Global Policy Forum

By Andrew Higgins

In April 1975, America's ambassador to Saudi Arabia, James Akins, sent a confidential cable to Washington denouncing as "criminally insane" an idea then being floated in the media: America should seize Saudi oil fields to break an Arab oil cartel and ensure a supply of cheap energy to fuel the U.S. economy.

Scoffing at the bravado of what he called America's "New Hawks," he warned that any attempt to take Arab oil by force would lead to world-wide fury and a protracted guerrilla war. This "could bring only disaster to the United States and to the world," he wrote.

His 34-page cable, obtained under the Freedom of Information Act, did not go down well in Washington. The idea of invading Saudi Arabia wasn't the work of cranks but of senior policy makers. Discussion of a military strike never got beyond the preliminary planning stage, but the idea terrified the Saudis, who laid plans to booby-trap oil wells. A few months after sending his cable, Mr. Akins was out of a job. He believes that his memo, which stoutly defended the Saudis' right to control their oil, "was basically the cause of my being fired."

The episode, with its echoes of today's bitter quarrels over Iraq and relations with the Saudi kingdom, highlights America's struggle with a quandary that has tormented it for decades: how to deal with countries that America doesn't trust, that don't trust America but that can dictate the fate of America's economy through their control of oil. For more than half a century, the U.S. has veered between confrontation and cajolery as it strove to secure a pillar of its global power: a steady flow of fuel at a stable price from the Persian Gulf. The U.S. has jumped from country to country in search of reliable friends.

It has often stumbled: The shah of Iran was overthrown. Saddam Hussein mutated from prickly partner to foe. The House of Saud still stands but wobbles, both at home -- where a divided ruling family staggers between reform and reaction -- and in Washington, where people ask how an ally could spawn 15 of the 19 Sept. 11 hijackers.

"Our big problem all along has been that our great friends often don't turn out to be so reliable," says William Quandt, a Middle East scholar who was on the White House's National Security Council during oil shocks caused by the 1973 Arab embargo and the 1979 Iranian revolution.

While many Arabs believe last year's invasion of Iraq was a petroleum grab, there's no evidence the U.S. plans to hold on to Iraqi oil fields or put them up for sale. Indeed, occupation officials have recommended a strong, state-controlled Iraqi oil sector, even if that means limited investment opportunities for U.S. oil companies. Washington's avowed goal in Iraq was entirely different: reducing the threat of terrorism by seeding a democratic government in place of one run by a dangerous tyrant.

Still, with the U.S. occupation, the quest for a solid ally in a region holding two-thirds of the world's known oil reserves has begun afresh, in a risky new direction. Instead of vesting hopes of stability in authoritarian leaders, Washington now seeks wrenching change by prying open closed political systems. No Gulf producer is a democracy. Of the world's known oil reserves, only 9% is situated in countries rated "free" by the U.S. research group Freedom House.

Since the 1970s crises, America has scoured the globe for other supplies, in an effort to reduce the dependence of global oil markets on Gulf states alternately cursed and courted. The U.S. has looked to the North Sea, Alaska, Mexico and, more recently, Russia, the Caspian Sea and West Africa. It has also poured money into fuel cells and other such technologies.

Much new oil has been found, and the U.S. has become far more efficient in energy use. But none of this disturbs a hard truth: America's economy, the engine of its global pre-eminence, depends on some of the world's most anti-American nations. By 2020, the federal Energy Information Agency expects, the Persian Gulf will account for 54% to 67% of world oil exports, up from around 30% now.

The White House believes giving Iraq democratic rule can help lance the boil of Mideast anti-Americanism. This, in turn, might help solve what President Bush, in a speech early last year, identified as a big problem: a dependence for oil "on countries that don't particularly like us." Whether America's initiative works in Iraq, whose oil reserves are second only to Saudi Arabia's, could also have an impact on the Saudis. A big unknown is whether the "democratic revolution" Mr. Bush has promised spreads to the doggedly undemocratic kingdom.

When invading Saudi Arabia was considered in the 1970s, the U.S. not only dropped the idea but decided it wouldn't even apply strong political pressure on the despotic Gulf states behind the embargo. Secretary of State Henry Kissinger said at the time that pressure could cause instability and "open up political trends that could defeat economic objectives." Today, haunted by terrorism, the U.S. makes a different calculation. Citing the absence of political freedom in the Mideast, Mr. Bush said in a speech last fall "it would be reckless to accept the status quo."

Also out to overthrow the status quo, however, are America's enemies in the region. Democracy, if it really takes hold there, could amplify their voices. Anger at Western use of Arab oil has been a theme for decades of populist rhetoric, both secular and Islamist. Just last month, Osama bin Laden, in a tape played on al Jazeera television, denounced the U.S. occupation of Iraq as a "big power" plot to control the Gulf's oil. Years earlier, Mr. bin Laden offered his own policy for an oil market he called the "biggest theft in history." A barrel of crude, the Saudi-born al Qaeda leader said in 1998, ought to cost $144, quadruple its current price.

FDR and the King

America has been fretting about dependence on foreign oil since the early 1940s, when Interior Secretary Harold Ickes wrote a gloomy article titled "We're Running out of Oil!" It warned: "If there should be a World War III, it would have to be fought with someone else's petroleum." Soon thereafter, geologist Everette Lee DeGolyer returned to the U.S. from Saudi Arabia and reported that "the center of gravity of world oil production is shifting ... to the Middle East."

With this in mind, Franklin D. Roosevelt, though seriously ill, made a stop on his journey home from the 1945 Yalta conference to meet the Saudi king, Abdul Aziz Ibn Saud. Their encounter on a battleship in the Suez Canal established bonds that, for more than half a century, would tie the two countries: oil and security. It also raised an issue that would divide them for just as long -- establishment of a Jewish state. Roosevelt wanted it in Palestine. The king suggested Jews get land in Germany.

America's wish to keep Persian Gulf oil secure took a violent turn in Iran. In 1953, the CIA carried out a British plot to topple an Iranian leader who had nationalized the Anglo-Persian Oil Co. At first, the U.S. had no enthusiasm for an idea it saw as a last gasp by Britain's expiring empire. Christopher Woodhouse, an official the U.K. sent to Washington to lobby for the plan, wrote later how he helped win over the U.S.: "I decided to emphasize the Communist threat to Iran rather than the need to recover control of the oil industry."

The resulting coup against Mohammed Mossadegh brought back the exiled Iranian shah, Mohammed Reza Pahlavi, who promptly invited U.S. companies to join a new international consortium to run Iran's oil industry. Washington poured in arms, turning Iran into a Cold War bulwark against the Soviet Union.

On prices, however, Iran's and America's interests diverged. The shah became a truculent hawk in the Organization of Petroleum Exporting Countries. "He turned out to be the most hard-driving of all," says James Schlesinger, secretary of defense in the mid-1970s and later energy secretary. "It was a great disappointment to Kissinger and Nixon, who thought the shah was a pal of theirs."

Saudi Arabia also disappointed. On Oct. 17, 1973, Mr. Kissinger met with other top U.S. officials to discuss the Yom Kippur Arab-Israeli war and possibility of oil-supply disruptions. Reporting on a meeting held earlier in the day with Arab envoys, he described the Saudi foreign minister as a "good little boy," according to recently released transcripts, and predicted confidently: "We don't expect an oil cutoff in the next few days." Minutes later, an aide rushed in with a bulletin: Saudi and other Arab oil producers had announced an immediate cut in output. Prices leapt 70% overnight and later quadrupled. The U.S. sank into a recession. Mr. Nixon launched a plan to end all imports by 1980. It flopped: Imports rose 40% by the target date. Mr. Kissinger turned to the Soviet Union for help, offering wheat in return for oil. The "bushels for barrels" plan fizzled.

The Military Option

Behind the scenes, officials mulled a more robust response to Arab cuts. Ambassador Akins says he knew something was afoot after a barrage of articles appeared championing war against Saudi Arabia. Particularly belligerent was one that appeared in Harper's under the byline Miles Ignotus, a pen name. Titled "Seizing Arab Oil," it argued that "the only countervailing power to OPEC's control of oil is power itself -- military power."

Its author was Edward Luttwak, a hawkish defense expert then working as an adviser to the Pentagon. Mr. Luttwak says he wrote the piece after discussion with several like-minded consultants and officials in the Pentagon, including Andrew Marshall, who was, and remains, head of the Defense Department's in-house think tank, the Office of Net Assessment. Mr. Luttwak says they wanted to demonstrate the merits of "maneuver warfare," the use of fast, light forces to penetrate the enemy's vital centers. "We set out to revolutionize war," Mr. Luttwak says. Last year's invasion of Iraq, he says, "was the accomplishment of that revolution." Mr. Marshall says that "Mr. Luttwak worked for me on several related subjects, but I do not recall cooperating on the article." Mr. Schlesinger says an oil-field grab was never adopted as policy but the Pentagon did examine the possibility. It concluded that the "only difficulty would be sabotage."

Britain's National Archives last month released several secret reports on America's likely response to the oil crisis. A December 1973 assessment by Britain's Joint Intelligence Committee said Washington might use subversion to "replace the existing rulers of Saudi Arabia, Kuwait and Abu Dhabi with more amenable men" or try "gun-boat diplomacy" to intimidate existing rulers. But an invasion to seize Arab oil fields was "the possibility uppermost in American thinking," the report added. It said Mr. Schlesinger had told Britain's ambassador "it was no longer obvious to him that the United States could not use force."

Another British intelligence report from the period outlined a "dark scenario" under which U.S. policy makers would use force "despite their experience in Vietnam.... This would, of course, be a highly dangerous policy with only slim chances of success." Military action, the U.K. intelligence committee warned, would provoke Arab sabotage and leave America's European allies "badly torn."

While weighing ways to punish Arab oil producers, Washington played down the Iranian shah's price aggressiveness. Iran's anti-Soviet stance trumped its unhelpfulness on energy. The U.S. Defense Intelligence Agency gave an upbeat assessment of the shah's prospects in September 1978, saying he was "expected to remain actively in power over the next 10 years." Three months later, he fled a country in chaos, with Americans held hostage and Ayatollah Khomeini in power. Iran quit exporting oil for nearly a year. World prices nearly tripled.

Relations With Iraq

With Iran ruled by stridently anti-American mullahs, Washington tilted toward Iraq, which also had a new leader, Saddam Hussein. The Baath Party to which he belonged had first grabbed power in 1963 after a coup backed by the U.S. against the Iraqi government of Abdul Karim Qasim, whom the U.S. saw as dangerously leftist. Among his sins: He had hosted a meeting that set up OPEC.

When Mr. Hussein invaded Iran in 1980, Washington initially stayed aloof, but grew worried when the tide turned and Iraq faced defeat. The U.S. then provided Iraq with satellite pictures and other help. Donald Rumsfeld, as President Reagan's special Mideast envoy, visited Baghdad twice. He discussed the idea, never followed up, of building a pipeline out of Iraq through Jordan. "I noted that Iraq's oil exports were important," Mr. Rumsfeld reported after a 1983 meeting with Iraqi Foreign Minister Tariq Aziz, according to a cable obtained by the National Security Archive. Mr. Rumsfeld visited again the following year, despite an uproar over Mr. Hussein's use of chemical weapons against Iran.

A 1988 national-security directive enshrined the wooing of Iraq as policy. "Normal relations" with the Hussein regime, it said, "would serve our longer-term interests and promote stability in both the Gulf and the Middle East." But this courtship, too, ended in tears: Iraq invaded Kuwait in 1990, seized its oil fields and began moving troops toward Saudi Arabia. Once again, a partner had become an enemy.

American concerns about oil were by no means the only motive for the multinational effort to drive Iraq out of Kuwait, but they weighed in the balance. Then-Defense Secretary Dick Cheney told a White House meeting "we should sort this out from strategic interests in Saudi Arabia and oil," according to a book by the first President Bush and his national security adviser, Brent Scowcroft.

The U.S. rushed troops to drive back Iraq and defend Saudi Arabia, which became a cornerstone of a newly declared "New World Order" -- a rampart against Iraq, an eager market for warplanes, and a generally reliable steward of the oil market. The kingdom, says Mr. Schlesinger, who sits on the U.S. Defense Policy Board, "worked hard to keep us tranquilized" by managing oil prices.

What to do about Mr. Hussein, once driven out of Kuwait, stirred fierce debate. Letting him continue building up his arsenal would, among other perils, put "a significant portion of the world's supply of oil ... at hazard," wrote Mr. Rumsfeld, Paul Wolfowitz, Richard Perle and 15 other conservatives in a 1998 letter to President Clinton urging regime change.

A group sponsored by the James A. Baker Institute for Public Policy and the Council on Foreign Relations also called Mr. Hussein a menace but suggested an easing of sanctions against his regime -- to allow oil-sector investment and also to reduce anti-American rage. "Like it or not, Iraqi reserves represent a major asset that can quickly add capacity to world oil markets and inject a more competitive tenor to oil trade," said its report.

New Look at the Saudis

The Sept. 11, 2001, attacks brought the debate to a head, heightening fear of Iraq and creating doubt in some minds about the reliability of Saudi Arabia. The Saudis worked to calm oil prices after the attacks, increasing their output. But as the homeland of so many of the hijackers, Saudi Arabia lost much of the trust won back since the 1970s oil embargo.

Conservative pundits began decrying the kingdom as an adversary. Some urged the conquest of Iraq partly as a way to ease dependence on the Saudis. Former Director of Central Intelligence James Woolsey says he and most other U.S. officials had viewed the Saudis as "somewhat idiosyncratic but generally as allies." Now, he says, officials woke up to the dangers of depending on "vulnerable autocracies and pathological predators."

Richard Haass, director of policy and planning at the State Department when the war in Iraq started, says the U.S. in the past "always gave Saudi Arabia a bye" on political questions and "never looked at what went on internally so long as their foreign policy met our basic requirements: energy, base access, the peace process" in Israel. After Sept. 11, Americans "internalized the lesson that what goes on inside Saudi Arabia can affect us, and affect us fundamentally."

In August, the last U.S. Air Force unit quietly left the Prince Sultan air base outside Riyadh, ending a deployment that dated to the 1991 Gulf War and removing one of Mr. bin Laden's rallying cries. With U.S. forces ensconced in Iraq, Qatar and Kuwait, the U.S. no longer needs Saudi bases. At the same time, the Pentagon has been working on a reshuffle of forces elsewhere. It envisions shrinking the U.S. military presence in Europe and putting some 20,000 troops in Africa and the Caucasus, in part to help protect emerging oil-production areas.

The 2001 attacks gave new impetus to the quest for energy diversity. Two decades after bushels-for-barrels, the U.S. again turned to Moscow. Russian oil production, now mostly in private hands, has picked up from a post-Soviet slump and, at over eight million barrels a day, nearly equals Saudi output. But Russia consumes plenty of this oil itself and has big trouble getting the rest to market. An Arctic export pipeline project pushed by Washington hit an unexpected hurdle when Russia jailed its main backer, oil tycoon Mikhail Khodorkovsky.

This year's U.S. presidential election, meanwhile, has revived energy angst. "It's time to make energy independence a national priority, and to put in place a plan that frees our nation from the grip of Mideast oil in the next 10 years," Sen. John Kerry states in a TV campaign ad.

"We've been going round in circles for decades," says Milton Copulos, a consultant the Energy Department hired in the 1980s to gauge Soviet oil potential. Now president of a think tank called the National Defense Council Foundation, Mr. Copulos has assessed hidden economic and military costs of imported oil. If military spending directly related to protecting oil supplies and other costs were reflected at the pump, he figures, gasoline would cost $5.28 a gallon in the U.S. "We are always looking for a quick fix, but the fundamental problem is we have to wean ourselves off oil," he contends.

Unless this happens, Saudi Arabia will remain the pivot of U.S. energy security. It now creaks under political and other pressures, but Washington has to keep it turning. Mr. Bush recently named James C. Oberwetter, a Texas oil lobbyist and former head of the American Petroleum Institute, as ambassador to the kingdom.

Iraq, though a potential big producer, pumps less than a quarter of the Saudi output. Sabotage is one of the hindrances to Iraqi production, seeming to bear out a warning voiced by Ambassador Akins in 1975 about Saudi Arabia. "There are scrub bushes, there are gullies, there are many places where guerrillas can be hidden," he wrote in his cable decrying the notion that the kingdom could easily be conquered and pacified. "Given the inevitable hostility of the country and its allies ... it is difficult to believe [oil] production could ever be brought back."

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