Modern history

CHAPTER 29

The Oil Weapon

JUST MOMENTS BEFORE 2:00 P.M. on October 6, 1973—on what, by that year’s calendar, was Yom Kippur, the holiest of Jewish holidays—222 Egyptian jets roared into the sky. Their targets were Israeli command posts and positions on the eastern bank of the Suez Canal and in the Sinai. Minutes later, more than 3,000 field guns opened fire along the entire front. At almost exactly the same time, Syrian aircraft launched an attack on Israel’s northern border, followed immediately by a barrage from 700 pieces of artillery. Thus began the October War, the fourth of the Arab-Israeli wars—the most destructive and intense of all of them, and the one with the most far-reaching consequences. The armaments on both sides of the conflict had been supplied by the superpowers, the United States and the Soviet Union. But one of the most potent weapons was unique to the Middle East. It was the oil weapon, wielded in the form of an embargo—production cutbacks and restrictions on exports—that, in the words of Henry Kissinger, “altered irrevocably the world as it had grown up in the postwar period.”

The embargo, like the war itself, came as a surprise and a shock. Yet the pathway to both in retrospect seemed in some ways unmistakable. By 1973, oil had become the lifeblood of the world’s industrial economies, and it was being pumped and circulated with very little to spare. Never before in the entire post-war period had the supply-demand equation been so tight, while the relationships between the oil-exporting countries and the oil companies continued to unravel. It was a situation in which any additional pressure could precipitate a crisis—in this case, one of global proportions.

The United States Joins the World Market

In 1969, as the new Administration of Richard Nixon settled into Washington, oil and energy were beginning to rise on the American political agenda. The number-one concern was the rapid increase in oil imports. The Mandatory Oil Import Program, reluctantly established by President Eisenhower a decade earlier, was laboring under mounting strain, creating controversies and gross disparities among companies and regions. Its loopholes and exceptions were very lucrative to those who had figured out how to capitalize on them, and all too visible. Nixon established a Cabinet Task Force on Oil Import Control, headed by Labor Secretary George Shultz, to review the quota program and recommend changes.

Politicians from oil-consuming states and oil users, such as utilities and petrochemical companies, were eager to see the restrictions loosened so they could get cheaper supplies. The independent oil men, however, were resolute in defense of quotas, which assured them prices higher than the world market. As for the majors that had fought the quotas a decade earlier, they had by now generally reconciled and adjusted themselves to the system, and were content with it. Prices were protected for their domestic production, and the companies had devised distribution systems outside the United States to dispose of their foreign oil. Many of them, therefore, were alarmed at the prospect of change and argued against it.

As it turned out, George Shultz’s committee recommended that the quotas be scrapped altogether and replaced with a tariff, thus removing the necessity for allocation by administrative fiat, leaving that task to the market instead. The political response to the Shultz study was not only vigorous but also overwhelmingly negative. The American oil and gas industry was already in a deep trough; the number of drilling rigs had declined steadily since 1955, hitting its lowest levels in 1970–71—little more than a third the level of the mid-1950s. A hundred Congressmen, fearing that the proposal would mean still more oil imports, signed a letter denouncing the Shultz report as a threat to the domestic industry. Nixon, the shrewd politician, shelved the report and kept the quotas.

That, of course, disappointed those who wanted to see the quota system dismantled, a group that was not limited to oil-consuming interests in the United States. The Shah of Iran wrote to Nixon, arguing that Iran’s security and economic development required it to surmount the quota barriers and sell larger volumes of oil directly into the United States. The Nixon Administration was sympathetic to Iran’s quest for higher production and thus higher revenues, owing, in the words of one White House adviser, to the “power vacuum in the Persian Gulf” consequent on the British withdrawal. But the Administration was not about to tear down the restrictions on imports, not even to please the Shah. “Your disappointment that it has not been possible to find a way to provide for increased sales of Iranian oil in the United States is understandable,” Nixon wrote to the Shah. “Our lack of success is due to the great complexity of our oil import policy problems.” Though apologetic, Nixon did promise to send a copy of the Cabinet Task Force report on oil import policy to the Shah for his own personal edification.1

By this time, however, there were already clear and politically worrisome signs of stress throughout the U.S. energy supply system. During the 1969–70 winter, the coldest in thirty years, both oil and natural gas were in short supply. The demand for low-sulfur oil, which had to be imported from such countries as Libya and Nigeria, grew dramatically in those months as electric utilities switched from coal to oil. The following summer, capacity constraints in the electric utility industry led to brownouts up and down the Atlantic Coast. Meanwhile, surplus oil production capacity in the United States had disappeared, as the industry pumped every single barrel that it could to meet the swelling demand.

With supply problems becoming chronic in the early 1970s, the phrase “energy crisis” began to emerge as part of the American political vocabulary, and in limited circles, there was agreement that the United States faced a major problem. The central reason was the rapid growth in demand for all forms of energy. Price controls on oil, imposed by Nixon in 1971 as part of his overall antiinflation program, were discouraging domestic oil production while stimulating consumption. Natural gas supplies were becoming tighter, primarily because of a regulatory system that controlled prices and could not keep up with changes in markets. The artificially low prices provided little incentive either for new exploration or for conservation. Electricity generating plants were operating near capacity in many parts of the country, continuing to threaten brownouts or even blackouts. Utilities were hurriedly ordering new nuclear power plants as the solution to a host of problems, which included the growing demand for electricity, the prospect of rising oil prices, and new environmental restrictions on coal burning.

As oil demand continued to surge in the first months of 1973, independent refiners were having trouble acquiring supplies, and a gasoline shortage was looming for the summer driving season. In April, Nixon delivered the first ever Presidential address on energy, in which he made a far-reaching announcement: He was abolishing the quota system. Domestic production, even with the protection of quotas, could no longer keep up with America’s voracious appetite. The Nixon Administration, responding to political pressure from Capitol Hill, immediately followed up on its abolition of quotas with the introduction of a “voluntary” allocation system, meant to assure supplies to independent refiners and marketers. Those two acts, coming one on top of the other, perfectly symbolized how circumstances had changed: Quotas were meant to manage and limit supplies in a world of surplus, while allocations were aimed at distributing whatever supplies were available in a world of shortage.

“The Wolf Is Here”

With energy matters rising on the political agenda, James Akins, a tall, somber Foreign Service officer who was one of the State Department’s chief oil experts, had been detailed to the White House to work on those issues. He had recently, at State, directed a secret oil study, in which he had concluded that the world petroleum industry was passing through “the last gasp in the buyers market.” He went on to add, “By 1975, and possibly earlier, we will have entered a permanent sellers’ market, with any one of several major suppliers being able to create a supply crisis by cutting off oil supplies.” It was time, he had said, for “an end to the ‘interminable’ studies on energy problems.” Instead the United States should act to reduce the growth rate of consumption, raise domestic production, and strive to import from “secure sources.” Such actions, he said, “will be as unpopular as they will be costly.” Neither the unpopularity nor the cost was ever tested, for none of those steps was taken. Indeed, with the rapid growth in imports, quite the opposite was happening.

In April 1973, the same month as Nixon’s abolition of quotas, Akins, now from his White House post, tried again. He prepared a secret report filled with proposals to counter the growing energy threat, among which were expanded coal use, development of synthetic fuels, stepped-up conservation efforts (including a stiff gasoline tax), and much-increased research and development spending in order to get beyond hydrocarbons. His ideas were met with incredulity. “Conservation is not the Republican ethic,” John Ehrlichman, Nixon’s chief domestic adviser, told him flatly. That same month, Akins went public with his concerns. He published an article in Foreign Affairs whose title captured the economic and political trends: “The Oil Crisis: This Time the Wolf Is Here.” It was very widely read. But it was also very controversial, and Akins’s arguments were far from widely endorsed or even accepted. For instance, at the same time, Foreign Policy magazine, the brash upstart rival to Foreign Affairs, published an essay entitled “Is the Oil Shortage Real?” That article emphatically said it was not. Announcing that “the world ‘energy crisis’ or ‘energy shortage’ is a fiction,” it seemed to suggest that Akins himself was part of a State Department/oil exporter/company cabal. So the warning flags were up, but there was no particular response, nor, it must be said, was there the requisite consensus either in the United States or among the industrial countries as a group that would have been needed for more concerted prophylactic action.2

Yet, without the import barriers, the United States was now a full-fledged, and very thirsty, member of the world oil market. It joined with the other consuming countries in the clamorous call on the Middle East. There was hardly any choice but to remove the quotas; but their abolition meant a major new demand on an already-fevered market. Companies were buying any oil they could find. “In spite of all the crude we had,” recalled the president of Gulf Oil’s supply and trading arm, “I thought we had to go out and buy oil. We needed diversification.” By the summer of 1973, United States imports were 6.2 million barrels per day, compared to 3.2 million barrels per day in 1970 and 4.5 in 1972. Independent refiners also rushed out to the world markets, joining a frenetic group of purchasers in bidding up the price for such supplies as were available. The trade journal Petroleum Intelligence Weekly reported in August 1973 that “near-panic buying by U.S. and European independents as well as the Japanese” was sending “oil prices sky-rocketing.”

As demand worldwide bobbed up against the limit of available supply, market prices exceeded the official posted prices. It was a decisive change, truly underlining the end of the twenty-year surplus. For so long, reflecting the chronic condition of oversupply, market prices had been below posted prices, irritating relations between companies and governments. But now the situation was reversed, and the exporting countries certainly did not want to be left behind; they did not want to see the growing gap between the posted price and the market price go to the companies.

Wasting little time, the exporters sought to revise their participation and buy-back arrangements so that they would be able to obtain a larger share of the rising prices. Libya was the most aggressive. On September 1, 1973, the fourth anniversary of Qaddafi’s coup, it nationalized 51 percent of those company operations it had not already taken over. President Nixon himself issued a warning in response: “Oil without a market, as Mr. Mossadegh learned many, many years ago, does not do a country much good.” But the stern admonition fell flat. It was not just twenty years that separated Mossadegh and Qaddafi; so did a dramatic difference in market conditions. When Mossadegh nationalized Anglo-Iranian, a great deal of new production capacity was being developed elsewhere in the Middle East. But now, in 1973, there was no spare capacity, the market was certainly there, and it was hungry. Libya had no trouble selling its environmentally desirable low-sulfur oil.

The radicals in OPEC—Iraq, Algeria, and Libya—began pushing for revision in the two supposedly sacred texts, the Tehran and Tripoli agreements. By the late spring and summer of 1973, the other exporters, observing the upward bound of prices on the open market, came around to that same point of view. They cited rising inflation and the dollar’s devaluation, but more than anything else, they cited what was happening to price. Between 1970 and 1973, the market price for crude oil doubled. The exporters’ per-barrel revenues were going up, but the companies’ part of revenues was also increasing in the buoyant market, which was in sharp contradiction to the objectives and ideology of the exporters. The companies’ part of the pie was supposed to decline, not grow. The price system, based on the 1971 Tehran Agreement, was “now out of whack,” Yamani told the president of Aramco in July 1973. By September, Yamani was ready to deliver a eulogy on the Tehran Agreement. It was, he said, “either dead or dying.” If the companies did not cooperate in framing a new price agreement, he added, the exporters would “exercise our rights on our own.” Even as the economics of oil were changing, so were the politics that surrounded it—and dramatically so.3

The Secret: Sadat’s Gamble

Upon coming to power after Nasser’s death in 1970, Anwar Sadat had been regarded by many as a nonentity and was judged likely to last only a few months, or even weeks. The new President of Egypt was much underestimated. “The legacy Nasser left me was in a pitiable condition,” he was later to say. He inherited a country that, in his view, had been politically and ethically bankrupted under the lofty rhetoric of pan-Arabism. The vaulting ambitions and self-confidence derived from Egyptian success in the 1956 Suez crisis had turned to dust, particularly in the aftermath of the 1967 defeat, and the country was in economic ruin. Sadat did not have the ambition to lead a united Arab nation stretching from the Atlantic to the Persian Gulf; as an Egyptian nationalist, he wanted to concentrate not on pan-Arabist visions but on the restoration of Egypt.

Egypt was pouring over 20 percent of its gross national product into military expenditures. (Israel was close behind, at 18 percent.) How could Egypt ever make economic progress in such circumstances? Sadat wanted to break out of the cycle of conflict with Israel, and out of stalemated diplomacy. He wanted some kind of stabilization or settlement, but after a couple of years of fruitless negotiation and discussion, he concluded that this could not occur while Israel sat on the eastern bank of the Suez Canal. Israel would have little incentive to negotiate, and he could not negotiate from such a position of weakness and humiliation, certainly not while the entire Sinai was in Israeli hands. He would have to do something. He moved first to consolidate his own domestic position and to assure himself a free hand internationally. He purged the pro-Soviet Egyptians; and then, in July 1972, he threw out the arrogant Soviet military advisers, as many as twenty thousand of them, though he continued to receive Soviet military supplies. Still, Sadat did not get the response he expected from the West, and in particular from the United States.

In late 1972 and early 1973, Sadat came to his fateful decision. He would go to war; it was the only way to obtain his political objectives. “What literally no one understood beforehand was the mind of the man,” Henry Kissinger was later to say. “Sadat aimed not so much for territorial gain but for a crisis that would alter the attitudes into which the parties were then frozen—and thereby open the way to negotiations. The shock would enable both sides, including Egypt, to show a flexibility that was impossible while Israel considered itself militarily supreme and Egypt was paralyzed by humiliation. His purpose, in short, was psychological and diplomatic, much more than military.”

Sadat’s decision was calculated; he was operating on Clausewitz’s dictum that war was the continuation of politics by other means. Yet, at the same time, he made his decision with a profound sense of fatalism; he knew he was gambling. While the possibility of a war was hinted and even talked about in a general way, it was not taken very seriously, especially by those who would be its object—the Israelis. Yet by April of 1973 Sadat had begun formulating with Syria’s President Hafez al-Assad strategic plans for a joint Egyptian-Syrian attack. Sadat’s secret—the specifics and the reality of his preparations for war—was tightly kept. One of the few people outside the high commands of Egypt and Syria with whom he shared it was King Faisal of Saudi Arabia. And that meant oil would be central to the coming conflict.4

The Oil Weapon Unsheathed: Faisal Changes His Mind

Ever since the 1950s, members of the Arab world had been talking about using the hazily defined “oil weapon” to achieve their various objectives regarding Israel, which ranged from its total annihilation to forcing it to give up territory. Yet the weapon had always been deflected by the fact that Arab oil, while it seemed endlessly abundant, was not the supply of last resort. Texas, Louisiana, Oklahoma—those states could always and quickly put additional oil into the world market. But once the United States hit 100 percent in terms of production rates, that old warrior, American production, could not rise up again to defend against the oil weapon.

In the early 1970s, as the market tightened, various elements in the Arab world became more vocal in calling for use of the oil weapon to achieve their economic and political objectives. King Faisal of Saudi Arabia was not among them. He hated Israel and Zionism as much as any Arab leader. He was sure there was a Zionist-communist plot to take over the Middle East; he told both Gamal Abdel Nasser and Richard Nixon that the Israelis were the real paymasters for radical Palestinian terrorists. Yet Faisal had gone out of his way to reject use of the oil weapon. In the summer of 1972, when Sadat called for the manipulation of oil supplies for political purposes, Faisal was quick to disagree strongly. It was not only useless, he said, but “dangerous even to think of that.” Politics and oil should not be mixed. So Saudi Arabia had discovered for itself during the 1967 war, when it had cut its exports to no avail, except in terms of its own loss of revenues and markets. Faisal believed that the United States was unlikely to be affected by any cutoffs because it would not need Arab Gulf oil before 1985. “Therefore my opinion is that this proposal should be ruled out,” he said emphatically. “I see no profit in discussing it at this time.”

There were political as well as economic reasons for Faisal’s caution. One Marxist state was already established on the Arabian Peninsula in South Yemen, where only recently the British flag had flown over the port of Aden, and Marxist guerillas were fighting elsewhere on the peninsula. In 1969, the same year that military cabals overthrew both the monarchy in Libya and the civilian government in the Sudan, a plot was uncovered among some air force officers in Saudi Arabia. Faisal feared the spread through the Arab world of radicalism, which challenged the legitimacy of kingship, and he rejected its agenda. He knew that his country was tied very closely to the United States in an economic and strategic relationship that was fundamental to his kingdom, not only for prosperity, but also for security. It was hardly desirable to take belligerent action against a government that was so important to one’s own survival. Yet, by early 1973, Faisal was changing his mind. Why?

Part of the answer lay in the marketplace. Much sooner than expected, Middle Eastern oil, not American, had become the supply of last resort. In particular, Saudi Arabia had become the marginal supplier for everybody, including the United States; American dependence on the Gulf had come not by the widely predicted 1985, but by 1973. Saudi Arabia had, at last, graduated to the position once held by Texas; the desert kingdom was now the swing producer for the entire world. The United States would no longer be able to increase production to supply its allies in the event of a crisis, and the United States itself was now, finally, vulnerable. The supply-demand balance was working to make Saudi Arabia even more powerful. Its share of world exports had risen rapidly, from 13 percent in 1970 to 21 percent in 1973, and was continuing to rise. Its average output in July 1973, 8.4 million barrels per day, was 62 percent higher than the July 1972 level of 5.4 million barrels per day, and it was still going up. Aramco was producing at capacity; indeed, it had pushed production up very quickly to meet the unexpected rush of demand, and some alleged that, whatever happened, Saudi Arabia would have to cut back production to prevent damage to the fields and to permit the development of more capacity.

In addition, there was a growing view within Saudi Arabia that it was now earning revenues in excess of what it could spend. Two devaluations of the American dollar had abruptly cut the worth of the financial holdings of countries with large dollar reserves, including Saudi Arabia. Libya and Kuwait had imposed production restraints. “What is the point of producing more oil and selling it for an unguaranteed paper currency?” the Kuwaiti oil minister had rhetorically asked. “Why produce the oil which is my bread and butter and strength and exchange it for a sum of money whose value will fall next year by such-and-such a percent?” Perhaps, some Saudis argued, their own country should do the same and substantially cut back on its output.

These changing conditions in the marketplace, which with each passing day made the Arab oil weapon more potent, coincided with significant political developments. Faisal had been estranged, for the most part, from Nasser, whom he saw as a radical pan-Arabist who wanted to topple traditional regimes. Anwar Sadat, Nasser’s successor, was cut from a different cloth; he was an Egyptian nationalist who was seeking to dismantle much of Nasser’s legacy. Sadat had become close to the Saudis through the Islamic Conference, and Faisal was sympathetic to Sadat for trying to escape from the suffocating bearhug of the alliance that Nasser had made with the Soviet Union. Without Saudi support, Sadat might be forced to revert to the Soviet connection, and the Russians would thereupon use every opportunity to expand their influence throughout the region, which was exactly counter to Saudi Arabia’s interests. By the spring of 1973, Sadat was strongly pressing Faisal to consider using the oil weapon to support Egypt in a confrontation with Israel and, perhaps, the West. King Faisal also felt growing pressure from many elements within his kingdom and throughout the Arab world. He could not afford to be seen as anything other than forthright in his support both for the “frontline” Arab states and the Palestinians. Otherwise, Saudi assets, beginning with oil installations, would be at risk from guerilla activity. Underlining that vulnerability, armed men attacked the Tapline terminal at Sidon in the spring of 1973, destroying one tank and damaging others. A few days later, the pipeline itself was hit. There were a number of other incidents, including an assault that ruptured the line inside Saudi Arabia.

Thus, politics and economics had come together to change Faisal’s mind. Thereupon the Saudis began a campaign to make their views known, warning they would not increase their oil production capacity to meet rising demand, and that the Arab oil weapon would be used, in some fashion, unless the United States moved closer to the Arab viewpoint and away from Israel. In early May 1973, the King himself met with Aramco executives. Yes, he was a staunch friend of the United States, he said. But it was “absolutely mandatory” that the United States “do something to change the direction that events were taking in the Middle East today.”

“He barely touched on the usual conspiracy idea but emphasized that Zionism and along with it the Communists were on the verge of having American interests thrown out of the area,” the president of Aramco reported afterward. “He mentioned that except for Saudi Arabia today it was most unsafe for American interests” in the Middle East. “He stated that it was up to those Americans and American enterprises who were friends of the Arabs and who had interests in the area to urgently do something to change the posture” of the United States government. “A simple disavowal of Israeli policies and actions” would “go a long way toward overcoming the current anti-American feeling,” the Aramco president said, adding there was “extreme urgency” to the King’s remarks.

To the relief of the apprehensive Aramco executives, the subject of oil itself was never specifically mentioned at that meeting. It did, however, come up explicitly a few weeks later, when executives from Aramco’s parent companies were meeting with Yamani at the Geneva Intercontinental Hotel. Would they like, asked Yamani, to make a courtesy visit to the King, who happened to be resting in Geneva after a trip to Paris and Cairo? The oil men were, of course, pleased by the invitation. In passing, Yamani happened to mention that the King had just had a “bad time” in Cairo; Sadat had put intense pressure on him for greater political support. “Time is running out with respect to U.S. interest in Middle East,” the King said to the oil men when they met. “Saudi Arabia is in danger of being isolated among its Arab friends, because of failure of the U.S. Government to give Saudi Arabia positive support.” Faisal was emphatic; he would not let such isolation occur. “You will lose everything,” he told the oil men.

They had no doubt what he meant. “Concession is clearly at risk,” said one of the executives afterward. They blamed the American media and indicated that they themselves were not immune to the conspiracy theories. The agenda, as these oil executives saw it, was clear: “Things we must do (1) inform U.S. public of their true interests in the area (they are now being misled by controlled news media) and (2) inform Government leaders—and promptly.”

A week later, the company executives were in Washington, at the White House and the State and Defense departments. They summarized Faisal’s warnings. “Action must be taken urgently; otherwise, everything will be lost.” They found an attentive audience, but receptive only up to a point. There was a problem, certainly, acknowledged the government officials. But they also expressed, according to the company representatives, “a large degree of disbelief that any drastic action was imminent or that any measures other than those already underway were needed to prevent such from happening.” The Saudis, the government officials said, had faced much greater pressure from Nasser in the past. They “had handled such successfully then and should be equally successful now.” In any event, there was little the United States could do in the short term, the oil men were told in Washington. “Some believe” that the King “is calling wolf when no wolf exists except in his imagination.” One of the U.S. senior officials opined that the King’s remarks at the Geneva meeting were for “home consumption”—to which one of the executives replied sharply that no one from “home” was there.

Three of the companies—Texaco, Chevron, and Mobil—all publicly called for a change in American Middle East policy. So did Howard Page, the retired Exxon director for the Middle East. King Faisal suddenly made himself available to the American press, which, despite its supposedly being “controlled,” responded eagerly. In short order, he was interviewed by the Washington Post, the Christian Science Monitor, Newsweek, and NBC Television. His message was the same to each. “We have no wish to restrict our oil exports to the United States in any way,” he told American television viewers, but “America’s complete support for Zionism and against the Arabs makes it extremely difficult for us to continue to supply the United States with oil, or even to remain friends with the United States.”5

Nervous Leaders

In June 1973, Richard Nixon was hosting Soviet General Secretary Leonid Brezhnev at a summit meeting at Nixon’s estate in San Clemente, California. After the two leaders had retired for the night on the last evening of the meeting, something unexpected occurred. An agitated Brezhnev, troubled and unable to sleep, suddenly demanded an unscheduled meeting with Nixon. Despite the obvious breach of diplomatic protocol, Nixon was awakened by the Secret Service. Though suspicious, the President received Brezhnev in his small study, overlooking the dark Pacific, in the middle of the night. For as much as three hours, in front of a little fire, Brezhnev in rough and emotional terms argued that the Middle East was explosive, that a war might soon start there. The only way to avoid war, insisted the Soviet leader, was with a new diplomatic initiative. Brezhnev was communicating that the Soviets knew something about Sadat’s and Assad’s intent, in general terms, if not the specifics—after all, they were supplying the weapons—and that the consequences would threaten the new Soviet-American “détente.” But Nixon and National Security Assistant Henry Kissinger thought Brezhnev’s strange démarche was a heavy-handed ploy to force a Mideast settlement on Soviet terms, rather than a genuine warning, and dismissed it.

On August 23, 1973, Sadat made an unannounced trip to Riyadh to see King Faisal. The Egyptian had news of great moment. He told the King that he was considering going to war against Israel. It would begin with a surprise attack and he wanted Saudi Arabia’s support and cooperation. He got it. Faisal allegedly went so far as to promise half a billion dollars for Sadat’s war chest. And, the King pledged, he would not fail to use the oil weapon. “But give us time,” the King was reported to have added. “We don’t want to use our oil as a weapon in a battle which only goes on for two or three days, and then stops. We want to see a battle which goes on for long enough time for world opinion to be mobilized.”

The effect of Sadat’s plan on Faisal was quite evident. Less than a week later, on August 27, Yamani told an Aramco executive that the King had suddenly taken to asking for detailed and regular reports on Aramco’s production, its expansion plans, and the consequences of curtailment in its production on consuming countries—in particular, on the United States. At one point, the King asked what would be the effect if Aramco’s production were reduced by two million barrels per day. “This is a completely new phenomenon,” explained Yamani. “The King never bothered with such details.”

Yamani sounded a warning. There were elements in the United States led by Kissinger, he said, that “are misleading Nixon as to the seriousness” of Saudi Arabia’s intentions. “For that reason, the King had been giving interviews and making public statements designed to eliminate any doubt that might exist” in the United States. “Anyone who knows our regime and how it works realizes that the decision to limit production is made only by one man, i.e., the King, and that he makes that decision without asking for anybody’s concurrence.” The King, continued Yamani, is “one hundred percent determined to effect a change in U.S. policy and to use oil for that purpose. The King feels a personal obligation to do something and knows that oil is now an effective weapon.” Yamani continued, “He is additionally under constant pressure from Arab public opinion and Arab leaders, particularly Sadat. He is losing patience.” Yamani added one other detail. The King was now often quite nervous.

September 1973: “Pressure All Around”

By September 1973, talk about both the security of supply and an impending energy crisis was becoming widespread. The Middle East Economic Survey headlined: “The Oil Scene: Pressure All Around.” That same month, the major oil companies and the Nixon Administration were discussing their common worry that Libya might shut down all production by the majors. The administration, after a good deal of debate, decided to impose mandatory allocations for some oil products that were in tight supply domestically.

King Faisal had told the oil company executives that a “simple disavowal” of Israeli policies by the United States would help deflect the use of the oil weapon. And, to a certain degree, there were now such disavowals. “While our interests in many respects are parallel to the interests of Israel,” Joseph Sisco, the American Assistant Secretary of State, told Israeli television, “they are not synonymous with the state of Israel. The interests of the U.S. go beyond any one nation in the area…. There is increasing concern in our country, for example, over the energy question, and I think it is foolhardy to believe that this is not a factor in the situation.” He was then asked whether the Arab oil producers might use petroleum as a political weapon against the United States sometime in the future—say, in the 1980s. “I’m in no position to be clairvoyant and predict it,” Sisco replied. But “there are obvious voices in the Arab world who are pressing for a linking of oil and politics.”

The American “disavowals” also came from even higher levels. At a press conference, President Nixon was asked whether the Arabs would “use oil as a club to force a change in the Middle East policy.” It was “a subject of major concern,” he replied. All the consuming countries, including the United States, could be affected. “We are all in the same bag when you really come down to it,” Nixon said, and then he went on to blame both sides, including Israel, for the impasse. “Israel simply can’t wait for the dust to settle and the Arabs can’t wait for the dust to settle in the Mid-East. Both sides are at fault. Both sides need to start negotiating. That is our position…. One of the dividends of having a successful negotiation will be to reduce the oil pressure.”

That pressure was being felt by all the major consumers. In Germany, in September, the Bonn government finally unveiled its first energy program, which had some focus on security of supply. The leading proponent of the program was State Secretary Ulf Lantzke, whose own anxiety had been sparked in 1968 by the American warning to the OECD that its spare capacity was evaporating. “For me,” Lantzke later said, “that was a triggering point. From that point onwards, I was trying to turn around energy policies in Germany. The issue was no longer how to resolve our coal problems, but how do we get security of supplies into our policies. It was very, very cumbersome. It took me five years to prepare the ground and convince people, so deep-seated was the political belief that energy supplies were no problem.”

In Japan, in that same anxious month of September, a newly created Agency for Resources and Energy in the Ministry of International Trade and Industry (MITI) released a White Paper on energy that addressed the overall insecurity of oil supply and emphasized the need to institute measures to cope with an emergency. It was the result of concerns that had risen over the previous year or so about what Japan’s rampant growth in oil demand meant in terms of dependence and vulnerability. Most of the nation’s oil was supplied directly or indirectly by the international companies, and both government officials and businessmen could discern the rapid shift of power away from the companies toward the oil-exporting countries. “The oil-supply management system, until now run by the international oil companies, has crumbled,” the September 1973 White Paper bluntly observed. And for Japan, that meant “the passive international response of the 1960s can no longer be permitted.”

By that time, in accord with the changing situation, a new strand had emerged in Japanese foreign policy, which had heretofore been firmly anchored in the United States–Japan alliance. It was called “resource diplomacy,” and it aimed to reorient Japan’s foreign policy in such a way as to try to guarantee access to oil. Its most prominent champion was MITI Minister Yasuhiro Nakasone (later Prime Minister), who argued, “It is inevitable that Japan will competitively follow her own independent direction. The era of blindly following has come to an end.” It was the United States that should no longer be so followed. In June 1973, Nakasone had called for a new resource policy “standing on the side of the oil producing countries.” By then, concern about an energy crisis was already commonplace in some circles in Japan. The previous winter had seen shortages of kerosene and gasoline, and now, in the summer of 1973, there were signs, as in the United States, of electricity brownouts. It seemed, at least to one visitor, that almost every Japanese policymaker concerned with energy had read James Akins’s article, “The Oil Crisis: This Time the Wolf Is Here,” and was persuaded. The only question was “When?” On September 26, Prime Minister Kakuei Tanaka told a television interviewer, “Regarding the energy crisis, an oil crisis ten years from now is clearly seen.”

It was more like ten days. For, at that very moment, Anwar Sadat was beginning his countdown to war.6

Nothing Further to Negotiate

At a meeting in Vienna in mid-September 1973, the OPEC countries had called for a new deal with the oil companies. The Tehran and Tripoli agreements were dead. The members of OPEC were determined to capture for themselves what they said were the “windfall profits” that the companies were earning from the increase in market prices. Oil company representatives were summoned to meet in Vienna on October 8 with a team headed by Yamani.

In order to negotiate as a group at the meeting, the oil companies would once again have to obtain a business review letter from the Justice Department, giving them assurance that they were not in violation of antitrust laws. The companies’ joint lawyer, the venerable John J. McCloy, requested such permission from Washington on September 21, initiating strenuous diplomacy not only between the companies and the Justice Department, but between a skeptical Justice and a worried State Department. At one heated meeting with Justice, McCloy invoked the names of former attorney generals, going back to Robert Kennedy, who had permitted the companies to work out joint strategies on difficult matters involving foreign affairs. “If Justice failed to give clearance,” he said, “Justice would be responsible for the companies being picked off one by one.” Kenneth Jamieson, chairman of Exxon, argued, “The industry was indispensable in holding the line against the volatile Arab world.” Justice Department attorneys, citing a book by an MIT professor that bore little relevance to the political crisis at hand, insisted that oil prices were going up because of the machinations of large integrated oil companies, not because of market conditions and OPEC’s move to capitalize on them. Jamieson stared in disbelief. But, finally, on October 5, three days before the Vienna meeting was scheduled to begin, the Antitrust Division reluctantly gave McCloy’s clients the clearance they needed to negotiate jointly.

Though the previous spring there had been some anxiety in Washington about the possibility of military conflict in the Middle East, it had dissipated over the summer, and for months the American intelligence community had, for the most part, been dismissing the likelihood of war. It did not make sense: The Israelis had no reason to open hostilities, nor could they dare launch a preemptive attack as they had in 1967. Since the Israelis were thought to hold military superiority, it appeared irrational for the Arabs to consider starting a war in which they would be badly beaten. The Israelis, whose survival was at stake, also consistently dismissed the prospect of war, which greatly influenced the American reading of the situation.

There was an exception to the consensus. In late September, the National Security Agency reported that the sudden intensification of military signals suggested that war might be imminent in the Middle East. The warning was passed over. On October 5, the Soviets suddenly airlifted dependents out of Syria and Egypt. The obvious significance of that move was also disregarded. A CIA analysis for the White House on that day reported: “The military preparations that have occurred do not indicate that any party intends to initiate hostilities.” At 5:30 P.M. on October 5, the latest Israeli estimate was given to the White House: “We consider the opening of military operations against Israel by the two armies [of Egypt and Syria] as of low probability.” The Watch Committee, representing the entire American intelligence community, reviewed developments and prospects. War, it said, was unlikely.

On that same day, while it was still afternoon in Washington, it was already nighttime in the Middle East, and in Israel, the country was coming to a halt, as the somber and most sacred Jewish holiday of Yom Kippur began. In Riyadh, the members of the Saudi delegation to OPEC boarded their jet for Vienna. They spent the time on the plane focused on their technical dossiers—such matters as prices, inflation, company profits, and gravity differentials. Only when the delegates arrived in Vienna on October 6 did they learn the dramatic news—that Egypt and Syria had launched their surprise attacks against Israel. And that morning, U.S. East Coast time, senior American officials and oil executives awoke to find the Middle East at war.

The outbreak of hostilities created great commotion among OPEC delegates in Vienna. As the oil company officials arrived for the discussions, they found that the Arab delegates were excitedly passing around newspaper articles and photographs. There could be no question that the Arab members of OPEC, at least, were taking sustenance and gaining confidence from what appeared to be an Arab victory on the battlefield. The oil men, for their part, could not have been anything but nervous. Not only were they on the defensive when it came to price, but at any moment the oil weapon in some form could be called into play. The Iranian petroleum minister noted that the oil men were “a little panicky.” He sensed something else more profound, as well: “They were losing their strength.”

At the negotiating table, even as war raged in the Middle East, the companies offered a 15 percent increase in the posted price, about forty-five cents more per barrel. To the oil exporters, that was wholly and laughably inadequate. They wanted a 100 percent increase—another three dollars. The gap was huge. The companies’ negotiating team, led by George Piercy of Exxon and André Bénard of Shell, could not reply without consulting their principals in Europe and the United States. Could they negotiate further? What kind of new offer could they next put on the table? When the crucial replies came from London and New York, the answer was essentially “no offer,” at least for the time being. The difference was so great that the companies did not dare begin the dangerous effort to bridge it without, in turn, first consulting the governments of the major industrial countries. What would be the effect on the economies of the Western world? Could the large increases be passed on to consumers? Moreover, the companies had been criticized for giving way too easily in the past before OPEC, and the decision now was too momentous, too political, to be theirs alone. So the various corporate headquarters told Piercy and Bénard not to negotiate further, but to ask for a delay while the consultations with the Western governments could be carried out. Between October 9 and 11, the United States, Japan, and a half-dozen Western European governments were canvassed. The reply was virtually unanimous: The increase sought by the exporters was much too big, and the companies should definitely not improve their offer to the point where OPEC might actually accept it.

It was after midnight, in the very early hours of October 12, six days since the war had begun, when Piercy and Bénard went to see Yamani in his suite at the Intercontinental Hotel. They could make no further offer at that time, they explained, and they asked for two weeks in which to frame a reply. Yamani did not say anything. Then he ordered a Coke for Piercy, cut a lime, and squeezed it into the drink. He was waiting. He wanted to keep things going. He gave Piercy the Coke, but neither Piercy nor Bénard had anything in return to give him.

“They won’t like this,” Yamani said at last. He put through a call to Baghdad, talked vigorously in Arabic, and then told the two oil men, “They’re mad at you.”

Yamani dialed one of the rooms of the delegation of Kuwait, whose members were also staying in the Intercontinental. The Kuwaiti oil minister soon appeared, in his pajamas. There were further excited conversations. Yamani began looking up airline timetables. Still there was nothing further to negotiate. Finally, in the dark hours of the morning, the impromptu session broke up. In leaving, George Piercy asked what would happen next.

“Listen to the radio,” replied Yamani.7

Sadat’s Surprise

The choice of Yom Kippur as the day to launch the latest Arab attack was designed to catch Israel when it was least prepared. Its entire defense strategy depended on rapid and total mobilization and deployment of its ready reserves. On no other day would such a response be so difficult; the country was shut down for meditation, introspection, soul searching, and prayer. Moreover, Sadat was intent on strategic surprise, and to that end had put considerable effort into deception. At least twice before he had feinted, appearing to prepare for war. Both times, Israel had mobilized at great cost and budgetary stress but to no purpose, and that experience did what Sadat had hoped—made them skeptical and complacent. Indeed, the Israeli Chief of Staff had found himself publicly criticized for a costly and unnecessary mobilization in May 1973. Assad had joined in the deception. A terrorist organization with links to Syria kidnapped some Soviet émigrés traveling to Vienna from Moscow, and Israeli Prime Minister Golda Meir went to Austria to deal with the crisis, which took up the attention of the Israeli leadership until October 3.

There were, however, genuine warning signs of an impending attack. The Israelis had disregarded them, as had the Americans. A few weeks before the attack, a Syrian source provided the United States with astonishingly exact information, including Syria’s order of battle, but that intelligence was only identified afterward, lost as it had been among hundreds of other pieces of information, some quite contradictory. Assad, in Syria, had ordered the preparation of large graveyards, another ominous sign. On October 3, a member of the U.S. National Security Council asked a CIA official about the large Egyptian troop movements. “The British, when they were still in Egypt, used to hold their fall maneuvers at this time of year,” the CIA man replied. “The Egyptians are just carrying on.” Some American officials noted reports that Egyptian hospital beds were suddenly being emptied, but these reports were waved away as merely another element in the Egyptian military exercises and without significance. On October 1 and again on October 3, a young Israeli lieutenant submitted reports to his superiors on the movement of Egyptian forces that pointed to an imminent war. They, too, were ignored. The Israeli military, and its intelligence especially, were in thrall to the “conception,” a particular view of the necessary preconditions for war, which, by definition, precluded an Egyptian attack under the current circumstances. Yet in the first days of October, a key Israeli source in Egypt had sent an urgent signal; he was hurriedly extricated and rushed to Europe, where he was debriefed. There could be no doubt about what he said. But, inexplicably, there was a delay of a day in transmitting his warning to Tel Aviv. By then, it was too late.

The Americans, as much as the Israelis, made the fundamental error of not thinking the way Sadat thought, of not putting themselves into his shoes, and of not taking him, and what he said, seriously enough. Attitudes and ideas prevented key intelligence warnings from being identified, analyzed, and correctly interpreted. Until October 1973, Kissinger later admitted, he thought of Sadat as more actor than statesman. Sadat’s gamble paid off, and the enormity of the surprise of the Arab attack would be for the Israelis what Pearl Harbor had been thirty-two years earlier for Americans. Afterward, the Israelis would ask themselves how they could have been caught so completely off guard. The signals were all so clear. But those signals were not so easily extracted from the noise of contradictory information mixed with deliberate deception, especially when complacency and overconfidence had taken hold.

When finally, nine and a half hours before the attack, the Israelis got what they took as confirmation of imminent hostilities, they were still hamstrung. This was not 1967. They could not go first, they could not take preemptive action. Also, in a fatal piece of misinformation, they thought the war would start four hours later than it actually did. They were not, in any manner, ready, and in the initial few days of the attack, the Israelis fell back, disordered, before the onslaught, while the Egyptians and Syrians scored massive victories.8

“The Third Temple Is Going Under”

Once war broke out, America’s number-one objective quickly became to arrange a truce, whereby the belligerents would pull back to their prehostilities lines, to be followed by an intensified search for a diplomatic solution. The United States wanted, as a top priority, to keep out of direct involvement; it did not want to become too obviously engaged in supplying the Israelis against the Soviet-supplied Arabs, but this was thought to be unlikely owing to the purported Israeli superiority. While U.S. policy would not countenance an Israeli defeat, it regarded the best outcome, in the words of one senior official, as one in which “Israel won, but had its nose bloodied in the process,” thus making it more amenable to negotiation.

Something far worse, however, than a bloody nose suddenly appeared to be at hand, owing to the second big miscalculation on the part of Israel (the first being that there would be no war at all). Israel had assumed that it had enough supplies to last for three weeks of war, a premise that was derived from the experience of the 1967 Six-Day War. But the 1967 war had been much easier from Israel’s point of view, for then it had had both the upper hand militarily and the advantage of surprise. Now, immediately thrown on the defensive by an Egypt and a Syria both richly equipped with Soviet weapons, the Israelis found themselves devouring materiel at an alarming pace, one far greater than anything they had anticipated. That miscalculation of requirements would prove a grave one for Israel; it would also lead directly to a staggering change in world oil.

On Monday, October 8, two days after the surprise attack, Washington told the Israelis that they could pick up some supplies in the United States in an unmarked El Al plane. That, it was thought, would be sufficient. But Israel was still reeling from the initial attack. A distraught Moshe Dayan, Israel’s Defense Minister, told Premier Golda Meir that “the Third Temple is going under,” and Meir herself prepared a secret letter to Richard Nixon, warning that Israel was being overwhelmed and might soon be destroyed. On October 9, the United States realized that the Israeli forces were in deep trouble, and were becoming desperately short of supplies. On October 10, the Soviet Union began a massive resupply to Syria, whose forces had started to retreat, and then to Egypt. The Soviets also put airborne troops on alert and began encouraging other Arab states to join in the battle. The United States then started discussions about having more unmarked El Al planes come to the United States for additional supplies. At the same time, the State Department began pressing American commercial carriers to provide charters to ferry materiel to Israel. Kissinger thought such an approach could be relatively low profile and would avoid out-and-out United States identification with Israel. “We were conscious of the need to preserve Arab self-respect,” Kissinger later said. But the huge scale of the Soviet resupply soon became evident. And on Thursday, October 11, the Americans realized that Israel could lose the war without resupply. In Kissinger’s and even more so in Nixon’s formulation, the United States could not allow an American ally to be defeated by Soviet arms. Moreover, who could know the consequences of a fight to the death?

On Friday, October 12, two private letters were sent to Nixon. One was from the chairmen of the four Aramco companies—Exxon, Mobil, Texaco, and Standard of California—hurriedly sent, via John McCloy. They said that the 100 percent increase in the posted price of oil that the OPEC delegation in Vienna was demanding would be “unacceptable.” But some kind of price increase was warranted since “the oil industry in the Free World is now operating ‘wide open,’ with essentially no spare capacity.” Yet they had something even more urgent they wanted to communicate. If the United States increased its military support for Israel, there could be a “snowballing effect” in terms of retaliation “that would produce a major petroleum supply crisis.” There was a further warning. “The whole position of the United States in the Middle East is on the way to being seriously impaired, with Japanese, European, and perhaps Russian interests largely supplanting United States presence in the area, to the detriment of both our economy and our security.”

The second letter was a desperate message from Israel’s Premier, Golda Meir. Her nation’s survival and the lives of its people, she wrote, now hung in the most precarious balance. Her warning was confirmed around midnight on that Friday, when Kissinger learned that Israel might well run out of critical munitions over the next several days. He also learned from Secretary of Defense James Schlesinger that all efforts to arrange commercial charters had failed. The American airlines did not dare risk either an Arab embargo or terrorist attacks, and they certainly did not care to send their planes into a war zone. In order for the United States government to draft them into service, they said, the President should declare a national emergency. “If you want supplies there,” Schlesinger told Kissinger, “we are going to have to use U.S. airlift all the way. There’s no alternative. There are not going to be new supplies without a U.S. airlift.”

Kissinger had to agree. But he asked Schlesinger to get the Israelis’ word that United States Air Force planes could land under cover of darkness, be unloaded, and be back off the ground by daybreak. If they were not seen, the resupply could be kept as inconspicuous as possible. Before daylight Saturday morning, October 13, Schlesinger had the Israeli promise, and the Military Airlift Command began to move supplies from bases in Rocky Mountain and Midwestern states to an airfield in Delaware. But the American planes would need a refueling stop on the way to Israel. On Saturday morning, the United States asked Portugal for landing rights in the Azores. It took direct and blunt pressure from President Nixon himself to get the required permission.

Still, Washington hoped to keep the low profile, but the presumption of secrecy did not take into account an unexpected act of nature. There were powerful crosswinds at Lajes airfield in the Azores, which would have put the huge C-5A transports at risk, so they were held back in Delaware, their bellies crammed full of supplies. The crosswinds did not diminish until late afternoon, which meant a half-day’s delay. As a result, the C-5As did not arrive in Israel in the darkness of Saturday night. Instead, they came lumbering out of the sky on Sunday during the day, October 14, their immense white stars visible for all to see. The United States, instead of keeping to its position of honest broker, was now portrayed as an active ally of Israel. The aid had been extended to counterbalance the huge Soviet resupply to the Arabs, but that did not matter. Not knowing of the strenuous efforts to keep American aid in the background, Arab leaders assumed that it was meant to be a dramatic and highly visible sign of support.

The Israelis had succeeded in stopping the Egyptian offensive before it could break through the critical mountain passes in the Sinai, and on October 15, they launched the first of a series of successful counteroffensives against the Egyptians. Meanwhile, in Vienna on October 14, OPEC had announced the failure of its negotiations with the companies, and the Gulf OPEC countries scheduled a meeting in Kuwait City to resume the oil price issue on their own. But most of the delegates had remained in Vienna, since the breakdown of the talks with the companies, and now they found themselves stranded. They were frantically trying to book airplane seats, but because of the war, the airlines had canceled virtually all flights into the Middle East. It appeared that the delegates would not be able to leave at all, meaning that the scheduled meeting in Kuwait would not take place. Then, at last, it was discovered that one flight was still operating—an Air India jet through Geneva that made an intermediate stop at Kuwait City—and, on the evening of October 15, many delegations rushed to the airport and hastily boarded the plane.

On October 16, the delegates of the Gulf states—five Arabs and an Iranian—met in Kuwait City to pick up where the discussions had been left off a few days earlier in Yamani’s suite in Vienna. They would not wait any longer for the companies to reply. They acted. They announced their decision to raise the posted price of oil by 70 percent, to $5.11 a barrel, which brought it into line with prices on the panicky spot market.

The significance of their action was twofold—in the price increase itself, and in the unilateral way in which it was imposed. The pretense that the exporters would negotiate with the companies was now past. They had taken complete and total charge of setting the price of oil. The transition was now complete from the days when the companies had unilaterally set the price, to the days when the exporters had at least obtained a veto, to the jointly negotiated prices, to this new assumption of sole suzerainty by the exporters. When the decision was taken, Yamani told one of the other delegates in Kuwait City, “This is a moment for which I have been waiting a long time. The moment has come. We are masters of our own commodity.”

The exporters were ready for the expected anguished complaints about the size of the increase. They announced that consuming governments were taking 66 percent of the retail price of oil in taxes, while they received the equivalent of only 9 percent. The Iranian oil minister, Jamshid Amouzegar, said that the exporters were merely keying prices to the forces of the market, and they would set prices in the future on the basis of what consumers were willing to pay. It was for the momentous October 16 decision on price that Yamani had advised George Piercy of Exxon to listen to the radio. As events turned out, however, Piercy learned about it from the newspapers.

If the OPEC exporters could unilaterally raise the price of oil, what might they do next? And what would happen on the battlefield? At the White House, the next day, October 17, Richard Nixon expressed his concern to his senior advisers on national security. “No one is more keenly aware of the stakes: oil and our strategic position.” Historic meaning was being given to that statement the same day, halfway around the world, again in Kuwait City. The Iranian oil minister had left the meeting, and the rest of the Arab oil ministers arrived for an exclusively Arab conclave. Their subject was the oil weapon. It was on everybody’s mind. The Kuwaiti oil minister declared, “Now the atmosphere is more propitious than in 1967.”9

Embargo

Yet there remained the question of what exactly Saudi Arabia would do. Despite Sadat’s importuning, King Faisal was reluctant to take any action against the United States without more contact with Washington. He sent a letter to Nixon, warning that if American support for Israel continued, Saudi-American relations would become only “lukewarm.” That was on October 16.

On October 17, at the time that the oil ministers were meeting in Kuwait City, first Kissinger and then Kissinger and Nixon together received four Arab foreign ministers. They were led by the Saudi, Omar Saqqaf, whom Kissinger would characterize as “gentle and wise.” The discussions were cordial, and there seemed to be some common ground. Nixon had pledged to strive for a ceasefire that would make it possible to “work within the framework of Resolution 242,” the United Nations resolution that would return Israel to its 1967 borders. The Saudi Minister of State seemed to affirm that Israel had a right to exist, so long as it was within its 1967 borders. Kissinger explained that the American resupply should not be taken as anti-Arab, but rather was “between the U.S. and theUSSR.” The United States had to react to the Russian supply. He added that the status quo ante in the region was untenable, and that, after the war was over, the United States would undertake an active diplomatic role and work for a positive peace settlement.

To Saqqaf, Nixon made the ultimate promise: the services of Henry Kissinger as negotiator, which seemed to be Nixon’s idea of a sure-fire guarantee of success. Nixon also assured Saqqaf and the other foreign ministers that, despite his Jewish origins, Kissinger “was not subject to domestic, that is to say Jewish, pressures.” He went on to add, “I can see that you are concerned about the fact that Henry Kissinger is a Jewish-American. A Jewish-American can be a good American, and Kissinger is a good American. He will work with you.” Kissinger was writhing with embarrassment and anger as the President made his gratuitous remark, but Saqqaf was nonplussed. “We are all Semites together,” Saqqaf deftly replied. And then the Minister of State made his way to the White House Rose Garden, where he told reporters that the talks had been constructive and friendly, and where, according to the press, it was all smiles, graciousness, and mutual compliments. After the meetings with Saqqaf and the other Arab foreign ministers, Kissinger told his staff he was surprised that there had been no mention of oil, and that it was unlikely that the Arabs would use the oil weapon against the United States.

That, however, was exactly what the Arab oil ministers in Kuwait City were contemplating. Early in 1973, in one of his “thinking aloud” speeches about Egypt’s options, Sadat had discussed the oil weapon. And around that time, at his urging, experts from Egypt and other Arab countries had begun drawing up a plan for the use of the oil weapon, taking into account the growing energy crisis in the United States. The Arab delegations in Kuwait City were familiar at least with the concept before the October 17 meeting. But at the meeting itself, radical Iraq had a different notion. The chief Iraqi delegate called on the Arab states to target their ire on the United States—to nationalize all American business in the Arab world, to withdraw all Arab funds from American banks, and to institute a total oil embargo against the United States and other countries friendly to Israel. The chairman of the meeting, the Algerian minister, dismissed such a proposal as impractical and unacceptable. Yamani, on instructions of his King, also resisted what would have been a declaration of all-out economic warfare against the United States, the consequences of which would have been, to say the least, very uncertain for all parties concerned. The angry Iraqi delegates withdrew from the meeting and from the whole embargo plan.

Instead, the Arab oil ministers agreed to an embargo, cutting production 5 percent from the September level, and to keep cutting by 5 percent in each succeeding month until their objectives were met. Oil supplies at previous levels would be maintained to “friendly states.” The nine ministers present also adopted a secret resolution recommending “that the United States be subjected to the most severe cuts” with the aim that “this progressive reduction lead to the total halt of oil supplies to the United States from every individual country party to the resolution.” Several of the countries immediately announced that they would start with 10 percent, rather than 5 percent, cutbacks. Whatever their size, the production cuts would be more effective than a ban on exports against a singlecountry, because oil could always be moved around, as had been done in the 1956 and 1967 crises. The cutbacks would assure that the absolute level of available supplies went down. The overall plan was very shrewd; the prospect of monthly cutbacks, plus the differentiation among consuming countries, would maximize uncertainty, tension, and rivalry within and among the importing countries. One clear objective of the plan was to split the industrial countries right from the start.

The two meetings in Kuwait City—October 16 and October 17—were not formally connected. The price increase and the OPEC seizure of sole price-setting authority were a logical continuation of what had long been in motion. The decision to use the oil weapon moved on a separate track. “Suffice it to say, however,” the Middle East Economic Survey commented, “that the new Arab-Israeli war probably stiffened the resolve of the Arab price negotiators.” And then, in what proved to be a momentous understatement, it added, “Probably, also, the cuts in output will incidentally serve to push up oil prices still further.”

Events moved rapidly after the Kuwait City meetings. On October 18, Nixon met with his Cabinet. “When it became clear that the fighting might be prolonged and the Soviets began a massive resupply effort, we had to act to prevent the Soviets from tilting the military balance against Israel,” he told the Cabinet officers. “This past weekend, therefore, we began a program of resupply to Israel.” Recalling his discussions the day before with Saqqaf and the others, he continued, “In meeting with the Arab foreign ministers yesterday, I made the point that we favor a cease fire and movement towards a peace settlement based on U.N. Resolution 242. Arab reaction thus far to any resupply effort has been restrained and we hope to continue in a manner which avoids confrontation with them.” He was being optimistic.

The next day, October 19, Nixon publicly proposed a $2.2 billion military aid package for Israel. It had been decided on a day or two earlier, and word of it was conveyed to several Arab countries in advance so that they would not be surprised by the announcement. The strategy was to try to assure that neither Egypt nor Israel ended up in a position of ascendancy, with the result that both would have reason to go to the negotiating table. That same day, Libya announced that it was embargoing all oil shipments to the United States.

At two o’clock Saturday morning, October 20, Kissinger departed for Moscow to try to devise a cease-fire formula. On board the plane, he learned further stunning news. In retaliation for the Israeli aid proposal, Saudi Arabia had gone beyond the rolling cutbacks; it would now cut off all shipments of oil, every last barrel, to the United States. The other Arab states had done or were doing the same. The oil weapon was now fully in battle—a weapon, in Kissinger’s words, “of political blackmail.” The three-decade-old postwar petroleum order had died its final death.

The embargo came as an almost complete surprise. “The possibility of an embargo didn’t even enter my mind,” said a senior executive of one of the Aramco companies. “I thought that if there was an outbreak of war and if the United States was on the side of Israel, there was no way that the U.S. companies in Arab countries would not be nationalized.” Nor was much thought given in the United States government to the prospect of an embargo, despite the evidence at hand: almost two decades of discussion in the Arab world about the “oil weapon,” the failed attempt in 1967, the threats of an embargo made in 1971 at the time of the Tehran negotiations, Sadat’s public discussion of the “oil option” in early 1973, and the exceedingly tight oil market of 1973. To be sure, whatever the nature of Faisal’s discussions with Sadat, and whatever promises Sadat may have heard, Faisal and the other conservative Arab leaders were reluctant to directly challenge the United States, a country on which they depended for their security. Moreover, they might have been surprised, even shocked in a way, had the United States not provided supplies to Israel. What transformed the situation and finally galvanized the production cuts and the embargo against the United States was the very public nature of the resupply—the result of the crosswinds at the Lajes airfield in the Azores—and then the $2.2 billion aid package. Not to have acted, some Arab leaders thought, could have put certain regimes at the mercy of street mobs. Yet the public show of support for Israel also provided them with a sufficient pretext to take on the United States, as others clearly wanted to do.

Even the embargo itself was not the end of stunning events on October 20. It was only in Moscow on Sunday morning that Kissinger learned what had transpired in Washington the night before. In what became known as the Saturday Night Massacre, a critical point in his Presidency, Nixon fired the special prosecutor, Archibald Cox, who had been appointed to investigate the Watergate scandal, and who had subpoenaed the President’s secret office tape recordings. Access to those tapes had become the centerpiece of the struggle between the President and the Senate—to ascertain how much Nixon himself had been directly involved in a maze of illegalities. Immediately after the firing, Attorney General Elliot Richardson and his chief deputy, William Ruckelshaus, resigned in protest. “And now,” White House Chief of Staff Alexander Haig told Kissinger over the telephone, “all hell has broken loose.”10

The Third-Rate Burglary

Throughout the clash of arms in the Middle East and the weeks of crisis over oil, one key actor was otherwise preoccupied. Richard Nixon was thoroughly entangled in the series of events that escalated from what he called a “third-rate burglary” into the unprecedented series of Watergate scandals, at the center of which was the President himself. The United States had seen nothing remotely like it since Teapot Dome. The unfolding of the Watergate saga during the October War; the country’s obsession with it; its effects on the war and the embargo, on American capabilities, and on perceptions within the United States—all interacted to create a strange, surrealistic dimension to the central drama on the world stage. For instance, on October 9, the day that a desperate Golda Meir signaled that she wanted to fly to Washington to plead personally for aid, Nixon was working out the resignation of Vice-President Spiro Agnew, who asked Nixon to help him find work as a consultant and complained that the Internal Revenue Service was trying to find out how much he had paid for his neckties. On October 12, the day that senior American officials realized that Israel might lose the war and were grappling with how to resupply, they were summoned to the White House for what Kissinger described as an “eerie ceremony,” in which Nixon introduced Gerald Ford as his choice for his new Vice-President.

In the weeks that followed, though Nixon would temporarily depart his own personal crisis and weave in and then out again of the world crisis, effective control over American policy was lodged in the hands of Henry Kissinger, who, in addition to being Special Assistant for National Security, had also just been appointed Secretary of State. Kissinger’s original base had been twofold—Harvard’s Center for International Affairs, housed in space borrowed from the Harvard Semitic Museum, and his service to Nixon’s great rival, Nelson Rockefeller. This former professor, who had fled to the United States as a boy, a Jewish refugee from Nazi Germany, and whose ambition once had been no loftier than to become a certified public accountant, now came, through the strange twists of Watergate and the crumbling of Presidential authority, to be the very embodiment of the legitimacy of the American government. Kissinger’s public personality expanded to oversized dimensions to fill the vacuum created by a discredited Presidency. He emerged—for Washington, for the media, for the capitals around the world—as the desperately needed figure of authority and continuity at a time when confidence in America was being severely tested.

Too much seemed to be happening. The media and the public mind were overloaded. But Watergate, and the President’s predicament, had direct and major consequences for the Middle East and for oil. Sadat might, at least arguably, never have gone to war had a strong President been able, after the 1972 election, to use his influence to open a dialogue between Egypt and Israel. An undistracted President might also have been able to address the energy issue with greater focus. And once the war began, Nixon was so preoccupied, his credibility so diminished, that he could not provide the Presidential leadership required for dealing with the belligerents, the oil exporters and the explicit economic warfare against the United States—and the Russians. For their part, foreign leaders could not comprehend this strange Watergate process, part ritual, part circus, part tragedy, part thriller, that had gripped American politics and the American Presidency.

Watergate gave, as well, a lasting cast to the energy problems of the 1970s. The accident of coincidence—the embargo and the Saturday Night Massacre, Watergate and the October War—seemed to imply logical connections. Things meshed in hazy, mysterious ways, and this impression left deep and abiding suspicions that fed conspiracy theories and obstructed more rational responses to the energy problems at hand. Some argued that Kissinger had masterminded the oil crisis to improve the economic position of the United States vis-à-vis Europe and Japan. Some believed that Nixon had deliberately started the war and actually encouraged the embargo to distract attention from Watergate. The oil embargo and illegal campaign contributions by some oil companies, which were part of the illegal loot extracted from corporate America by the Committee to Reelect the President, flowed together in the public’s mind, greatly expanding the traditional distrust of the oil industry and leading many to think that the October War, the embargo, and the energy crisis had all been created and masterfully manipulated by the oil companies in the name of greed. Such various perceptions were to last much longer than the October War or the Nixon Presidency itself.

Alert

In Riyadh, on the afternoon of October 21, the day following the Saturday Night Massacre, Sheikh Yamani met with Frank Jungers, the president of Aramco. Using computer data about exports and destinations that the Saudis had requested from Aramco a few days earlier, Yamani laid out the ground rules for the cutbacks and the embargo the Saudis were about to impose. He acknowledged that the administration of the system would be very complicated. But the Saudis were “looking to Aramco to police it,” he said. “Any deviations by the Aramco offtakers from the ground rules,” he added, “would be harshly dealt with.” At one point, Yamani departed from the operational details to ask Jungers a more philosophical question. Was he surprised by what had just happened? No, Jungers replied, “except that this cutback was greater than we had anticipated.”

Yamani then pointedly asked if Jungers would be “surprised at the next move if this one didn’t produce some results.”

“No,” said Jungers, “I would not be surprised.”

Jungers’s own guess, based upon his previous conversations with Yamani and other information, was that the subsequent move would be “complete nationalization of American interests if not a break in diplomatic relations.” This was suggested by Yamani in his final ominous comment to Jungers: “The next step would not just be more of the same.”

In Moscow, meanwhile, Kissinger and the Russians completed a cease-fire plan. But in its implementation over the next few days, it ran into serious snags. Neither the Israelis nor the Egyptians seemed to be observing the cease-fire, and there was the imminent possibility that Egypt’s Third Army would be captured or annihilated. Then came a blunt and provocative letter from Leonid Brezhnev to Nixon. The Soviet Union would not allow the Third Army to be destroyed. If that happened, Soviet credibility in the Middle East would also be destroyed and Brezhnev, in Kissinger’s words, would “look like an idiot.” Brezhnev demanded that a joint American-Soviet force move in to separate the two sides. If the United States would not cooperate, the Soviets would intervene unilaterally. “I shall say it straight,” Brezhnev menacingly wrote. His threat was taken very seriously. It was known that Soviet airborne troops were on alert, and Soviet ships in the Mediterranean seemed to be proceeding in a belligerent fashion. Most worrying, neutron emissions from what might be nuclear weapons had been detected on a Soviet freighter passing through the Dardanelles into the Mediterranean. Was Egypt the destination?

A half dozen of the most senior American national security officials were summoned to a hurriedly called late-night emergency meeting in the White House Situation Room. Nixon himself was not awakened for the meeting on the advice of Alexander Haig, who told Kissinger that the President was “too distraught” to join them. Some of the participants were surprised to find that the President was not there. The officials grimly reviewed the Brezhnev message. Direct Soviet military intervention could not be tolerated; it could upset the entire international order. Brezhnev could not be allowed to assume that the Soviet Union could take advantage of a Watergate-weakened Presidency. There was further reason for alarm. Over the previous few hours, United States intelligence had “lost” the Soviet air transport, which it had been tracking as the planes ferried arms to Egypt and Syria. No one knew where the planes now were. Could they be on their way back to Soviet bases to pick up the airborne troops, already on alert, and carry them into the Sinai?

The officials in the White House Situation Room concluded that the risks had suddenly escalated; the United States would have to respond resolutely to Brezhnev’s challenge. Force would have to be prepared to meet force. The readiness state of American forces was raised to DefCon 3 and in some cases even higher, which meant that, in the early morning of October 25, the American military went on a nuclear alert around the world. The message was clear. The United States and the Soviet Union were squaring off directly against each other, something that had not happened since the Cuban Missile Crisis. Miscalculation could lead to a nuclear confrontation. The next hours were very tense.

But the following day, the fighting in the Middle East stopped, Egypt’s Third Army was resupplied, and the cease-fire went into effect. It was just in time. The superpowers pulled back from their alerts. Two days later, Egyptian and Israeli military representatives met for direct talks for the first time in a quarter of a century. Egypt and the United States, meanwhile, opened a new dialogue. Both had been objectives of Sadat when he first conceived his gamble a year earlier. The nuclear weapons were sheathed. But the Arabs continued to wield the oil weapon. The oil embargo remained in place, with consequences that would extend far beyond the October War.11

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