The thorn of Israel, wars and invasions, all relate to Western control of Arab oil and development, writes Hussein Abdallah* Was the Annapolis conference really intended to tackle the entrenched core issues of the Arab-Israeli conflict, or only to push Arab governments to improve relations with Israel and recognise it as the state for the Jewish people to the exclusion of all others, which would push Arab governments to permanently accept the millions of Palestinian refugees displaced throughout the region? Whatever was the real intention behind the conference, there is a crucial petroleum aspect to the conflict which none of the participating parties was ready to openly admit. The story goes back to the year 1948 when the US government was the first to officially recognise the establishment of the state of Israel. In the same year, the US was turning from an oil exporting country to a net oil importer. The US was also initiating the Marshall Plan to help Europe, its major commercial partner, in the reconstruction of its economy. Coal, the dominant fuel before World War II, was in short supply after the war, and both regions, on the Atlantic shores, were thirsty for Middle East oil, as they are still today. Therefore, American and European oil companies, which were in full control of most world oil supplies, were encouraged to move Middle East oil at the lowest price to feed the US and European economies. Over the period 1948 up until the mid- 1970s, Arab oil production jumped from less than one million barrels per day to more than 22 million barrels daily. However, the oil companies' grasp of Arab oil was not tight enough to guarantee permanent security of oil flowing at the lowest price, which was only 70 cents per barrel in 1948. Under the so-called "profit-sharing agreement", the share of oil producing countries did not exceed 30 cents per barrel over the quarter of a century that preceded the 1973 October War. Therefore, support by the US and other Western countries for Israel was a necessity to bolster the companies' firm grip over Arab oil. The role of Israel was, therefore, intended to weaken and detract from Arab efforts, divert with political conflicts, as represented by the occupation of Palestine, taking the focus away from the legitimate Arab share of oil wealth, valued in the consumer market at 10 times the price paid by oil companies. Oil prices were not freed of Western downward pressure until the Israeli thorn was pulled out of the Arabs back during the October 1973 War. On 8 October, Arab Gulf delegates were engaged in negotiations with major oil companies in Vienna to raise oil prices, which were eroded by early 1970s hyperinflation. The triumphant crossing of the Suez Canal by Egyptian troops, which preceded the negotiations by two days, was a decisive indication that the Arabs were regaining the integrity that was lost in June 1967. Encouraged by positive news about ground battles east of the canal, oil producer delegates in Vienna refused the oil companies' offer to raise oil prices by 46 cents a barrel, from $3 to $3.46. The companies' delegates consulted with major Western governments, guided by the US, as to whether they could raise the price further in order to reach an agreement with OPEC, but the answer was almost unanimously "No". On 15 October, an Egyptian plane left Cairo with an Egyptian delegation on board, presided over by the minister of petroleum, the late Ahmed Hilal. The plane landed in Riyadh, picking up a Saudi delegation, and finally landed in Kuwait. As is well known, oil prices are related to and greatly dependent on the political freedom of oil producers; a clear proof of this fact was the nationalisation of Iranian oil in 1951 by Prime Minister Musaddaq which disgracefully ended by his exclusion from office and being imprisoned. Therefore, and encouraged by the Egyptian victory, Arab ministers of petroleum, joined by the Iranian minister, held a historic meeting at the Kuwait Sheraton on 16 October. Without going into intricate details, the price of oil was raised, for the first time, unilaterally, by the sole decision of oil producing countries, from $3 to $11.65 starting 1974. In order to support the price increase, and also to support the war politics, it was further decided to cut Arab oil supplies by 25 per cent and to continue cuts at five per cent per month thereafter. This was only the first step on a long road to free the Arab oil industry from the control of Western companies and the harsh Israeli thorn. In a series of effective actions, supported by the October victory, the Arab oil industry was restructured so as to be subject only to Arab sovereignty. The slow step-by-step oil nationalisation that started by 25 per cent in 1972 and was to end up at only 50 per cent in 10 years, turned unilaterally by Arab governments into 100 per cent in 1974. Likewise, the oil revenues of the seven Arab members of OPEC jumped from $14 billion in 1972 to reach a peak of $213 billion in 1980. Those countries are Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Iraq, Algeria and Libya. Unfortunately, the high tide of Arab victory in October 1973, which was positively mirrored in the freeing of the Arab oil industry, did not last for more than 10 years. Western countries, guided by the US, realigned their efforts, individually and collectively, within the framework of the International Energy Agency, to undermine Arab control over oil prices. Among several energy strategies, they revived the role of Israel as a thorn in the back of Arabs and rearmed its war arsenal with nuclear weapons. The oil price that peaked at $33 a barrel in 1980 began to drop off under Western pressures, which included the Israeli thorn. The early 1980s occupation of Lebanon by Israel, and what followed, all the way up to present day atrocities against the Palestinian people, was not haphazard, but was a designed part of the oil play. The price of oil was gradually eroded and finally crashed in 1986 from $28 to $13 a barrel, touching a bottom of $7 in July of that year. Along the period 1987-2003, the price of oil ranged around $18 in nominal terms, but, in real terms, it was only around $5 valued against the 1973 dollar; the year that witnessed the correction of oil prices from $3 to nearly $12, thanks to the October victory. A simple calculation of how much oil importing countries have gained due to the erosion of oil prices over the period 1986-2003, which represent losses to oil exporting countries, would lead to an approximate but credible figure of $7.5 trillion. This may raise the question: was the Israeli share of these gains enough to pay for their planned role as the thorn in the Arab back and to distract Arab efforts away from protecting their main source of wealth? Yes, it was more than enough, considering that Israel is basically seeking the support of the Bush administration to push Arabs to recognise and deal with Israel without requiring Israel to make any meaningful concessions in exchange. The bottom line in our opinion is in brief: Western strategies, which by now have recognised that a severe oil crisis is forthcoming, will never be sincere in helping resolve the Arab-Israeli conflict before they get the last drop of the Gulf oil. The US and its allies have in fact added to the severity of the conflict by occupying Iraq and threatening to strike Iran using false reasons as they did in Iraq. If such strategies become true, Israeli hawks will be flying to where they belong in the US and Europe, and the poor Jewish people will rejoin their Palestinian fellows and live together in peace as they did before the oil era. * The writer is a consultant on petroleum and energy economics.
