[The following article, which appeared signed by R. L. in the December 6 issue of La Brèche, fortnightly organ of the Ligue Marxiste Révolutionnaire (Revolutionary Marxist League), the Swiss organization in support of the Fourth International, was the first of a series dealing with various aspects of the Arab oil boycott and the energy crisis. The translation is by Intercontinental Press.]
The Arab countries' utilization of the "oil weapon" and the consequences for the supply of oil to the imperialist January 21, 1974
countries is front-page news. The theme of the energy crisis is being debated in more or less apocalyptic fashion as problem No. 1 of "our civilization." The bourgeoisie and its spokesmen are using that argument to call upon "everybody" to limit consumption. The "ecologists" who advocate the zerogrowth theory are proclaiming their analysis verified: Natural resources have been exhausted by industrial development; only a return to a "less affluent life-style" can avert disaster.
In this first article we will analyze the political meaning of the Arab contries' utilization of the "oil weapon" and the policy of the big petroleum trusts, and will see how these two factors intertwine.
In the next article we will show that there is no conspiracy between the Arab producers and the big trusts; we will analyze the consequences of the restrictions imposed by the Arab countries for the state of the world capitalist market, the meaning of the measures taken by the Swiss Federal Council, and the intensification of the attack on the buying power of the working class that the oil crisis engenders. Finally, we will discuss the problem of civilization that the "energy crisis" masks and will answer the advocates of "zero growth" by showing that behind the energy crisis lies the alternative "socialism or barbarism."
The Arab Restrictions
On October 16, six Arab countries on the Persian Gulf unilaterally raised the price of their oil by 70 percent. On October 17 the Organization of Arab Petroleum Exporting Countries (OAPEC) decided to reduce oil production 5 percent a month and to slap a total boycott of oil deliveries on the United States and the Netherlands in order to force these countries to abandon their policy of intensive support for Israel.
All these measures were aimed at forcing the imperialist countries to act to make Israel relinquish the occupied Arab territories and restore the national rights of the Palestinian people. On November 4 OAPEC hardened its position by deciding to immediately reduce production by 25 percent. But it decided that "friendly" countries — France, Britain, and Spain — would receive the same quantity of Arab oil as they had previously. On November 18, after the pro-Arab declaration of the Common Market countries and Japan, OAPEC decided to exempt those countries, except Holland, from the 5 percent reduction scheduled for December.
Despite these modifications, the restrictions hit especially hard at Europe, which is dependent on Arab countries for 65 percent of its oil, and even harder at Japan, which gets 90 percent of its oil from Arab countries. The main target, the United States, was less seriously affected, since less than 20 percent of its oil comes from Arab countries. According to the November 17 issue of the British weekly The Economist, the restrictions imposed by the Arab countries represent a 20 percent reduction in the total amount of oil traded on the world market.
The Arab countries wanted the restrictions to be selective. But the selectivity was to a large extent destroyed by the big oil trusts, which control almost all world oil trade and tended to share out shortages by directing greater quantities of non-Arab oil than usual to the countries affected by the Arab reductions.
The 'Oil Weapon' - A Rubber- Tipped Foil
Reactionary bourgeois circles present the Arab restrictions as the fruit of antiwestern Arab radicalism. The reality is the opposite: The ultilization of the oil weapon is not a sign of radicalization of the Arab countries' poliev, but of a move to the right.
This move to the right was stimulated by the crushing of the Palestinian resistance in 1970 with the complicity of all the Arab regimes and by the death of Nasser, which left a leadership vacuum that Faisal, the Arab countries' main creditor and a staunch friend of the U.S. A., has been able increasingly to fill, thus further accelerating the move to the right.
Utilization of the oil weapon is symbolic of Faisal's leadership and will intensify that leadership still further, for Saudi Arabia is the largest oil producer in the Arab world. Sparsely populated, it is not short of currency for development plans, unlike Algeria or Iraq. It can therefore reduce its oil receipts without great consequences. The Arab regimes already owe Saudi Arabia a great portion of their resources, and to compensate the losses they will sustain because of the restriction of oil production they will certainly apply for more credit. Faisal will thus strengthen his means of putting pressure on them and on the Palestinian resistance movement, which is also in debt to Saudi Arabia.
The oil weapon, like the October War, is an instrument of diplomatic pressure. It allows the regimes to make the Arab masses believe that a resolute anti-imperialist nationalist offensive is going on and covers up the important concessions they are preparing to make at the Geneva conference to establish a "just peace." It allows the regimes to put some pressure on imperialism to meet these concessions half way in order to avoid a mobilization of the Arab masses.
The "just peace" will be presented as a victory and the Arab regimes will extract themselves from the situation of "no war, no peace," of nonresolution of the Palestinian problem, which was greatly undermining the popularity of these regimes, even the most "progressive" ones. Faisal will appear as the hero of the Arab nation and his specific weight in the Arab world will be bolstered, to the advantage of imperialism.
While the Khartoum conference of 1967 said "no" to any recognition of or negotiations with Israel, the Algiers Arab summit of 1973 gave Egypt and Syria the green light to sign a peace treaty with Israel, provided it returns the occupied territories. The recognition of the Palestine Liberation Organization (PLO) as the sole representative of the Palestinian people "sounded" radical, as did the assertion by Abu Ayad, a leader of the PLO, that liberated Gaza and the West Bank should not be returned to King Hussein. But in reality, this only indicates that the Arab countries and the PLO are abandoning their old demand for the destruction of the Israeli state in favor of contenting themselves with a little Palestinian state limited to Gaza and the West Bank.
The "moderate" character of the utilization of the oil weapon was confirmed by the statements made by Yamani and Abdessalam, oil ministers of Saudi Arabia and Algeria, during their recent educational tour through Europe: "According to the Danish financial journal Boersen," wrote the November 23 Le Monde, "Mr. Yamani, Saudi minister of oil, who took a private trip to Copenhagen before arriving in Paris on Monday, declared that the Arab countries have no interest in ruining the economy of the western world, because it is from there that they derive their basic income."
That is the effective limitation on use of the oil weapon. The Arab countries will not be able to keep the embargo going very long. Saudi Arabia and the emirates of the Persian Gulf can hold out the longest, but they will not be able indefinitely to prop up the resolve of the other countries by handing out subsidies. The November 26 issue of Nouvel Observateur wrote that "Algeria, whose financial reserves are limited, is reportedly planning to ask its partners that it be partially released from its boycott obligations."
And the November 25-26 Le Monde quoted an Egyptian magazine as reporting that Libyan oil was allegedly getting to the United States via some Caribbean countries.
The Arab governments are hurrying to sit down at the negotiating table and reach an accord with Israel so as to be able to halt the embargo. "We hope that it will all end soon," Yamani declared Friday morning upon his arrival in Brussels. And the November 28 Le Monde reported: "If a timetable for the liberation of the occupied territorities were set up, simultaneously another timetable could map out the return to normal oil production. Mr. Yamani confirmed this on television."
Furthermore, the imperialist governbole they ha ments, with Nixon in the lead, are not fooled by the oil weapon. The proof is that they have taken no retaliatory measures. The U.S. government has stated that the only means of exerting counterpressure would be a boycott on food deliveries, which would be an ineffective boycott since the Arab countries do not buy much food from the United States and could get these commodities elsewhere anyway. And what about the hundreds of millions of dollars worth of "aid" that the U.S. government sends to Saudi Arabia and what about the airplanes and other arms Washington has delivered to Saudi Arabia since the Arab oil restrictions were imposed?
The imperialist governments are quite well aware that the oil weapon will be used only for a limited time in the context of a diplomatic game in which the Arab countries will make great concessions and in which the structure of imperialist interests will be broken by no one. They are only too happy to see Saudi Arabia's leadership in the Arab world strengthened, a Saudi Arabia traditionally sworn to the allegiance of U.S. imperialism, financed and armed by it, and protected by it from the Arab revolution, a Saudi Arabia that is the candidate for replacing Israel as the policeman of imperialist interests in the region.
Finally, one additional element explains the failure of imperialist governments to take retaliatory measures: The oil trusts can profit to a certain extent from the Arab boycott.
And here we broach more directly the problem of the "energy crisis."
The Masters of Energy
The world oil market is dominated by seven giant trusts. They are, in order of size: Exxon (formerly Esso, Standard Oil of New Jersey, the sec- January 21, 1974
ond-largest American corporation), Royal-Dutch Shell (the largest non- American corporation), Mobil Oil (seventh-largest American corporation), Texaco (eighth-largest American corporation), Gulf Oil (eleventhlargest American corporation), Socal
YAMANI: "No interest" in "ruining" Western economy.
(Standard Oil of California, twelfthlargest American corporation), and BP (British Petroleum, fourth-largest non-American corporation).
Three of these, Exxon, Mobil, and Socal, belong to the Rockefeller Chase Manhattan Bank group. As of 1970, these seven "majors" owned 77 percent of oil production, 57 percent of refining, and 56 percent of distribution in the capitalist world outside th United States.
It is these seven big trusts that largely determine the world oil market, even if they have to face smaller, not negligible competitors. It is these seven trusts that in reality decide the attitude of all the oil trusts in relation to the producing countries.
Jean-Marie Chevalier, a young
French economist, has just published a book, Le nouvel enjeu pétrolier (The New Stakes in Oil), devoted to analyzing the policy of the oil trusts. This book, surprisingly advanced in its political positions, is basic to understanding the real mechanisms of the energy crisis. It appeared before the imposition of the Arab restrictions. What we are going to explain about the turn of the oil market and the plans of the trusts is largely drawn from this book, which we recommend to our readers.
The Turn of the Oil Market
The year 1970 marked a turn in the development of the world oil market. The market suddenly tightened, strengthening the position of the sellers of oil relative to the buyers, the producing countries relative to the companies, and the companies relative to the importers. A growing scarcity in supply was combined with an abrupt increase in demand and in costs:
— The Tapline (Transarabian Pipe Line), which had been piping 17 percent of Saudi Arabian oil to Lebanese ports, was closed down following Syria's refusal to allow it to be repaired after an accident in May 1970 because the government wanted larger tolls.
- The new Libyan leaders raised taxes and prices on the oil companies and demanded a reduction in production by the second-level trusts, such as Occidental Petroleum, which had been pumping frantically since 1960.
- The costs of shipping by sea rose sharply because the companies had been counting on a quick reopening of the Suez Canal, closed since 1967, and had therefore waited too long before ordering the extra ships necessary.
- The orders for giant tankers increased the demand for fuel oil on the part of the steel industry. In 1970 the demand for oil on the capitalist market increased between 13 and 20 percent as compared to 8 percent during preceding years.
- New fields (North Sea, Alaska, Gulf of Guinea, Amazon, eastern Siberia, China Sea) turned out to be very costly, and the governments concerned felt it necessary to put off pumping in order to protect the environment.
The tight market put the members of the Organization of Petroleum Exporting Countries (OPEC, which includes the Arab oil producers plus Venezuela, Trinidad and Tobago, and Nigeria) in position to demand increasingly important price concessions from the companies. To this was added more and more nationalizations by producing countries (Libya, Algeria, Iraq) as well as the perspective of growing U.S. dependence on oil imports from third-world countries. (The United States imported 18 percent of its oil in 1959 and 22 percent in 1969, and it will have to import 40 percent of its oil by 1980, mostly from the countries of the
Persian Gulf, according to the July 30, 1973, Express.) And to all this is added the perspective of a definitive exhaustion of oil supplies.
The Trusts' Plan: Prepdre for Winding Up on Oil
Faced with this combination of various factors, what is the strategic plan of the big oil trusts, especially the American trusts?
In the long run (thirty to fifty years), they are preparing to end oil produc tion while setting themselves up to maintain their monopoly on alternative sources of energy.
In the United States, the oil trusts already control about half the atomic energy industry. But the way is not entirely clear for the development of atomic energy because of the pressure of wide layers of the population that have been alerted by scientists to the dangers of atomic reactors. So other, "more classical" sources of energy can be put to use.
The United States still has enormous coal reserves. As of 1970, some 32 percent of American coal production was controlled by oil companies. These companies are in the lead in preparing to exploit the Rocky Mountain bituminous shale deposits and the Athabasca asphalt sands.
In the medium term (ten to twenty years) the oil trusts want to extract themselves from third-world countries that are too unstable politically and that have been making more and more demands, above all the Arab countries. (The price demands don't scare the trusts. But more and more countries are asking that profits be reinvested in the country instead of exported.) This desire for disengagement fits in with the general disengagement of imperialist investment in the third world because of the rise of the colonial revolution.
Oil prospecting is being directed toward regions where imperialist domination is more assured: the coasts of the imperialist countries, the North Sea, Alaska, the Amazon basin (in dear old Brazil).
Finally, during the medium term, the American companies want to reestablish U.S. independence in energy. With the bituminous shale, the coal, and the Athapasca sands, this would be assured.
A Huge Maneuver and How to Make Others Pay for It
Two problems stand in the way of the trusts achieving these objectives: On the one hand, these new sources of energy are not competitive with
NIXON: Not fooled by Arab embargo.
oil because their utilization requires greater expenditure; and on the other hand, achieving these goals would require gigantic investments estimated at a million dollars.
That is why the oil trusts have launched a three-pronged offensive that has been under way since 1971.
1. Massively increase the price of OPEC oil in order to:
- Raise this price in the immediate future to the level of the price of American oil and thus eliminate the disadvantage U.S. industrialists face in relation to European and Japanese industrialists in having to pay much more for their oil.
- Increase their profit margins by raising the sales price still higher.
- Set in motion a process of oil price increases that will eventually make the new sources of energy profitable.
As Chevalier notes (on page 94 of Le nouvel enjeu pétrolier):
"For both electoral and strategic reasons, the United States has been constrained to keep the price of domestic oil at a high level and to seek to encourage internal research and production.
"Under these conditions, in 1970 the United States had every interest in provoking a strong rise in the price of non-American crude in order to rebalance its position. Such a price rise ... would diminish the commercial advantage of their European and Japanese competitors and in addition strengthen the competitiveness of American crude.
"This solution was easy to set in motion, because all that was necessary was to stimulate a movement toward general demands by the producing countries. It is not accidental that it was exactly the shah of Iran who became the spokesman of the producing countries in the sense desired by the United States by setting off an increase in the price of non- American crude that was miraculously equal to the price difference between Middle Eastern and American crude."
Thus, the successive oil price rises conceded to OPEC in the Tehran accords, and later in the Tripoli, Geneva, and New York agreements, which looked like victories for the third world, were in fact the result not of concessions by the companies but of the companies' desire at the outset.
2. Make governments finance their plans.
The • U.S. oil trusts, which already enjoy staggering financial benefits (because of the country's energy independence), began clamoring for and received more subsidies in order to begin exploiting the new oil deposits (in Alaska and the North Sea), as well as the discoveries of bituminous shale and asphalt sands.
But their great master stroke was making the producing countries finance their plans, all the while passing this off as a concession to these countries' "participation":
"Thus," Chevalier writes on page 232, "Iran is participating in the North Sea explorations and is engaged side by side with the members of the Consortium in downstream activities (refining, distribution, petrochemicals) in the industrialized countries. For its part, Saudi Arabia is investing in the American oil industry."
And: "At first, Saudi Arabia was assessed $200 million for a 25 percent participation in Aramco. [Aramco is a consortium owned as follows: Saudi Arabia 25%, Socal 22.5%, Exxon 22.5%, Texaco 22.5%, Mobil 7.5%; that is, the Rockefeller group controls 52.5%.] But the deal was finally closed at the price of $500 million." (Chevalier, p. 232.)
3. Increase their share in the distribution of petroleum products in order to boost their downstream profits and eventually compensate for the diminution of their upstream profits. In the United States the five largest In the United States the five largest oil trusts control 32.5 percent of the market in distribution of petroleum products.
To put the finishing touches on what they needed to achieve their aims, the big oil trusts created out of whole cloth the idea of a fear-laden energy crisis by evoking in their statements and publications a psychosis about energy shortage and exhaustion of oil* so as to make people swallow their price increases, to get out from under the environmental protection measures constricting them, and to obtain more state subsidies.
The Energy Crisis Comes Onto the Scene
Thus, they just made up the oil shortage in the United States in the spring of 1973, well before the Arab boy cott.
On March 28 Texaco began rationing gas in Los Angeles. At the beginning of May, Socal rationed gas in the western states. In April the retail price of gasoline rose 1.5 percent. The
* We do not mean by this that there is no energy crisis or fear about it. The point is that the cause is not exhaustion of resources, as is generally thought.
An oil refinery on the Arab-Persian Gulf. Part of the "upstream"
trusts cut down on their deliveries to independent refineries and distributors in order to drive them off the market. About 1,000 independent gas stations were forced to close and another 1,800 were threatened with closing for lack of supplies.
The oil industry explained this "shortage" by saying that the refining capacity in the United States was insufficient (through a declaration by the president of the American Petroapparatus.
the first quarter of 1972; they reached $2,000 million. Exxon's profits rose by 43 percent.