CAN THE ARABS EVER USE THEIR
OIL WEAPON POWER AGAIN?

By Emanuel A. Winston

The focus of the industrial West has, for many years, been drawn to the oil-bearing nations of the Middle East because they needed oil. As a repository of developed and yet to be developed fields, reserves of precious crude in the Middle East were an irresistible magnet.

The point men were the oil companies who represented industrial and government interests. Nations contested with each other for oil leases and oil contracts as if there were no other oil deposits on the planet. But, something has happened to change that status. There were international interests who wanted Middle East oil prices driven up so they could raise local prices to a similar level in their own countries. And weapons' manufacturers wanted prices to rise so the Arab countries could use there new wealth to buy their goods. Henry Kissinger, then Sec. of State, was particularly anxious for the Shah of Iran to be able to afford generous purchases of weapons in quantities sufficient for Iran to serve as America's guardian and policeman over the Gulf States.

Recall the embargo of 1973, when the Arab countries refused to ship oil to the West? This required assistance from the multi-national oil companies who agreed not to deliver crude oil to America, Europe, Japan. Their trick worked and the prices per barrel skyrocketed from $2.50 per barrel to $10 and then even up to $40 on the spot market as the bidding grew wild. Overnight the Arabs became super rich and the oil companies enjoyed astronomical price increases to their markets.

The profits to the oil nations were enormous which spurred them into a buying spree never before seen in these desert countries. Weapons especially were purchased in such volume that US and European arms manufacturers made fortunes, as did banks, shipping, and industrial building contractors like Bechtel. Money flowed like water via the international exchange medium of black gold. The West had its collective lips firmly affixed to the behind of the Arab nations' dictators. Oil was King and its users became its vassals. Nothing the Arabs demanded was withheld by the West.

But, something was quietly happening in parallel to this flood of this high-priced commodity.

Other countries around the globe envied the easy money that the Arabs were taking from the global economy. They began exploring in earnest their own oil-bearing resources which heretofore were not economical to develop. Sinking wells (many were dry) and running pipe over land to ports (yet to be built) was very expensive. However, with the price of oil at the levels to which the Arab nations had driven it, economics warranted going into debt and this they did.

Slowly, small and even some large fields came on stream. It started with small trickling fingers of oil which began to make it to market. At first the volume was too small to effect the market price. But, soon those small fields were expanded and new fields were discovered, drilled and piped. Those trickling streams grew and started to converge into a mighty river, pouring into a virtual global sea of crude. This resulted in a glut now and still growing.

The Middle Eastern oil potentates tried using their cartel called OPEC (with the assistance of the multi-nationals) to coordinate and pump less in order to keep their prices and profits up to support their now very expensive lifestyles. They had created such massive debts by buying and building infrastructure they mostly didn't need, they could barely keep up the payments. In fact, Saudi Arabia has reportedly just borrowed $5 billion from a neighboring oil nation as it experienced a short fall in liquidity. Other breaking reports speak of these oil nations negotiating to re-schedule their debts to weapons' manufacturers - while canceling orders not yet delivered. This has panicked the weapons' manufacturers who based much of their profits on the income expected from prior and new sales. On the global level, all those nations who borrowed heavily to get in on the Black Gold bonanza now had to pay principal and interest to their creditors. They could not stop or slow pumping. They even had to pump more than was wise as the price per barrel fell ever downward. Recently, at a symposium held by the prestigious think tank, AEI. American Enterprise Institute, there was a startling revelation by Paul Michael Wihbey, an expert on Mid East oil. He said that the center of gravity of oil politics had shifted. He described the dramatic shift away from the Middle East as the primary source of oil. (1)

Today, the South Atlantic region supplies between 45% and 48% of oil imported to America. Combined with imports from Canada, the North Sea, South America (Venezuela and Mexico), Western East Africa (Nigeria, Equatorial Guinea, Angola and the Congo) total non-Persian Gulf oil represents 81.2% of oil imported by the United States. During the Gulf War (1990-91) 27.8% of American oil came from the Persian Gulf. Today, it has dropped to 18.2% and continues to decline. (2)

Concurrently, more new oil is coming on stream, while the Arab oil states are looking desperately at a now vigorously competitive market. The oil companies have so far successfully manipulated market prices despite the glut so their refined products like gasoline will continue getting high prices at the pump.

Therefore, while the Middle East continues to pump for their necessary cash flow, most of the world's oil is now coming from all those new fields which their inflated prices made economical to develop. Many contractors and end product users of Middle East oil will not be sorry to see the stick removed from the Arab hand. During the era when the Arab nations boycotted Israel, all corporations and nations had to genuflect to Arab wishes with respect to Not doing business with Israel. While not necessarily pro-Israel, these nations and their companies chaffed under the unreasonable dictates of Arab kings, dictators and even free-wheeling terrorist nations and groups who demanded and received protection money for Not attacking the oil flow. What then does this decline in Arab oil power mean for Israel?

First, the nations and corporations will not be so eager to attack Israel on all issue while defending Arab reasons. This will not happen quickly since there are operating institutions whose policy is to continue appeasing Arab nations while concurrently undermining Israel. Three such institutions are the US State Department, the EU (European Union), and the United Nations who often collaborate in undercutting Israel whenever possible. They've got the habit and, even when the world's paradigm reverses, they're not smart enough or eager to switch gears fast enough. Such institutions are so filled with their own hubris that they will not give up their prerogatives so easily when they have an in-bred base of anti-Semitism driving their policies. This demonstrated anti-Jewish bias fit very well with the Islamic driven hostility the Arabs demonstrated against the Jews since centuries before the founding of the State of Israel in 1948.

Along with the shifting centers of energy supplies, Mr. Wihbey also demonstrated how the lucrative markets have shifted from the Arab/Muslim countries to the eastern Mediterranean countries of Israel and possibly Turkey. Now, since Israel is the major high tech market growing in the region, major corporations are placing themselves in that market to buy and sell. Because her technological base is growing at such a fast pace, Israel is often called the "second Silicon Valley". Many nations and companies have taken the opportunity to sub-contract their technological development in Israel. This growth will continue providing the Arab nations in rage and frustration over their own decline don't start a super-war with all their Western-gotten weapons.

NOTES

1. "US Strategic & Economic Interests in the Region Are Changing?" Paul Michael Wihbey, Institute for Advanced Strategic & Policy Studies at Symposium: "Rethinking the Middle East" AEI: American Enterprise Institute for Public Policy Research October 14, 1998 "

2. "Washington Insight" by Harun Kazaz TURKISH DAILY NEWS

============

Emanuel A. Winston is a Middle East analyst & commentator and research associate of the Freeman Center For Strategic Studies.


 HOME  Maccabean  comments