The Persian Gulf: Understanding the American Oil Strategy

A recent visit to the city of Baku in Azerbaijan on the Caspian Sea called to mind that a century ago, the Caspian region held half the world oil supplies. Half a century ago, the battle of Stalingrad, one of the bloodiest of World War II, was fought in large part over who controlled those vast oil supplies. Today, the region has little to show for it. Still relatively poor and underdeveloped, and environmentally one of the most devastated in the world, it now sees its salvation once again in the promise of newly discovered oil reserves. And once again, Western oil companies and political strategists are showing greater interest in the region as it embarks on a project to build a new pipeline through Georgia and Turkey into the Mediterranean, pumping a million barrels a day in the hope of further reducing the impact of OPEC on the oil markets and meeting projected increases in oil demand.

But there is no escaping that the region that has grabbed the greatest global attention during the past half century in matters of oil, the Middle East, remains critical for future energy supplies. In a way, all the scrambling to develop resources around the world today is intended to delay the day of reckoning. Although the Middle East produces a quarter of world oil supplies, it holds between two-thirds and three-quarters of all known oil reserves. For that reason the United States and the West have continued to define the region as being vitally important.

Addressing Vital Interests

That the region is vitally important, however, does not automatically lead to the conclusion that a large military presence is required there—or to serious questions about the continued availability of this oil on the world market. This seeming revelation has recently provoked a debate in Washington, one focused especially on Saudi Arabia, which alone holds a quarter of the world’s known oil reserves. Two central questions have been whether the United States needs to have a military presence in the region at all and whether our primary aim has been to defend Saudi Arabia and other Gulf states with whom we now discover we have serious policy disagreements. Moreover, many commentators, frustrated with the tension in relations between the United States and Saudi Arabia, have stepped up calls for weaning the United States of foreign oil broadly and of Middle Eastern oil in particular. But the debate entirely misses the logic of the American involvement.

First of all, buying oil from regions other than the Middle East will not resolve the problem. As the adage reminds us, “we are all sipping from the same cup.” The oil market is seamless and is largely driven by supply and demand. Middle Eastern supplies affect the price of Middle Eastern oil, yes, but also the price of global oil. And while the United States can and should conserve energy and develop alternate energy sources, the gap between what the United States now produces and what it consumes (nearly 10 million barrels a day) is simply too wide to be bridged. Moreover, the clustering of the reserves in the Middle East also means that at some point in the not too distant future, a greater share of the oil supply will inescapably be coming from that region.

Nonetheless, it is not entirely clear why oil economics should be mixed with oil politics or what necessitates a military strategy at all. Indeed, many countries that depend heavily on Middle Eastern oil—countries such as Japan and many in Europe—have assumed that they can base their policy entirely on the demands of the market without seeing a need for political and military intervention. This attitude may in part be driven by their taking the United States for granted and assuming that Uncle Sam will do the job to the benefit of all consumers. But there is more to it than that. Outside the United States the view is growing that assuring the flow of oil does not require a significant military strategy. This view is bolstered by historical trends. With the exception of the 1973 Arab oil embargo, which was politically motivated and which led to extraordinary increases in oil prices, long-term evidence suggests that the market, more than any other issue, determines trends in oil prices. Historically, political alliances have not greatly altered patterns of trade between the oil countries and the rest of the world. Oil producers sell oil to the countries that need it and are willing to pay the price and import the best products they can from the best sources they can find. The same was true even during the Cold War years, when political relationships were obviously not central to the oil producers’ trading behavior. A case in point was Libya, which, up until 1969, had been a strategic ally of the West and had hosted British and American military bases. The overthrow of the monarchy there in 1969 and the rise of President Qadafi shifted Libyan politics in favor of the Soviet Union. Yet its trade patterns before and after the coup were largely the same. For example, the share of trade with Soviet Bloc nations stood at 1.9 percent in 1960 and 1965, 1.8 percent in 1970, 1.3 percent in 1975, and 1.0 percent in 1980. Moreover, moderate states in the Middle East did not differ radically from pro-Soviet states in their trading: the oil-exporting nation with the greatest share of trade with the Soviet Bloc was the Shah’s Iran, not Libya, Algeria, or Iraq. The bottom line was that these states did what was in their economic interest, regardless of their political orientation.

After the 1991 Gulf War, with momentum on the rise for deploying American forces and establishing what amounted to a new fleet in the Gulf region, some observers believed that the increased American presence would give the United States a decided advantage over Europe and Japan in trade with the Gulf states. In some instances, no doubt, Washington was able to use its political leverage to help American businesses win contracts in the region, especially in the military and aerospace arenas. But at the aggregate level, the trade figures between the region and the rest of the world show that the United States had no visible advantage. In 1989, the year before Iraq invaded Kuwait, European exports to the Middle East stood at $40.2 billion, as against $13.7 billion for the United States. In 1992, the year after the Gulf War, Europe’s export total was $57.2 billion, as against $19.9 billion for the United States. And the trend continued. In 2000, Europe shipped $63.7 billion of exports to the Middle East; the United States, $23.0 billion.

Maintaining the U.S. military presence in the Persian Gulf costs upward of $60 billion a year. Because these forces can also be used elsewhere, that sum is not entirely spent on defending the region. Still, one wonders why the United States devotes so much of its resources, energies, and war planning to the Persian Gulf. Would it not be more sensible to leave the oil issue to market forces and to leave politics out of it?

As conventionally understood, the American strategy is based on a resolve to assure the flow of oil to the West at reasonable prices—a resolve that extends to mitigating short-term interruptions in oil supply and subsequent spikes in pricing by relying on states, notably Saudi Arabia, that have excess capacity. (This alone requires Saudi-U.S. cooperation to assure that the Saudi capacity is used as a moderating force on the oil market.) But for more than half a century a central drive behind the American military strategy in the oil-rich region—one that has been not fully understood by most analysts—has been to deny the control of such vast resources to powerful enemies who would thereby become even more powerful and thus more threatening.

The Genesis of the Oil-Denial Policy

As the Cold War was moving to center stage in American foreign policy in 1948, a new worry emerged in the White House: that the Soviet Union could come to control oil supplies in the Middle East. It is no coincidence that much of the early preoccupation with the potential Soviet threat after the end of World War II centered on the remaining Soviet presence in Iran. But unknown to the public until the recent declassification of National Security Council documents (first uncovered by a reporter for the Kansas City Star, Steve Everly) was the extent of Truman administration concern about the possible Soviet takeover of the oil fields. Equally surprising was that the Truman administration built its strategy not so much on defending the oil fields in the face of a possible Soviet invasion, as on denying the Soviet Union use of the oil fields if it should invade.

The administration quickly developed a detailed plan that was signed by President Truman in 1949 as NSC 26/2 and later supplemented by a series of additional NSC directives. The plan, developed in coordination with the British government and American and British oil companies without the knowledge of governments in the region, called for moving explosives to the Middle East, where they would be stored for use. In case of a Soviet invasion, and as a last resort, the oil installations and refineries would be blown up and oil fields plugged to make it impossible for the Soviet Union to use the oil resources.

So great was the fear that the Soviets might exploit the region’s oil that the administration considered deploying “radiological” weapons. Ultimately that option was rejected by the Central Intelligence Agency, as revealed in another recently declassified document, NSC 26/3, dated June 29, 1950. The explanation was this: “Denial of the wells by radiological means can be accomplished to prevent an enemy from utilizing the oil fields, but it could not prevent him from forcing ‘expendable’ Arabs to enter contaminated areas to open well heads and deplete the reservoirs. Therefore, aside from other effects on the Arab population, it is not considered that radiological means are practicable as a conservation measure.” In other words, the logic of the rejection was that besides denying oil to the enemy, the policy also sought future “conservation” of oil, which “means a preservation of the resources for our own use after our reoccupation.” Ultimately, more conventional plugging methods were recommended.

The plan was implemented and explosives were moved to the region. Although the State Department apparently expressed reservations that the plan might ultimately signal that the United States was not prepared to defend the local governments, the fear of Soviet control overwhelmed such concerns. Worries intensified still further in 1957, leading the Eisenhower administration to reinforce the plan as fears of regional instability grew following the Suez crisis. Evidence suggests that the plan remained in place at least through the early 1960s.

Denying Oil to Potential Enemies Today

Today, the prevailing perception in Washington is that Iraq and Iran are aggressive, dangerous states. Deterring their ability to encroach on Saudi oil fields—hence denying these states additional oil revenues—is one aim of the continuing American presence in the region. The underlying concern is not just about possible disruptions in oil supplies, and ensuing price shocks, that the actions of hostile regimes could occasion. The larger issue, from the standpoint of the United States, is that if Iraq or Iran were to enrich themselves by taking control of additional oil reserves, these regimes would soon become more menacing to the United States than they already are, even if they were eager to sell to the rest of the world all the oil they seized.

The extent to which Iraq and Iran are a threat will remain a matter of debate. Do they pose a threat to the United States? Or is the U.S. concern more for its friends in the region, especially Israel, for whom the two states are potential threats? It is hard to imagine the circumstances under which the current governments in Iraq and Iran (but especially in Iraq) will be seen as anything less than aggressive and threatening, especially since President Bush has declared them, together with North Korea, as the “evil axis” that will feature centrally in the war on terrorism. This outlook makes it likely that any American administration in the foreseeable future will continue to try to prevent these two states from coming to control the bulk of the world’s known oil reserves—independent of U.S. concern for friendly Arab governments in the Gulf.

But whatever the reasoning behind the American military strategy, it remains in the interest of the Gulf Cooperation Council states to have American military backing. That gives the United States some leverage, but only up to a point since GCC states know that the U.S. strategy also serves American interests. The result is clear mutual incentives to cooperate. Certainly, when threats to oil are clear, as in the Iraqi invasion of Kuwait in 1990, Saudi Arabia and other GCC states will undoubtedly rally behind the United States to defend the oil fields. And even without imminent threat, GCC states, especially Kuwait, have an interest in the U.S. presence in the region. U.S. forces are spread throughout much of the Gulf, from prepositioned equipment in Qatar, to forces and equipment in Kuwait, to the naval facilities in Bahrain. The Saudis, who also host American troops, have incentives to maintain an American presence in the region even as they seek to lower the numbers and the profile of American forces on their own soil for fear of public backlash.

The extent to which the Saudi public resents the American presence as such is not entirely known (although obviously segments of that public do). What is clear is that much of the resentment of the United States is a function of the Arab-Israeli conflict, which has been a visible sore point in the U.S.-Saudi relationship in the past year. The Saudi government is reflecting a pervasive public mood on this issue. In a survey I conducted in Saudi Arabia last summer, 63 percent of Saudis ranked the Palestinian issue as “the single most important issue” to them personally, and another 20 percent ranked it among the top three. In a new survey among Saudi elites in late January, 66 percent said that their frustrations with the United States would be completely removed or significantly reduced if Washington could succeed in brokering Arab-Israeli peace. Importantly, 86 percent said that their frustrations with the United States are based on “its policies” and only 6 percent said they are based on “its values.”

But in the months since September 11, the Saudis have discovered that their public perception of the illegitimacy of the American presence on their soil is a threat to them as well as to that presence—just as the United States has discovered the depth of public resentment in the region. This will necessitate mutual cooperation. The Saudis will have to transmit to their public the sort of friendship with America that has existed at the governmental level, and the United States will need to work with them to reduce the level and the profile of American forces without jeopardizing its military strategy. The Saudis will continue to need American backing, and the United States will continue to need their cooperation. The Gulf region and its immense oil reserves will only become more important for the global economy in the future.