The Seven Ages of Oil Part 4 – The Middle East Shrugs its Shackles
This blog is part four of a series that explores the intricate history of oil.
1973-1994: The Middle East Shrugs its Shackles
It is important to understand that the oil industry is largely a Western invention and is very much American led. When America began making overtures to King Ibn Saud of Saudi Arabia in the post-depression years, the British balked. At this time, Ibn Saud’s kingdom was a fractious collection of warring nomadic bands spread out across a desert wasteland. They were only brought together with a heavy hand. The worldwide depression reached its long fingers into the desert as well. The King was desperate for money. The American gamble won out. Quickly thereafter, with the discovery of oil, the American oil companies began transforming the Middle East into an oil economy. America had established itself firmly in the Middle East, much to the chagrin of the British.
Ironically, as the US was making headway in Arabia, establishing a firm foothold in foreign oil reserves, the rest of the world was pushing back against its former colonial masters. Nationalism was the word of the day and would be a contributing factor to the Second World War. Indeed, WWII fueled nationalistic fervor across the entire oil-producing world, most notably in Iran and Venezuela. These two countries would be critical in bringing about OPEC. While the idea initiated in Venezuela, it would be ratified in Baghdad. Ostensibly, it was the intention of the five founding members – the Islamic nations of Iran, Iraq, Kuwait, and Saudi Arabia along with Venezuela – to mitigate the price control ability of the Seven Sisters. The Seven Sisters were the global oil majors of ESSO, Shell, BP, Mobil, Chevron, Gulf, and Texaco. It was perceived, justifiably, that the Sisters were able to keep oil prices depressed to the benefit of Western growth, while exclusively benefiting from the balance of the integrated oil business. As nationalistic fervor and a reaction against what was seen as Western oppression (a greed for oil) intensified, OPEC would grow to include Qatar, Indonesia, Libya, The United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon, and Angola.
With the insertion of Israel into the Middle East, resulting in the Israeli-Palestinian conflict, tensions grew. But these tensions came to a head with the overt involvement of the United States in the Yom Kippur War. Iran had previously been stung by British and American involvement during the Iranian coup d’état in 1953. That operation was a blatant action to retain oil concession from the Anglo-Iranian Oil Company. Recall that Anglo-Iranian Oil was the biggest foreign asset of the United Kingdom at the time, which was remarkable, given the impressive colonial reach of the British Empire. This made the oil company a massive asset, one deemed critical to the security of the Empire.
The CIA staged the overthrow, hiring local thugs and importing others to overrun the streets. The payoff to the United States was a share of concessions that would last for 26 years and the control of Iran through a puppet shah. In the preceding years, every effort was made to smother Iranian nationalism, including crippling oil embargos and subversion; however, when clandestine operations and economic throttling fail, overt force has been the traditional means of securing Western interests.
Jumping ahead to 1973, in retribution for Egypt’s humiliation at the supposed hands of the Americans, OPEC sent a decisive message: self-determination for oil-producing nations – a permanent throwing off of the colonial yoke whether in the Middle East or South America. The resulting oil embargo and price setting ignited the Middle East tinderbox. The region has been burning fiercely for four decades. The flames, bombs, and gunfire have visited every Arab country and every Western nation in the form of terrorism. Terrorism, fanatic nationalism/Islamism, remains today the greatest threat facing the oil industry and global security.
For the rest of the story, read the whole article on the DataWatch emagazine site here.
For more industry perspectives and the latest market data reports, subscribe to the monthly DataWatch emagazine here.https://blog.ze.com/our-industry-views/the-seven-ages-of-oil-part-4-the-middle-east-shrugs-its-shackles/https://blog.ze.com/wp-content/uploads/2015/03/550x300blogImage2015-02-23AA.jpghttps://blog.ze.com/wp-content/uploads/2015/03/550x300blogImage2015-02-23AA-300x300.jpgIndustry ViewsAlgeria,America,Angola,BP,Britain,Chevron,crude,Ecuador,Egypt,Esso,Gabon,Gulf,Indonesia,Iran,Libya,Middle East,Mobil,Nigeria,oil,OPEC,petroleum,Qatar,Saudi Arabia,Shell,terrorism,Texaco,United Arab Erirates,US,Venezuela,WWIIThis blog is part four of a series that explores the intricate history of oil. 1973-1994: The Middle East Shrugs its Shackles It is important to understand that the oil industry is largely a Western invention and is very much American led. When America began making overtures to King Ibn Saud...Aiman El-RamlyAiman El-Ramlyaiman@ze.comContributorBlogs by data management Experts & Analysts | ZE