Spanish Civil War and helping emissaries from Germany to the US. Finally, the Anglo-Iranian Oil Company and Standard Oil consistently supplied Mussolini’s navy.
Many alliances were also forged between Anglo-Saxon oil companies and German industry. Lacking in capital, Germany’s chemical industry had a lot to offer the American petroleum industry, particularly in the development of petrochemicals. I.G. Farben, the conglomerate formed in 1925 by the merger of the largest German chemistry companies, was able produce large quantities of nitric acid, needed for the preparation of gunpowder and nitroglycerin. The synthesis of ammonia also provided modern agriculture with artificial nitrogen fertilizers and aided in the production of various pharmaceuticals. Confidential agreements established between Standard Oil of New Jersey and I.G. Farben continued under the Nazi regime.” I.G. Farben cooperated 100% with Hitler, facilitating his rise to power and providing his military with synthetic rubber, explosives, and synthetic fuel made from hydrogenated coal. Jersey Standard defended itself from charges of collusion with the enemy in 1942 by claiming that patents obtained from I.G. Farben had also benefited the American war industry.
“The First World War had killed 18 million people,” Auzanneau says, and the Second was responsible for the deaths of four times as many, because of the “energy power” now available to the belligerents. The Axis powers, he believes, lost the war because they lacked sufficient access to oil. Italy, for example, “saw half its fleet stranded in port as early as February 1941. The Allies, on the other hand, were able to count on the United States, the dominant producer of black gold. Blitzkrieg (“lightning war”) was a necessary tactic for an army with limited fuel. When Germany attacked Poland on September 1, 1939, it had only six months of gasoline, diesel fuel, and fuel oil in reserve.” Receiving some fuel from its Soviet ally and taking over oil installations in Romania in December 1939, enabled the Germans to enter Paris in June 1940.
Auzanneau says that the air Battle of Britain was won largely because of the “superior quality of American gasoline, higher octane and resistant to catching on fire. Thanks to better fuel, British fighter pilots could fly faster and longer.”
Historians agree that Japanese imperialism and its attack on the US were motivated by the need to obtain petroleum. Japan advanced into northern China not only to obtain coal, but hoping to extract shale oil in Manchuria, Auzanneau says. “Between 1931 and 1939, its oil consumption doubled, reaching 100,000 barrels a day. But 80% of this oil was imported from California. Japan could only survive without American petroleum if it gained control of Sumatra, Borneo, and Java – the Dutch East Indies. Roosevelt held off on an oil embargo for fear of driving the Japanese in this direction. Finally, on June 24, 1941, after confirmation that Japan was about to invade French Indochina, Washington froze its US assets. There was no official embargo on fuel, but shipments were authorized on a case-by-case basis, and Japanese tankers were no longer permitted to fill their tanks in California. After Pearl Harbor, Japan seized the Dutch East Indies, and thanks to the 70,000 barrels of crude oil that its wells supplied each day, enjoyed an uninterrupted succession of victories during the following months.”
In July 1940, Hitler decided it was necessary to capture the Soviet Union’s petroleum fields and take control of crops in the Ukraine. The invasion of Russia, which began on June 22, 1941, bogged down, however, the longer the supply lines grew. In order to conserve gasoline, the Wehrmacht increasingly used horses. On June 23, 1942, having been unable to take Moscow, Hitler ordered the capture of Stalingrad, a thousand kilometers north of Baku. But, again, the advance halted in the face of numerous Russian forces and lack of fuel. Even had the Nazis been able to take Baku, it would still have been necessary to route the oil by the Black Sea, under the control of the Soviet fleet.
“The Nazis also dreamed of capturing the oil fields of the Middle East. In April 1941, Erwin Rommel and the Afrikakorps marched across the deserts of Cyrenaica with the goal of taking the Suez Canal. On April 1st, Iraqi generals in Baghdad took power in a coup, blocked the carotid artery of the British Empire, the Kirkuk-Haifa pipeline, and requested German assistance. Reza Shah of Iran also asked for German advisors. The Vichy government offered the Nazis free access to its Syrian bases, and Germany had an air base on the Greek island of Rhodes.” Britain was able to block the Nazis on all important fronts, however, including a joint invasion of Iran with the US that forced the shah to abdicate in favor of his 21-year-old son. Beginning in 1942, the US used Iran to supply the Soviet Union with planes, trucks, and other war materiel.
The Mediterranean Sea route between Naples and Tripoli for Rommel’s supplies of fuel and spare parts was “relentlessly harassed by British naval forces, forcing German armored divisions to depend more and more on scavenged British oil deposits and captured vehicles. Won by the British in early November, the Battle of El Alamein, along with the Battle of Stalingrad, turned the tide for the Allies. The ultimate blow began on May 12, 1944, a month before the invasion of Normandy, when after years of unsuccessful attempts, the Allied air forces were finally able to efficiently bomb German synthetic fuel factories. At the end of the year, in a desperate attempt to repair them and create new ones, the Nazis tried to mobilize 120,000 workers in mines, quarries, and caves throughout Germany and Austria. Half of them were slaves – deportees and prisoners. During the June 1944 Normandy landings, superior Allied aviation crushed a German army frequently short of oil and trying to use men and horses except in battle. The German retreat took place mostly on foot or by bicycle.
In the Pacific, Japanese tankers were a priority target for the US navy. By 1944, the Rising Sun’s fuel resources had fallen by half. Missing, in particular, fuel for aviation, the imperial army had to reduce the training hours of young pilots, and order many of them to fly kamikaze suicide missions. Japanese fighter pilots were effectively grounded when, on March 9, 1945, having realized that Japanese cities were mostly built of wood, the Americans began to bomb them with incendiary weapons. More than 100,000 residents of Tokyo died in fire in probably the most lethal air raid in history. The new B-29 long-distance bombers also dropped phosphorous and napalm bombs. The US air force then launched similar attacks on more than 60 Japanese cities, including Yokohama, Nagoya, and Osaka in the following weeks. The long bombing campaign preceded the dropping of atomic bombs on Hiroshima and Nagasaki in August 1945, and was much deadlier.
The war revealed the manner in which the new world would function – a world where it was the masters of technology who would govern. The ultimate masters, however, were beyond the realm of men – they were the laws and limits of physics.”
During the war, President Roosevelt had extended the Lend-Lease program, supposed to be just for allies, to Saudi Arabia, having found that its defense was “vital to the defense of the United States. An independent assessment of Saudi oil reserves had revealed unequaled resources – four times more oil than the total proven reserves American companies had controlled up to that time. When the war began, barely 5% of the crude oil produced in the world came from the Middle East – 63% was extracted in the US. But, starting in 1943, many diplomats and senior leaders were aware that everything was about to change.
On February 12, 1945, His Majesty Abdulaziz al Saud left the kingdom he’d founded 13 years earlier for the third time in his life. He was on his way to join Roosevelt on an American battleship in the Red Sea. The evening before, the American president had participated in the closing ceremonies of the Yalta conference, also attended by Winston Churchill and Joseph Stalin. In six hours Roosevelt and Ibn Saud, as he was known in the West, established a strong personal bond that set the tone for decades of close relations between their two nations. Upset about Britain’s encouragement of Jewish immigration to Palestine, the king had decided to make the US his new main ally.
The Californians of SoCal had acquired the first Saudi oil concession in 1933, joined in 1936 by Texaco in the form of the Arabian American Oil Company (Aramco). The first successful drilling occurred in March 1938. In 1946 Aramco opened its operations to Standard Oil’s network. The oil companies entrusted the construction of the Trans-Arabian pipeline to Bechtel, the California firm that had built the Hoover Dam on the Colorado River in the 1930s and grown considerably thanks to army contracts during the war. The pipeline ran on an east to northwest diagonal from Dhahran, Saudi Arabia on the Persian Gulf to the Mediterranean port of Sidon, Lebanon.
Europe was reconstructed under the auspices of General George C. Marshall, US army chief of staff throughout the war. The objective of the Marshall Plan (1948-52) objective was to raise a wall of capitalist wealth capable of curbing Soviet expansion, with oil as the cement in the dike. The countries involved used a fifth of the loans they received from Washington to buy petroleum products, half of which were produced by American companies. As a 1945 White House memo stated, ‘The Navy wants Arabian oil developed to supply European commercial demand, replacing Western hemisphere oil and thus conserving supplies under US military control.’ Only 6% of the oil required to run US motors, electric turbines, and factories was extracted outside US territory, and even this percentage (most of it from Saudi Arabia) was extracted by American companies.”
When the Saudi king asked for the same 50-50 profit sharing deal Venezuela had negotiated during the war, “the compromise to which Washington and Aramco agreed in December 1950, the ‘golden gimmick,’ rested on the back of the American taxpayer and extended well beyond the petroleum industry. The revenue Aramco paid to Saudi Arabia was exempted from taxation in the United States. By this means, Washington provided continuous financial support to a country with an indispensable resource without having to ask permission every year from Congress and its pro-Israeli legislators. The arrangement ended up being extended to all US companies abroad, and was also adopted by European countries, spurring Western firms to expand operations in developing countries whose elites they could easily corrupt to avoid taxation there as well.
After India won independence in 1947, the sole extractor of Iranian crude oil, the Anglo-Iranian Oil Company, 51% controlled by Britain, was that country’s primary source of income and energetic power. The Americans were drilling in Iraq, held half of Kuwait’s oil and all of Bahrain’s, and, especially, had taken from right under the noses of their English cousins the incredible treasure in Saudi Arabia. Iranian oil still provided 40% of Middle Eastern extractions, but Iranians resented the British and the Americans for controlling events in their country, including allowing Stalin to requisition crops grown in the northern part of their country, causing famine. In 1950, Mohammad Mossadegh, leader of the opposition to the shah and his British patrons, persuaded the Iranian parliament, the Majlis, to nationalize the country’s oil. London immediately levied an embargo on Iran, threatening prosecution of any cargo-ship owner loading oil ‘stolen’ by the Iranians. The oil wells and the Abadan refinery closed.”
Britain wanted to invade Iran, but could do nothing without US support, and President Harry Truman was taking a neutral position on the conflict. “The US attitude shifted radically, however, with General Dwight D. Eisenhower’s arrival in the White House in January 1953. ‘Ike’’s more aggressive foreign policy was entrusted to two New York lawyer brothers, John Foster (secretary of state) and Allen (CIA director) Dulles, associates in a New York law firm representing companies related to the Rockefeller empire. In July 1953, Allen Dulles launched Operation Ajax, a plan jointly developed by the CIA and Britain’s MI6 to ‘bring about the fall of Mossadegh’ by any means in the name of anti-communism. On August 17thand 18th, Iranian men paid by American agents bribed police officers, elected representatives, and religious leaders while others staged a riot. Claiming allegiance to Mossadegh and communism, they struck passers-by and fired shots at mosques. The next morning the shah surrounded Mossadegh’s neighborhood with American tanks, and took the prime minister’s residence by force. After three years in solitary confinement in a military prison, Mossadegh, the father of Iranian democracy aborted by the CIA, spent the rest of his life under house arrest. The shah was thus enabled to begin a bloody dictatorship that ended only with the Islamic revolution of 1979, and American oil companies grabbed the largest share of Iranian oil. A consortium of Western companies were the only ones empowered to buy and sell the product, and the British (via British Petroleum – BP) had to be satisfied with only 40% of its shares.
Next came the 1956 Suez crisis, from which the US was the only country to emerge victorious, even though it was Washington’s refusal to allow the World Bank to lend Nasser the funds to build the Aswan Dam that led the Egyptian dictator to nationalize the canal. Britain and France’s decision to take control of the Canal (with Israel’s secret support), of course, had to do with oil. Oil tankers comprised two-third of the vessels that passed through the canal. On October 26, 1956, Israeli troops invaded the Gaza Strip and the Sinai Desert, and turned in the direction of the canal. As previously agreed, London and Paris issued an ultimatum demanding that both the Israelis and the Egyptians withdraw from the canal zone. When Nasser refused, the UK and France bombed his airfields and dropped paratroopers, taking control of the canal. London and Paris had counted on Washington’s support, which wasn’t forthcoming. On December 15th, they began to withdraw their troops. The role of the US in the Suez crisis – and by extension, American oil companies – greatly increased their prestige with the governments of the Arab world, in particular the Gulf countries.”
In the next section of this chapter, headed “How Kennedy and the CIA Helped Saddam Hussein” Come to Power, Auzanneau says that “in 1963 the leader of the Iraqi government, General Abdul Karim Kassem, was executed during a coup by the Baath Party. Kassem himself had seized power five years earlier with the support of Communist allies, executing or turning a blind eye to the execution of the young king, Faisal II. In 2003, it was revealed that the coup against Kassem had the support of the CIA, which had previously tried to assassinate him with a poisoned scarf. Among Baath Party members colluding with the CIA in 1963 was 26-year-old Saddam Hussein. In the weeks following the Baath Party’s power grab, the CIA supplied the Baathists with lists of intellectuals suspected of being Communists: doctors, professors, engineers, and lawyers, who were assassinated by the hundreds. The US had originally supported Kassem as a counterweight to Nasser, but in 1961 he’d made the fatal decision to sign a law nationalizing territories where the Western oil consortium hadn’t yet drilled, 99% of their concession. After the Baath Party came to power in 1963, Western corporations like Mobil, Bechtel, and BP were able to conduct business with Baghdad – for American firms, their first involvement in Iraq.
In Indonesia, where the oil industry that appeared at the end of the 19thcentury was the creation of Anglo-Dutch Royal Dutch Shell, American petroleum giants also gained considerable ground. As early as 1957 and 1958, the CIA armed secessionist movements and paramilitary rebellions from the extreme right in the petroleum zones of Sumatra and Sulawesi, where American companies possessed enormous interests. American rubber and oil investments had to be defended in the face of Mao’s China, which was financing its own insurrectional movements. In 1965, the CIA strongly supported General Suharto’s ouster Sukarno, who’d tried to remain neutral in the Cold War. As in Iraq, the CIA supplied Suharto with a list of thousands of people suspected of Communism, leading to the murders of between 250,000 and 500,000.
Oil wasn’t the only or the most obvious aim of American interventionism during this time, but it was a constant motivator, necessary for the optimal functioning of the war and peace machine. American political power deployed its empire thanks to the control of sources and flows of oil far greater than that of other nations. For this reason, the oil establishment was able, time and time again, to put its interests above the political sovereignty of the American people.
In December 1949, a Federal Trade Commission investigation concluded that the world’s seven most powerful oil companies (the five American majors, Shell, and the Anglo-Iranian Oil Company) shared patents maintained artificially high crude oil prices. President Truman was reluctant to allow the report to go public or to allow the Justice Department’s antitrust division to go after the oil companies. The argument supported by the Departments of Defense and the Interior held that ‘American oil operations are, for all practical purposes, instruments of our foreign policy.’ It argued that, in the midst of the Cold War, an antitrust trial against the oil companies might foster the belief that ‘capitalism is synonymous with predatory exploitation.’ London and Paris lent their support to this argument.
On January 14, 1954, under the Eisenhower administration, American oil companies obtained the National Security Council’s explicit guarantee that they would never face antitrust litigation. On the other hand, at the end of his second term, during his farewell speech on January 17, 1961, Eisenhower surprised US citizens by warning: ‘In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.’
In 1973, on the eve of the first oil crisis, the major Anglo-Saxon oil companies controlled at least 91% of Middle Eastern petroleum production, and 77% of the production of the ‘free world’ outside the US. This uncompromising leadership, remarkably stable from 1954 to 1970, earned Jersey Standard, Mobil, SoCal, Texaco, Gulf Oil, BP, and Shell the nickname the Seven Sisters. The five Yankee Sisters alone ruled almost half of world production. The corporate oil world was headed by a close coterie, almost exclusively composed of WASPS, with families often intermarrying. The Rockefellers remained the principal shareholders and retained operational control of the four main offspring of John D.’s empire: Standard Oil of New Jersey, which became Exxon (20.2%); Standard Oil of New York, which became Mobil (16.3%); Standard Oil of California, which became Chevron (11.3%), and Standard Oil of Indiana, which became Amoco (12.3%), for a total of 60.1%.
From 1945 to the early 1970s, the five major American oil firms and Shell never ceased to increase the interlinking of their capital through cross-shareholdings held by New York’s most powerful banks – Morgan Guaranty, Chemical Bank, Bank of America, First National City Bank, and Chase Manhattan. The last two were the most important commercial banks in the US and the keystones of the Rockefeller empire. Beginning in 1960, Chase Manhattan Bank was chaired by its number one shareholder, David Rockefeller, the grandson of John D. Its principal rival, First National City Bank, had been founded with capital from John D.’s brother William, and was chaired from 1952 to 1967 by James Stillman Rockefeller, William’s grandson. Both banks were heavily focused on oil.
The neoclassical economist Friedrich Hayek spent most of his career in two bastions of academia funded by the Rockefeller Foundation: the London School of Economics and the University of Chicago. The ‘Chicago School of Economics’ that emerged from Hayek’s teaching was championed by Milton Friedman, hero of neoliberalism. Proudly biting the hand that fed him in a 1967 article in Newsweekmagazine, Professor Friedman exposed the duplicity with which Big Oil exerted its influence on the political affairs of America and the world: ‘Few US industries sing the praises of free enterprise more loudly than the oil industry. Yet few industries rely so heavily on special government favors.’ Thanks to the golden gimmick and the influence the petroleum industry exerted on both the Democratic and Republican Parties during the 1960s, the average tax levied on the five major American oil companies wasn’t even 5% of their income.
When, in 1946, the United Nations announced its intention to establish headquarters in New York City, John D. Rockefeller, Jr. tasked his son Nelson, David’s older brother, with purchasing the land on which it would be erected. But the Rockefeller family’s influence on the UN was greater than that. In 1939, the Council on Foreign Relations, Washington’s geopolitical think tank, had collaborated secretly with the State Department to create a commission on postwar studies funded by the Rockefeller Foundation. Several members of this War and Peace Commission attended the 1944 Dumbarton Oaks Conference that had outlined the provisions of the Bretton Woods agreements that set up the post-World War II financial order; others participated in the June 1945 international conference that established the UN. The Dulles brothers were eminent members of the War and Peace Commission. During the war, John Foster had helped conceive the State Department proposals that led to the UN’s creation. Allen was at the heart of the industrial and financial establishment that helped develop the intelligence network that became the the CIA, of which he was the first head. The Dulles brothers had close social ties with the Rockefeller heirs. American diplomacy’s financial arm, the World Bank, created in 1945 by the Bretton Woods agreements and situated one block away from the White House, was chaired for two decades by senior leaders of Chase Manhattan Bank.
The Council on Foreign Relations, mentioned above, was one of the main crucibles of the Rockefeller network. Important figures like Henry Kissinger, Dick Cheney, Jimmy Carter, Madeleine Albright, and Alan Greenspan spent time there. The CFR was, par excellence, the institution where the American political, financial, and media establishments met, and where they dreamed up their self-serving vision for the world. Founded in 1922, it had been conceived in the image of Chatham House, created in London a year earlier as a prestigious forum supporting the British Empire. John D. Rockefeller, Jr. had financially supported the CFR since its inception, and in 1944 the widow of Harold Pratt, a former director of Standard Oil of New Jersey, donated the New York residence where the CFR still meets. As early as 1946, David Rockefeller participated in a CFR study group on the reconstruction of Western Europe that strongly influenced the development of the Marshall Plan. In 1949, he became one of the CFR’s directors, and in 1970 he assumed its presidency, taking the place of John McCloy, whom he had succeeded as the head of Chase Manhattan Bank ten years earlier.
Another prestigious sanctum of the Rockefeller sphere, this time secret, was the Bilderberg Group. Whether it was a place where – as David Rockefeller himself said, ‘omnipotent international bankers plotted with unscrupulous government officials,’ or simply the most select forum for North America’s and Western Europe’s economic, political, and media elite, the Bilderberg Group met each year in strict confidentiality. Its dozens of members were hand-picked by a committee whose essential pillar was, for decades, David Rockefeller.
During the 1950s and ‘60s, through an intense game of revolving doors, in which powerful figures rotated between business and political leadership, the American oil industry deployed an influence as omnipresent as it was discreet. John McCloy, a powerful New York lawyer, was the epitome of this. Secretary of War during World War II, he was president of the World Bank from 1947 to 1949, then high commissioner for Germany from 1950 to 1953. In the latter position, he granted forgiveness to many German industrial commanders for their roles in the Nazi regime, among them several directors of IG Farben, including Fritz ter Meer, who’d supervised the construction of a chemical plant at the Auschwitz extermination camp. At the beginning of 1950, McCloy approved the CIA recruitment of Reinhard Gehlen, a former Nazi general, to serve as the head of West German espionage. Gehlen was involved in Germany’s refusal to extradite SS criminal Klaus Barbie to France, whose escape to Bolivia in 1951 was organized by American counterespionage. Ten years later, while providing legal counsel to each of the Seven Sisters, McCloy became an important advisor to President Kennedy on both security and oil policy.
Rockefeller influence also appears in Henry Kissinger’s ascension. He entered the United States just before the war, and graduated from Harvard University in 1955. After directing a nuclear weapons study group at the Council on Foreign Relations, he was recruited to head another on American geopolitical strategies. It published a report in December 1957, two months after Sputnik’s launch, calling for a massive intensification of military spending, including nuclear weapons, to counter the Soviet threat. Nelson Rockefeller, now governor of New York, called on Kissinger the same year to serve as his personal adviser on foreign affairs. Kissinger played a similar role in Rockefeller’s three unsuccessful runs for the Republican nomination for the US presidency. When Richard Nixon was elected president in 1968, he appointed Kissinger to head the National Security Council.
Independent Texas oil companies, which first promoted Lyndon Johnson to protect their interests, also supported Nixon, politically rooted in California oil money, as they would later support Texas oilman George H.W. Bush. From the time he became Senate majority leader in 1955, Johnson was an unwavering defender of the oil depletion allowance. Instituted in 1913, this tax deduction was designed to protect the oil companies from the ebb and flow of capital ‘depletion’ – the exhaustion of their oil reserves. Maintained at 27.5% of revenue, it favored oil more than any other American industry, and by the end of the 1960s represented $160 billion lost to the US Treasury. [According to Wikipedia, it’s still in existence.]
George Herbert Walker Bush stood at the exact confluence of American financial, political, and intelligence powers, via the oil industry that became its nexus in 1945. At that time, the future 41stpresident of the United States was a novice oilman supported by powerful familial interests. Between the First and Second World Wars, Prescott Bush, H.W.’s father, like his friend Allen Dulles and John McCloy, was one of the brightest agents of the global Wall Street financial empire, on which the American intelligence machine relied at the beginning of the Cold War. Prescott played an essential role in his son’s emerging career in petroleum, politically, and in helping the secret service. In 1924, before the age of 30, he’d become a powerful New York business banker, five years after his return from the First World War, in which he’d served as an intelligence officer. He belonged to Yale’s exclusively WASP secret society, Skull and Bones, as did his son and grandson, George W. Prescott’s father, Samuel Bush, was an influential Ohio steel producer, counting among his main clients the railway networks controlled by the Morgans and Rockefellers.
In 1926, Prescott Bush was named vice president of a prestigious Wall Street bank, W.A. Harriman & Co., directed by his father-in-law, George Herbert Walker. Renamed Brown Brothers Harriman in 1931, by the end of the 1930s it was one of the biggest investment banks in the world. Prescott oversaw the bank’s German clientele, in particular the Thyssen family, which played a key role on financing Hitler’s rise to power and arming the Reich, and remained the director of Thyssen’s American front company, the Union Banking Corporation, after the US entered the war. The company’s assets were seized in 1942, but there was no further investigation. After the war, when the American army found documents showing that Brown Brothers Harriman and Prescott Bush had helped the Nazis, John McCloy and Allen Dulles stifled the scandal and recruited Bush to help with ongoing intelligence. Continuing his international banking activities after the war, Bush helped manage the investments of the House of Saud and the House of Sabah, the ruling family of Kuwait. With the Rockefeller and Dulles brothers, Prescott Bush was among the Republican Party leaders who fared better than the Democrats in courting General Eisenhower to run for president in 1952. Bush also played a key role in Richard Nixon’s fledgling political career, opening the doors to the East Coast establishment, providing unwavering support during the slush fund scandal of 1952, and conducting Nixon’s unsuccessful campaign against John F. Kennedy in 1960.
In 1948, at age 24, with his Yale diploma in hand, George H.W. Bush renounced the aristocratic comfort of New England and migrated to west Texas, accompanied by his wife Barbara and 2-year-old son, George W. In 1953 he founded Zapata Petroleum with capital from his father and maternal grandfather, George Herbert Walker, a powerful banker who died the same year. In 1954 H.W. became president of Zapata Offshore, an offshoot of Zapata Petroleum that specialized in offshore drilling. The company, which never made any profits, may have been a cover for undercover CIA activities related to Cuba, whose government was taken over by Fidel Castro in 1958. In particular, Zapata Offshore seems to have been involved in the US maneuvers that culminated, on April 17, 1961, in the failed Bay of Pigs invasion of Cuba by anti-Castro forces trained by the CIA and supported by the US army. Testifying 30 years later, John Sherwood, a former CIA officer involved in the operation, said that Bush ‘was no spy. What guys like him helped us with was giving a place to park people that was discreet’ – a drilling platform 40 miles north of Cuba. US Army general Russell Bowen later said that Bush had ‘worked directly with anti-Castro Cuban groups in Miami before and after the Bay of Pigs invasion, using his company as a corporate cover for his activities on behalf of the agency.’ Brown Brothers Harriman, Prescott Bush’s prestigious investment bank, sustained tremendous losses as a result of Castro’s takeover of Cuba, as did a number of oil companies prospecting around the island.
Another link between H.W. and CIA operations at the juncture of petroleum, financial, political, and military influence, is his relationship with George de Mohrenschildt, a Russian petrogeologist linked with Lee Harvey Oswald. In 1976, de Mohrenschildt complained to his longtime friend, then CIA director, that the FBI was following him. On March 29, 1977, two months after Bush left the CIA, de Mohrenschildt was found dead, shot in the mouth with a hunting rifle, an apparent suicide. A Russian aristocrat, he’d come to the United States in 1938. During World War II, while his elder brother Dmitri served in the OSS, George worked with a French intelligence officer in an operation aimed at preventing the Third Reich from procuring petroleum products from the United States. He then traveled to Venezuela to work for an oil company involved in many of the CIA’s operations in Latin America. In 1950, he started a small petroleum investment firm in Abilene, Texas with Eddy Hooker, his nephew by marriage and a close friend of George H.W. Bush. He also worked for a company that later acquired prospecting rights in over half of Cuba.
George de Mohrenschildt was the person in closest contact with Lee Harvey Oswald between June 1962 and the tragic day of November 22, 1963, and he was the witness interrogated the longest by the Warren Commission, on which sat Allen Dulles, the head of the CIA fired abruptly by Kennedy following the Bay of Pigs. In a report others deemed insufficient, the commission drew no firm conclusions about the role de Mohrenschildt had played regarding Oswald. George H.W. Bush was in Dallas on the eve of President Kennedy’s assassination, speaking at a meeting of the American Association of Oil Well Drilling Contractors. Never in the course of his long public service career did the future 41stpresident mention this fact. American journalist Russ Baker reported that, among other coincidences, on April 26, 1963, five months before Kennedy’s death, de Mohrenschildt met, on the New York premises of the Train, Cabot, and Associates investment bank, a CIA agent who was very likely Thomas Devine, George H.W. Bush’s close collaborator in Zapata Offshore.
H.W. had begun his political career in 1962, when he took charge of Republican Party finances in Houston, then in the process of becoming the planet’s petroleum capital. That same year, his father, Prescott, decided not to run for reelection as a Connecticut senator, ending his own political career. In 1964, still inexperienced, but ambitious and confident, H.W. lost a race for senator from Texas, while Lyndon Johnson beat Barry Goldwater for the presidency. Goldwater, supported by the Bush family, had won the Republican nomination over Nelson Rockefeller. The Bushes, having gravitated around the oil majors and Wall Street, were in the process of switching political alliances toward independent oilmen and the cluster of new industrial powers emerging alongside what some called the ‘Texas Raj.’ Resigning the Zapata Offshore presidency in 1966, H.W. was elected to the House of Representatives the following year. In 1968, Prescott Bush and others moved heaven and earth to persuade Nixon to name H.W. as his vice presidential candidate, but, in his first betrayal of the oil interests, the future president went with Spiro Agnew, governor of Maryland. By the time the Watergate scandal exploded in 1973, Big Oil’s support had been handed off to H.W.
The end of the 1960s saw two opposing factions in the Republican Party: the ‘traders,’ representing the traditional industrial establishment, and the ‘warriors,’ politically more to the right, from the conservative Southern states, in particular, Texas. These factions were personified by two oilmen with drastically different perspectives. Nelson Rockefeller represented the internationalist ethic of the oil majors and their Wall Street banks, whose strategies, global by necessity, could never be unilaterally pro-American. George H.W. Bush, the embodiment of East Coast high society transformed into a Southerner, was the custodian of independent American oil interests and other US industries revolving around oil. His ethics rested on a deliberately jingoistic viewpoint.
In 1960, the Saudi royal family and inner circles of Saudi Arabian power were divided over the question of whether or not the regime should evolve into a constitutional monarchy with a modern parliament. The reformers had the ear of King Saud, while the partisans of absolute monarchy aligned with Prince Faisal, the king’s half-brother and future successor. Prince Talal, a younger half-brother, had created a national council to draft a constitution in 1958. That summer, American intelligence alerted Aramco’s Government Relations Office that Saudi officers were preparing a coup, intending to impose democratic reform on the country and planning to assassinate Prince Faisal. Even though the officers let Aramco know that their republic would ally with the US rather than with Nasser, Aramco exposed the plot. In 1962, Prince Talal was forced into exile, and in 1964 Prince Faisal surrounded King Saud’s palace and dethroned him. Neither Aramco nor American president Lyndon Johnson had the slightest objection, and Faisal remained Washington’s ally until a mentally unbalanced nephew assassinated him in 1975.
OPEC, the Organization of the Petroleum Exporting Countries, came into being in September 1960. Founded by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, its goal was to regain control of the petroleum that had been dominated by Western companies. The five oil-producing countries held, but didn’t control 80% of the planet’s known crude oil reserves, and as Venezuelan oil minister Pérez Alfonso noted, since world oil reserves wouldn’t continue to expand forever, ‘our people can’t let their only possibility to pass from poverty to well-being, from ignorance, to culture, and from instability and fear to security and confidence’ go by. Pérez Alfonso intended to make OPEC an ecological organization, limiting the production of oil not only to maintain its price, but to curb pollution and allow the resource to benefit many generations. He reigned from his position in January 1963, profoundly disillusioned.
China, meanwhile, had found a source of oil in a giant field named Daqing, and remained petroleum-self-sufficient until its economic liftoff in 1992. Oil was also discovered in the Algerian and Libyan deserts, and in Nigeria at the mouth of the Niger River. At the end of the 1960, Libyan crude oil production rivaled Saudi Arabia’s, providing western Europe with a quarter of its fuel.
On May 16, 1967, Nasser sent Egyptian troops into the Sinai Peninsula and demanding the departure of the UN troops that had controlled the canal zone for ten years. On the night of May 22ndto 23rd, Egyptian ships also blockaded the entrance to the Gulf of Aqaba, which received most of Israel’s essential petroleum shipments from the Persian Gulf. Israeli forces retaliated on June 5th, and the next day at dawn, bombed the Egyptian and Syrian air forces out of existence. By June 10th, following one of the most intense armored offensives in history, Israel had tripled the size of its territory. Egypt had lost Sinai and the Gaza Strip in this Six-Day War, Syria the Golan Heights, and Jordan the West Bank and East Jerusalem.
In 1970 the United States was by far the largest crude oil producer in the world, providing almost a fourth of world production. In 1956, however, geologist Marion King Hubbert had introduced the concept of peak oil, stating that between the end of the 1960s and the early 1970s, American oil production would peak, then enter an irreversible decline, due to lack of easily obtainable reserves. Before a mystified assembly of Texas oilmen, the unemotional geologist drove home the message that humanity’s petroleum endeavor was a ‘unique event in human and biological history – non-repetitive, a blip in the span of time.’ In 1971, as Hubbert had predicted, US oil production stopped growing. The principal oil fields on which US industrial power depended were half-spent, and one after another their strength eroded. President Nixon proposed a series of measures to accelerate the development of offshore oil, produce nuclear as well as ‘clean’ energy, and revive the exploitation of shale oil, but his message to Congress was largely ignored.
In April 1971, for the first time since the Second World War, the American trade balance was in the red, crude oil imports weighing heavily. Four months later, Nixon announced that the United States was suspending the trade of dollars for gold, effectively eliminating the gold standard. It’s difficult to conclude,” Auzanneau says, “that the timing of the onset of American crude oil production decline, the end of the Bretton Woods monetary system, and the 1973 oil crisis (blamed on OPEC) were coincidental. Throughout the 1960s, while inflation ran rampant in the rich countries, provoked by the heat of growth, crude oil costs had remained relatively unchanged, around $1.80 a barrel, due to abundant supply. Now Persian Gulf producers raised the price, and some of them – Algeria, Venezuela, Iraq, and Libya nationalized at least part of their production. Saudi Arabia, Kuwait, Qatar, and Abu Dhabi increased the percentage of profits due them.
On October 6, 1973, Egypt and Saudi Arabia launched a surprise attack against the territories Israel had occupied since the Six Day War. The massive military supply replenishments provided almost immediately by the Soviet Union to Egypt and Syria and the United States to Israel made the Yom Kippur War one of the hottest episodes in the Cold War. Israeli general Ariel Sharon made a decisive breakthrough on October 19th, passing through the Suez Canal, with nearly 300 tanks. On October 16th, the Gulf’s six oil-exporting countries convened in Kuwait to impose a price of $5.12 for a barrel of Arabian light crude. The following day, as the Yom Kippur War turned in Israel’s favor, they agreed to reduce their production by 5% a month until Israel withdrew. On October 18th, King Faisal announced an immediate 10% reduction until the US stopped helping the Israelis. Three days later, while Israeli troops had Cairo in their sights, Israel accepted a cease-fire negotiated by the US and the USSR. The true oil crisis began in December when the shah of Iran again doubled the price of oil. When he obtained the support of the most radical Arab exporters – Iraq, Algeria, and Libya, the Saudis had no alternative but to go along. Later, it came out that American oil interests, represented by Henry Kissinger, had asked for the shah’s price increase, so that they could finance such new projects.
Oil now provided almost half the energy produced by humankind, having usurped coal as the primary energy source ten years earlier. The industrial powers still used three-quarters of the oil produced. The Arab oil embargo and the shah’s price increase caused two years of violent recession throughout the capitalist world. OPEC was blamed, even though it was the depletion of the United States’ principal oil zones that was responsible.
The oil crisis created two long-lasting effects that the world economy never got rid of: debt and mass unemployment. It also fanned the flames of inflation. Growth was more sparing and selective, and there was more competition. Many governments resorted to borrowing for the first time since the war, and massive public debt entrenched itself. There was an explosion of debt in developing countries, where the Green Revolution had created a strong need for petroleum products, leading the International Monetary Fund and the World Bank to impose drastic structural adjustment programs. Big Oil’s profits soared, however, as new oil sources were explored in Alaska and the North Sea.
The decline of the Alaska fields began in 1988, and North Sea production peaked in 1999 off the coast of the United Kingdom and 2001 for Norway. Meanwhile, the formidable Saudi fortune, which increased dramatically after 1973, was mostly redirected to the United States, in the form of US treasury bills or certificates of deposit in private banks. As early as 1974, the money that flowed from Saudi Arabia to the US, through financial organizations such as Chase Manhattan and Citibank, was at least twice what America had paid for Saudi oil. As a key part of this phenomenon, the US became the primary arms supplier for the Middle East, starting with Iran and Saudi Arabia.
After Nixon was forced to resign on August 9, 1974, Gerald Ford, his vice president, took over. Ford’s cabinet chief, Donald Rumsfeld, became secretary of defense, and his assistant and protégé Dick Cheney took the position of primary adviser to the president. George H.W. Bush was appointed head of the CIA. At the same time, in Texas, Jim Bath, an aircraft merchant close to the Bush family, was connecting with a son of Mohammed bin Laden, a multibillonaire and intimate friend of King Faisal of Saudi Arabia. Bath, who was perfectly integrated into the petroleum network, and went duck hunting with George H.W. Bush’s friend and business partner, James Baker, a business lawyer, ending up managing the American interests of both Salem bin Laden and Khalid bin Mahfouz, the heir of the Saudi bank in charge of managing the royal fortune.
Whatever we may think of the synchronicity between George H.W.’s becoming head of the CIA and Jim Bath’s business links, early 1976 marked a turning point in the relations between the kingdom of Saudi Arabia and American espionage. This was marked by the creation of the Safari Club, a secret group of intelligence services united in the fight against Communism, that outsourced to Riyadh and wealthy Middle Eastern princes a share in financing the Cold War. Saudi Arabia especially served as a covert funding source for American and French counterinsurgency operations. An embarrassing gap, obviously tolerated, soon appeared, however, between Saudi secret aid to American allies in the developing world and aid the princes gave to anti-Zionist groups that Washington considered terrorists, beginning with Yasser Arafat’s Palestine Liberation Organization (PLO).
In 1979, during the Carter administration, Iran was taken over by Islamic revolutionaries who vowed to make America pay for having murdered Iranian democracy 25 years earlier and then arming and training Savak, the shah’s barbaric political police. At the same time, in Saudi Arabia’s Holy City of Mecca, Sunni terrorists took hundreds of pilgrims hostage and demanded the immediate removal of the Saudi royal family, who they accused of selling themselves to America. Soviet troops entered Afghanistan, fighting Muslim rebels undermining the Communist government. Funding Afghan resistance with the United States’ blessing, the House of Saud believed this was an opportunity to reinstate its honor in the eyes of a new generation of Muslim radicals, headed by Osama bin Laden. In September 1980, Saddam Hussein’s Iraq attacked Khomeini’s Iran, beginning an 8-year war. The American strategy for its global energy structure had just birthed its three worst monsters: Iran’s Islamic Revolution, Salafi jihadism, and the military adventurism of Saddam Hussein.
The Iranian Revolution triggered a diplomatic and political crisis in the United States, which was a deciding factor in Ronald Reagan’s overwhelming victory in the November 1980 presidential election. Fearing that the Carter administration would rescue the hostages before the election, Reagan’s campaign team initiated parallel negotiations with Khomeini’s regime. Iran agreed to hold the hostages captive until after the election in exchange for spare parts (delivered by Israel) needed for the war against Iraq. The hostages were released on January 20, 1981, five minutes after Reagan was sworn into office.
Many believe the long Iran-Iraq war was a lose-lose game orchestrated by the Reagan administration to keep both countries in check. The war began in September 1980, when Saddam Hussein attacked on a 650-kilometer front. The two countries attacked each other’s oil industries, and in a few weeks Iraqi production collapsed and Iranian extractions, already harmed by the revolution and the departure of foreign engineers, slowed down even more. The US delivered arms to Iran via Israel between 1980 and 1983, and in 1986 sold anti-tank and ground-to-air missiles directly.” This led to the Iran-Contra scandal, since a portion of the proceeds from these heavy weapons sales was used to illegally fund forces trying to topple the Nicaraguan Sandinista government. The US also helped Iraq, allowing Saddam Hussein to use chemical weapons and even selling them to him.
Auzanneau makes the case that the US was instrumental in the fall of the Soviet Union in 1991, blocking the construction of a pipeline to provide Russian oil to Europe and flooding the oil market with Saudi Arabian crude. This caused the Soviet Union’s main source of foreign currency to fall by two thirds. The US had also led the USSR into Afghanistan and, with the help of Saudi Arabia, contributed to its defeat there. “The clandestine cooperation between the US and Saudi Arabia, initiated at the end of the 1970s with the creation of the Safari Club, radically intensified during the Reagan administration.” The Saudi emissary coordinating all this, a close friend of George H.W. Bush, was King Fahd’s nephew, Prince Bandar. “To transfer the funds necessary for its secret war to Pakistan’s Inter-Services Intelligence (ISI) and the various guerillas in Afghanistan, the CIA used accounts in the Bank of Credit and Commerce International (BCCI), founded in 1972 by Agha Hasan Abedi, a Pakistani well connected to the largest fortunes in the Persian Gulf. On July 5, 1991, it was closed by authority of the Bank of England because of its suspect accounting measures, Ponzi schemes, and involvement in laundering hundred of millions of dollars from all forms of organized crime, including arms trafficking, drug trafficking, prostitution, and corruption, as well as financing terrorist groups. BCCI had counted powerful Saudi businessmen among its major shareholders, beginning with Kamal Adham, Turki al Saud’s predecessor as the director of Saudi intelligence. William Casey, US CIA director and friend of Ronald Reagan, frequently met Hasan Abedi at Washington’s Madison Hotel in order to use the BCCI’s services for clandestine operations, and BCCI’s accounts were also used to transfer funds from the White House to the Nicaraguan contras.
The Senate investigation report published in December 1992 on all this was a terrible source of embarrassment for the CIA and the H.W. Bush Justice Department, which had turned a blind eye as evidence of the scandal’s enormity accumulated. Among other things, the American secret services were accused of using a series of BCCI accounts to finance the war in Afghanistan by laundering opium money. According to historian Alfred McCoy, ‘the Pakistan-Afghanistan borderlands became the world’s top heroin producer, supplying 60% of US demand. In Pakistan, the heroin-addict population went from near zero in 1979 to 1.2 million by 1985. As the mujahedeen guerillas seized territory in Afghanistan, they ordered peasants to plant opium as a tax. Across the border in Pakistan, Afghan leaders and local syndicates under the protection of Pakistan intelligence operated hundreds of heroin laboratories. During this decade of wide-open drug dealing, the US Drug Enforcement Agency in Islamabad failed to instigate major seizures or arrests.’ In 1995, Charles Cogan, the CIA’s former head of operations in Afghanistan, admitted that the United States had knowingly overlooked this heroin trafficking, but justified it by the results – ‘The Soviets left Afghanistan.’
H.W.’s eldest son, George W., was able to work nearly full-time on his father’s 1988 presidential campaign because his small, debt-ridden oil company, Spectrum 7, had been purchased by Dallas-based Harken Energy two years earlier for $2.25 million. By the terms of the transaction, W. received $600,000, a seat on Harken’s board of directors, and a consulting post paying more than $50,000 a year. The main shareholders in Harken included Alan Quasha, son of an influential friend of Ferdinand Marcos, the Philippines’ corrupt pro-American dictator, and Harvard University’s investment funds, directed by Robert G. Stone, Jr., son-in-law of a cousin of Nelson and David Rockefeller and a friend of the Bush family. In spite of its powerful partners, Harken was in bad shape, like Spectrum 7 having dug mostly dry wells. Yet in January 1990, a year after George H.W. Bush arrived in the White House, the small company, which had never drilled either abroad or at sea, astounded the petroleum world by winning, at Amoco’s expense, a contract for prospecting off the coast of Bahrain. The three key characters in Harken’s successful bid – a Houston oil consultant, the American ambassador to Bahrain, and the prime minister of Bahrain – were all connected to the BCCI. All this enabled George W. to buy the Dallas baseball team, the Texas Rangers, his first step in a dazzling political ascension that would make him the governor of Texas in 1995.
The collaboration between Exxon and JP Morgan during the Reagan years led to the invention of ‘credit default swaps,’ a financial derivative that became famous during the 2008 financial crisis. JP Morgan invented credit default swaps to allow Exxon to raise the funds necessary to pay a record $5 billion fine levied by the state of Alaska after the 1989 Exxon-Valdez oil spill. In 2000, JP Morgan merged with the historic Rockefeller enterprise, the Chase Manhattan Bank. During the 1980s, multinational corporations, in particular the oil majors, had grown to such tremendous proportions that they were clamoring for colossal investments beyond the capacities of wealthy capitalist families. Capitalism needed to access the savings of ‘everyman.’ Expedited by computers, this involuntary ‘democratization’ of financial investment led to the Black Monday crash on October 19, 1987, the culmination of a fevered period of leveraged buyouts and mergers. The largest mergers were in the American oil industry. In March 1984, Gulf Oil, the company the Mellon family had created at the turn of the century, was swallowed by Chevron, the former SoCal. And on December 31, 1984, Texaco acquired Getty Oil, the company created by J. Paul Getty, the richest man in the world since John D. Rockefeller. Exxon, meanwhile, spent billions of dollars purchasing its own shares to protect itself against takeover. American oil companies were discovering that it was easier to buy competitors and take over their oil reserves than it was to acquire new ones.
Saudi Arabia and Kuwait, which had largely financed the Iraqi army so that it would put down Shiite rebellions against Sunni Arab princes, now refused to erase any portion of the debt Iraq had incurred ($90 billion by the end of the Iran-Iraq war). Baghdad began its revenge by accusing Kuwait of having used slant drilling to steal $2.4 billion of crude oil from Iraqi oil fields. Then, on August 2, 1990, the Iraqi army invaded Kuwait, allowing Saddam to control a fifth of the world’s petroleum, nearly as much as Saudi Arabia. On August 5th, George H.W. Bush announced that this Iraqi ‘aggression…would not stand.’ Saddam had offered to negotiate a withdrawal, but Washington warned its allies and Arab clients not to meet with him and tried to convince everyone that the Iraqi leader intended to invade the Saudi kingdom. The Saudis, in return, agreed to host American armed forces, which they hoped would destroy Saddam’s regime.
From August 1990 to the end of what would become the Gulf War, the Bush administration rejected 11 peace proposals put forward not only by Iraq, but also by Jordan, Libya, Morocco, and the two main suppliers of Saddam Hussein’s army – the Soviet Union and France. From August to December of 1990, Washington assembled the largest military coalition since the Second World War: 31 nations, dominated by the American military, which supplied more than half of the nearly one million troops. In early October 1990, while hundreds of thousands of American soldiers participated in Operation Desert Shield, which aimed to protect Saudi Arabia against an Iraqi threat that appeared increasingly illusory, 70% of Americans favored negotiations and rejected recourse to a military option. On August 11, 1990, Kuwait’s exiled ruling family hired the largest PR firm in the world, however, and their campaign began with the shocking testimony of a 15-year-old Kuwaiti girl before the US Congress. Nayirah, who didn’t give her family name or speak under oath, told the sub-committee on human rights that she’d seen Iraqi soldiers in a maternity ward in Kuwait City pluck newborns from incubators and throw them ‘on the floor to die.’ H.W. referred to the story many times, invoking the Holocaust and comparing Saddam Hussein to Hitler. After the war,it was revealed to be pure fiction, purveyed by the daughter of Kuwait’s ambassador to the United States, a member of the Kuwaiti royal family, to reverse American public opinion, which favored a war against Saddam Hussein in early January 1991.
On January 17, 1991, the war opened with a 46-day bombing campaign of colossal intensity. Beyond its goal of destroying Saddam Hussein’s war machine, this was aimed at destroying infrastructure vital to the Iraqi population – electric power plants and refineries. Iraq was deprived of 92% of its electricity production capacity and 80% of its fuel production capacity. American bombs also targeted petrochemical plants, cement factories, aluminum, textile, electric cable, medical equipment facilities, and radio and television stations. Considered a model of development in the Middle East, the country was set back more than half a century, unable, among other things, to filter drinking water or operate the sewers. Not only did the destruction of the Iraqi electrical system greatly overstep the UN Security Council resolution authorizing the war, it violated the Geneva Conventions, which made it illegal to interfere with or deprive civilians of vital resources.
On February 15th, when Baghdad announced that it would comply with the UN resolution and withdraw from Kuwait, Bush shunned the offer, calling it a ‘hoax.’ A few days later, a land offensive, Desert Storm, was launched from Saudi Arabia. Iraqi troops fled from Kuwait City toward Basra any way they could, but between 25 and 50 thousand were killed during a period of 48 hours. The carnage passed almost unnoticed in the Western media, since journalists had no other way to access the front than to be embedded in units chosen for them by the military. Encouraged by American leaflets, Iraqi rebels – Kurds in the north and Shiites in the south – rose up. They not only received no help from the American coalition, but General Schwarzkopf authorized the defeated Iraqi army to use attack helicopters against them. Iraqi repression of the rebellions caused between 20 and 100 thousand deaths. In the middle of winter, nearly a million Kurds took refuge in the mountains of Turkey and Iran. Between 15 and 30 thousand of them died on their escape route or in the refugee camps. Brent Scowcroft, adviser to the Bush administration, later said, ‘The trick was to damage Saddam’s offensive capability without destroying the balance between Iraq and Iran.’
Saddam Hussein’s departure wasn’t the object of the ongoing embargo either. It was ostensibly intended to force the Iraqi leader to accept the destruction of his biological and chemical weapons, his nuclear program, and his medium- and long-range missiles. The destruction of Iraq’s famous ‘weapons of mass destruction,’ largely acquired from the US during the war against Iran, was largely accomplished by the mid-1990s, and in October 1998, the International Atomic Energy Agency found that Iraq’s nuclear program no longer existed. Sanctions continued, however, lasting until the fall of the regime in May 2003 and bringing to its knees the Iraqi population. Iraq was rendered incapable of repairing the infrastructure destroyed in the coalition bombing campaign of early 1991. In 1996, all Iraqi wastewater treatment plants remained out of commission – sewage was being dumped in the rivers that were used for drinking water. In 2002, UNICEF estimated that 40% of the water consumed in the city of Basra consisted of untreated wastewater. Cholera, typhoid fever, and severe diarrhea was rampant in Iraqi cities. Hunger also wreaked havoc, as Iraqi fields suffered from a lack of irrigation, spare parts for farm equipment, fertilizer, and pesticides. The harvest was only a third of what it should have been. In 1999, UNICEF estimated that a quarter of Iraqi newborns were underweight, and that a quarter of children under five – a million kids – suffered from chronic malnutrition. Hospitals were also denied essential equipment, including vaccines and medicines. The United Nations’ two successive humanitarian coordinators in Iraq, Irish Denis Halliday and German Hans von Sponeck, resigned on October 1, 1998 and February 2, 2000, respectively, in protest against the Security Council’s sanctions, described by Halliday as ‘genocidal.’
On August 7, 1998, after two terrorist attacks in Saudi Arabia, Osama bin Laden ordered the massacre of more than 200 people in a double car bomb attack against the American embassies in Dar-es-Salaam, Tanzania and Nairobi, Kenya. The date chosen was the 8thanniversary of American soldiers’ arrival in Saudi Arabia.
The practice of ‘revolving doors,’ by which powerful American business managers switch between working in the public and private sectors, had been in place a long time when a new investment company began taking ‘access capitalism’ to a new level. The Carlyle Group was founded in 1987 by former Carter administration policy advisor David Rubenstein, who made it the leader of buying and selling companies not listed on the stock exchange, but in ‘federally regulated or impacted industries such as aerospace/defense.’ In January 1989, Frank Carlucci became Carlyle’s CEO days after having left his seat as President Reagan’s defense secretary. During his time at Princeton University, Carlucci had counted among his comrades James Baker and Donald Rumsfeld (his roommate). George W. Bush, who clearly had access to government, was also on Carlyle’s board of directors, and his father, H.W., became associated with the company soon after he left the presidency.
In 1993, when Carlyle took control of Vinnell, the security company that, among other things, trained the Saudi national guard, it was poised to become one of the biggest arms traders in the world. That same year, the company recruited a man who probably had the most charmed Washington career of anyone who hadn’t been elected: James Baker, undersecretary of commerce for Ford, cabinet chief and secretary of the treasury for Reagan, and secretary of state and cabinet chief for H.W. Bush. Carlyle landed an even greater coup in 1995 when it recruited ex-president Bush himself as an adviser, and some time later, former British prime minister John Major – both men with longtime ties to Arab oil princes. That same year, the symbiosis in the oil money crucible led several members of the bin Laden family to invest directly in Carlyle.
The idea that societal development rests essentially on economic growth – itself dependent on abundant fossil energy – was questioned for the first time during the first Earth Summit, organized by the United Nations in Rio de Janeiro in June 1992. Many there saw ‘sustainable development’ as an oxymoron, and brought up the concept of the ecological footprint. According to researchers, the earth’s capacity had been exceeded during the 1970s, mainly because of the developed world’s over-use of resources. The industrial nations’ lifestyle, the focal point of economic development, to these folks, had proven to be a fatal lure, its promotion an irresponsible and untenable promise.
Already identified as a potential risk by the Club of Rome report 20 years earlier, the greenhouse effect of burning hydrocarbons and coal appeared on the radar of major media for the first time on June 24, 1988 when scientist James Hansen testified before a US congressional committee. Hansen, director of the NASA Goddard Institute for Space Studies in New York, submitted that there was a 99% probability that the warming observed in recent years was the result of the combustion of carbon energy. On December 6, 1988, the UN General Assembly established the Intergovernmental Panel on Climate Change (IPCC) to provide ‘internationally coordinated scientific assessments of the magnitude, timing, and potential environmental and socio-economic impact of climate change and realistic response strategies.’ A year and a half later, in May 1990, the IPCC released its first report, immediately challenged by the oil industry. Eighty-three countries signed the Kyoto Protocol on climate change on December 11, 1997. The Clinton administration was one of the signatories, but on July 25thof that year the senators of the number-one world industrial power – the oil country where the two largest companies were General Motors and Exxon – had already voted for a resolution prohibiting ratification of the protocol because of the harm it would do to the US economy. A New York Timessurvey conducted on the eve of the Kyoto summit indicated that 65% of Americans wanted their country to reduce its greenhouse gas emissions as quickly as possible, however, ‘regardless of what other countries do.’
On December 1, 1998, Exxon, Standard Oil’s eldest daughter, announced that it was absorbing its little sister, Mobil. The deal, at $80 billion in shares, recreated the largest private enterprise in the world. The megamerger was in part a response to the merger of BP and Amoco (formerly Standard Oil of Indiana) announced four months earlier. At the dawn of the new millennium, after many vicissitudes, the Western oil industry found itself once again dominated by three companies almost identical to the behemoths that prevailed on the eve of the First World War: ExxonMobil, BP-Amoco, and Shell, direct descendants of Standard Oil, the Anglo-Persian Oil Company, and the apparently unalterable Royal Dutch Shell. In 1999, Total absorbed the Belgian Petrofina and the formerly public French company, Elf Aquitaine. Finally, after purchasing Gulf Oil in 1984, in October 2000, Chevron consumed the other great Texas company, Texaco. In September 2000, Chase Manhattan Bank bought JP Morgan for $33 billion in shares, giving birth to JP Morgan Chase. This united two banks that for many years had served Big Oil, acting both as financiers and tributaries for the profits of the largest and richest of all industries. JP Morgan Chase competed successfully with Citigroup, another Wall Street superheavyweight created two years earlier.
When George H.W. Bush left the White House in 1993, the United States for the first time imported more oil than it produced. Five years later, in 1998, US production continued to decline, supplying no more than 40% of American consumption. This reached the unprecedented level of 20 million barrels a day in 2003, no les than a quarter of the world’s production.
On January 26, 1998, a neoconservative think tank called Project for the New American Century (PNAC) sent President Bill Clinton an open letter calling for the ‘removal of Saddam Hussein’s regime from power’ in Iraq. A rising force within the Republican Party, the neoconservatives wanted the United States to dominate the world for another century. Among the signatories were three ‘hawks’ of earlier Republican administrations: Richard Perle, Paul Wolfowitz, and Donald Rumsfeld. Dick Cheney, Halliburton’s CEO since 1995, belonged to the group, consisting mainly of Pentagon alumni like himself, that had founded the PNAC in 1997. Probably more than any of the signatories of the 1998 letter to President Clinton, he was aware of the Persian Gulf’s vital role for the future of the world’s petroleum reserves. In 1992, as secretary of defense, he’d supervised Paul Wolfowitz’s draft of a ‘defense planning’ policy statement stating that ‘in the Middle East and southwest Asia, our overall objective is to remain the predominant outside power in the region and preserve US and Western access to the region’s oil.’ (The world’s largest petroleum service company, Halliburton’s primary business was to design, sell, and install the equipment used to delay the decline of oil fields as they reached maturity.)
On July 25, 2000, presidential candidate George W. Bush surprised the political world by announcing Dick Cheney as his vice-presidential running mate. No US government, not even Warren Harding’s in the early 1920s, had been as close to Big Oil as the one Bush and Cheney established in the aftermath of their controversial victory in the presidential election of November 7, 2000. Donald Evans, Bush’s crony and the CEO of a Midland, Texas oil company, was appointed secretary of commerce, and Bush appointed Condoleeza Rice as head of the National Security Council. She was formerly a part of George H.W. Bush’s administration and had served on Chevron’s board of directors. Also in the first ranks of the Bush administration was Thomas White, secretary to the army and former senior officer of Enron, a Houston firm that traded natural gas and produced electricity. Kenneth Lay, Enron’s CEO, was close to the Bush clan, and one of George W.’s most generous campaign donors. The stunning revelation of his firm’s fraudulent accounting practices – which implicated the highest executives of Wall Street’s finest jewels, beginning with JP Morgan Chase and Citigroup – led Enron stocks to collapse that summer.
In the first days of the new administration, Cheney established the Energy Task Force to seek advice from the masters of the American energy industry. After a long legal battle, certain documents that had circulated within the task force were made public. The nation’s main environmental organizations, some of which had brought the lawsuit to release the documents, had been kept out of the task force’s secret consultations. Among the documents, dating back to March 2001, were maps of the Middle East and in particular of Iraqi oil resources – fields, pipelines, refineries, terminals, and areas of exploration, as well as a table analyzing Saddam Hussein’s relationships with European and Chinese oil companies.”
The 28thchapter of Auzanneau’s book is entitled “September 11, 2001: A Rogue Pearl Harbor. Nearly 3,000 people died in the September 11thattacks. Fifteen of the 19 hijackers were Saudi nationals. It was the deadliest foreign attack ever perpetrated on American soil. In the days following the attacks, Richard Clarke, the White House director of counterterrorism, authorized the departure from American territory of at least 160 Saudi nationals, including many members of the royal family and several members of the bin Laden family. None were interrogated before leaving, and some of their planes took off during a period when the FAA was prohibiting all plane travel.
Al Qaeda leader Abu Zubaydah, captured in March 2002 by Pakistani commandos and American special forces, told investigators that in the late 1990s, Osama bin Laden had made a pact with the House of Saud in order to obtain its support, in exchange for the assurance that Al Qaeda would spare it. The contact Zubaydah provided was Prince Ahmed bin Salman al Saud, son of Salman al Saud, who ascended the throne in January 2015. The prince, age 43, died unexpectedly in his sleep a year after 9-11. In the days that followed, two other Saudi princes named by Zubaydah also died, one in a car accident on the way to Prince Ahmed bin Salman’s funeral, and the other of dehydration in the desert.
For several months after 9-11, the White House tried to restrict its investigation to secret congressional committees with limited power, until, pressured by lawmakers and the victims’ families, an ad hoc national commission was established on November 27, 2002. President Bush announced that Henry Kissinger would chair the commission, but he resigned from the position after a group of the victims’ widows visited him and asked if his international relations company had any Saudi clients. The chairmanship of the 9-11 Commission was finally given to a friend of Bush’s father, former Republican governor of New Jersey Tom Kean, who by his own admission was ignorant of intelligence and national security issues. To analyze the circumstances of the worst crime ever committed in the US, the commission had a budget of $3 million, thirteen times less than was allotted for the investigation of the space shuttle Challengerexplosion and half as much as had been spent on the Monica Lewinsky scandal. In January 2003, the key position of executive director of the commission was given to Philip Zelikow, a professor of history and political science from the University of Virginia, a Texan from the world oil capital, Houston, who’d worked with Condoleeza Rice on George H.W. Bush’s National Security Council. The conclusions of the commission, published in July 2004, were very lenient toward Condoleeza Rice and the Bush administration, even though they’d ignored numerous specific warning signs in the months preceding the attacks. Various potentially problematic aspects of the attacks were also left out of the report, including any mention of tower #7 in the World Trade Center complex, the third building that collapsed on September 11th, and the discovery of melted steel at ground zero. These were elements that might have indicated that there had been a controlled demolition of the towers from ground level.
The press was also wondering about the swiftness with which the Bush administration attacked Afghanistan, where the Taliban regime had harbored Osama bin Laden’s terrorist organization. It had also been negotiating with Unocal for a northern pipeline project to bring natural gas from the Caspian Sea to Turkmenistan through Afghan territory. Once the Taliban were driven out of Kabul in December 2001, the Bush administration supported the rise to power of future Afghan president Hamid Karzai, a former Unocal consultant. Zalmay Khalilzad, an American strategist of Afghan origin, sent to assist Karzai, was also an endorser of the Project for the New American Century and had been employed as a consultant by Unocal. The pipeline project briefly resurfaced in 2005, with President Karzai’s blessing, but the seemingly perpetual war that ravaged Afghanistan blocked the path to its construction. Finally, a report published by the PNAC in September 2000, analyzing the situation in the Persian Gulf, bemoaned the fact that the process of dominating the area would take a lot of time and resources, then evoked a possible alternative: ‘The process of transformation is likely to be a long one, absent some catastrophic and catalyzing event like a new Pearl Harbor.’ On the evening of September 11, 2001, President Bush noted in his diary, ‘The Pearl Harbor of the 21stcentury took place today.’”
Having raised these suspicions, Auzanneau then demonstrates that the Iraq War was “a war for oil. The country sat on what constituted by far the most important reserves of known un- and under-exploited crude oil reserves on earth, and Saddam Hussein had announced his intention of selling it in euros rather than dollars. On June 29, 2009, in the heart of the protected ‘Green Zone,’ the new Iraqi government opened the bidding on the exploitation of Iraqi oil. After months of bidding, China had gained control of almost a quarter of the petroleum projects in Iraq and soon received nearly half of the oil extracted.
The price of crude oil shot up as never before from 2005 to 2008, rising from $50 to $100 a barrel. In 2008, barrel prices began by transcending the $100 mark. Then, after a record barrel price of $147 on July 11th, the value collapsed, precipitated by recession and the implosion of speculative capital. By December, prices had fallen to $45.” Auzanneau says its “quite possible” that there was “a cause-and-effect link between the continuing rise in oil prices and the subprime crisis. The rise in the cost of gas and heating oil broke the budgets of many modest, indebted American households, some of which may have been forced to miss their mortgage payments. The rise in the price of oil also caused the price of many other commodities, including food – there were food riots in developing countries where people could no longer afford to buy it.
In November 2010, the International Energy Agency announced that the peak of conventional, classic crude oil production (still four-fifths of the world’s production) had been reached. Any future increase in production would have to come from new, extreme, and unconventional sources. That same year, Canadian oil sands were the number one source of petroleum imports for the United States. The boom of shale or ‘tight’ oil had also begun, and, thanks to hydraulic fracturing (‘fracking’), US natural gas extraction was increasing. The economic viability of fracking tight hydrocarbons, like its ecological impact, is the source of much debate, especially since to provide a high extraction rate, it’s necessary to continuously drill new wells.
Despite the spectacular initial takeoff of unconventional petroleum in 2011, conventional oil continues to provide approximately 80% of the world’s liquid fuel supply. According to Olivier Rech, who was responsible for oil forecasts during the drafting of the IEA’s 2008 report, world production will probably enter decline before 2020.
The laws of nature appear to be on the brink of imposing a radical change in the course of the brief history of human technology. Humanity will have to realize that only solar energy will assure its long-term survival. Preserving the climate also means leaving the majority of remaining fossil fuel reserves underground.”
In “The Big Picture,” posted on resilience.org on 12-17-18, Richard Heinberg explains why we need to replace fossil fuels with other energy sources as soon as possible, then adds that “doing so fully would require massive investment, not just for building solar panels, wind turbines, or nuclear reactors (there are some serious problems with this latter option), but also for the retooling of manufacturing, transportation, buildings, and food systems to run on electricity instead of solid, liquid, or gaseous fuels. An energy transition is needed, but it’s not happening at even nearly the pace that would be required in order to forestall catastrophic climate change or to prevent economic decline resulting from the depletion of the world’s highest quality oil, coal, and gas resources. Industrial society’s failure to make this energy transition is no doubt due not just to well-funded opposition by the fossil fuel industry, but also to the enormous technical challenge posed, and to the failure of policy makers to champion and implement the carbon taxes and alternative energy subsidies that would be needed. And so we accelerate toward ecological and economic ruin.
This is fairly typical of what happens toward the end of the conservation phase of every civilization’s adaptive cycle. Each problem that arises, taken by itself, is usually solvable, at least in principle. But, as problems accumulate, leaders who are accustomed to (and benefit from) the status quo grow increasingly reluctant to undertake the changes to systems and procedures that would be required in order to address worrisome trends. And as those trends are ignored, the level of effort and discomfort needed to reverse them soars. Once solving problems requires too much perceived sacrifice, the only realistic ways to deal with them are to deny their existence or to blame others for them. Blame has the advantages of enabling leaders to look as though they’re actually doing something, and of winning loyalty from their followers. But it does nothing to actually stave off snowballing crises.
It’s easy enough to see how elites could lose touch with reality and miss signals of impending collapse. But why would everyone else follow suit? Recent discoveries in neuroscience help explain why it’s hard for most of us to grasp that we’re on an unsustainable path.
We humans have an understandable innate tendency, when making decisions, to give more weight to present threats and opportunities than to future ones. This is called discounting the future, and it makes it hard to sacrifice now to overcome an enormous future risk such as climate change. The immediate reward of vacationing in another country, for example, is likely to overwhelm our concern about the greenhouse gas footprint of our airline flight. Multiply that future-discounting tendency in one instance by the billions of individual decisions with climate repercussions and you can see why it’s difficult to actually reduce our total greenhouse gas emissions.
We humans are also wired to respond to novelty – to notice anything in our environment that’s out of place or unexpected and that might signal a potential threat or reward. Most types of reward increase the level of the neurotransmitter dopamine within the brain. Experiments have found that if an animal’s dopamine receptor genes are removed, it explores less and takes fewer risks, and without some exploration and risk taking, individuals have reduced chances of survival. But the human brain’s dopamine reward system, which evolved to serve this practical function, can be hijacked by addictive substances and behaviors. This is especially problematic in a culture full of novel stimuli specifically designed to attract our interest, such as the hundreds of advertising messages the average child sees each day. We’ve become addicted to stimuli that our culture has multiplied and refined specifically for the purpose of grabbing our attention (for fun and profit) to such a degree that we barely notice long-term trends that are as threatening as a charging rhino.
The power holders in society incentivize smart people below them in rank and wealth to normalize the unsustainable, deny impending consequences, and distract everyone from worsening contradictions. Economists who claim that economic growth can continue forever on a finite planet win Nobel Prizes. Politicians who argue that climate change is a hoax attract big campaign contributions. Pundits and entrepreneurs advance along their career paths by asserting that society can grow its way out of climate change and resource depletion traps through “decoupling” (service economies, it is claimed, can expand in perpetuity without requiring additional energy or physical resources). Technology mavens win fame and glory by informing us that artificial intelligence, 3D printing, or Blockchain will usher in the “singularity,” at which point no one will have to work and all human needs and desires can be satisfied by self-reproducing machines.
Denial comes in shades, some of them quite benign. Many thoughtful and informed people acknowledge the threats of climate change, species extinctions, soil depletion, and so on, and insist that we can overcome these threats if we just try harder. Elect different, more responsible politicians. Donate to environmental nonprofits. Drive an electric car. Install rooftop solar panels. Eat organic food. Shop at local farmers markets. These are all actions that move society in the right direction, but and there’s no point in discouraging them, but those who propose them are denying the reality that the overall trajectory of modern industrial society is beyond our control, and that it leads inexorably toward overshoot and collapse.
If all this is true, we now face more-or-less inevitable economic, social, political, and ecological calamity. Although no one can possibly predict at this point just how complete and awful collapse might actually be, even human extinction is conceivable (though no one can say with any confidence that it’s likely, much less inevitable). This is more than a fragile human psyche can bear. One’s own mortality is hard enough to contemplate. It’s no wonder therefore that so many of us opt for denial and distraction.
Our reasoning shuts down when we assume that collapse means a sudden and complete dissolution of everything meaningful. In reality, however, there are degrees of collapse, and history shows that the process has usually taken decades and sometimes centuries to unfold, often in stair-steps punctuated by periods of partial recovery. Further, it may be possible to intervene in collapse to improve outcomes – for ourselves, our communities, our species, and thousands of other species. After the collapse of the Roman Empire, medieval Irish monks may have “saved civilization” by memorizing and transcribing ancient texts. Could we, with planning and motivation, do as much and more?
Many of the things we could do toward this end are already being done in order to avert climate change and other converging crises. Again, people who voluntarily reduce energy usage, eat locally grown organic food, make the effort to get to know their neighbors, get off the consumer treadmill, reduce their debt, help protect local biodiversity by planting species that feed or shelter native pollinators, use biochar in their gardens, support political candidates who prioritize addressing the sustainability crisis, and contribute to environmental, population, and human rights organizations are all helping moderate the impending collapse and ensure that there will be more survivors. We could do more. Acting together, we could start to re-green the planet; begin to incorporate captured carbon not only in soils, but in nearly everything we make, including concrete, paper, and plastics; and design a new economic system based on mutual aid rather than competition, debt, and perpetual growth. All of these efforts make sense with or without the knowledge that civilization is nearing its sell-by date.
However, the Big Picture (an understanding of the adaptive cycle, the role of energy, and our overshoot predicament) adds both a sense of urgency, and also a new set of priorities that are currently being neglected. For example, when civilizations collapse, culturally significant knowledge is typically lost. It’s probably inevitable that we’ll lose a great deal of our shared knowledge during the coming centuries. Much of this information is trivial anyway (will our distant descendants really suffer from not having the ability to watch archived episodes of ‘Let’s Make a Deal’ or ‘Storage Wars’?). Yet people across the globe now use fragile storage media – computer and server hard drives – to store everything from music to books to instruction manuals. In the event that the world’s electricity grids could no longer be maintained, we’d miss more than comfort and convenience; we could lose science, higher mathematics, and history.
It’s not only the dominant industrial culture that is vulnerable to information loss. Indigenous cultures that have survived for millennia are being rapidly eroded by the forces of globalization, resulting in the extinction of region-specific knowledge that could help future humans live sustainably.
Upon whom does the responsibility fall to curate, safeguard, and reproduce all this knowledge, if not those who understand its peril?
We at the Post Carbon Institute (PCI) have been aware of the Big Picture since the founding of the organization 15 years ago. We’ve been privileged to meet, and draw upon the insights of, some of the pioneering ecologists of the 1960s, ’70s, and ’80s who laid the basis of our current understanding of resilience science, systems thinking, climate change, resource depletion, and much more. And we’ve tried to convey that understanding to a younger generation of thinkers and activists. Throughout this time, we have continually grappled with the question, “What plan for action makes the most sense in the context of the Big Picture, given our meager organizational resources?”
After protracted discussion, we’ve hit upon the four-fold strategy described below.
Encourage resilience building at the community level.
Resilience is the capacity of a system to encounter disruption and still maintain its basic structure and functions. When it is in its conservation phase, a system’s resilience is typically at its lowest level. If it’s possible at this point to build resilience into the human social system, and ecological systems, then the approaching release phase of the cycle may be more moderate and less intense.
The community is the most available and effective level of scale at which to intervene in human systems. National action is difficult these days, and not only in the United States: discussions about nearly everything quickly become politicized, polarized, and contested. It’s at the community level where we most directly interact with the people and institutions that make up our society. It’s where we’re most affected by the decisions society makes: what jobs are available to us, what infrastructure is available for our use, and what policies exist that limit or empower us. And critically, it’s where the majority of us who don’t wield major political or economic power can most directly affect society, as voters, neighbors, entrepreneurs, volunteers, shoppers, activists, and elected officials.
PCI has supported Transition Initiatives since its inception as one useful, locally replicable, and adaptable model for community resilience building.
Leave good ideas lying around.
Naomi Klein, in her book The Shock Doctrine, quotes economist Milton Friedman, who wrote: ‘Only a crisis, actual or perceived, produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.’ Klein’s point is that the key to taking advantage of crises is having effective system-changing plans waiting in the wings for the ripe moment. That’s a strategy that makes sense as society as a whole teeters on the brink of an immensely disruptive shift.
What ideas and skills need to be lying around as industrial civilization crumbles? One collection of ideas and skills that’s already handily packaged and awaiting adoption is permaculture – a set of design tools for living created by ecologists back in the 1970s who understood that industrial civilization would eventually reach its limits. Another set consists of consensus group decision-making skills. The list could go on at some length.
Target innovators and early adopters.
Back in the 1960s, Everett Rogers, a professor of communications, contributed the theory of the Diffusion of Innovations, which describes how, why, and at what rate new ideas, social innovations, and technology spread throughout culture. The key to the theory is his identification of different types of individuals in the population, in terms of how they relate to the development and adoption of something new: innovators, early adopters, early majority, late majority, and laggards.
Innovators are important, but the success of their efforts depends on diffusion of the innovation among early adopters, who tend to be few in number but exceptionally influential in the general population. At PCI, we have decided to focus our communications on early adopters.
Help people grasp the Big Picture.
Discussions about the vulnerability of civilization to collapse aren’t for everyone. Some of us are too psychologically fragile. All of us need a break occasionally, and time to feel and process the emotions that contemplating the Big Picture evokes. But for those able to take in the information, the Big Picture offers helpful perspective and provides a context for strategic action.
Earlier I explained how the findings of neuroscience help us understand why so many of us turn to denial and distraction in the face of threats to civilization’s survival. Neuroscience also teaches us that cooperative impulses are rooted deep in our evolutionary past, just like competitive ones. Self-restraint and empathy for others are partly learned behaviors, acquired and developed in the same way as our capacity for language. We inherit both selfishness and the capacity for altruism, but culture generally nudges us more in the direction of the latter, as parents are traditionally encouraged to teach their children to share and not to be wasteful or arrogant.
Disaster research informs us that, in the early phases of crisis, people typically respond with extraordinary degrees of cooperation and self-sacrifice. But if privation persists, they may turn toward blame and competition for scarce resources.
All of this suggests that the one thing that is most likely to influence how our communities get through the coming meta-crisis is the quality of relationships among members. A great deal depends on whether we exhibit pro-social attitudes and responses, while discouraging blame and panic. Those of us working to build community resilience need to avoid partisan frames and loaded words, appeal to shared values, and pull together in hopes of salvaging and protecting what’s most intrinsically valuable about our world, and perhaps even improving lives over the long term.
Hard times are in store. But that doesn’t mean there’s nothing we can do. Each day of relative normalcy that remains is an occasion for thankfulness and an opportunity for action.”
Richard Heinberg is the author of thirteen books including: Our Renewable Future: Laying the Path for One Hundred Percent Clean Energy, co-authored with David Fridley (2016), Afterburn(2015), Snake Oil(2013), and The End of Growth(2011). He’s been my go-to guru on energy and sustainability for years.