The Oil Kings

How the U.S., Iran, and Saudi Arabia Changed the Balance of Power in the Middle
East

by Andrew Scott Cooper

From THE OIL KINGS by Andrew Scott Cooper. Copyright © 2011 by Andrew Scott
Cooper. Reprinted by permission of Simon & Schuster, Inc.
544 pages

Focus Take-Aways
Leadership & Management • In 1969, Persian Gulf nations delivered one-third of the developed world’s oil.
Strategy
Sales & Marketing
• To secure oil supplies through the volatile Gulf region, President Richard Nixon’s
Finance
administration promoted the “Nixon Doctrine.”
Human Resources • The Nixon Doctrine’s aim was to supply pro-US regimes, especially Iran, with arms.
IT, Production & Logistics
Career & Self-Development
• The Shah of Iran, a staunch anticommunist, spent much of his country’s oil wealth on
Small Business
military purchases.
Economics & Politics • Nixon secretly allowed Iran to raise oil prices so the Shah could buy US weapons.
Industries
Global Business
• This decision started a huge wealth transfer from the West to Middle Eastern oil nations.
Concepts & Trends • In 1972, Nixon covertly promised to supply Iran with nuclear technology.
• The US cultivated its relations with Saudi Arabia to counterbalance Iran’s growing power
and help break the 1973 Arab oil embargo.
• When Saudi Arabia broke OPEC’s ranks by opposing price increases, Iran’s economy
nose-dived.
• By 1977, rebellion exploded in Iran, leading to the Shah’s overthrow and the nation’s
subsequent turmoil. In 1980, Iran’s Emperor died in Egypt, a stateless exile.

Rating (10 is best)

Overall Importance Innovation Style
8 8 8 7

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 Relevance
What You Will Learn
In this Abstract, you will learn:r1) How US relations with the Shah of Iran
shaped American energy and foreign policy, 2) How America used Saudi Arabia to
counterbalance Iran’s oil power, and 3) Why America’s Mideast oil policies have failed.

Recommendation
If you think the US’s alternative energy policy is forging ahead, think again. It has been
stalled for decades, largely because of US reliance on oil from Iran and Saudi Arabia.
Andrew Scott Cooper, a historian and NGO activist, offers a dense presentation about the
geopolitics of oil from 1969 to 1977. He focuses on the politicians and diplomats of the
time, covering their relationships and limitations. Cooper discusses the flawed decision
making that shaped American foreign policy and the US’s dependence on foreign oil.
He tells a powerful story, much of it revealed for the first time, since he culled research
from newly declassified documents. While the book occasionally gets bogged down in
minutiae that distract from the more interesting main narrative, getAbstract recommends
it to anyone intrigued by the convoluted mechanics of oil geopolitics.

Abstract
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A Pivotal Time
String that jumps The late 1960s and early 1970s were a pivotal time in strategic world relationships,
String that jumps particularly in the Middle East. At the time, Persian Gulf oil fields produced one-third
“Mohammad Reza
Shah Pahlavi was
of the developed world’s oil. Almost all of Japan’s petroleum imports came through the
a hard man to say Gulf, as did 55% of the oil “NATO Europe” used. These trade connections made the
no to in the spring of region’s security crucial, particularly Iran’s, since much of the world’s oil moved by ship
1969.”
String that jumps through its Strait of Hormuz, a narrow, potentially vulnerable marine passageway. Yet
String that jumps Great Britain recalled its military from the Persian Gulf, and the US, preoccupied with
String that jumps the Vietnam War, had only “a seaplane tender and two destroyers” in the region. Seeing
String that jumps
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String that jumps Nixon and his national security adviser, Henry Kissinger, fostered the idea that the US
String that jumps should develop and arm regional surrogate nations to protect American national interests.
String that jumps
String that jumps This policy became known as the “Nixon Doctrine.”
String that jumps
String that jumps In the Persian Gulf, the US turned to its old ally, the Shah of Iran. Mohammad Reza
String that jumps
String that jumps Shah Pahlavi, a staunch anticommunist, became his country’s leader after the CIA and
String that jumps British intelligence sponsored a coup in 1953 that overthrew his predecessor, the popular,
String that jumps pro-Soviet prime minister Mohammad Mossadegh. The taint of foreign intervention in
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String that jumps Iran’s domestic affairs stained the Shah’s rule as absolute monarch. Yet the Shah remained
String that jumps independent from US influence in some areas, specifically oil production, much to the
“Oil was the Shah’s chagrin of the CIA and successive US presidential administrations.
greatest source of
strength and also his
Achilles’ heel.” Clandestine Dealings with the Shah
String that jumps
String that jumps By the late 1960s, US officials began worrying that the Shah’s military expenditures –
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String that jumps reign – were cutting into the funding of important civilian programs that could support
String that jumps
String that jumps Iran’s domestic progress. As resentment against the Shah built inside Iran, US officials
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 String that jumps thought a revolution was imminent, but as long as oil prices and production grew, Iran
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“A greater share enjoyed political stability.
of oil revenues
allowed pro-US While the Shah pursued independent policies in domestic areas, he also worked closely
oil potentates
to develop their
with the CIA, allowing it to set up spy facilities in Iran, mainly directed against the Soviet
economies while Union. To repay the Shah, maintain him as an ally in the region and help him buy more US
buying the weapons arms, President Nixon made an extraordinary offer: In a secret meeting on May 14, 1970,
they needed to
defend themselves
he gave the Shah’s emissary permission to raise oil prices. Nixon knowingly allowed this
and the free world’s transfer of wealth from the West to the Middle Eastern oil kingdoms. But Iran’s spending
oil supplies.” soon exceeded its oil revenues. As Washington debated Iran’s future, Nixon decided to
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cultivate Saudi Arabia as a US ally, alongside Iran, in his “Twin Pillars” policy.
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Saudi Arabia’s Ascent
String that jumps Unlike the Shah, Saudi Arabia’s ruler, King Faisal, believed that oil prices should increase
String that jumps gradually, so as not to disrupt national economies. US imports from Saudi Arabia grew
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from $13.5 million in 1970 to more than $79 million by early 1972, but Nixon failed to
“The Nixon- develop a cohesive energy policy because his administration was focused on the ’72 re-
Pahlavi relationship election campaign. Instead, 64 federal agencies worked independently of one another on
was based on a
shared interest in fuel issues, with no direction from Nixon’s cabinet.
grand strategy and
geopolitics and a Nixon appointed former Texas governor John Connally, an important fund-raiser for the
mutual fascination
with power and its
president’s re-election bid, to negotiate with the Saudis about their push to control more
many uses.” of Aramco, the joint US-Saudi oil producer in Saudi Arabia. King Faisal won a huge
String that jumps concession, paid for by Western oil consumers: The Saudis gained a 25% participation
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deal and an eventual 51% controlling interest in Aramco. Years later, transcripts revealed
String that jumps that Kissinger had encouraged the Saudis to negotiate hard against the US oil companies;
String that jumps Kissinger, uncomfortable with economic issues, considered the oil companies greedy and
String that jumps
String that jumps wanted the Saudis as vital allies.
String that jumps
String that jumps Envying the Saudis’ victory, the Shah issued an ultimatum to his Western partners in
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the National Iranian Oil Company to relinquish control of the corporation to Iran. The
“When it came to consortium agreed, setting the tone for a new shift in oil power. In September 1973,
Iran, Washington’s Colonel Muammar al-Qaddafi of Libya expropriated 51% of foreign oil firms’ assets in
dividing lines
between power,
his nation, raised oil prices 30% and stopped accepting US dollars as payment for oil
money and access exports. Saudi Arabia and Egypt then reduced their oil production. In October 1973, eight
were often blurred.” Arab armies invaded Israel in the fourth Arab-Israeli war. When the US rearmed Israel, the
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Arab oil-producing nations objected. They increased oil prices and imposed a complete
String that jumps oil embargo against the US – the first time nations used oil as an economic weapon.
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To break the embargo, Kissinger and Nixon approached the Saudis about forging a
String that jumps
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String that jumps King Faisal’s regime against internal and external political and military threats. In
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exchange, the Saudis would raise oil production and refuse to grant their OPEC partners
“In foreign affairs a requested price increase. US and Saudi officials finalized their new petro-military-
as in domestic political alliance at a party for 1,400 guests at Saudi Arabia’s US Embassy in June 1974.
politics, the Shah’s
brinksmanship was
driven by a self- Post-Nixon Pandemonium in Iran
perpetuating money
chase.”
When Richard Nixon resigned from the presidency on August 8, 1974, following the
String that jumps Watergate scandal, the Shah lost an important ally. Moreover, despite the support the
Shah received from Nixon, he had feared the president as the only American who could
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 String that jumps thwart his ambitions. But the Shah dismissed Nixon’s successor, Gerald Ford, as weak –
String that jumps
String that jumps an impression Kissinger planted. Recognizing his own strong position, the Shah promoted
“‘This Qaddafi is a Iran as the center of a new regional political bloc composed of Ethiopia, Israel, Australia,
real nut,’ the Shah India, Indonesia, South Africa and New Zealand. He set out to collect on Nixon’s 1972
warned Kissinger.
‘He is making promise to sell Iran nuclear power plants and fuel.
trouble.’”
String that jumps Iran’s flamboyant military purchases, complicated by its weakening economy, alarmed
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experts in the Department of Defense and the CIA, who feared the Shah would become
String that jumps more nationalistic and more closely aligned with anti-US Arab nations. But these
String that jumps agencies, as well as Kissinger, thought the Shah was vulnerable to a leftist coup. They
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dismissed the possibility that the Ayatollah Khomeini, a right-wing Shiite cleric then
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In autumn 1974, Kissinger visited Iran and accepted the Shah’s offer of surplus Iranian
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“Kissinger let the oil at a discounted price. This would skirt OPEC pricing, give dollars to Iran and help
Shah increase oil build the new US strategic oil reserve. But the deal had serious legal and political issues,
prices because he
believed oil revenues
so Kissinger had to sell it to Ford. If the arrangement failed, Iran threatened to raise oil
would cushion prices to aid its domestic economy.
the pro-American
monarchies of the To deal with the Shah during this sensitive period, Kissinger hired former Nixon treasury
Persian Gulf from
internal revolt and secretary George Shultz, who by the fall of 1974 had become president of Bechtel, an
external invasion.” international engineering firm. This meant that Shultz was acting in both a diplomatic and
String that jumps a corporate sales capacity in Iran. The Ford administration had calculated that if the Shah
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String that jumps the US. Kissinger favored this purchase as a way to bring Iranian petrodollars back into
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the American economy. After 18 months of bilateral negotiations, the parties reached an
String that jumps impasse. But when Kissinger met the Shah in 1975, he reached a possible agreement,
String that jumps bringing home a plan for Iran to buy $12.5 billion in US nuclear reactors, while selling
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oil to the US below the OPEC price. The deal met continuing opposition.
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“Henry Kissinger
had personalized
The Politics of Oil
relations with the In March 1975, the assassination of King Faisal shook the Middle East. Saddam Hussein’s
Shah, hoarded massacre of Kurds in Iraq delivered another shock. Iran and the CIA had earlier supported
information, and
sidelined the Shah’s
the Kurds, but the Shah abandoned them as part of a deal with Hussein. The Shah’s
critics in the White duplicity greatly concerned Israel, which relied on Iran for its oil.
House.”
String that jumps While visiting President Ford in May 1975, the Shah said he was developing a plan
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String that jumps with Egypt to invade Saudi Arabia. He also said Iran would boost oil prices by 30% to
String that jumps 35%, a move that could destabilize world economies. At the time, the US’s military and
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commercial presence in Iran was booming: Some 40,000 Americans lived and worked
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String that jumps the ire of the conservative Islamic population. When the US Embassy in Tehran reported
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the deteriorating security situation inside Iran, including an increase in the killings of
“There is no Americans by leftist groups, Kissinger dismissed it.
indication that
Kissinger briefed his By the summer of 1975, a global economic contraction led to a drop in oil production,
successors on the
byzantine deals he which hit Iran hard: Decreased oil revenues spawned a financial crisis and social unrest. In
had negotiated.” June, students in Qum rioted, advocating the return of the Ayatollah Khomeini. Since the
String that jumps Shah had outlawed opposition parties, he crushed the uprising. But in Washington, more
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 String that jumps This view eroded Kissinger’s influence and pitted him against the growing number of
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“Television viewers anti-Shah officials in the White House.
in Iran and
elsewhere watched In 1976, rising oil prices strained Western economies. European communist parties were
the astonishing
spectacle of
attaining power in Spain, Portugal and Italy. Syria invaded Lebanon to contain a civil
their king being war between Lebanese Christians and Muslims. When gunmen assassinated the US
tear-gassed on ambassador to the Lebanon, Ford ordered 1,400 Americans to leave the nation; the Saudis
the American
president’s front
provided security for the evacuees. Grateful for the support and for the Saudis’ promise
lawn.” to hold the line on oil price increases, Ford agreed to sell them more weapons: $6 billion
String that jumps in military hardware over a two-year period. Only Iran had purchased more.
String that jumps
String that jumps
String that jumps The Collapse of the Shah
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In November 1976, Jimmy Carter won the presidential election. As Ford’s term drew to an
“Perhaps it was end, it grew increasingly clear that the Iran policies he, Kissinger and Nixon promulgated
appropriate, given had failed to produce a pro-US ally. Kissinger, given his own questionable actions,
everything that had
happened the past
decided not to turn over key documents detailing his agreements and discussions with the
nine years, that the Shah to the incoming Carter administration. Today, the location of these papers – as well
fuse of revolution as their content – remains a mystery.
had been lit on the
White House lawn.”
String that jumps With many world economies staggering under the load of increasing oil prices, all eyes
String that jumps turned to the OPEC meeting in December 1976. When every member except Saudi Arabia
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voted to increase prices in two stages, the Saudis balked, announcing they would raise
String that jumps prices by only 5%, while also increasing their oil output. This was bad news for Iran,
String that jumps which desperately needed more oil revenue. It also altered the US’s strategic Mideast
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relationships, as the Saudis asserted themselves as the new oil power brokers.
“Pride comes before
a fall, although in By January 1977, Iran was broke. The Shah accused the Saudis of betraying OPEC. One
[Kissinger’s] case it’s Iranian court minister noted that his country had “squandered every cent we had only to
more conceit than
pride.” (The Shah) find ourselves checkmated by a single move from Saudi Arabia.” Since Kissinger had
String that jumps failed to brief the Carter team on his convoluted arms-oil-CIA deals with the Shah, the
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new administration lacked critical information about the history governing the delicate
String that jumps Iran-US relationship. And Carter’s fresh diplomatic team at Tehran’s US Embassy had
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String that jumps
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String that jumps By the summer of 1977, Iran was suffering from political paralysis, a depressed economy,
“The industrialized rolling electrical blackouts and water shortages. Unemployment surged as workers
world will have flocked to Tehran from the countryside looking for work. South Tehran became a slum,
to realize that the
era of their terrific and wealthy Iranians sensed it was time to leave. To save the regime, the Shah fired
progress and even key ministers who had been entrusted with building low-cost housing and making other
more terrific income
civic improvements. The changes were too little and too late. During the Shah’s 12th and
and wealth based
on cheap oil is final visit to Washington, D.C., in November 1977, Iranian student demonstrators rioted
finished.” (The simultaneously outside the White House and in downtown Tehran. The tide had turned
Shah)
and would wash the Shah away. Mohammad Reza Shah Pahlavi, Iran’s Emperor and King
of Kings, died three years later, a stateless exile in Egypt.

About the Author

Andrew Scott Cooper is a PhD candidate in American history. He has worked with the
United Nations and Human Rights Watch.

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