Modern history

CHAPTER 30

“Bidding for Our Life”

THE EMBARGO SIGNALED a new era for world oil. As war was too important to be left to the generals, so oil was now clearly too important to be left to the oil men. Petroleum had become the province of presidents and premiers, of foreign and finance and energy ministers, of congressmen and parliamentarians, of regulators and “czars,” of activists and pundits, and in particular, of Henry Kissinger, who, by his own proud admission, had before 1973 known nothing about oil, and precious little about international economics. Politics and grand strategy were what he relished. In the months after the embargo, he would tell aides, “Don’t talk to me about barrels of oil. They might as well be bottles of Coca Cola. I don’t understand!” Yet once the oil weapon had been brought into play, this diplomatic acrobat would do more than anybody else to get the sword back into its scabbard.

“The Loss”

What was called the “Arab oil embargo” had two elements. The broader one was composed of the rolling production restraints that affected the entire market—the initial cutbacks, then the additional 5 percent each month. The second element was the total ban on export of oil, which was initially imposed on only two countries, the United States and the Netherlands, though subsequently extended to Portugal, South Africa, and Rhodesia. In a bizarre twist, the embargo also extended to United States military forces in the Eastern Hemisphere, including the Sixth Fleet, among whose de facto responsibilities was the protection of some of those states that were imposing the embargo. The oil companies may have thought that they carried out that particular cutoff with a “wink,” implying that the missing oil would be made up from other sources; but, if so, the wink was not seen in the Pentagon, where, in the midst of a major military crisis, which might involve American forces, the reaction was one of fury. Nor was it seen in the Congress, where an amendment was hurriedly passed making it a criminal act to discriminate against the Department of Defense. Meanwhile, supplies were resumed to the U.S. forces.

At the beginning of November 1973, only two weeks after the initial decision to use the oil weapon, the Arab ministers decided to increase the size of the across-the-board cuts. But how much oil was really lost? Available Arab oil in the first part of October had totaled 20.8 million barrels per day. In December, at the most severe point in the embargo, it was 15.8 million barrels per day, a gross loss of 5 million barrels per day of supply from the market. This time, however, there was no spare capacity in the United States. Its disappearance represented a major change in the underlying dynamics of politics and oil as they had existed as recently as six years earlier, during the 1967 Six-Day War. America’s spare capacity had proved to be the single most important element in the energy security margin of the Western world, not only in every postwar energy crisis but also in World War II. And now that margin was gone. Without it the United States had lost its critical ability to influence the world oil market. Other producers, led by Iran, were able to increase their output by a total of 600,000 barrels per day. Iraq, its proposal for total economic warfare against the United States rejected by the other Arab producers, not only sulked, it actually increased production and thus its revenues. Seeking to explain his country’s policies, Iraq’s Saddam Hussein blasted the governments of Saudi Arabia and Kuwait as “reactionary ruling circles well known for their links with America and American monopolistic interests” and attacked the cutbacks on supplies to the Europeans and Japanese as likely to throw them back into the arms of the reviled Americans.

The production increases elsewhere meant that the net loss of supplies in December was 4.4 million barrels per day, or about 9 percent of the total 50.8 million barrels per day that had been available in the “free world” two months earlier—not, at first blush, a particularly large loss, proportionately. But it amounted to 14 percent of internationally traded oil. And its effects were made even more severe because of the rapid rate at which world oil consumption had been growing—7.5 percent a year.

Yet all the knowledge about the dimensions of the loss and its limits was gained only after the fact. In the midst of the cutbacks, there was great uncertainty about how much oil was available, combined with an inevitable tendency to exaggerate the loss. The confusion resulted from the contradictory and fragmentary nature of information and from the massive disruption of established supply channels, all overlaid by rabid and violent emotions. Unanswered questions made the fear and disarray even worse. Would further cutbacks be imposed each month? Would new countries be embargoed? Would countries be shifted from the “neutral” to the “preferential” or even to “most favored” list—meaning that the Arabs would reward them for good behavior by giving them more oil? Would other countries find themselves punished more severely?

There was one other very large uncertainty. The oil exporters, in the final analysis, thought in terms of revenues. In 1967, they had pulled back from an embargo because they had found that their total earnings fell. Having learned that lesson, King Faisal had been reluctant, at least through 1972, to resort to the oil weapon. But now, with the price per barrel skyrocketing, the exporters could cut back on volumes and still increase their total income. They could sell less and still earn more. Looking at their earnings, they might decide to make the cuts permanent and never bring the missing barrels back to the market, which could mean a chronic shortage, permanent fear—and even higher prices.1

Panic at the Pump

What better recipe could there have been for panic prices than the oil supply situation in the memorable final months of 1973? The ingredients included war and violence, cutbacks in supply, embargoes, shortages, desperate consumers, the specter of further cutbacks, and the possibility that the Arabs would never restore production. Fear and uncertainty were pervasive and had a self-fulfilling effect: both oil companies and consumers frantically sought additional supplies not only for current use but also for storage against future shortages and the unknown. Panic buying meant extra demand in the market. Indeed, buyers were scrambling desperately to get any oil they could find. “We weren’t bidding just for oil,” said one independent refiner who did not have a secure source of supply. “We were bidding for our life.”

The bidding propelled prices even further upward. The posted price for Iranian oil, in accord with the October 16 agreement, was $5.40 a barrel. In November, some Nigerian oil was sold for over $16. In mid-December, Iran decided to hold a major auction to test the market. The bids were dramatic—over $17 a barrel, 600 percent greater than the pre-October 16 price. Then, at a rumorladen and skillfully managed Nigerian auction, a Japanese trading company—inexperienced in buying oil, under pressure to help assure Japan’s supply, and competing with eighty or so other companies—bid $22.60 a barrel. As events turned out, the trading company could never find buyers at that price, and the deal was not consummated, but no one could have known that at the time. There were reports of even higher bids.

The embargo and its consequences sent shock radiating through the social fabric of the industrial nations. The Club of Rome’s pessimistic outlook seemed to have been substantiated. E. F. Schumacher, it appeared, had been a prophet after all. His jeremiads on the dangers of the stupendous growth rates in oil demand and on the risks of dependence upon the Middle East had been proved right. With the timely publication of Small is Beautiful in 1973, he had found, after decades of anonymity, his metier as spokesman for those who challenged the tenets of unbridled growth and the “bigger is better” philosophy that had dominated the 1950s and 1960s. Now, in his later years, the erstwhile coal champion and energy Cassandra had become a man for his time. The title of his book and its interpretation—“less is more”—became catch phrases of the environmental movement following the embargo, and Schumacher was lionized around the world. Queen Elizabeth awarded him a CBE and invited him to lunch at Buckingham Palace, and he had a private dinner with Prince Philip. “The party is over,” Schumacher declared to the world. But then he asked, “Whose party was it anyway?”

The age of shortage was at hand. The prospect, at best, was gloomy: lost economic growth, recession, and inflation. The international monetary system could be subject to extreme dislocation. Most of the developing world would surely suffer a significant setback, and there was good reason to wonder darkly about the political effects on the industrial democracies from the loss of sustained economic growth, which had provided social glue in the postwar years. Would protracted economic problems mean a rebirth of the domestic conflict of the interwar years, which had had such terrible consequences? Moreover, the United States, the world’s foremost superpower and the underwriter of the international order, had now been thrown on the defensive, humiliated, by a handful of small nations. Would the international system now unravel? Would the decline of the West mean the inevitable rise of world disorder? As for individual consumers, they began to worry about higher prices, their pocketbooks, and the disruption of their way of life. They feared that the end of an era was at hand.

The effects of the embargo on the psyches of the Western Europeans and the Japanese were dramatic. The disruption instantaneously transported them back to the bitter postwar years of deprivation and shortages. Suddenly their economic achievements of the 1950s and 1960s seemed very precarious. In West Germany, the Ministry of Economics took on the task of allocating supply and found itself buried almost immediately under a sea of telexes from desperately worried industries. The first was from the sugar beet industry, whose season was in full swing. If it ran out of fuel oil for only twenty-four hours, its entire operations would come to a stop, and the sugar would crystallize in the tubes. The specter of Germany’s sugar beet industry immobilized, its supplies lost forever to the market, was such that its sugar refineries were swiftly given a sufficient allotment of fuel oil.

In Japan, the embargo came as an even more devastating shock. The confidence that had been built up with strong economic growth was suddenly shattered; all of the old fears about vulnerability rushed back. Did this mean, the Japanese asked themselves, that, despite all their exertions, they would be poor again? The fears aroused by the embargo ignited a series of commodity panics that recalled the violent “rice riots” that had shaken Japanese governments in the late nineteenth and early twentieth centuries. Taxicab drivers staged angry demonstrations, and housewives rushed out to buy and hoard laundry detergent and toilet paper—in some cases, upwards of a two-year supply. The price of toilet paper would have quadrupled, like that of oil, had it not been for government controls. As a result, in Japan, the oil shortage was accompanied by a toilet paper shortage.

In the United States, the shortfall struck at fundamental beliefs in the endless abundance of resources, convictions so deeply rooted in the American character and experience that a large part of the public did not even know, up until October 1973, that the United States imported any oil at all. But, inexorably, in a matter of months, American motorists saw retail gasoline prices climb by 40 percent—and for reasons that they did not understand. No other price change had such visible, immediate, and visceral effects as that of gasoline. Not only did motorists have to shell out more money to fill their tanks, they also passed stations that upped the price of a gallon of gas as often as once a day. But the short-age became even more vivid with the emergence of what John Sawhill, of the Federal Energy Office, called “one-time supply curtailment measures”—better known as “gas lines.”

These gas lines became the most visible symbol of the embargo and America’s most direct experience of it. An allocation system had been introduced in the United States just before the embargo because of the growing tightness of the market. It was meant to distribute supplies evenly around the country. Now it assured, perversely, that gasoline could not be shifted from an area already well-supplied to one where it was needed. As reports and rumors proliferated, Americans became prey to their own commodity panic—not for laundry detergent or toilet paper, but for gasoline itself. Motorists who had been content to drive until the gauge was virtually on “empty” now hastened to “top off” their tanks, even if it was only a one-dollar purchase, thus contributing to the lengthening gas lines. It was prudent; no one wanted to take a chance on there not being any gasoline tomorrow. At some stations, purchases were allocated by the day of the week and whether the motorist’s license plate ended with an odd or even number. Motorists waiting in line an hour or two, with their engines running and their tempers rising, sometimes seemed to burn more gas than they were able to purchase. In many parts of the country, gasoline stations sprouted “Sorry, No Gas Today” signs—very different from the “gas war” signs advertising discounts, which had been so common in the preceding decade of surplus. The embargo and the shortage it caused were an abrupt break with America’s past, and the experience would severely undermine Americans’ confidence in the future.2

“Beef Prices”

Richard Nixon would seek to restore that confidence. In early November, in a Cabinet meeting devoted to energy, one Cabinet officer suggested turning off lights on public buildings. “But you have to hire more police,” the practical law-and-order President pointed out. He had something much more significant and far-reaching in mind. On November 7, 1973, he made a major Presidential address on energy to an alarmed and fearful nation. He offered a wide range of proposals. Citizens should turn down their thermostats and car pool. He would seek authority to relax environmental standards, halt the switching of utilities from coal to oil, and establish an Energy Research and Development Administration. He called for a grand new national undertaking, Project Independence. “Let us set as our national goal,” he said, “in the spirit of Apollo, with the determination of the Manhattan Project, that by the end of this decade we will have developed the potential to meet our own energy needs without depending on any foreign energy source.” To call his plan ambitious was a considerable understatement; it would require many technological advances, vast amounts of money, and a sharp swerve away from the new road of environmentalism. His staff had told him that the goal of energy independence by 1980 was impossible and suggested that it was thus silly to proclaim. Nixon overruled his staff. For energy was now both a crisis and high politics.

The President fired his old energy czar, John Love, a holdover from the pre-embargo days, and replaced him with Deputy Treasury Secretary William Simon. Telling the Cabinet about Simon’s new post, Nixon likened it to Albert Speer’s position as armaments overlord in the Third Reich. Had Speer not been given the power to override the German bureaucracy, Nixon explained, Germany would have been defeated far earlier. Simon was somewhat discomfited by the comparison. Nixon further said that Simon would have “absolute authority.” But that was one thing he surely did not have in fragmented, contentious Washington. The new energy czar found himself caught up in a never-ending series of hearings by Congressional committees and subcommittees that seemed to run almost around the clock. Once, rushing out of a meeting to answer a summons to one such hearing, Simon was rapidly walking backward so that he could finish a conversation with two lieutenant governors. As he backed into his car, he cracked his head, cutting his scalp. Though Simon needed stitches, the committee chairman would not put off the hearing, and thus the energy czar sat through five hours of interrogation, with blood oozing from the gash in his head. So intense were emotions during these months of gasoline lines that Simon’s wife gave up using any charge cards that carried her husband’s name.

The Administration resisted the continual clamor for gasoline rationing. Finally, as the din grew ever louder, Nixon ordered rationing stamps printed and held in reserve. “Maybe that will shut them up,” he said. Though his Administration continued to generate policies and programs, Nixon himself wanted to be deliberate in reacting to the crisis. One of his aides, Roy Ash, wrote a memo to him advising great caution. “I urge that we not allow pressures of the next month or two, based on a real and immediate shortage, seriously compounded by trendiness and news-magazine hysteria, to result in unnecessary and even counter-productive energy policies,” said Ash. “In a few months, I suspect, we will look back on the energy crisis somewhat like we now view beef prices—a continuing and routine governmental problem—but not a Presidential crisis.” On this note, Nixon penned two hand-written comments: “absolutely right” and “makes great sense.” But to the public, what had happened to gasoline prices far transcended the price of beef. Their birthright as Americans seemed to be in jeopardy.

Who was to blame? The oil industry was held responsible by many for the embargo, the shortages, and the price increases. After the oil companies themselves, the Nixon Administration became the other major target of animosity. In early December, public opinion analyst Daniel Yankelovich forwarded to General Alexander Haig, for the President’s attention, a memorandum he had prepared at the behest of Treasury Secretary George Shultz on the “incipient signs of panic” among the public. People are “growing fearful that the country has run out of energy,” Yankelovich explained. “A combination of circumstances has shaped an unstable public mood compounded of misinformation, mistrust, confusion and fear.” Those circumstances included Watergate, mistrust of the petroleum industry (which was thought to be using the gasoline shortage as an excuse for unfairly raising prices), a general decline of confidence in business, and the belief that the Nixon Administration was “too close to big business.” Watergate, Yankelovich added, “has bred a widespread feeling of gloom about the state of the nation,” and, as a direct result, public confidence that “things are going well in the country” had plummeted from 62 percent in May 1973 to a mere 27 percent in late November 1973.

Clearly, Watergate increased the need for the weakened Administration to do “something” positive; yet the scandal dogged the Nixon White House at every step of its efforts to respond to the oil crisis, and continually diverted the attention not only of the public but of the top policymakers. “Because of Watergate, there was a general sense of paralysis,” recalled Steven Bosworth, who was director of the State Department’s Office of Fuels and Energy. “Congress was mesmerized by Watergate, the executive branch was mired in it, and the White House was circling the wagons. It was difficult to get a political decision on anything on an inter-agency basis. There was no real decision-making apparatus in Washington—other than Henry Kissinger.”

Watergate was, as Kissinger himself would say, a “hydra-headed monster.” He was the only one who seemed able to surmount it. He strove to keep foreign policy, including that involving oil, insulated from Watergate, but domestic energy policy had no such luck. In November 1973, one White House official argued with Haig about a planned announcement of Administration energy actions. “I fully recognize the desire for a heavy newsday on Monday with an eye toward burying the tapes to Sirica issue,” he said, referring to the transfer of Nixon’s secret Oval Office tape recordings to a federal judge. “However, we are deluding ourselves if we think that any action will bury that issue.” Several weeks later, White House adviser Roy Ash added that news on any Presidential action on energy, no matter what day it was released, would not get good press coverage. “Perhaps nothing could win against Watergate,” he said. It seemed to those around Nixon that the President was always searching for some political “spectacular” involving oil and the Middle East to try to divert the country from its obsession with Watergate and each new revelation in the scandal. If that was his strategy, it failed.3

“Equal Misery”

In such circumstances of global agitation, anger, and suspicion, how was the shortfall in oil supplies to be allocated among nations—by governments or by companies? Several of the companies had warned about the instability of oil supplies. For the American companies, particularly the Aramco partners, the major problem was the Arab-Israeli dispute. If only the United States would jettison Israel, or at least greatly restrain its support, then all could return to normal. In this formulation, the Israelis were generally intransigent; the Arabs were not. To the European companies, the problem was different: The tight supply-demand balance had become inherently unstable and unsafe. The industrial world had become overdependent on a volatile part of the world, and thus was vulnerable to it. The real answer was to slow the growth in oil demand and, in the meantime, put some formal energy security measures in place. Royal Dutch/Shell had been distributing to government leaders a confidential “Pink Book,” warning that the supply situation was dangerously out of whack and that an “oil scramble” might ensue. Unlike the American companies, Shell had been campaigning for an intergovernmental agreement to share supplies in a crisis and, indeed, had already begun outlining, in its planning group, how such a system might work.

There had also been discussions about a sharing plan among the Western governments before October 1973, as had been put in place in 1956 and 1967. Each government, however, insisted on a system that would fit its own needs and position. Moreover, before the actual crisis, the issues had been too complex, there was too little agreement on the stakes and risks, the impetus was insufficient, and such coordination would have been too controversial for American politics. Thus, there was hardly any preparation. In June 1973, the industrial nations had agreed to establish “an informal working group to develop and evaluate the various options.” And that was as far as they got before the crisis.

In the midst of the crisis—with all its uncertainty, with American-European relations so brittle, and with the Arabs shrewdly intent on splitting the Western allies—no such machinery could quickly be established. Agreement for emergency sharing did exist among the members of the European Economic Community, but it was never invoked. After all, the main target of the cutback was the United States. Moreover, by putting the various European countries into different categories, from embargoed to “most favored,” the Arab exporters had gone a long way toward frustrating the ability of the Europeans to unite and implement a sharing agreement.

The U.S. government might have invoked the Defense Production Act of 1950, which provided antitrust exemption so that companies could pool supplies and information during a designated crisis, and which had been used to varying degrees in crises going back to the Korean War and the Iranian nationalization of 1951–53. Its use this time, however, might have added tinder to the fire, hindering the ability of the oil companies to finesse their way through the crisis and making the conflicts with the Arabs and the Western allies more explicit and more difficult. Moreover, its invocation in the midst of Watergate would have provoked suspicion and vocal criticism of collusion between the administration and the oil companies; Nixon simply was not in a position to appeal credibly to national interests.

That left only one choice for coping with the crisis—the companies themselves, primarily the majors. Heretofore, the companies had expressed pride in their buffer role between the producing and consuming countries—“the thin lubricating film,” David Barran of Shell had called it. But now they found how painfully grating it was to be that buffer during a time of acute stress, when the lubrication of oil was abruptly withdrawn.

On the one side there was the intense, deadly serious pressure from the Arab governments. The threat was explicit; the companies could lose their entire position in the Middle East. When the Saudis ordered the first 10 percent cutback on October 18, Aramco responded immediately, and it cut just a little extra for good measure. Here would unfold the anomalous, unpalatable sight of an American company—the most important jewel, some thought, of all American investments abroad—in a position that it had worked to avoid at all costs: actually implementing an embargo against the United States. But what choice did it have? Was it not better to cooperate and move as much oil onto the world market as possible than to be nationalized and thrown out? “The only alternative was not to ship the oil at all,” Chevron’s George Keller, an Aramco director, said afterward. “Obviously it was in the best interests of the United States to move 5, 6, 7 million barrels per day to our friends around the world rather than to have that cut off.”

Yet on the other side were the consuming governments, all of which sought the oil their publics needed. The most powerful of them happened to be the United States, not only the home government of five of the seven majors, but also the primary target for the whole exercise. Any action the companies took, they knew, would be subject to the closest scrutiny and after-the-fact evaluation. They did not want to lose markets, nor find themselves shut out, nor invite investigation and retaliation by consumers and their governments.

In such circumstances, the only logical response was one of “equal suffering” and “equal misery.” That is, the companies would try to allocate the same percentage of cutbacks from total supplies to all countries by moving both Arab and non-Arab oil around the world. They had already gained some experience in how to organize a sharing system during the embargo that accompanied the 1967 war. But the scale and the risks in 1973 were much, much larger. As the basis for the prorated cutbacks, they used either actual consumption in the first nine months of 1973 or what had been their projections for the immediate period ahead. Equal suffering “was the only defensible course if governments were not collectively to agree on any alternative preferred system,” said a senior executive of Shell. For the companies, he added, “this seemed the only way to avoid inviting their own destruction.” Anything else, for international companies, would be suicide. A further factor reinforced the equal-suffering principle—the existence of the “internal market” within the international oil companies. The head of a major’s Far East operations, for instance, who had to explain things subsequently to Japan and other governments in his part of the world, would certainly have raised holy hell if he thought his opposite number for Europe were getting a proportionately bigger share.

Though the companies were by long experience expert at juggling supplies under normal circumstances, they now had to improvise frenetically. “It was a very great torment,” recalled the head of oil supply for Gulf. “We were working around the clock. There were teams of people in the office all night long, allocating countries, figures, and supply plans, responding to anguished cries. We had to be cutting back on our worldwide commitments. We prorated worldwide. That meant cutting back our own refineries as well as our customers. I had to fight for our third party customers. Gulf and the other companies were being bombarded daily. ‘Why are you selling to the Koreans and Japanese when you could bring it into the United States? You’re an American company.’ We were being attacked in the press every day. The pressures were so great to bring another cargo in for a U.S. refinery. I had to remind our board that we had sold our long-term contracts to customers on the basis that we would treat them like ourselves. We had to contact field people, tell old friends that we were cutting them back, and go around the world explaining the supply/demand balance and, therefore, the prorationing. It was very difficult to make all that happen.”

The massive reallocation posed a very considerable logistical problem. Even under calm and relatively predictable circumstances, managing an integrated oil system was a highly complex matter. Supplies of varying qualities from various sources had to be linked into the transportation system and then moved to refineries that had been designed to handle those specific oils. Free will was not an option when it came to assigning crude oils. The “wrong” crudes could do considerable damage to the innards of a refinery, as well as reducing efficiency and profitability. And once the crude supplies were run through the refinery and turned into a number of products, they then had to be moved into a distribution system and linked with a “market demand” that wanted that particular balance of products—this amount of gasoline, that amount of jet fuel and heating oil.

And to make matters even more difficult, the companies still had to figure out what their oil supplies actually cost, so that they did not sell at a loss or invite attack for excessive profit margins. The costs for oil royalties, extent of government participation, buyback prices, volumes—all these were changing week by week, and were further complicated by leapfrogs and retroactive increases by the various exporting governments. “It was impossible to know whether a calculation made on the basis of all the known facts on one day would not be overturned by a rewriting of those facts a month later,” said an executive from Shell. Indeed, the only sure thing was that the price of oil was going up and up, and up again.

The scale of operations was massive; the decision points, almost innumerable. Normally, the complex calculations that guided the movement of oil through an integrated system were masterminded by computers on the basis of economic and technical criteria. Now, the political criteria were at least as important—not crossing the Arabs and their restrictions and yet also satisfying, to the greatest degree possible, the importing nations. Much sleight of hand was required to meet both objectives. Yet to a considerable degree, the companies made it all work.

Different governments responded differently to the companies’ prorationing cutbacks. Washington gave little direct guidance. John Sawhill, the head of the new Federal Energy Office, urged the companies “to bring as much as possible” into the United States, but at the same time to recognize “the interest in all of the countries of the world in having some kind of equitable share of the world’s supplies.” In a meeting with oil executives, Henry Kissinger did make it a point to ask them “to take care of Holland,” which had been made a particular target by the Arabs because of its traditional friendship for Israel.

Japan felt a special vulnerability. It had little indigenous energy, and imported oil fueled its formidable economic growth. Not only was its public in a panic, but Japan was highly dependent on the majors, most of which were American. At one meeting, a senior MITI bureaucrat warned representatives of the majors not to divert non-Arab oil from Japan to the United States. The company representatives replied that they were allocating oil as fairly as possible, and that they would be more than happy to hand the whole thankless job over to the governments, Japan included, if they wanted it. The Japanese government backed off; thereafter, it seemed to be satisfied with what was being done, though it continued to monitor the operation very closely.4

The most turbulent reaction was that of the British government. The United Kingdom had been placed among the “friendly nations” by the Arab governments, and thus was supposed to receive 100 percent of its September 1973 supplies, notwithstanding the cutbacks. The Secretary of Trade and Industry confidently told the House of Commons about “assurances from Arab states.” He himself went to Saudi Arabia to negotiate a government-to-government oil deal. The British government also owned half the stock in BP, but, by agreement dating back to Churchill’s acquisition of the shares in 1914, was not supposed to intervene in commercial matters. But was this a case of commerce or of security? Moreover, a confrontation was already brewing between the coal miners and the Conservative government of Prime Minister Edward Heath, threatening a major strike that could cut coal supplies at the same time that oil supplies were down. An oil shortfall would greatly strengthen the miners’ hand. Heath wanted as much oil as he could get in order to be prepared for a battle with the miners.

Heath summoned Sir Eric Drake, chairman of BP, and Sir Frank McFadzean, chairman of Shell Transport and Trading, to his country house, Chequers. The Prime Minister was accompanied by several of his Cabinet colleagues; it was clear that, if he could not cajole the oil companies into accepting his point of view, he would try to bully them into doing so. Britain must be given preferential treatment, Heath told them. The two companies must not cut their supplies to the United Kingdom; the flow should be maintained at 100 percent of normal requirements.

Both chairmen pointed out that the oil companies were in a position that was not of their choosing; they had been sucked into a vaccuum that had resulted, as McFadzean later expressed it, “from the failure of governments to plan on how to handle an oil shortage.” Every company had a web of legal and moral obligations in the many countries in which they did business; in the event of their being left to handle the shortage, the only possible policy they could pursue was equality of sacrifice, though they recognized even that principle would become progressively more difficult to hold to. McFadzean added another dimension. He was terribly sorry, but the Royal Dutch/Shell Group was 60 percent owned by the Dutch and only 40 percent by the British. So, even if he were to agree with Heath, which he “most decidedly did not,” it would not be possible to ride roughshod over the Dutch interests.

Rebuffed and irritated, Heath more insistently bore in on Drake in his quest for special treatment. Since the government owned 51 percent of BP, said Heath bluntly, Drake would do as the Prime Minister had ordered. But Drake was nothing if not direct, and he certainly was not accustomed to giving ground. As BP’s general manager in Iran in 1951, he had stood up to Mossadegh, for which he had been threatened with death, and thereafter he had stood up no less resolutely to BP’s chairman, the autocratic William Fraser, for which he had been threatened with exile to a BP refinery in Australia. He certainly was not going to give way now before Edward Heath and allow the Prime Minister, as he later said, “to destroy my company.” Having lived through one nationalization in Iran, Drake did not intend to be party to any more nationalizations, which he was sure would be the fate of BP facilities in other countries if he acquiesced to the Prime Minister.

So, when Heath pressed him, Drake parried with a question of his own. “Are you asking me to do this as a shareholder or as a government? If you’re asking me as a shareholder to give the U.K. 100 percent of its normal supplies, you should know that we could get nationalized in retaliation in France, Germany, Holland, and the rest. That would mean a great loss to the minority shareholders.” Drake then delivered to Heath an acid-edged lecture on company law, which prohibited giving one shareholder better treatment than another. All directors had a fiduciary responsibility to look after the interests of the company as a whole and not of particular shareholders. So, not only would the company be risking retaliation in countries that had had to suffer deeper cuts, the British government would leave itself open to minority suits for abuse of dominant power. “If you’re telling me to do it as a government,” Drake continued, “then I must tell you that I must have it in writing. Then we can plead force majeure to the other governments because I’m under government instructions. Perhaps, just perhaps, we can avoid nationalization.”

At this point, Heath lost his temper. “You know perfectly well that I can’t put it in writing,” he boomed. After all, he was the great champion of British entry into the European Community and of cooperation with the Europeans.

“Then I won’t do it,” Drake replied with absolute firmness.

Of course, Heath could always have asked Parliament to pass a law forcing BP to give special preference, but after a few days of reflection—including, no doubt, meditation on the effects such a move would have on Britain’s relations with its European allies—Heath’s temper cooled, and he gave up on his insistence on special treatment.

The civil servants in Whitehall had a better grasp of the overall picture than the politicians. They recognized the merits of the “fair share” principle and were more deft in seeking to bend it. They brought pressure to bear on the international companies, including reminding them that it was the British government that decided who would get exploration licenses in the North Sea. That way, they could assure that Britain received what they chose to interpret as “fair share”—and a bit more.

Diversion was the essence of the application of the principles of equal suffering and fair share. Non-Arab oil was diverted to countries that were embargoed or on the neutral list, while Arab oil was directed to the countries on the preferred lists. Altogether, the five American major companies ended up so diverting about a third of their oil. Overall, the principle of equal suffering was applied relatively effectively. Adjusting the data for the wide differences in energy and oil growth rates, the loss to Japan over the embargo period was 17 percent; to the United States, 18 percent; and to Western Europe, 16 percent. The Federal Energy Administration subsequently prepared, for the Senate Multinational Subcommittee, a retrospective analysis of how the informal allocation system had worked. When all things were considered, the report said, “it is difficult to imagine that any other allocation plan would have achieved a more equitable allocation of reduced supplies.” The companies “were called upon to make difficult and potentially volatile political decisions during the embargo—decisions beyond the realm of normal corporate concerns.” And that, the report noted, was something they absolutely never wanted to have to do again.5

A New World of Prices

It was amid the feverish bidding up of prices on spot markets that the OPEC oil ministers met in Tehran in late December 1973 to discuss the official price. The proposed range extended from that of the Economic Commission of OPEC, which recommended prices as high as $23 a barrel, down to Saudi Arabia’s $8. Saudi Arabia was fearful that a suddenly skyrocketing price could result in a depression, which would affect Saudi Arabia along with everybody else. “If you went down,” Yamani said, referring to the industrial world, “we would go down.” He argued that the recent huge auction prices were not indicative of real market conditions, but rather reflected the fact that the auctioning took place in the midst of politically imposed embargoes and cutbacks. Also, King Faisal wanted to maintain the “political character” of the embargo; he did not want it to look like a cloak for a money grab. Still, the prospect that income from one’s only major cash crop was about to be increased many times over could certainly mute such discomfort among the exporters.

By far the most aggressive and outspoken country was Iran. Here was the opportunity, finally, for the Shah to gain the kind of revenues that he deemed necessary to finance his grand ambitions. Iran argued for $11.65 as the new posted price, which would mean a government take of $7. The Iranians had a rationale for their price. It was based not on supply and demand but on what the Shah called a “new concept,” the cost of alternative energy sources—liquids and gas made from coal and shale oil. It was the minimum price necessary if these other processes were to be economical, or so the Shah said. In private, he proudly cited a study done for Iran by Arthur D. Little on this subject. The Arthur D. Little premises, in turn, were shared in many oil companies. The study had the ring of hard analysis, but in fact was at best very conjectural, since of all those alternative energy processes, only one was commercially operating, and that was a single, limited coal liquefaction project in South Africa. Shell’s chief Middle East adviser summed the matter up thus: “The alternative source existed, in the volume required, only in economic theory, not in reality.” As in previous oil shortages, the miracle of shale oil was really a chimera.

After much hard discussion, the Shah’s position was accepted by the oil ministers gathered in Tehran. The new price would be $11.65. It was a price rise pregnant with history and significance. The posted price had been raised from $1.80 in 1970 to $2.18 in 1971 to $2.90 in mid-1973 to $5.12 in October 1973—and now to $11.65. Thus, the two price increases since the war had begun—in October and now in December—constituted a fourfold increase. As a “marker,” the new posted price was applied to a particular Saudi crude, Arabian Light. The prices of all other OPEC crudes were to be keyed to that, with the “differentials” in prices to be based upon quality (low- or high-sulfur), gravity, and transportation costs to major markets. Pointing out that the new price was considerably lower than the $17.04 that had been tendered in the recent Iranian auction, the Shah graciously said that it was a price fixed out of “kindness and generosity.”

At the end of December, Richard Nixon wrote a very strong private letter to the Shah. Outlining “the destabilizing impact” of the price increase and the “catastrophic problems” it could create for the world economy, he asked that it be reconsidered and withdrawn. “This drastic price increase is particularly unreasonable coming as it does when oil supplies are artificially restrained,” said the President. The Shah’s reply was brief and totally ungiving. “We are conscious of the importance of this source of Energy to the prosperity and stability of the international economy,” he said, “but we also know that for us this source of wealth might be finished in thirty years.”

The Shah had found a new role; he was now to be the moralist for world oil. “Really oil is almost a noble product,” he declared. “We were almost careless to use oil for heating houses or even generating electricity, when this could so easily be done by coal. Why finish this noble product in, say, 30 years’ time when thousands of billions of tons of coals remain in the ground.” It was also the Shah’s inclination to become the moralist for world civilization. He had words of advice for the industrial nations. “They will have to realize that the era of their terrific progress and even more terrific income and wealth based on cheap oil is finished. They will have to find new sources of energy. Eventually they will have to tighten their belts; eventually all those children of well-to-do families who have plenty to eat at every meal, who have their cars, and who act almost as terrorists and throw bombs here and there, they will have to rethink all these aspects of the advanced industrial world. And they will have to work harder.… Your young boys and young girls who receive so much money from their fathers will also have to think that they must earn their living somehow.” His haughty stance, in the midst of shortages and huge price increases, would cost him dearly only a few years later, when he desperately needed friends.6

Alliance Strained

The embargo was a political act that took advantage of economic circumstances, and it had to be met with political action on three interrelated fronts: between Israel and its Arab neighbors; between America and its allies; and between the industrial countries, particularly the United States, and the Arab oil exporters.

On the first front, Kissinger made himself the center of a vortex of activity. He would seek to take advantage of the new reality created by the war: Israel had lost a good deal of confidence, while the Arabs, particularly Egypt, had regained some of theirs. “Shuttle diplomacy” became the hallmark of his tireless, dramatic, and virtuoso performance. There were several landmarks along the way, including an Egyptian-Israeli disengagement agreement in mid-January 1974, and finally a Syrian-Israeli disengagement at the end of May. And while the negotiations were arduous, uncertain, and contingent, they would lay the basis for broader agreement four years later. Throughout, Kissinger had a particular partner, Anwar Sadat, who knew his own objectives. Sadat had resorted to war, in the first place, to effect political changes. In the aftermath of the war, he had a better chance of achieving those changes in collaboration with the Americans. For, as he publicly declared, “The United States holds 99 percent of the cards in this game.” Of course, Sadat was a politician, conscious of his audiences, and in private he once admitted, “The United States actually only holds 60 percent of the cards, but it sounds better if I say ‘99 percent.’” And even 60 percent, in pursuit of his objectives, was certainly more than adequate reason to lean toward the United States. At a meeting in Cairo less than a month after the war, Sadat left no doubt in Kissinger’s mind that, having achieved his shock, he was now ready to begin a peace process—and, at enormous risk, to seek to transform the psychology of the Middle East.

The oil embargo precipitated one of the gravest splits in the Western alliance since its foundation in the days after World War II, and certainly the worst since Suez in 1956. Relations had already been under some strain before the October War. Once the embargo began, the European allies, led by France, hastened to disassociate themselves from the United States as fast as they could and to assume positions more agreeable to the Arabs, a process that was speeded by a tour of European capitals that Yamani made in the company of his Algerian counterpart. At each stop, the two ministers pressed the Europeans to oppose the United States and its Middle East policy, and to support the Arabs. Yamani applied his special touch to the effort. “We are extremely sorry for the inconvenience caused in Europe by the Arab oil cut,” he said apologetically. But he left no doubt what he expected of them.

As the Europeans compliantly shifted their policies, seeking to separate themselves from the United States and promote “dialogue” and “cooperation” with the Arab countries and OPEC, senior American officials began to talk caustically about the Europeans’ being soft on OPEC and falling all over themselves in their haste to accommodate and appease. For their part, the Europeans insisted that the United States was too confrontational, too belligerent, in its posture toward the oil exporters. To be sure, there were significant variations among countries in Europe. The French and the British were the most keen to distance themselves from the United States and to court the producers; the Germans, less so; and the Dutch, by contrast, resolute in their commitment to traditional alliances. Some of the Europeans emphasized that they had large and immediate interests to protect. “You only rely on the Arabs for about a tenth of your consumption,” French President Georges Pompidou bluntly told Kissinger. “We are entirely dependent upon them.”

There were elements of both resentment and poetic justice in the European position. The French had long felt that the “Anglo-Americans” had unfairly excluded them from most Middle Eastern oil, especially in Saudi Arabia with the postwar renunciation of the Red Line agreement, and that the Americans had undermined them in the struggle over Algeria. Then there was the 1956 Suez crisis. Seventeen years had passed since the Americans had blatantly undercut France and Britain in the confrontation over the canal with Nasser, hastening the retreat of the two nations from their global roles and giving a great boost to Arab nationalism. But, as Prime Minister Edward Heath now privately and pointedly told the Americans, “I don’t want to raise the issue of Suez but it’s there for many people.” It was vividly “there” for Heath himself; he had been Anthony Eden’s loyal whip during those pained Suez days. In mid-November 1973 the European Community passed a resolution supportive of the Arab position in the Arab-Israeli conflict. Some Arab officials were still dissatisfied. One described the statement as “a kiss blown from afar—which is all very nice but we would prefer something warmer and closer.” The resolution, however, clearly represented the kind of accommodation that the Arabs were trying to force, and it was enough to win the Europeans a suspension of the 5 percent December cut. But, just to make sure the Europeans kept on good behavior, the Arab oil ministers warned that the cuts would be imposed after all if the Europeans did not keep “putting pressure on the United States or Israel.”

There was one very awkward matter for the European Community. While many of its members were being put on the “friendly” list, one of them, the Netherlands, was still embargoed. If the other members decided to embargo transshipments to the Netherlands, they would be violating one of the basic precepts of the community, namely, the free flow of commodities. Nevertheless, they were inclined to do exactly that, until the Netherlands reminded them, forcefully, that it was the major source of natural gas for Europe, including 40 percent of France’s total supply and most of the gas used for heating and cooking in Paris. A quiet compromise was worked out, involving an unspecified “common position” among the European Community members and the expediting of non-Arab supplies from the international companies.

The Japanese, who thought themselves quite removed from the Middle East crisis, were distressed to find they had been placed on the “unfriendly” list. Forty-four percent of Japan’s oil came from the Arab Gulf states, and of all the industrial countries, it was the one most dependent on oil as a source of total energy—77 percent compared to 46 percent for the United States. It had taken oil for granted as the essential and reliable fuel for economic growth. No longer. Point blank, Yamani spelled out the new Arab export policy to the Japanese: “If you are hostile to us you get no oil. If you are neutral you get oil but not as much as before. If you are friendly you get the same as before.”

Before the oil embargo, the “resource faction” in Japanese government and business circles had already begun to call for a reorientation in Japanese policy toward the Middle East. They had not made much progress because, in the words of Vice-Minister for Foreign Affairs Fumihiko Togo, “before 1973, we could always buy the oil if only we had the money,” and because Japan bought the oil primarily from the international companies, and not directly from Middle Eastern countries. After the crisis began, the resource faction mightily intensified its efforts. On November 14, the same day that Kissinger was in Tokyo trying to persuade Japan’s Foreign Minister not to break with the United States, worried business leaders met privately with Prime Minister Kakuei Tanaka to make a “direct request” for a major change of policy. A few days later, the Arab exporters exempted from further cutbacks the European countries that had issued the pro-Arab statement. Here was tangible proof of the rewards of changing policy. Meanwhile, unofficial Japanese emissaries, who had hurriedly been dispatched on secret trips to the Middle East, were reporting back that the Arabs regarded “neutrality” as insufficient and indeed, as opposition to their cause. On November 22, Tokyo issued its own statement endorsing the Arab position.

That declaration represented Japan’s first major split on foreign policy with the United States in the postwar era. Such an action was hardly to be undertaken lightly, as the U.S.-Japan alliance was the basis of Japanese foreign policy—or had been. Four days after the statement’s issuance, Japan got its own reward; it was exempted from the December cutbacks by the Arab exporters. As part of its new resource diplomacy, Tokyo sent a host of high-level representatives to the Middle East to conduct business with a decidedly political cast—economic assistance, loans, new projects, joint ventures, bilateral deals, the works. By the very fact of the allocations and cutbacks, the majors had, in effect, said they could not supply Japan as they had in the past. Therefore, Japan could not rely on them and would have to make its own deals in quest of security of supply. However, the Japanese did refuse, despite continuing Arab insistence, to break all diplomatic and economic relations with Israel. The Japanese who pushed to abrogate those ties, argued Vice-Foreign Minister Togo, were suffering from a familiar epidemic—“oil on the brain.”7

Even as its traditional allies gave way to Arab demands, the United States tried to promote a coordinated response among the industrial countries. Washington feared that a resort to bilateralism—state-to-state barter deals—would result in a much more rigid, permanently politicized oil market. Already the rush was on. “Bilateral Deals: Everybody’s Doing It,” headlined the Middle East Economic Survey in January 1974. The oil industry looked with skepticism at the scramble among politicians to acquire national supplies. One oil man, Frank McFadzean of Shell, could only marvel, albeit with a certain cynicism, at “the spectacle of two senior Cabinet Ministers flying off with the melodrama normally associated with the relief of a beleaguered fortress, to sign a barter agreement involving a quantity of crude oil equal to less than four weeks of the country’s requirements. Delegations and emissaries, politicians and friends of politicians, most of them with little knowledge of the oil business, descended on the Middle East like a latter day plague of near Biblical proportions.” For his part, Henry Kissinger feared these bilateral arrangements would undermine his efforts to negotiate a settlement to the Arab-Israeli war. If the industrial countries kept to the helter-skelter approaches already taken—competitive bidding based on panic and lack of information, mercantilism, sauve qui peut (“every man for himself”)—all were likely to end up worse off.

The United States called for an energy conference to convene in Washington in February 1974. It wanted to assuage fears about competition over supplies, heal the deep rifts in the alliance, and ensure that oil did not become a lasting source of division in the Western alliance. The British had come to the conclusion that being on the “friendly” list did not buy them very much; they still had to face the same price increases, and were most interested to participate. In fact, the political situation in the United Kingdom had changed dramatically. For Britain, the oil shortage was magnified several times over by the coal miners’ confrontation with Prime Minister Heath, which turned not only into a strike but into full-scale economic war. There were not sufficient oil supplies to substitute quickly for coal in power stations; the country’s economy was paralyzed as it had not been since the coal shortage of 1947. Electricity supplies were interrupted, and industry went on a three-day workweek. Even heating for domestic hot water was in short supply, and clergymen solemnly debated on the BBC the morality of family members’ sharing their bath water, and thus keeping demand down to one tub of hot water, as a contribution to the national weal. In what would turn out to be the last weeks of the Heath government, Britain was a supportive participant in the Washington Energy Conference.

So were the Japanese. They believed that a coordinated response by the industrial nations was required. They were also keen to find a framework in which to mute what they regarded, in the words of one official, as the “tendency of U.S. policy to become very confrontational.” The Germans were also eager to talk on a multilateral basis. Not so the French. They remained unreconstructed. Though reluctantly making an appearance at the Washington gathering, they were vocal in their antagonism. Foreign Minister Michel Jobert, who took Gaullism to an extreme, opened a caucus in Washington of the European Community participants with the bitter salutation: “Bonjour les traitres” (“Hello traitors”).

For their part, American officials did hint rather broadly that America’s overall security relationship, including the maintenance of American troops in Europe, might be jeopardized by discord on energy issues. Most of the participants in the Washington Energy Conference agreed on the merit of developing consensus and some common policies on international energy matters, and the conference led to the establishment of an emergency sharing program for the “next” crisis and the creation of the International Energy Agency, which would be charged with managing the program and, more broadly, with harmonizing and making parallel the energy policies of the Western countries. The IEA would help to deflect the drive to bilateralism and establish the framework for common response, both politically and technically. Before 1974 was out, the IEA would be set up in a leafy section of the sixteenth arrondissement in Paris, in an annex to the Organization for Economic Cooperation and Development. Yet one major industrial country refused to join—France. The IEA, said the un-reconstructed Foreign Minister Jobert, was a “machine de guerre,” an instrument of war.8

Sheathing the Oil Weapon

When, and how, would the embargo itself end? No one really knew, not even the Arabs. In the last days of December 1973, the Arab producers did relax the embargo a little as some initial progress was made on the Arab-Israeli dispute. The embargo had become, in Kissinger’s sarcastic formulation in early January, “increasingly less appropriate.” He himself went twice to Saudi Arabia to see King Faisal. On the first trip, as he walked through a tremendous hall where distinguished men of the kingdom in black robes and white headdresses sat against the walls, Kissinger, a Jewish emigrant to America, found himself reflecting “in some wonder what strange twists of fate had caused a refugee from Nazi persecution to wind up in Arabia as the representative of American democracy.” He also found the form of the discussions outside his experience. “The King always spoke in a gentle voice even when making strong points. He loved elliptical comments capable of many interpretations.” Kissinger sat at his right in the center of the room. “In talking to me he would look straight ahead, occasionally peeking from around his headdress to make sure I had understood the drift of some particular conundrum.” That would be the case, whether Faisal was talking about the conspiracy of Jews and communists to take over the Middle East or the practical political questions that stood in the way of ending the embargo. The King was apologetic but firm. He did not have a free hand to end the embargo; the invocation of the oil weapon had been a joint decision of all the Arabs. Itswithdrawal would also have to be a joint decision. “What I need,” said the King, “is the wherewithal to go to my colleagues and urge this.” He would also insist that a fundamental condition for him was that Jerusalem become an Arab Islamic city. What about the Wailing Wall, he was asked? Another wall, he replied, could be built somewhere else, against which the Jews could wail.

With little sign that the embargo would be lifted, Washington now turned to a new ally, Anwar Sadat. The chief proponent and beneficiary of the embargo had now become the chief advocate of its cancellation. Like the war itself, he said, the embargo had served its purpose and should be ended. And, indeed, he recognized that the continuation of the embargo would now work against Egypt’s interests. The United States itself could go only so far on the path toward Middle Eastern peace under the gun of the embargo. Moreover, the perpetuation of the embargo, which after all was an act of economic warfare, could do long-term damage to the whole range of America’s relations with nations like Saudi Arabia and Kuwait, to the disadvantage of those countries. For finally, Watergate or no Watergate, a superpower like the United States could ill afford to be in such a position for any length of time.

But the Arab exporters, having successfully played their trump card, did not want to move quickly to take it off the table. Nor did they want to be seen as giving in too quickly to American blandishments. Still, as the embargo dragged on, more and more oil was seeping back into the market, and the cutoffs were becoming less and less effective. The Saudis indicated to the Americans that the embargo could not be brought to an end without some kind of movement on the Syrian front and at least the tacit acquiescence of Syria’s Hafez al-Assad, who was furious with Sadat because of the diplomatic progress being made on the Egyptian front. In effect, Assad had a veto on whether the embargo would be lifted. To help end it, the Saudis opened the door to American-Syrian negotiations concerning disengagement on the Golan Heights. In mid-February 1974, Faisal met in Algiers with Sadat, Assad, and the president of Algeria. Sadat made clear he thought the embargo had outlived its usefulness and might well work against Arab interests. He said that the Americans were leading the way toward a new political reality. Faisal agreed to ending the embargo, so long as there was “constructive effort,” promoted by the United States, toward a Syrian-Israeli disengagement. Over the next few weeks, however, Assad maintained a particularly hard-line position, which prevented the others from publicly endorsing an end to the embargo. But they took seriously the warning that the United States peace effort could not proceed without the lifting of the embargo. On March 18, the Arab oil ministers agreed to its end. Syria and Libya dissented.

After two decades of talk and several failed attempts, the oil weapon had finally been successfully used, with an impact not merely convincing, but overwhelming, and far greater than even its proponents might have dared to expect. It had recast the alignments and geopolitics of both the Middle East and the entire world. It had transformed world oil and the relations between producers and consumers, and it had remade the international economy. Now it could be resheathed. But the threat would remain.

In May, Henry Kissinger was able to secure the Syrian-Israeli disengagement, and a peace process seemed to have begun. In June, Richard Nixon made a visit to Israel, Egypt, Syria, and Saudi Arabia. The embargo was now history, albeit very recent history, at least insofar as the United States was concerned. (It was still in place against the Netherlands.) The United States could rightly claim the beginnings of some considerable results in Middle Eastern diplomacy. Watergate, however, was an ever-present reality, and Nixon’s behavior on the trip struck some as stark. Sitting with the Israeli Cabinet in Tel Aviv, he suddenly announced that he knew the best way to deal with terrorists. He sprang to his feet and, with an imaginary submachine gun in his hand, pretended to gun down the entire Cabinet, Chicago style, making a “brrrrr” sound as he did so. The Israelis were perplexed and a little concerned. In Damascus, Nixon told Syria’s Assad that the Israelis should be pushed back until they fell off the cliff, and to underscore the point, he made strange, chopping gestures. Thereafter, in subsequent meetings with other Americans, Assad would insist on recalling Nixon’s exposition.

But it was in Egypt that Nixon had his great moment. His days there could only have been called triumphal. Millions of enthusiastic, delirious Egyptians turned out to cheer. It was truly his last hurrah. There was much there for savorers of irony. After all, this was the land of Gamal Abdel Nasser, who had been a master at turning out massive crowds to denounce Western imperialism and, in particular, the United States. But now the country in which Richard Nixon was much more likely to be greeted by hostile crowds was not Egypt but the United States. The bitter antagonism to him at home in what would prove to be the last months of his Presidency stood in marked contrast to the clamor and excitement that greeted him in the streets of Cairo. For the Egyptians, it was a celebration of Sadat’s restoration of Egypt and of its prestige, which had been greatly tarnished in Nasser’s final years. For Nixon, it could no less have been a celebration both of the end of the embargo and of the diplomatic effectiveness of his administration. But he was hardly in a mood to enjoy it. He was in poor health during the visit, his leg was swollen with phlebitis, and he spent much of his free time on the trip listening to his own incriminating Oval Office tapes, which would finally compel his resignation.9

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