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Fighting for Oil?

Mises Daily: Monday, January 07, 2013 by

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[Editor's Note: Is the Iraq War over oil? Chuck Hagel, who was just nominated for Secretary of Defense, thinks so; or at least he did in 2007. And, for neocon Bill Kristol, that's a big problem. Michael Moore responded to Kristol, quoting several conservative pundits who basically agreed with Hagel. One of the pundits quoted was Ann Coulter, who claimed that it is right and good that the U.S. fights for oil, because the country needs it. Murray Rothbard, in detailing the prime motives for the first war in Iraq, made a crucial point. Intervention in Iraq is indeed about oil. But it is not about national access to oil per se, but about the privileged access of certain oil producers. It is war, not for consumer capitalism, but for crony capitalists.]

Why the Intervention in Arabia?

(The Free Market, November 1990. Included in Making Economic Sense.)

Amidst the near-universal hoopla for President Bush's massive intervention into the Arabian Peninsula, a few sober observers have pointed out the curious lack of clarity in Mr. Bush's strategic objective: is it to defend Saudi Arabia (and is that kingdom really under attack?); to kick Iraq out of Kuwait; to restore what Bush has oddly referred to as the "legitimate government" of Kuwait (made "legitimate" by what process?); to depose or murder Saddam Hussein (and to replace him with whom or what?); or to carpet-bomb Iraq back to the Stone Age?

There has been even less discussion, however, about a somewhat different even more puzzling question: why, exactly, are we suddenly hip-deep into Saudi Arabia? Why the hysteria? Why the most massive military buildup since Vietnam, and the placing of almost our entire army, air force, navy, marines, and a chunk of reserves in this one spot on the globe where there is not even a U.S. treaty obligation?

(1) Big guy, little guy. What is puzzling to some of us is crystal clear to General H. Norman Schwarzkopf, commander of U.S. forces in "Operation Desert Shield." Growing testy under media questioning, the general replied: "Don't you read the papers? You all know why we're here. A big guy beat up a little guy and we're here to stop it."

The general was obviously using the Police Action metaphor. A big guy is beating up a little guy, and the cop on the corner intervenes to put a stop to the aggression.

Unfortunately, on further analysis, the Police Action metaphor raises far more questions than it answers. Aside from the obvious problem: why is the U.S. the self-appointed international cop? The cops, seeing the bad guy flee and lose himself in his neighborhood, do not surround that neighborhood with massive force and starve out the entire neighborhood looking for the bad guy. Still less do cops carpet-bomb the area hoping the bad guy is killed in the process. Cops operate on the crucial principle that innocent civilians do not get killed or targeted in the course of trying to apprehend the guilty.

Another crucial point: governments are not akin to individuals. If a big guy sets upon a little guy, the aggressor is invading his victim's right to his person and to his property. But governments cannot be assumed to be innocent individuals possessing just property rights in their territory. Government boundaries are not productive acquisitions, as is private property. They are almost always the result of previous aggressions and coercion by governments on both sides. We cannot assume that every existing state has the absolute right to "own" or control all the territory within its generally arbitrary borders.

Another problem with the alleged principle of the U.S. cop defending all borders, especially those of little states: what about the big U.S. government's own invasion of decidedly little Panama only a short time ago? Who gets to put the manacles on the U.S.? The usual retort was that the U.S. was "restoring" free elections in Panama. An odd way to justify intervention against Iraq, however, since Kuwait and Saudi Arabia are each absolutist royal oligarchies that are at the furtherest possible pole from "democracy" or "free elections."

(2) Saddam Hussein is a very bad man, the "Butcher of Baghdad." Absolutely, but he was just as much a butcher only the other day when he was our gallant ally against the terrible threat posed to the Gulf by the fanatical Shiites of Iran. The fanatical Shiites are still there, by the way, but they--as well as the Dictator of Syria, Hafez Assad, the Butcher of Hama--seem to have been magically transformed into our gallant allies against Saddam Hussein.

(3) But some day (three but more likely ten years) Saddam Hussein may acquire nuclear weapons. So what? The U.S. has nuclear weapons galore, the result of its late Cold War with the U.S.S.R., which also has a lot of nuclear weapons, and had them during the decades that they were our Implacable Enemy. So why is there far more hysteria now against Saddam than there ever was against the Soviet Union? Besides, Israel has had nuclear weapons for a long time, and India and Pakistan are at the point of war over Kashmir, and they each have nuclear arms. So why don't we worry about them?

The appeal to high principle is not going to succeed as a coherent explanation for the American intervention. Many observers, therefore, have zeroed in on economics as the explanation.

(4) The Oil War. Saddam, by invading Kuwait and threatening the rest of Arabia, poses the danger, as one media person put it, of being "king of the world's oil." But the oil explanation has invariably been posed as the U.S. defending the American consumer against an astronomical raising of oil prices by Iraq.

Again, however, there are many problems with the Oil Price explanation. The same Establishment that now worries about higher oil prices as a "threat to the American way of life," treated OPEC's quadrupling of oil prices in the early 1970s when we were far more dependent on Gulf oil than we are now, with calm and fortitude. Why was there no U.S. invasion of Saudi Arabia then to lower the price of oil? If there is so much concern for the consumer, why do so many politicians long to slap a huge 50 cents a gallon tax on the price gasoline?

Indeeed, it is clear that the power of OPEC, like all cartels, is strictly limited by consumer demand, and that its power to raise the price of oil is far less than in the 1970s. Best estimates are that Saddam Hussein, even conquering the entire Gulf, could not raise the oil price above $25 a barrel. But the U.S., by its embargo, blockade, and continuing threats of war, has already managed to raise the price of crude to $40 a barrel!

In fact, it would be more plausible to suppose that the aim of the massive Bush intervention has been to raise the price of oil, not to lower it. And considering Mr. Bush's vice presidential visit to Saudi Arabia specifically to urge them to raise prices, his long-time connections with Texas oil and with Big Oil generally, as well as Texas's slump in recent years, this hunch begins to look all too credible.

But the likeliest explanation for the Bush intervention has not been raised at all. This view focuses not on the price of oil, but on its supply, and specifically on the profits to be made from that supply. For surely, as Joe Sobran has emphasized, Saddam does not intend to control oil in order to destroy either its supply or the world's customers whom he hopes will purchase that oil.

The Rockefeller interest and other Western Big Oil companies have had intimate ties with the absolute royalties of Kuwait and Saudi Arabia ever since the 1930s. During that decade and World War II, King Ibn Saud of Saudi Arabia granted a monopoly concession on all oil under his domain to the Rockefeller-control-led Aramco, while the $30 million in royalty payments for the concession was paid by the U.S. taxpayer.

The Rockefeller-influenced U.S. Export-Import Bank obligingly paid another $25 million to Ibn Saud to construct a pleasure railroad from his main palace, and President Roosevelt made a secret appropriation out of war funds of $165 million to Aramco for pipeline construction across Saudi Arabia. Furthermore, the U.S. Army was obligingly assigned to build an airfield and military base at Dhahran, near the Aramco Oilfields, after which the multi-million dollar base was turned over, gratis, to Ibn Saud.

It is true that Aramco was gradually "nationalized" by the Saudi monarchy during the 1970s, but that amounts merely to a shift in the terms of this cozy partnership: over half of Saudi oil is still turned over to the old Aramco consortium as management corporation for sale to the outside world. Plus Rockefeller's Mobil Oil, in addition to being a key part of Aramco, is engaged in two huge joint ventures with the Saudi government: an oil refinery and a petrochemical complex costing more than $1 billion each.

Oil pipelines and refineries have to be constructed, and Standard Oil of California (now Chevron), part of Aramco, brought in its longtime associate, Bechtel, from the beginning in Saudi Arabia to perform construction. The well-connected Bechtel (which has provided cabinet secretaries George Schultz and Casper Weinberger to the federal government) is now busily building Jubail, a new $20 billion industrial city on the Persian Gulf, as well as several other large projects in Saudi Arabia.

As for Kuwait, its emir granted a monopoly oil concession to Kuwait Oil Co., a partnership of Gulf Oil and British Petroleum, in the 1930s, and by now Kuwait's immensely wealthy ruling Sabah family owns a large chunk of British Petroleum, and also keeps enormous and most welcome deposits at Rockefeller-oriented Chase Manhattan and Citibank.

Iraq, on the other hand, has long been a rogue oil country, in the sense of being outside the Rockefeller-Wall Street ambit. Thus, when the crisis struck on August 2, the big Wall Street banks, including Chase and Citibank, told reporters that they had virtually no loans outstanding, nor deposits owed, to Iraq.

Hence, it may well be that Mr. Bush's war is an oil war all right, but not in the sense of a heroic battle on behalf of cheap oil for the American consumer. George Bush, before he ascended to the vice presidency, was a member of the executive committee of David Rockefeller's powerful Trilateral Commission. Mr. Bush's own oil exploration company, Zapata, was funded by the Rockefeller family. So this Oil War may instead be a less-than-noble effort on behalf of Rockefeller control of Middle East. 

Why the War? The Kuwait Connection

(The Rothbard-Rockwell Report, May 1991. Included in The Irrepressible Rothbard.)

Why, exactly, did we go to war in the Gulf? The answer remains murky, but perhaps we can find one explanation by examining the strong and ominous Kuwait Connection in our government. (I am indebted to an excellent article in an obscure New York tabloid, Downtown, by Bob Feldman, "The Kissinger Affair," March 27.) The Sabahklatura that runs the Kuwait government is immensely wealthy, to the tune of hundreds of billions of dollars, derived from tax/"royalty" loot extracted from oil producers simply because the Sabah tribe claims "sovereignty" over that valuable chunk of desert real estate. The Sabah tribe has no legitimate claim to the oil revenue; it did nothing to homestead or mix its labor or any other resource with the crude oil.

It is reasonable to assume that the Sabah family stands ready to use a modest portion of that ill-gotten wealth to purchase defenders and advocates in the powerful United States. We now focus our attention on the sinister but almost universally Beloved figure of Dr. Henry Kissinger, a lifelong spokesman, counselor, and servitor of the Rockefeller World Empire. Kissinger is so Beloved, in fact, that whenever he appears on Nightline or Crossfire he appears alone, since it seems to be lese-majeste (or even blasphemy) for anyone to contradict the Great One's banal and ponderous Teutonic pronouncements. Only a handful of grumblers and malcontents on the extreme right and extreme left disturb this cozy consensus.

In 1954, the 31-year-old Kissinger, a Harvard political scientist and admirer of Metternich, was plucked out of his academic obscurity to become lifelong foreign policy advisor to New York Governor Nelson Aldrich Rockefeller. Doctor K continued in that august role until he assumed the mastery of foreign policy throughout the Nixon and Ford administrations. In that role, Kissinger played a major part in prolonging and extending the Vietnam War, and in the mass murder of civilians entailed by the terror bombings of Vietnam, the secret bombing of Cambodia, and the invasion of Laos.

Since leaving office in 1977, Dr. Kissinger has continued to play a highly influential role in U.S. politics, in the U.S. media, and in the Rockefeller world empire. It was Kissinger, along with David Rockefeller, who was decisive in the disastrous decision of President Carter to admit the recently toppled Shah of Iran, old friend and ally of the Rockefellers into the United States, a decision that led directly to the Iranian hostage crisis and to Carter's downfall. Today, Kissinger still continues to serve as a trustee of the powerful Rockefeller Brothers Fund, as a counselor to Rockefellers' Chase Manhattan Bank, and as a member of Chase's International Advisory Committee. Kissinger's media influence is evident from his having served on the board of CBS, Inc., and having been a paid consultant to both NBC News and ABC News. That takes care of all three networks.

But Kissinger's major, and most lucrative role, has come as head of Kissinger Associates in New York City, founded on a loan obtained in 1982 from the international banking firm of E.M. Warburg, Pincus and Company. Nominally, Kissinger Associates (KA) is an "international consulting firm" but "consultant" covers many sins, and in KA's case, this means international political influence-peddling for its two dozen or so important corporate clients. In the fullest report on KA, Leslie Gelb in the New York Times Magazine for April 20, 1986, reveals that, in that year, 25 to 30 corporations paid KA between $150,000 and $420,000 each per annum for political influence and access." As Gelb blandly puts it: "The superstar international consultants [at KA] were certainly people who would get their telephone calls returned from high American government officials and who would also be able to get executives in to see foreign leaders." I dare say a lot more than mere access could be gained thereby. KA's offices in New York and Washington are small, but they pack a powerful punch. (Is it mere coincidence that KA's Park Avenue headquarters is in the same building as the local office of Chase Manhattan Bank's subsidiary, the Commercial Bank of Kuwait?)

Who were these "superstar international consultants?" One of them, who in 1986 was the vice chairman of KA, is none other than General Brent Scowcroft, former national security advisor under President Ford, and, playing the exact same role under George Bush, serving as the chief architect of the Gulf War. One of the General's top clients was Kuwait's government-owned Kuwait Petroleum Corporation, who paid Scowcroft for his services at least from 1984 through 1986. In addition, Scowcroft became a director of Santa Fe International (SFI) in the early 1980s, not long after SFI was purchased by the Kuwait Petroleum Corporation in 1981. Joining Scowcroft on the SFI board was Scowcroft's old boss, Gerald Ford. One of SFI's activities is drilling oil wells in Kuwait, an operation which, of course, had to be suspended after the Iraq invasion.

Brent Scowcroft, it is clear, has enjoyed a long-standing and lucrative Kuwait connection. Is it a coincidence that it was Scowcroft's National Security Council presentation on August 3, 1990, which according to the New York Times (February 21) "crystallized people's thinking and galvanized support" for a "strong response" to the Iraq invasion of Kuwait?

Scowcroft, by the way, does not exhaust the Republican administrations' revolving door among Kissinger Associates. Another top KA official, Lawrence Eagleburger, undersecretary of state under Reagan, has returned to high office after a stint at KA as deputy secretary of state under George Bush.

Also vitally important at KA are the members of its board of directors. One director is T. Jefferson Cunningham III, who is also a director of the Midland Bank of Britain, which has also been a KA client. The fascinating point here is that 10.5 percent of this $4 billion bank is owned by the Kuwait government. And Kissinger, as head of KA, is of course concerned to advance the interests of his clients – which include the Midland Bank and therefore the government of Kuwait. Does this connection have anything to do with Kissinger's ultra-hawkish views on the Gulf War? In the meantime, Kissinger continues to serve on President Bush's Foreign Intelligence Advisory Board, which gives Kissinger not only a channel for giving advice but also gives him access to national security information which could prove useful to KA's corporate clients.

Another KA client is the Fluor Corporation, which has a special interest in Saudi Arabia. Shortly before the August 2 invasion, Saudi Arabia decided to launch a $30 to $40 billion project to expand oil production, and granted two huge oil contracts to the Parson and Fluor corporations. ( New York Times, August 21)

One member of KA's board of directors is ARCO Chairman Robert O. Anderson; ARCO, also one of KA's clients, is engaged in joint oil-exploration and oil-drilling in offshore China with Santa Fe International, the subsidiary of the Kuwait government.

Other KA board members are William D. Rogers, undersecretary of state in the Eisenhower administration, and long-time leading Dewey-Rockefeller Republican in New York; former Citibank (Rockefeller) Chairman Edward Palmer; and Eric Lord Roll, economist and chairman of the board of the London international banking house of S.F. Warburg.

Perhaps the most interesting KA board member is one of the most Beloved figures in the conservative movement, William E. Simon, secretary of treasury in the Nixon and Ford administrations. When Simon left office in 1977, he became a consultant to the Bechtel Corporation, which has had the major massive construction contracts to build oil refineries and cities in Saudi Arabia. In addition, Simon became a consultant to Suliman Olayan, one of the wealthiest and most powerful businessmen in Saudi Arabia. Long a close associate of the oil-rich Saudi royal family, Olayan had served Bechtel well by getting it the multi-billion contract to build the oil city of Jubail. In 1980, furthermore, Olayan hired William Simon to be chairman of two investment firms owned jointly by himself and the influential Saudi Prince Khaled al Saud.

Bechtel, the Rockefellers, and the Saudi royal family have long had an intimate connection. After the Saudis granted the Rockefeller dominated Aramco oil consortium the monopoly of oil in Saudi Arabia, the Rockefellers brought their pals at Bechtel in on the construction contracts. The Bechtel Corporation, of course, has also contributed George Shultz and Cap Weinberger to high office in Republican administrations. To complete the circle, KA director Simon's former boss Suliman Olayan was, in 1988, the largest shareholder in the Chase Manhattan Bank after David Rockefeller himself.

The pattern is clear. An old New Left slogan held that "you don't need a weatherman to tell you how the wind is blowing." In the same way, you don't need to be a "conspiracy theorist" to see what's going on here. All you have to do is be willing to use your eyes.