On Power: Oil Power in the Middle East

John C. Campbell

From Foreign Affairs, October 1977

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Summary:  Iran, in the view of Shah Mohammed Reza Pahlavi, has a great imperial past and a greater imperial future. In the next few years it is to assert its dominant role in the Persian Gulf region and the nearby reaches of the Indian Ocean. By 1990 it will attain the status of a Britain or a France in the global hierarchy of powers. Seeing this dream of the future, the Shah is already acting as if it were reality. Meanwhile, his neighbor across the Gulf, Saudi Arabia, talks less of empire but gradually extends its influence through the Arab world. Sheikh Ahmed Zaki Yamani, the Saudi Minister of Oil and Industry, can virtually dictate the world price of oil as long as he speaks for his king. He can lead the Organization of Petroleum Exporting Countries (OPEC) or he can break it. He can please the Americans by being "moderate" on the oil price, and at the same time can remind them that he expects them to move Israel toward a settlement acceptable to the Arabs. The United States worries about its rising imports of oil, which increase its vulnerability to the decisions of OPEC, but takes comfort in the fact that it has a friend in Riyadh.

John C. Campbell is Director of Studies and a Senior Research Fellow at the Council on Foreign Relations.

Iran, in the view of Shah Mohammed Reza Pahlavi, has a great imperial past and a greater imperial future. In the next few years it is to assert its dominant role in the Persian Gulf region and the nearby reaches of the Indian Ocean. By 1990 it will attain the status of a Britain or a France in the global hierarchy of powers. Seeing this dream of the future, the Shah is already acting as if it were reality. Meanwhile, his neighbor across the Gulf, Saudi Arabia, talks less of empire but gradually extends its influence through the Arab world. Sheikh Ahmed Zaki Yamani, the Saudi Minister of Oil and Industry, can virtually dictate the world price of oil as long as he speaks for his king. He can lead the Organization of Petroleum Exporting Countries (OPEC) or he can break it. He can please the Americans by being "moderate" on the oil price, and at the same time can remind them that he expects them to move Israel toward a settlement acceptable to the Arabs. The United States worries about its rising imports of oil, which increase its vulnerability to the decisions of OPEC, but takes comfort in the fact that it has a friend in Riyadh.

A few years ago, before the oil crisis of 1973-74, Walter Levy wrote in these pages about "oil power."1 The oil-producing countries of the Mediterranean and the Middle East, following the initiative of Libya, had demonstrated that they could dictate terms to the great international oil companies, for years the symbols of the power of Western capitalism. Whether the question at hand was the price of oil, the level of royalties and taxes, or the terms of nationalization of company properties, there was no real negotiation because the world oil trade had become a sellers' market and because national sovereignty could not be challenged. As long as the companies and the consumers were willing to pay for the oil, the governments that controlled it could establish the conditions. The governments of the consuming countries might have taken the decision to back the companies in resisting the demands they faced, using their economic and perhaps their military power if it came to a showdown. But such a decision was not seriously considered. The chief concern of the U.S. government, for one, was to maintain the good will of the Shah and of the King of Saudi Arabia, on whom it was counting to maintain the security and stability of the Persian Gulf region against any attempt by the Soviets or their local followers to upset it.

Oil power, then, was the ability not just to dictate to private companies but to influence the governments of important powers. The Arabs learned this lesson and applied it for political purposes, with their oil embargo and cuts in production and export, at the time of the October War in 1973. The members of OPEC, Arab and non-Arab, used the same occasion to quadruple the price ...

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