Approved For Release 1999/09/02 : CIA-R FEATU "Seizing Arab Oil," by Miles Ignotus, arper's, March 1975. "How the Arabs Bluffed Us on Oil and How Vie C-an Stop Them From Bluffing Us Again," by Leonard Mosley, New York, 17 February 1975. "The Price of Oil: A Politica Time Bomb," by Willy Linder, Swiss Review of World Affairs, February 1975. Although the four recent articles in this packet are more stimulating than most media items addressed to one aspect or another of the OPEC problem, none is reflective of current USG policy and should not be passed to forei 'Contacts who might misconstrue them. Our purpose in sending them is primarily or ac ground use by Station officers, to keep your attention focused on the oil/energy situation and to make you aware of some of the ideas now current for coping with it. The article from The Economist is optimistic on the grounds that there is a huge oversupply of oil, that -w-17e-spread nationalizations have obviated the need for the international distributing and marketing companies to cooperate with the producers' cartel, and that all the major consuming nations now have energy policies that will lead to a greater excess of supply over demand in the future. By contrast, the Harper's article, which might better be entitled "Seizing Saudi Oil," argues that the West has no alternative but to use force to_ciipture the Saudi fields and thus break the cartel; the author suggests that the Soviets, Iranians and even the Saudis can be brought around to accept this action. Mosley contends that the West has caved in to OPEC's demands without really fighting them, but that in the upcoming negotiations we can count on the sheiks' development plans and their need to keep domestic radicals at bay to play into our hands to reach an acceptable compromise solution. Finally, Linder's article concentrates on the problems of the mounting indebtedness of the consuming countries and the recycling phenomenon, both of which lie at the heart of what Ottar Emminger of the West German Bundesbank characterizes as a time bomb that has yet to be defused. We hope Station officers will find these articles of interest and call our attention to comparable items in foreign publications of quality to which you have access. "The North Sea Bubble," The Economist, 8 March 1975. This issuance contains articles from domestic and foreign publications selected for field operational use. Recipients are cautioned that most of this material is copyrighted. For repub- lication in areas where copyright infringement may cause prob- lems payment of copyright fees not to exceed $50.00 is authorized per previous instructions. The attachment is unclassified when detached. 2.5 March 1975 E-2, 61rJ11tellease 1999/09/02 : CIA-RDP79-01194A000100420001-9 Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 CPYRGHT The Economist Building 25 St James's Street London SW1A1HG 'telephone: 01-930 5155 telex: 24344 telegrams and cables: Mistecon London SW1 March 8, 1975 - 13 Republican twilight 14 Vorster to move . 15 The North Sea bubble - 17 Harold mustn't welsh either 18 One way out for Cyprus Britain 25 Uproar in the Commons-but it's not all sound and fury; Housing; Tories; Ulster; Moorgate accident; Defence; Union elections; Arts; Sex education School Brief 34 Managing the British economy (the first. of a series to help students through their exams) Britain and Europe 39 And so to Dublin for the last (?) round; Helmut's health; India; Regional fund; Farming; Polls; Denmark; Canada The World 47 International Report: Flap in Ian Smith's cloud cuckoo land; South Africa; 'Cambodia; Tern- orists; Nuclear weapons; Turkey; Oman; Iran; Portugal; Vatican; India; China 65 American Survey: Throwing stones at the Fed; Energy policy; Foreign aid; Urban Development Corporation; Railways; Black Muslims Business . 71 This Week, Stirring it 72 Brief' Open that budget box 75 Those lame docks 76 Reds under the blanket ." . 78 Wait till the dollar rises 81 Britain: Meriden's road to failure paved with bad decisions; The economy; Pensions; Textiles 86 International: Lots of oil on troubled waters; East-west trade; Russian shops; French nuclear power; Swiss referendum; Colour television 92 Investment: London looks over Chicago's gift horse; Burmah Oil; London market; Stock- brokers' losses; Lockheed; Matsushita, 104 World Shares and Money Books .107 Robert Browning; Literary relics; Elizabeth Gaskell; Alain-Fournier; Historiology; Queen Charlotte Letters 4 EDITOR IN CHIEF: Robert Shnayerson; MANAGING EDrroR: Lewis H. Lapham; ART DIRECTOR: Sheila Berger; SENIOR EDITOR: Nelson W. Aldrich, Jr.; COPY EDITOR: Rhoda Koenig; ASSOCIATE EDITORS: Judith Appelbaum, Gwyneth Cravens. John Fischer; WASHINGTON EDITOR: Taylor Branch; STAFF EDITORS: Valerie Brooks, Lawrence S. Burns; EDITORIAL ADMINISTRATOR: Angela Santoro; CONTRIBUTING EDITORS: George Crile, Timothy Dickinson, Annie Dillard, Barry Farrell (West Coast), Jim Hougan, Russell Lynes, George Plimpton. Marion K. Sanders, Earl Shorris, Kurt Vonnegut, Jr.; BOOKLETTER EDITOR: Suzanne Mantel] PUBLISHER- Russell Barnard; ASSOCIATE PUBLISHER: Griff Ellison; COr TROLLkR: Louis A. Isidora; CIRCULATION MANAGER: Elizabeth Jacobsen; PRODUCTION MANAGER: Louis Seeger; REPRINTS/PERMISSIONS: Lucy \lattimore HARPER'S MAGAZINE PRESS EDITOR: Lawrence S. Freundlich Published monthly by Harper 's Magazine Company, Two Park Avenue, New York, N.Y. 10016. C. Canfield. Honorary Chairman, Russell Barnard, President; Robert Shnayerson, Executive Vice-President; Lewis H. Lapham, Vice-President. Subscriptions $8.97 one year; $17.94 three years. Foreign except Canada and Pan America: $1.50 per year additional. Harper's Magazine Company is a division of the Minneapolis Star and Tribune Company, Inc. John Cowles, Jr., Chairman; Otto A. Silha, President; Norton Armour, Secretary; William R. Beattie, Treasurer. For advertising information contact Harper-Atlantic Sales, 420 Lexington Avenue, New York, N.Y. 10017. Other offices in Boston, Chicago, Detroit. Loa Angeles, Philadelphia, and San Francisco. Copyright Q 1975 by the Minneapolis Star and Tribune Company, inc. All rights reserved. The trademark Nnrper's Is used by Harper 's Magazine Company under license, and is a registered trademark owned by Harper & Row. Publisher,, Incorporated. Printed in the U.S.A. Second class postage paid at New York. N.Y., and addi- tioeal mailing offices. roe 4As7'sar Please send Foram 3379 to Harper's Ma ulna, 381 West Center St. Marian Ohio 4330?, Contents Volume 254 Number 6863 Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420000?9yRGHT CPYRGHT Over a yoar ago The Economist unfashionably suggested that there was. a "coming glut of energy". Well it's there, earlier than we expected History is being swayed by the increasing capability of important groups to cod each other and themselves that they are observing the precise reverse of what is actually happening. In oil what is happening is that the world is now trying to produce about 20 per cent more than people are willing to buy while the price of oil is around $10 a barrel, and that some glut of present productive capacity would probably persist even if the price dropped to $3-$4 a barrel. Medium-term energy policies all over the world are now. geared to making this present glut enormously greater with every year that passes. Under one of these policies the world's governments may-as a diplomatic ploy, perhaps rightly-sign Mr Henry Kissinger's piece of paper pretending that all this generation's successors in business and government will promise to pay through the 1980s perhaps $7 a barrel, maybe index-linked, for a commodity which costs 10 cents a barrel to produce in much of the Middle East and whose marginal operating costs (once rigs are in place, and it costs money to stop pipelines) are some- times barely over two cents a barrel. If there is an index- linked floor price of $7 a barrel, then it is probable that more than half of the productive capacity of primary energy either already existing or now planned for the early 1980s will have to be held or edged out of pro- duction; indeed Mr Kissinger's objective in talking about $7 a barrel is precisely to create such a glut. People can believe if they wish that the capacity declared redundant will not then be the expensive (and rising-marginal-cost) capacity like Alaska and the North Sea plus the high wage coal mines of Britain and America. People can believe if they wish that countries like Japan will be bound by a piece of paper saying that they must buy oil at $7 a barrel when marginal producers will be offering it at a price based on costs less than one- seventieth of that, and that Japan's competitors will then allow their own energy costs to stay up to 70 times more expensive than hers. People will believe what they want to believe, including dear delusions. In the rush to oil glut in the last 18 months there have been four main self-deluders (oil companies, governments of producing and consuming countries, journalists), just as there were four in the exchange-rate farce that pre- ceded it (central banks, governments with strong and weak currencies, journalists). Both these stories began with the breakdown of a longstanding, because restrainedly canny, restrictive practice (oil companies' rigging of -world oil prices against the Arabs before Yom Kippur, central banks' fixed exchange rates before 1971). In both the breakdown led initially to a wildly un- sustainable attempt at more extravagant market-rigging the other way (Opec, Smithsonian agreement), so that ordinary market forces swung into reaction. While they were thus in swing, governments who always believe they can repeal the laws of supply and demand were holding consecutive meetings in lush hotel (Opec summits, finance ministers' conferences), and jo rnalists always wrote as if something important was happening there. But anybody who stayed home and based his guesses on any reasonable calculation of elasticities of substitution and supply could see that exchan e rates would float again and could guess correctly wh t would happen first to demand for oil, then to stocks, then to supply, and next to prices. Before Yom Kippur of 1973 the. major international oil companies rigged world oil prices in a way which ensured that their very cheap Middle East oil did not undercut their sometimes 50-times-more-expensive oil from existing and intended ventures in unecono 'c areas like North America, the Arctic, the North S a. This market-rigging was probably illegal under American and other anti-trust laws, but was thought worth lowing to "keep us out of the power of the Arabs". The old cartel was (a) hurting all consumes to the benefit of producers in the sense that it kept selling prices well above marginal cost, but (b) kept most of the gravy from the most efficient producers (Arabs) so as to finance the digging of oil from uneconomic areas on which these companies got both a produ is and distributor's profit. At the same time the comp nies (c) cannily did not push selling prices so high as t induce substitution or indeed even (d) so high as to maximise monopoly profits (leaving grateful western governments room to put on heavy petrol taxes in a still rising market). Many poor primary producers would give t eir eye- teeth if big foreign capitalists would kindly a -range a semi-monopolistic distribution network for their products in the west, down to tied petrol filling stations During the 1960s and early 1970s a lot of us believed that the Arabs could eventually seize advantage oft is, and double their revenue to about an index-linked. $4 per barrel by diverting to themselves the monopoly profits that were then going to (a) western oil companies and the support of their ventures in uneconomic western areas, (b) western governments who were taking such a large tax revenue from oil.. The Economist was much attacked in 1967 for pointing out that it w only a matter of time before the Middle East producers with small populations and small dependence on it would bring the oil companies and Europe's consumer to their knees. The big question was always whether th Arabs, when the moment came to strike the oil companies down, would be too greedy, and stimulate- over-supply The boycott that wasn't When they quintupled the oil price under the remotion of the Yom Kippur war, it was clear that the Aabs had Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 he N orth Sean, 'bubble Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 CPYRGHT ver-egged their pudding. Why should the new country artel (which controlled local production only) be likely - o be able to maintain for long a .far bigger monopoly rofit than the old company cartel (which controlled orldwide production, distribution, and possessed the ar of rich countries' governments), unless one assumed. at the old companies were shrinking violets, and that he newcomers could keep unbelievably tight the con- ol of supplies? Reports of that first winter's "boycott" were delusive. Hawk-like old oil companies were intent n saying "see how effectively the Arabs are strangling e west, America must invade them", while the. dove- 'ke old oil companies were intent on saying "see how ffectively the Arabs can strangle the west, so let's ditch srael". The Economist at this time adopted the simple xpedient of checking the insurance coverage at Lloyd's f oil shipments from the- Gulf,. and found that the ycott was not being enforced as fully as both sides' propaganda alleged. Does anybody now deny this? In the eak boycott month of January; 1974, shipments of oil rom the Middle East were 5 per cent higher than in the ree market month of January, 1975. All through the any months after the price hoist, all through the period hen the world was supposed to be -being strangled by he boycott, the Arabs were shipping out more oil than ustomers were ever likely to want to buy at the new rice. That winter some normally shrewd traders bought marginal free market oil at $18 a barrel, although any ounter at Lloyd's could see that before it got home ample oil would be available at little more than half that rice. Nearly all big countries discussed the, possibility of petrol rationing, and some introduced it; as The conomist was pilloried for forecasting, all found that the flood of supplies made rationing ridiculous within a week. All through the first half of 1974 some serious commentators were writing that oil would become steadily scarcer and more expensive for the rest of our lives, although anybody who counted how many Gulf supertankers made five could tell that oil was heading for its biggest instant glut. By June the glut was obvious, as tankers were told to go slow across the oceans and act as great floating storage tanks. The big oil companies made embarrass- ingly large stock profits in the first half of 1974 because of the quintupling in price, but now recognised un-. comfortably that they might suffer huge stock losses on record inventories held at a time when demand was fall- ing fast. Since mid-1974 some oil companies have front- stage joined with the oil countries in urging everybody to believe that prices will not come down, while back- stage they have frantically cut their purchases so as not to be holding quite such large stocks when prices actually do. The cuts in production have not been dictated by Arab solidarity, but by the companies' sensible commer- cial decision not to buy from the most expensive Opec suppliers. Libya and Abu Dhabi (who were unlucky enough to enjoy price extras for their low-sulphur crude) have seen their sales cut by more than half, while Saudi Arabia was until recently selling more than before Yom Kippur.. The one-third cut in Kuwait's production is partly voluntary, because it suffers from what can be called the Aberdeen disease;. in a country the size of Yorkshire, with an immigrant majority that is dis- trusted by the ruling native minority, nationalists in the Kuwait assembly feel they might do better to keep their scarce oil in the ground. Some nationalists in Scotland and Norway have the. same delusion, which is very un- wise for. this period of mounting energy glut. Those who are whistling to keep prices up have two arguments. One is that oil cartels have stuck together well in the. past, and that Opec's successes have tightened it. Actually, Opec's nationalisations have broken the old cartel up. In place of the experienced ring of the seven sisters (the big oil companies who once controlled nearly all production and distribution), there are now a dozen inexperienced nationalised companies trying to sell their -oil in a market of surging surplus, confronted by the old oil companies, who still control distribution and whose sole incentive in the Opec area should soon be to shop around for the best deal they can get. The cartel can only last if the western oil companies find some new reason for wanting to keep oil prices-up. Secondly, Opec's optimists say that the drop in demand is caused by world recession. But recovery from recession will coincide with the beginnings of new oil coming on flow. The present market situation, to repeat, is that the operators of existing capacity want to produce 20 per cent more oil than the world wants at present prices to buy; while, for the first time in any slump for anything, every country has an "energy policy" designed to make this overexpansion of supply far more overexpanded still. That is a market in which to be a buyer (like Japan) could be very heaven and in which a potential seller like Britain should not buoy up its hopes on a North Sea bubble. The diplomats of the world rightly look beyond this price-induced glut; and Mr Kissinger and an army of thousands in the west and the Middle East are now sensibly looking for trading and price arrangements that may prevent the next war from creating an oil-price nonsense again. But that doesn't change the economic fact of the matter. An oil-price nonsense it is. Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 CPYRGHT WRAPAROUND 3 95 98 William Sa f re 12 R. M. Koster 18 Horace Freeland Judson 32 Miles Ignotus 45 Perry Deane Young 63 John Vachon 69 R. Buckminster Fuller 72 Nadine Gordimer 77 Josephine Hendin 82 Marshall Cohen 91 79 arper Waste: Cutting Back the Fat Making Connections 100 Game Tools for Living 100 Information PUPPET AS PRINCE A character analysis of Henry Kissinger by a former White House associate SURPRISE PARTY How the Democrats managed to forge a sort of unity FEARFUL OF SCIENCE An inquiry into the future of biology SEIZING ARAB OIL A blueprint for fast and effective action Place: GOODBYE, ASHEVILLE Construction and destruction in a once-lovely Southern town GOING HOME AGAIN Photographs: Thomas Wolfe's Asheville TIME PRESENT A series of aphorisms on the structure of reality A LION ON THE FREEWAY A short story BOOKS WHAT IS THOMAS PYNCHON TELLING US? THE ROAD TO SERFDOM WHEN DID YOU STOP WANTING TO BE PRESIDENT? Answers by Ronald Reagan, Theodore C. Sorensen, George Romney, Kevin H. White, Kevin Phillips, William S. Burroughs, and Eugene J. McCarthy 103 On the pride and ~hame of the cities Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 Approved For Release 1999/09/02 : CIA-RDP79-01194A0001004200060YRGHT SEIZING ARAB OIL Sucre % Hatserim Gull o/~` SINAI Sue? ` JORDAN ~ t t Gull of Aqaba A FTER MORE THAN A YEAR of extraordinary passivity, the United States and the other oil-consuming nations of the West have slowly -very slowly-begun debating ways to break the oil cartel's power. So far, they have pursued a futile policy of appeasement. Instead of mount- ing an economic counteroffensive against the price-rigging of the Organization of Petroleum Exporting Countries (OPEC), the victims have talked only of accommodation. Instead of a forc- ible reaction to protect national interestsvital national interests they have talked about co- operation. In response, the oil cartel has pre- dictably raised prices again, twice. Meanwhile, economic growth in formerly de- veloping countries, from Brazil to Taiwan, has stopped. India and the rest of the hopelessly poor have been driven into even deeper poverty. Virtually every industrialized oil importer is in deep recession, with its threat of social instabil- ity and, in turn, political disarray. Although the price of oil is not the sole cause of these trou- bles, it is-by far the single major factor propel- ling inflation, unbalancing the balance of pay. ments, and disrupting capital markets. The policy of appeasement has failed, again. In the 1930s the craven men of Munich dis- played not only an almost complacent defeat- ism, but also a constant need to justify German demands. Similarly, the modern appeasers have constantly tried to justify Arab oil extortion. When OPEC members began accumulating bil- lions of dollars in unearned reserves, we were told that this was merely fair compensation for past "exploitation"-as if men who for years had been receiving huge royalties (for a prod- uct they had neither made nor found) could be said to have been exploited. When OPEC prices brought worldwide economic growth to an end, it was said that growth had been too rapid in any case-as if we had any other way to relieve poverty, and as if the military dictators and megalomaniac kings of OPEC had been chosen to oversee the ecological balance of the planet. Many Western intellectuals have put forward an even sillier equation: OPEC = Third World = Good. To be sure, the oil cartel is bringing about a massive redistribution of the world's wealth, but it is a rather peculiar redistribution: Indian peasants buying kerosene are subsidizing the super-rich, while Americans, are buying smaller cars because sheiks want bigger jets. Just as men persisted in seeing modera- tion in Hitler's policies when there was none, so we have persisted in seeing painless solutions to the problem of OPEC. The first of these was private "recycling." The bankers said that the massive transfer of funds to OPEC, which most of the recipients could not possibly spend, would not drain the monetary system of its liquidity, nor would it destroy the equilibrium on which the world economy depends. The bankers assured us they would take care of the problem: surplus OPEC funds would flow into their banks as deposits, and the bankers would re-lend the money to the oil consumers, who would pay OPEC, which would deposit the money, thus closing the circle. All this depended on the willingness of gov- ernment bank regulators to overlook private bank practices that were essentially unsound- borrowing from the few to lend to the many, and borrowing short-term money to lend it long. And so the regulators overlooked, and the banks recycled, until the banking failures began. By then some of the world's largest banks had shouldered commitments (notably loans to Italy and Japan) that may yet destroy them. The economists, with their trained inability to understand the real world, had an even sim- pler solution. Paper money (dollars, marks, et- cetera) would flow to OPEC, whose members would have to spend it, lend it, or bury it in the sand. If they spent it, we would get the oil ow the U.S. can break the oil cartel's stranglehold on the world by Miles Ignotus Miles Ignotus is the pseudonym of a Wash- ington-based professor and defense consultant with intimate links to high-level U.S. policy makers. 9 Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-OPYRGHT and pay for it with our exports, a workable ex- change even if at unfair prices. If they lent the ,paper money we would borrow it and thereby get the oil in exchange for bonds and deposits, the sophisticated IOUs of modern finance. If they buried it in the sand, we would get the oil, and they would get slowly rotting and quickly depreciating paper. Missing from this classroom version of the world were institutions such as the gold and Eurodollar markets, where vast infusions of Arab money could destabilize small currencies overnight, and undermine the credibility of even the largest. Above all, the economists over- looked a fourth alternative: Arabs who did not want to spend the money or lend it or bury it in the sand could simply avoid earning it-by re- ducing the output of oil. At present, the world is being denied more than 3 million barrels of oil per day, mainly owing to production cuts in Kuwait and Libya. As to the political effects of all this, even the most informed pessimists may be too opti- mistic. For example, Italy's endemic unemploy- ment of 5 to 7 percent represents the men who have failed to leave the rural South and are trapped in its decaying economy. Socially and politically, Italy could survive such unemploy- ment for centuries. But when inflated oil prices increased Italy's unemployment, the extra per- centage points forecast an ominous future. Be- hind those numbers are men who did have the initiative to seek work in the North, and who now have the initiative to destroy the fragile institutions of the Italian republic. "The scenario: an Arab embar- go or supply cut, an a mo- sphere o crisis, probably in the aftermath of a short but bloody war. The we go in." From bad to worse HOSE WHO MAKE IT their business to under- state the depredations of OPEC invariably point out that Italy and the rest were unstable anyway; if one speaks of global economic con- sequences, they reply that the poor were starv- ing already, and inflation did not begin with oil. All these arguments are valid, and they are all irrelevant. What matters is that OPEC's price- rigging has made all these troubles-from the malaise of Italian politics to the muddle of world economics-far graver than they were before October 1973. This alone is important. The real enigma is the behavior of the poor countries that have no oil. After all, the tax that OPEC has imposed on all oil-consumers is hid- eously regressive and the incidence of suffering very different: Indian peasants are paying ex- actly as much for their oil as Swiss bankers are, and the man who will no longer be able to afford fertilizer and fuel to grow food for his family is suffering far more than the American who can no longer afford to visit Yellowstone in his eight-cylinder car. And yet, leaders of the poor countries have praised OPEC and given it their support at the United Nations. - There are two very different explanations for this anomaly. The first is that the actions of OPEC are only a prelude to a much broader rearrangement of the world economy. This vi- sion is embodied in the proposals for a "new economic world order," recently blessed at the U.N. General Assembly by the usual automatic majority. Schemes are now circulating accord- ing to which raw materials produced by the poor would be indexed at 400 percent of present prices (almost matching that of oil), while all industrial goods would be indexed at present prices. In short, the high price of oil would be balanced by equally high prices for other raw materials produced by poor countries. Only in- dustrialized nations would continue to pay high prices while selling their own products cheaply. Wheat and other cereals have been excluded from the magic circle, since they are exported primarily by rich, white countries. But this is not enough to make the scheme workable, let alone fair. If not the poorest of the poor, India is certainly the most important, and it is not primarily a raw-material exporter. No conceiv- able way could be found to make Indian tea and Bengali jute sufficiently expensive to balance the price of oil. In reality, the distribution of raw materials simply does not correspond with the distribution of poverty: rich Canada has a great deal, and Bangladesh has virtually none. Hence, no workable or just scheme of global redistri- bution can be hinged on raw-material cartels, and the argument that OPEC is merely leading the way is false, mere propaganda. The second explanation suggests why the leaders of the poor should have acquiesced in peddling the first explanation, hollow as it is. The truth is that the voices praising OPEC do not belong to the poor but to those who control their lives-narrow, self-appointed ruling groups (elections have become a rarity in Africa and Asia) fond of shiny black cars and.numbered Swiss accounts. Westernizing, yet fiercely anti- Western, these dictatorial elites see in OPEC a force that can humiliate the West, and perhaps even destroy its prosperity. Those who eat three ample meals a day in Dacca or Bamako instruct their nephews serving as delegates to the U.N. to applaud when the Kuwaitis say that the price of oil is low, and that the recent 500 percent in- crease was only fair. It is doubtful whether those who are starving because of the shortage of oil-based fertilizer have been asked for their opinions. Their rulers value the license of un- fettered sovereignty and anti-Westernism far more than mere food for hungry people. With the oil-price crisis compounding every human misery, the time for action has surely come. For in the end it does not matter whether the latest solution, Dr. Kissinger's governmental Approved or Release : 0001-9 Approved For Release 1999/09/02 : CIA-RDP79-01194A0001004200d1P9YRGHT "recycling," would actually work or not. If the OPEC countries lend back a portion of their huge unearned revenues to those they deem credit-worthy, such as the United States and Western Germany, and if the countries so privi- leged re-lend funds to other countries which are denied direct loans, such as Italy, the only re- sult would be a massive and ruinous transfer of .capital* and, of course, of power. I F WE DO MAKE Dr. Kissinger's recycling scheme work, we will have created the engine of our own impoverishment. Oil payments to the Arab members of OPEC amounted to $8.5 bil- lion in 1972, and are projected at $65.4 billion for 1975, and $101 billion for 1980-an in- crease of just under 200 percent in eight years. And the transfers to OPEC are not just a matter of paper money. Right now, the Kuwaitis could easily buy British Leyland Motors, the largest industrial combine in Britain. Built up through the work of tens of thousands of English workers over a period of more than seventy years, BLM would then be acquired by a single family in Kuwait with only six days' worth of oil produc- tion. Why should we countenance the transfer of hundreds of billions of dollars' worth of real estate and industry to the ownership of reverse colonialists? In the West such property may be owned by the rich, but at least our rich are taxed and regulated. And even the top 5 per- cent of our home-grown rich cannot be com- pared to the handful of families that control such a large portion of OPEC revenues. If at last we resolve that OPEC must be broken, the question remains: how? The non- violent methods have been discussed so much that mere mention suffices: ^ Financial denial: Western nations in soli- darity refuse OPEC deposits unless they are long-term, evenly distributed, and at low interest -or possibly under any circumstances. ^ Ownership denial: OPEC money is forced to remain paper money since no transfer of real assets is allowed. ^ Market manipulation: Conservation and sub- stitution are used to cut the demand for oil, thus depressing prices once a surplus develops. Some of these nonviolent strategies are more plausible than others, but all would in fact be utterly ineffectual. As long as OPEC controls oil supply, it will -prevail: it can deny supply in the face of financial denial; withhold supply so long as purchases of Western real estate and industry are forbidden; and cut supply pro rata to offset any contrived decline in demand. As * Internal World Bank estimates project the un- expended reserves of Saudi Arabia, the United Arab Emirates, Kuwait, Libya, and Qatar at $453 billion by 1980 and over $1,000 billion by 1985. the Saudi oil minister has already explained: "If you cut demand hoping to depress prices, we will cut supply even more so as to raise prices still further." In theory again, we could cut demand to the point where the market share of OPEC producers who do need the cash is affected. To do this we must cut demand by more than the low-population, cash-surplus OPEC producers can cut supply; by the time that demand level is reached, half our industry will be without fuel, and half our work force unemployed. Nor is there any hope that enough "new" oil will be found to solve the supply prob- lem. The finds in the North Sea, Alaska, off- shore Vietnam, offshore China, and the promis- ing structures being explored elsewhere are all useful. But their combined output-when fully developed-will not amount to half of Saudi Arabia's. And this assumes high rates of output: when it comes to reserves, all the oil found worldwide since 1965 is equivalent to a tenth of the Saudi reserves already fully proven. Even if vast new oil fields were found, it would still take five to seven years to bring them into produc- tion-and there is absolutely no reason to ex- pect major new discoveries. The fallacy of all the nonviolent strategies is fundamental: to break OPEC by economic means, we must break its power to control sup- ply-and this power can always defeat the strat- egies first. Moreover, there are some minor prac- tical difficulties. For the financial strategy: the Swiss would never play, but would instead laun- der all the money that OPEC would ever want to deposit. For the ownership-denial strategy: Ja- pan and the gold market would never play, while OPEC investors might just want to buy all the gold in the world, plus every Japanese factory and scenic inn. Finally, for the market-manipu- lation strategy: for every producer willing to sell a few cargoes under the table, there is likely to be a consumer willing to buy two, in order to keep the factories running and the workers off the streets. The use of war T HERE REMAINS ONLY FORCE. The only feasi- ble countervailing power to OPEC's control of oil is power itself-military power. But the lack of any other alternative does not, of course, mean that the use of force is ipso facto feasible. First, the essential question: could we start a war on OPEC just because the price of oil is too high? Surely the answer is no. And it would probably remain so even if OPEC raises prices again, citing the rising prices of caviar, Cadil- lacs, and fighter-bombers. That, however, is not the end of the story. Fortunately for us, while all members of OPEC are extortinnist4, some 4th?' Aral-c~ nra elan Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 CPYRGHT u ti ff- blackmailers. Sooner or later, their demands on lower than present prices. Is being e Israel will become excessive; the Israelis will mate goal, there is only one feasible target: then refuse to concede further territory without Saudi Arabia. L d . h Lib t h reciprocal concessions. Then there will be war, and then, at whatever cost, the Israelis will pre- vail again. The last Arab-Israeli war ended with the Arab armies in disarray and both Cairo and Damascus in danger. The next war is likely to end with the same result, but sooner. This time, the massive surprise of October 1973 cannot possibly be repeated, and the contest in the air will no longer feature a pre-Vietnam Israeli air force with dumb bombs and few electronic countermeasures facing post-Vietnam Arab air defenses. The Arabs may have more and better . missiles, but the Israelis now have smart bombs. With Israeli fighter-bombers now making one pass instead of five or six to hit each target, Arab air defenses would have to improve by 500 to 600 percent to retain their power undi. minished. Eventually the Russians will no doubt supply better guns and better missiles, but five- fold improvements would require totally new technologies, and many years to mature. Mean- time, it is back to 1967 for the Israeli air force. The Arabs know this, otherwise Syrians would have opened fire in 1974. But the Israelis know this also, and they will resist Arab demands: hence war, and an embargo. When the price problem did not exist, and Persian Gulf crude was changing hands at $1.80 per barrel or less, an Arab oil embargo was a danger to be feared, and Israel was pressured to make concessions. Now an embargo is no longer a threat but an opportunity. Some, captive to the old politics, fail to make the connection, re- peating endlessly that war in the Middle East must be averted at all costs, for if Israel loses, then catastrophe, and if Israel wins, an embargo follows. There they stop. Their advice, of course, is to comply with blackmail by blackmailing Is- rael into further concessions. But if this dis- honorable deed is done, the result will only en- sure the continuation of supply at present prices, and the damage these prices are causing is al- together more fundamental than any short-term embargo could inflict. This, then, is the sce- nario: an Arab embargo or supply cut, an at- mosphere of crisis, most probably in the after- math of a short but bloody war. Then we go in. The first question is where. The goal is not just to seize some oil (say, in accessible Nigeria or Venezuela) but to break OPEC. Thus force must be used selectively to occupy large and concentrated oil reserves, which can be pro- duced rapidly in order to end the artificial scar- city of oil and thus cut the price. Faced with armed consumers occupying vast oil fields whose full output can eventually bring the price down to 50 cents per barrel, most of the pro- ducers would see virtue in agreeing to a price four or five times as high, but still six times a - t , some aye suggeste Oddly enoug ya would make an ideal target. It is true that a is a good deal more open to attack, but in fact an invasion of Libya would be worse than useless. Far from having enough oil to make OPEC vulnerable to market pressures,. Libya's oil would not even suffice to cover cur- rent needs. Hence the rest of OPEC could de-, feat any invasion of Libya by simply cutting off; oil production for as long as it would take to force a withdrawal. WITH ROUGHLY 200 BILLION BARRELS of pub- lished, proven reserves (they could be sub- stantially higher), Saudi oil fields are now be- ing worked at a rate of just over 8.5 million barrels a day, for an annual output of just over 3 billion barrels. In other words, at present rates of production Saudi oil would last for more than sixty years. By contrast, oil fields in most other parts of the world are developed much faster, with output/reserve ratios of 1:10, or at most 1:20. Producing Saudi oil fields at Texan rates would mean producing almost 55 million barrels of oil a day, enough to supply current worldwide needs almost twice over. It would take huge investments and several years to in- stall the required capacity, but in order t break OPEC we need not go to such heroic lengths. It would suffice to increase output by little, and then by a little more, each time erod ing the remaining market shares, until a corn promise is reached. If none is forthcoming, then the time will have come for large output in creases to flood the market. In short, if the use of military force is to b limited and therefore efficient, the real leverage mutt come from market pressures, and only the Saudi oil fields can provide the means. Fortu nately, those fields are not only prolific but are also concentrated in a small area, a fraction o Saudi territory. Even better, the areas involve are scarcely settled except for the oil workers some 20,000 in all, American technicians in cluded. If Vietnam was full of trees and bray men, and the national interest was almost invisible, here there are no trees, very few men and a clear objective. There could be seriou risks in the operation, but at least there woul -be no sense of futility with 200 billion barrels o oil underfoot--oil that would restore jobs to th unemployed and supply the wherewithal for gradual program of substitution. Now for the problems. There are many, star ing with the pure logistics. For one thing, th region is remote and not open to the ocean Except for staging and refueling points in I rael-itself almost 1,000 miles away (Hatseri Approvecl or Release Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001?YRGHT to Dhahran)-there would be no friendly bases within easy reach. The Israelis owe a great deal to the United States, and it is inconceivable that they would deny airfield facilities, even if the operation entailed serious risks for them. It would have to be a long-distance operation and a large one. The Saudi forces that could resist an occupation are small and deficient in train- ing. For all the best efforts of our own advisers and weapons salesmen, the Saudis do not yet have a serious military force: 36,000 soldiers scattered over a vast land. But the scale of the operation is set by the nature of the target itself: some hundreds of wellheads, dozens of miles of pipeline, several loading jetties, and much else besides will have to be secured, reactivated, and thereafter patrolled. Moreover, to deter sabotage and counterintervention (of which more below), it will be necessary to have a siz- able force, diversified in composition. The first wave should include the combat echelons of one Marine division: 14,000 men, with one or two battalions amphibious-landed and the rest simply to be unloaded from aboard ship. The Marines could be gathered quietly in the Pacific, but by the time their shipping sailed past Singapore across the Straits of Ma- lacca, the threat would become pretty obvious, even to the New York Times. At twenty knots, the passage from the straits to the gulf would take almost a week, too long. Though some re- sistance and sabotage are unavoidable, the less of it the better. An effort must therefore be made to minimize warning time. Hence the need for a preliminary airlift wave: the combat echelons of the 82nd Airborne Divi- sion, sent with its nine infantry battalions but without its too-heavy armor or armored cavalry battalion. Instead, the division should be equipped with two additional battalions of heli- copter-borne "air cavalry" detached from other divisions, as well as extra antitank missiles and many Jeeps fitted with recoil-less rifles. If the Marines of the first wave are due to arrive in and around Dhahran on the shores of the gulf at day D, and if warning is given by their tran- sit at Singapore by D-7, the 82nd Airborne must arrive on D-3, to restore surprise by ar- riving three days before the Marines are expect- ed. Flown out of the U.S. without fanfare, brief- ly staged and refueled in Israel, the 82nd's heavy C-5 and C-141 jet transports would fly straight across Saudi Arabia to Dhahran, escorted all the way by air-refueled Phantom fighters, also based on Israeli fields or aboard carriers in the Arabian Sea. One or two paratroop battalions would jump to seize the Dhahran airfield, and to take up positions around the U.S. residents' housing a few miles away. Once. the airfield was secured, the paratroopers would signal other air- craft waiting overhead to fly in the rest of the troops. As the troops landed and began to spread out, the empty aircraft would be reloaded with the families of American and other foreign oil technicians who would be evacuated to Israel and the U.S. Immediate targets of the advance force would include the Ras Tanura jetties as well as storage tanks: it would be ridiculous to have to airlift oil into Saudi Arabia. The air cavalry battal- ions, powerful and highly mobile, could secure some of the installations of the Ghawar oil field (the largest by far), which is seventy miles at its northern extremity from Dhahran. They could also seize the entire nearby Abqaiq field. The Marines would arrive seventy-two hours later to consolidate the base and expand the coverage. Having vehicles including some ar- mor, they would complete the occupation of Ghawar and other Saudi oil fields. Having small boats and more helicopters, they could also oc- cupy the non-Saudi offshore oil fields near Doha, Adma, and Dubai, as well as patrol to the north toward oil-rich Kuwait, and danger- ous Iraq beyond it. Very soon after the Marines landed, on D+ 1 at most, a second Army divi- sion would arrive, the First Cavalry, with its in- fantry, armor, and helicopter-cavalry. This too would come by air, staged by way of Israel, ex- cept for its battle tanks, for which air transport is inefficient. The tanks would be loaded aboard fast landing ships and fast freighters, and off- loaded with heavy derricks. Finally, on D + 3 or D + 4, the expedition would be reinforced with more Marines, the combat echelons of a second division. This would arrive entirely logistic- loaded, for an "administrative" landing: no storming of beaches here. By then the occupation force would have its own air power. Some fighters would be flown into Dhahran from Israel as soon as the airfield was seized; the two Marine divisions would come with their organic air "wings," no mean force: eight Phantom fighter squadrons, two reconnaissance squadrons, and another eight "attack" squadrons, with light and not-so-light bombers. Not that any bombing is planned; the mission is to deter others. At this point, the ba- sic force would be in place, with resupply com- ing by air or by ship, depending on bulk, weight, and urgency. With some 40,000 men by now mobile on the ground and in the air, the phys. ical occupation of all the major oil fields on- and off-shore would be complete. Tactics S O MUCH FOR LOGISTICS. Now the strategy and tactics, starting with "industrial" tactics. Much has been said about the dangers of pre- emptive sabotage. Alarmists have conjured up visions of oil fields burning till the year-2000. Not so. The world's supply of oil field firefight- Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 C g talent is to be found in Texas. Given all the ther resources available in the U.S., the chances re that fire and damage could be handled uickly. Assuming fairly extensive but unsystem- tic sabotage, preinvasion. output levels could e resumed in one to two months so long as ertain essential items (e.g., segments of scarce rge-diameter pipe) are sea-lifted with the first arine convoys and plenty of skilled manpower s flown in. The difference between the operating cost of he Saudi oil barrel and the OPEC price is the difference between 10 to 30 cents and $11. Multiplied by the output of more than 8.5 mil- lion barrels a day, this means that one month's production could pay for $2.5 billion worth of skilled manpower and equipment: enough to repair or replace every damaged wellhead, ev. ery interrupted feeder line, and every sabotaged gas separator, as well as to replace as much large-diameter pipe as could possibly be needed. Of course, if the Saudis did to their oil fields what the departing Germans did to the Roma- nian oil fields at Ploelti in August 1944, it could take longer to restore full production and begin adding to it. It took the Russians almost three months to restore production at Ploe?ti. Still, a well-organized rehabilitation task force would be better prepared than the chaotic hordes of Marshal Rodion Malinovsky, and the Saudis are not Germans. Even if they were, they would not have enough time to do a thorough job. In making advance preparations for sabotage, the Saudis face severe limits: there are too many underpaid and radical non-Saudi oil workers; if plastique charges were pre-set to demolish oil facilities, they would be apt to go off whether there was an invasion or not. As for postinvasion sabotage, if the oil work- ers cannot be trusted to work reliably-at higher postinvasion wages-they should be replaced. No labor force is more mobile: from Texas and from Europe, all the labor that could possibly be needed would come, at the right pay. The local oil workers know this, and they also know that if they are expelled from Saudi fields, their next available employer is going to be hundreds of miles to the north, at much lower Iraqi wages. Initially, squads will patrol the installations in constant crisscross patterns, covering every wellhead every few minutes, protecting repair squads from those who might try to stop them. Helicopter teams will circle overhead, ready to descend at the first hint of trouble. Given the vast stretches of open desert around the heavily guarded oil fields, infiltration will be utterly impossible during the day and perhaps no less so at night, since the clear desert sky allows almost perfect visibility with modern night- vision devices. Pipelines, highly vulnerable in theory, can be kept under total surveillance by helicopters and small ground-support teams. The PYRGHT Israeli experience has proven quite conclusively that guerrilla tactics are simply ineffectual in desert areas, there being no ground cover for concealment. The whole of the Negev and Sinai are secured by a few Bedouin guards and a handful of soldiers; once consolidated, the oil fields can be reliably secured by a handful of battalions, a fraction of the total force. `Many say we Even discounting the effect of sabotage, there need of do it, would still be a problem of short-term oil sup- ply. Aside from. the temporary cutoff in Saudi since we can production that must be expected between D + 7 afford to pay and D+60 (or at the very most D + 90) it is the economic virtually certain that radical Arab oil producers rice (Iraq, Libya, possibly Algeria) would cut o$ production in sympathy. The shortfall could range from 3.5 million barrels a day to 4.5 mil- lion. It is probable that nonradical Arab oil producers would partially deny oil to the U.S. and other consumer countries that did not dis- sociate themselves from its deed; this could mean an additional shortfall of up to 2.5 mil- lion barrels a day. It is possible, but unlikely, that at least some non-Arab oil exporters would also reduce output in sympathy with a fellow OPEC member. Nevertheless, the problem is manageable. Ninety-day stocks are being built up in all the industrialized countries, and oil shipped o D+8 will still be at sea for many destinations o D + 90. By then, if not sooner, the smoke wil have thoroughly cleared, and OPEC member will be faced with U.S. control of Saudi oil re serves, which, if worked to the full, could put a, of them out of business for fifteen years. At thi stage, reason is likely to prevail, and productio is likely to be restored. But if the risk seem high, something can be done to reduce it: Kuwait, Abu Dhabi, Dubai, and Qatar there i a production capacity of 6.6 million barrels day, a good deal of it now shut in for "conser vation" (read price-rigging). If Arab or eve non-Arab oil solidarity strikes are in the card battalion-sized detachments can be sent to seiz much of this capacity for the immediate pu pose of short-term supply (rather than reserve for price leverage). The seizure of Kuwaiti c pacity, however, would require a division an entail a serious strategic problem, of whic more below. Next, the minor tactics. One or perhaps tw Saudi brigades and some U.S.-made Hawk mi sile batteries will be in the target area. Pri to getting there, the airlifted elements woul have to cross 975 miles of unfriendly airspa in large, vulnerable transports. But oppositio would be thin. The twenty-four-jet Jordanian a force can be grounded, and the Israel-Dhahra air route would be totally out of range for E tian, Iraqi, or Syrian fighters-an imports t consideration, these being very large, if poor trained, air forces. In the October war, the I jof extor- p tion. But the moral, political, and s cial price is too high." Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 Approved For Release 1999/09/02 : CIA-RDP79-01194A00010042000f,?YRGHT raelis scored fifty dogfight kills for every one of their own shot down. But relative superior. ity is not enough: not a single transport must be exposed to risk. Hence ample fighter cover will be needed against the six fighter squadrons of the Saudis, and any chance arrival of Egyptians, Jordanians, Iraqis, or Syrians. This will require perhaps six squadrons of air-refueled Phantoms and tankers out of Israel, readily supported, if necessary, by more Phantoms, this time Israeli (flying outer patrol tracks, to avoid misidenti- fication and fratricide). Finally, for the Hawk missile batteries so shortsightedly supplied, there are different remedies, and prudence de- mands that all be used: active and passive elec- tronic countermeasures. (Those who designed the missiles are not unfamiliar with their weak points. ) On the ground, the tactics must stress mo- bility and avoidance. In the first stages, every available truck-and Cadillac-found on . the ground must be commandeered to give mobility. Otherwise troops that had crossed thousands of miles by air would be totally immobile on the ground. Speed is of the essence to secure the oil fields, as well as U.S. civilians for rapid evacua- tions. Lastly, avoidance: Saudi troops, if pru- dent, will avoid combat, and they must not be needlessly provoked. Very quickly it will become entirely obvious that the oil fields alone are to be occupied in one small corner of Saudi Ara- bia. Between them and most of the inhabited areas of the country, there are vast distances (except for Riyadh, only 400 miles away by road) and broad deserts, easily turned into buffer zones by air interdiction, here effective and totally unhampered since there are neither trees nor village targets: any military traffic would simply be stopped by air patrols. N OW FOR THE REAL PROBLEMS, the strategic. What options are open to the Russians? They could not hope to anticipate the first American move. Nor is it imaginable that the ruling Saudis would invite their presence: the Saudis know that with Americans some compromise might well he possible, but with Russians the Saudi leadership, fiercely Islamic and fiercely anti- Communist, would not last long. An invitation to the Russians would merely ensure the over- throw of the ruling family. And that is not a fig- ure of speech. It would mean defenestration and mutilation by the mob, as when the Hashemites of Iraq were overthrown. If the Russians landed forces in Iraq, Russian policy would thereafter be captive to Iraqi hyperactivism, or at least the landed troops would be. Still, the move would have a ready payoff. Even if their troops did nothing, the Russians would score a major political victory, since they could then claim to have deterred an imperialist attack on Iraq- an oil producer like Saudi Arabia, but one whose leaders (it could then be said) had been prudent enough to seek the friendship of the U.S.S.R and to sign a treaty of mutual defense. If still more reckless, the Russians could en- courage and support an Iraqi move south into Kuwait. This would deprive the West of Ku- wait's 2.8 million barrels of oil a day, a serious loss if only in the short term. It would. also make Iraq, Russia's chosen client, a more important client. But it would risk Iraqi-American armed clashes, entailing the further risk of direct U.S.- Soviet conflict. Direct Russian counterintervention need bare- ly be considered. The rules of nuclear parity are no mere paper rules to be changed at will. They reflect the harsh and looming danger of annihilation. Americans may open fire on Sau- dis, and Russians may open fire on Czechs with near-impunity; at a much higher level of risk, each side can attack the clients of the other. If Iraq were attacked, for example, the Russians would be forced to react because there is a pub- lic Russian commitment to Iraqi defense, both in policy and on paper-the Treaty of Friend- ship and Cooperation of April 1972. But for the Russians to counterintervene directly, by block- ing .American forces or opening fire on them, is another matter altogether. Neither side could afford to lose the local battle, and the potential loser would then have to transform it into a re- gional war; neither side can afford to lose a re- gional war, and the potential loser would have to use tactical nuclear weapons-beyond that one need not go. Some suggest that the Russians could use their naval forces for "interposition." This no- tion is fanciful. The U.S. Navy would send at least four aircraft carriers, twenty frigates and destroyers, and ten nuclear submarines into the area. Russian mining could only serve as a de- laying tactic. Russian warships could not physi- cally block the Strait of Hormuz at the entrance to the gulf. To prevent passage, they would have to shoot, and shooting at American warships would mean jumping on the escalator to de- struction. The essence of the Russian question is not technical but political. Before one considers the balance of superpower forces in place, one must consider the balance of interests between Amer- icans and Russians. Under conditions of nuclear parity, it is primarily "resolve" that settles the issue, and resolve is not a matter of machismo but a reflection of the true value to each party of the interests in dispute. The control of Saudi oil is a vital national and all-Western interest for the United States. By contrast, its denial would merely be a desirable bonus for the So- viet Union. Hence the risks that each side can accept, and must anticipate that the other side Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 CPYRGHT ill a ,r~4,v14 "iy j a gV402 : CIA nR r79w614 4AOOQ1i60 h R i K it the United States must seize some tracts of esert. To deny the oil, the Russians must kill merican troops. This, neither the collection of ired bureaucrats in the Kremlin (who agonized ver the low-risk Czech invasion for months) or even another Stalin could possibly do, for scalation to catastrophe could follow. As against his, there are the rewards of inaction, already ligh: even if the Russians do nothing at all, heir prestige and influence would immediately ncrease all over the Middle East, and beyond. Let the Russians have the influence, and let us have the oil. So far no mention of Iran. With a large army of 175,000 men, well-equipped and heavy in tanks even if poorly trained and worse led, with an air force that includes 100 Phantoms, with more coming, and with a navy already not in- significant, Iran could in theory do a great deal to oppose intervention. The risk must not be discounted, but there are offsetting factors. At a minor level, there is the fact that Iranian air- craft fly by the grace of American technicians serving on contract, most of whom could depart. on vacation just before D day. On a high polit- ical plane, there is another factor. Even though a sharp cut in oil prices would seriously dam- age the Shah's dreams of grandeur, Iran and the Shah would nevertheless remain dependent on the United States. With a common border to the north, with its client Iraq to the west and its semiclient Afghanistan to the east, the Soviet Union already embraces Iran far too closely for comfort. Reluctantly and privately, the Shah would most probably accept an American ac- tion he cannot prevent, for the alternative would be war with Iran's only protector. One way to cope with the Iranian problem is to combine it with the planning dilemma of Ku- wait. On the one hand, it might be wise to send a composite Marine/armor division (after wave two, D+3) into Kuwait to deter Iraqi interven- tion. But if the Iraqis descended across Kuwait toward the main zone of operations some 300 miles to the south, real fighting could take place, entailing risk of Russian involvement in support of its junior partner. Also, the acquisition of Kuwaiti oil capacity-even if damaged-would alleviate the short-term supply problem. On the other hand, if Kuwait is left unoccupied, a buffer zone, it will be easier to avoid clashes with Iraqis and reduce the risk of direct conflict with Russians. There is also a severe tactical prob- lem: while the Kuwaiti army of 10,200 men can be brushed aside, Kuwait does contain more than a million people in a small area. By con- trast, the population in the main zone of oper- ations, even if extended to Abu Dhabi, Dubai, and Qatar, amounts to less than 300,000, widely scattered. Why not then discreetly ask whether the Iranians might be willing to "protect" Kuwait -and, incidentally, appropriate their oil. This us- e t t uwa sure, if the Iranians move into sians may be tempted to invade northern Ira but this would be a high-risk operation fort the Russians, since Iran is already a protected am a of the other superpower, the U.S. Still, this is a danger that cannot be dismissed, and that would be reduced by Iranian tranquility befo e, during, and after the occupation. Afterw NEXT, THE PROBLEM OF management, that is, politics. Clearly, the operation would not be conducted to serve the interests of ARAM O, which is American-owned but has long been subservient to the Saudis. To maximize out ut and avoid commercial entanglement, we sho ld throw open the oil fields to any and every o er- ating company, American or not, large or small, so long as it is ready to come in quickly, rep ir, and lift the oil, fast. Each company would re- ceive the acreage it could begin to work im e- diately. Each would be compensated at cost plus a generous fee for every barrel lifted, every well dug, and every facility repaired. Assuming maximum inefficiency and a great deal of p tty graft, the oil would cost an average 30 cents per barrel-in other words, less than 3 percen of present prices. But the oil should not be sold at cost, for many reasons. First, all measures of energy sub- stitution being taken worldwide would be dis- couraged, and eventually stopped. Second to reach a compromise with the uninvaded em- bers of OPEC, some reasonable revenues Lust be left to them in bargaining for their early resumption of full output (the short-term up- ply problem again), in exchange for a gu ran- tee that Saudi oil will not be used to bring the price down to near nullity. Finally, oil ca not be sold at cost because there is a wider political purpose to be pursued. If oil raised at an average cost of 30 cents were sold, at say, $2 per barrel, each day of output would at first generate profits of $14 million. When output reached the OPEC- compromise level, profits could rise to as much as $30 million per day. Now these profits should not be appropriated by the world's rich- est country, whosa compensation, in secure sup- plies at low cost, would already be ample. In- stead, the profits should be handed out t the poor on conditions. An International Oil an Aid Organization would be created to lit th oil, allocate funds for investment, give som money for the Saudis et al. to pay for ess ntia imports, and then distribute the rest of the mon ey to those of its members whose annu 1 pe capita income is less than, say $500. In othe words, any poor country in the world would i mediately be entitled to a share in the oil pro its if it joined the IOAO, and so political y e dorsed the fait accompli. This would provide the poor with a kvastl CPYRGHT Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 reater flow of aid funds than all current aid rograms combined-in fact, almost five times s much, once full output is reached, even if all ligible recipients join. In view of what was aid earlier about the regimes of the Third orld, it can be safely assumed that the Indian overnment for one would prefer to let millions f its people starve rather than associate itself ith the IOAO. But already for Bangladesh atters are less certain: throughout 1974, this oorest of the poor nations, which is fervently uslim to boot, failed to extract more than $100 illion from all the Arab oil producers combined -truly a case of crumbs to the starving. The OAO, with $10 billion or so eventually avail- ble to it, would do much better than that- nd all for a symbolic association. The IOAO would obviously use similar tac- ics with the oil workers. The Saudi regime, not xactly the most progressive in the world, did of allow ARAMCO to pay its workers lavishly, est sheiks lose their low-paid servants. The OAO would not have to defer to the Saudi ver- ion of the housemaid problem; it could an- ounce a 50 percent wage increase. Will the world condemn America? Some of it will, and will mean it. Others, including some Europeans and unfortunate Japanese, will con- demn, cry, and partake of lower oil prices with a sigh of relief. Certainly the image of the Soviet Union will improve in contrast and the United States will lose "influence and prestige in the Third World." But what influence? What pres- tige? And what would the spectacle of American acquiescence in the political blackmail of the kings and dictators of Araby do to American prestige? The weak respect power more than do the strong, who know its limitations. The crucial factor, however, is domestic opin- ion. First, there is the why in the raison d'etat. The American people instinctively felt that in Indochina the national interest was not at stake and only the commitment itself made for fur- ther commitment. Not so here. All would under- stand, all those affected by inflation and unem- ployment, that is. Second, performance. All agree that had the U.S. done well militarily in Vietnam, public op- position would have been limited to the tiny minority of those who oppose war, or their own country, in all circumstances. The first group is certainly entitled to its elevated conceptions, but the vast majority of the people think otherwise. A neat and rapid operation is possible in Saudi Arabia owing to the terrain and the men, mostly absent. Moreover, the four required divisions are fit, trained, well-equipped, and battle-ready. On that score we need have no anxieties. Third, duration. Americans were wearied by a war that was not only unsuccessful but also far too long. This operation will not be over in a day. It will last for years, though sure- f41 the last dro of Saudi oil is ex- n t tribution office of the IOAO would allocate oil to consumers at the new low prices, but demand that they finance serious substitution efforts with some appropriate share of the vast savings on cheaper oil. Given rigid controls, diplomatic pressure, and their own caution, strong substitu- tion policies are sure to follow in Europe, Ja- pan, and wherever possible. And it is mud easier to build nuclear power stations, hot roc generators, solar arrays, and windmills when the balance of payments is no longer in deficit inflation has been curbed, and recession a mem ory-all of which $2 oil could ensure. Hence an occupation of ten years and prob ably much less would suffice. Once the dust o the invasion settled, once every evidence of per manent intent became apparent, the remai ing members of OPEC would see reason, an accept a binding commitment to maintain su plies at agreed prices in exchange for America withdrawal. From their point of view, the gre danger is that Saudi oil could be used to brin the price down not to $2 but to $1.50, the $1.40, then $1.30.. and so on. N A SOBER ASSESSMENT, mindful of all th I political costs and all the strategic risks, can be done. It must be done. For if we do n do it, Project Independence will in fact be Pro - ect Isolation, with a somewhat impoverishe America surrounded by a world turned into slum. Almost everywhere, this would be an a - thoritarian slum, the product of utter hopeles - ness among the poor and mass unemployment among the former rich, all of us being forced o finance the executive jets of the sheiks and t le: fighter bombers of the dictators. If we will not do it, future generations w 11 see through our protestations of moral restrai it and recognize craven passivity. Many of tho e who took the United States into the jungles f Vietnam to look for the national interest e now saying that we need not do it, since we can comply with political blackmail (by blackm 1 ing Israel in turn), and since we can afford :o pay the economic extortion. True, we can o both. But the price-moral, political, and social would be far too high. We would no longer e able to look each other in the face. Many w to saw prudence and reason in bombing an ally of the Soviet Union and even blockading its poi ts, are now saying that we cannot do it, for behind the Arabs stand the Russians, and the Russians would not let us. That, it has been argued is false. And since no one denies that the dep n- dence of the Western world on Arab oil is b- solute, if their analysis were correct, it wo ld mean that we are living at the mercy of he Arabs, that is to say, as Prof. Robert W.Tck er has pointed out, of the Russians. An if that is true, we no longer need a foreign po icy establishment, and we might as well disband he armed forces unless we double or triple t eir n O y no ~a~~~~~ p hWke" n O** : CIA-RDR79 41WAfi110010O420001-9 0 strength: there is no sense in paying $85 it- CPYRGHT CONTENTS FEBRUARY 17, 1 Page 33 How the Arabs Bluffed Us on Oil and How We Can Stop Them From Bluffing Us Again By Leonard Mosley The 1973 oil boycott against the West succeeded be- yond the Arab world's wildest expectations. That is no reason, Leonard Mosley argues, to think that an- other boycott is inevitable, or that it could extermi? ? nate the oil-consuming nations. If anything, the oil producers are aware of how much of their success was based on bluff, and it's high time the West real- ized that, too. Mr. Mosley, a distinguished British journalist and author of Power Pla ( hi Page 72 Movies: Of Heads and Heels By Judith'Crist Shampoo, co-authored by and starring Warren Beat is a devastating study of Hollywood dolce vita. Page 75 Theater: Social Notes From All Over By John Simon The only show at Lovers and Man on the Moon in the audience, and even that wasn't much. ty, as y a story of page 33 MISCELLANY oil and oil politics in the Middle East), shows why the widely predicted oil disaster is as unlikely as everybody hopes it is. Page 8 The City Politic: Running Against New York Page 37 By Aaron Latham The New Sexual Frankness: Out-of-town politicians are using New York Ci ty Good-by to Hearts and Flowers in their campaigns the way mom used the boog~ y- By Dorothy Seiberling man, and a local. adman is egging them on. The new candor in conducting and discussing one's Page 11 sex life has had heads wagging and eyes popping for The Bottom Line: The Clipping of the years now. Here's an account of one of the major milestones along the way to freedom, which we pub. Barber of Forest Hills lish as our own. contribution to the celebration of page 37 By Dan Dorfman St. Valentine's Day. concerns the sculptor Lynda Once upon a time, a small investor took a flier y' n ccr A It I.B.M. He need a miracle to make it good, and Benglis and the personal statements she's been mak- f got one. But, Dorfman reports, the "system" see ' ri in her art d i i e 's g an n pr nt. Ms. Benglis has en- to have taken it all away I - . raged a lot of art world denizens along the way,, but that's the way things often go these days. n n n Page 66 The Artful Lodger: Calder Prone Page 40 By Joan Kron The New Macho Why a hammock designed by Alexander Calder? Wh By John Mariani - A y 66: .: not? ask the Nicaraguan weavers who make them It used to be Bogart; now it's Woody Allen. Macho, . too, has come a long way, baby! o ^^ Page 70 Behavior: Funny Valentine Page 48 page 62 By Linda Wolfe The Bradens' Washington Salon: For Valentine's Day Doubleday has published wh ~t The Politics of Their Parties may be the ultimate do-it-yourself book on sex . By Kandy Stroud Page 76 Washington's current host and hostess with the mostest are the syndicated columnist Tom Braden Wine: Bordeaux Without Tears and his wife, Joan. The By Alexis Bespaloy great and the near great The current confusion in the Bordeaux market h to enjoy the action at the Bradens' and the s , company y of of Bradens seem to enjoy forced prices down, to the delighted consumer's ben the the great and the ngreat. So the he near e , fit. Mr. Bespaloff describes some Bordeaux bargain everybody's getting something . , right? But it's a long trip to the top of the greasy pole. Page 78 The Underground Gourmet: The Rio Thing THE LIVELY ARTS page 66 By Milton Glaser and Jerome Snyder A new Brazilian restaurant has more than coffee. Page 60 Jazz: The Joy of Helen Page 5: Letters; Page 15: In and Around Town By Gary Giddins Page 59: New York Intelligencer The great old jazz singer, Helen Humes, whose first Page 62: Best Bets, By Ellen Stock records go back to 1927, is still lacing into her songs 3r Page 81: Sales & Bargains, By Dale Hoffman in her current engagement at the Cooker y. Page 82: New York Classified Page 64 Page 87: New York Real Estate Classified Music: Don Pablo's Foundation Page 89: Competition, By Mary Ann Madden By Alan Rich Page 92: London Sunday Times Crossword The musical life that Pablo Casals founded in Puerto Rico may be that island's most durable monument. page 70 Cover: A Funny Kind of Valentine. --- -?-- --- ~- ???- .~ au.m~ prumm[ed: me nraut Longer, Best Bets, Best Bits, The Bottom Lim I The Capitol Letter, The City Politic, Cityscape, The Global Village, In and Around Town, New York Intelligences, The Passionate Shopper, and lb Urban Strategist. New York is published weekly (except for-a combin .__. . -- . . d I h e ssue t e two ?r ?.? +..v..? nn rigors reserved. Reproduction without permission is strictly prohibited. Milton Glaser, Chairman; Clay S. Felker, President; Ruth A. Bower, Executive Vice-President; John C. Thomas Jr., Vice-President, Marketing; Kenneth Fadner, Vice-President, Finance; Thomas B. Morgan, Vice-President; Sheldon Zalaznick, Vice-President. Second-class postage paid at Ne York. N.Y., and at additional mailing offices. Editorial and Business offices: 212 YU 6-4600. Postmaster: send form 3579 to New York, Box 2979, Boulde , Colorado 80302. Subscription rates in Continental U.S. nnly? veg. cu t e cep ars ror ouueenpdon information, write Joseph Oliver, New York Magazine, Subscription Department, Box 2979, Boulder, Colorado 80302. Approved CPYRGHT Approved For Release 1999/09/02: CIA-RDP79-01194A000100420001-%PYRGHT Now the Arabs Bluffed Us on Oil And Now We Can Stop Them From Bluffing Us Again By Leonard Mosley " .. What astounded embargo but the we If a fifth Israeli-Arab war break out this year in the Middle East, will the Arab nations start another oil boy- cott of the Western world-and really ruin us this time? Most governments in Europe and quite a few Arabists in the State Department think they will. As for the lobbyists of the major oil com- panies, they prophesy downfall and deg- radation for the West if the U.S. gov- ernment fails to bear down hard and fast on the Israelis and force them to accept the Arab line. But since the Israelis think that it is not even a baited hook that they are being asked to swallow, it looks as if they are going to refuse to be pressured. And what then? War seems inevitable -plus an oil boycott of the West which, the Arabs threaten, will be total this time and bring us all whimpering to our knees. "We would hate to impose another embargo," says Prince Fahd, Saudi Arabia's minister of the interior and brother of King Faisal. "But in a war, when you feel you are in danger of dying, you may do anything. If war breaks out again, it will be not only -he Arabs and Israelis who are dam- aged, but the world as a whole." vviaybe. But before the Western world starts throwing in the towel before the first blow has landed, it might be wise to look at some of the facts about the Arab oil situation that don't usually yet talked about where lobbyists gather :J propagandize governments. First, let us get it clear about what happened sixteen months ago when the Arabs embargoed oil to the West in the aftermath of the Yom Kippur war. I am among those who believe that the Leonard Mosley, the British journalist, is the author of "Power Play," a history of oil and oil politics in the Middle East. the Arabs was not the strength of the oil kne s of the oil-consuming. nations ..." Weste world at that time fell for the bigges and most expensive bluff in his- tory-and that no one was more sur- prised when it succeeded than the Arabs who made the play. The major oil companies had (and still have) their own selfish reasons for keeping quiet about it, but what star- tled t oil people and astounded the Arabs vas not the strength of the oil embar o as an instrument of pressure and pe suasion, but the weakness of the oil-con uming nations the moment it was brandished over their heads. Me bers of the Organization of Arab etroleum Exporting Countries (O.A. E.C.) announced that they were cutting down their oil production as a punish lent to the West for its overt or cow rt support of, or neutral attitude toward, Israel. But at the same time, non-A b countries, particularly Iran, steppe up their output to compensate. As a t suit, there was never more than a 10 pr cent diminution in world oil output during the embargo. Nev rtheless, panic buttons were pushed in Europe and Japan. Who first started the panic is one of those ques- tions that can't be answered with cer- tainty until all the documentation is availa e, and some of it is in the hands f the major oil companies, all of wh m keep shredding machines on hand for the disposal of evidence. The majors have virtuously hinted that during the Yom Kippur war, they actual) raced to the rescue of the Europe ns, particularly the Netherlands. The Ditch (like the Americans) were put un er a total embargo by the Arabs during the crisis. The oil companies say the circumvented the full effect of this y rearranging their world delivery program and getting fuel to Holland anyway. But at the same time, whether by accident or design, they also fouled up the distribution system, and chaos resulted. The oil companies found them- selves in the happy position of having governments pleading with them to get needed supplies, and the oil companies didn't always help those governments out. So the governments panicked. Yet the Arabs were using a ploy that was pure bluff and blackmail. Their customers, as it turned out, possessed quite sufficient stocks to tide them over for the critical winter of the embargo, and had the Western governments taken a stand and refused to accept particu- larized boycotts (like the ones against the United States and Holland) and thus demonstrated their unity, the less arrogantly self-confident Arabs now ad- mit that their tactics would have failed. They don't say it publicly, of course, but in talks with their friends and with favored correspondents at O.A.P.E.C. sessions, one or two oil ministers have confessed that they "never believed the oil-consuming countries would cave in so easily." They expected resistance that would have produced a conference and a compromise. But instead, the bluff succeeded- beyond the Arabs' wildest imaginings. You can hardly blame them for con- vincing themselves that the West was no more than a bunch of paper tigers who would henceforth come crawling every time the Arabs rolled their eyeballs. And so it worked out. The oil-pro- ducing countries met and jacked up the price of oil beyond all reason, and no government dared to complain. Europe and Japan promised to be nice to the Arabs and nasty to the Israelis in the future. Yasir Arafat, head of the Pales- tine Liberation Organization, was wel- comed at the United Nations, justified, and embraced. Henry Kissinger and Approved For Release 1999/09/02 : CIA-RDP79-01194A000100420001-9 CPYRGHT ... The Arabs won't close their wells except in the event o~ an invasion. The consequences would be too great-for them . . some of his friends may have thought that this was going a bit too far, but for pro-Arabist generals in the Penta- gon and major oil-company lobbies, Arafat's U.N. "success" was a catalyst. A large number of brass hats, almost certainly including the chairman of the joint chiefs, had thought for some time that America had been loading the wrong cannons in the Middle East, and the oil companies had always, for purely selfish reasons, been sure of it. This seemed the moment for the Pentagon to start prodding the government to make changes. Psychologically, it couldn't have been better for them. State was reeling over the way the Arab summit had gone in Morocco-when the Arab leaders, despite Kissinger's pleas for moderation,.threw their turbans over the mosque and put their whole political weight and money behind the Palestini- ans. This, combined with Arafat's tri- umph, made it easy to convince nervous State Department officials that maybe the time was coming to get into step with the rest of the world, and if neces- sary perform an Arabesque in order to do so. State Department officials, while insisting on their friendly support for Israel, let it be known that, as Time magazine put it, "marked progress to- ward peace on terms acceptable to the Arabs is absolutely essential...." Essential to whom? And what will happen if the Arabs don't get the com- plete Israeli capitulation which they are now demanding? "In that case," says a Saudi Arabian spokesman, "the West will have to face another oil embargo. But this o e will be worse, because it will be total embargo this time." Now before you cringe back in hor- ror before this direful threat, and pic- tures flash before your eyes of a United States run down to a standstill through lack of oil, an inert urope moiling in its own tears, Japan flat on its face (what's left of it), et me rinse out of your minds this brainwash you've been getting about a tot I Arab oil boycott. It isn't going to happen. No unless the U.S. government is foolish enough to carry out Henry Kissinger' threat and try to occupy the Persian Gulf oil fields. The moment marines try to land in the Gulf and paratroops drop around the oil fields of Arabia, lot of those fields are certainly going to be blown up. It would take quit a few months to get them working again, in the face of a hostile population (which is, however, in most places qu to thin. on the ground). But the Arabs, no matter w at their threats, are not going to close down their wells except in the event of an in- vasion. They know that the conse- quences would be too great not for us, but for them. Not long after the end of. t~e Yom Kippur war, the management of Aramco (the Arabian American Oil Company) in Dhahran, Saudi Arabia, received a message from Ahmed Zaki Yamani, the Saudi oil minister. He asked them to prepare at one a fea- sibility study of the cost an conse- quences of a total shutdown of the Saudi oil fields. He got his repot short- ly afterward and took it around to King Faisal in his modest palace on the Red Sea at Jiddah. According to the accounts which were circulated later in Vienna, where the oil-exporting countries have their official headquarters, the dialogue went along these lines: "Summarize it for me," said the king, whose internal ailments do nc t permit him to sit around too long. "Could we shut down all our fields if necessary?" "In theory, yes, your Maje ty," re- plied Yamani, and then went on smoothly, "in practice, there ould be certain difficulties." For one thing, he explained, it would be monstrously expensive. If Arabia's oil wells are not to be permanently damaged and the whole natu a of the fields affected by a shutdowr, special precautions would have to be taken about care and maintenance. Not only would all oil revenues be lost during t s u n, the per also cost ten times as much to keep the fields closed as it does to keep the oil flowing. And even so, some of the fields might be fundamentally damaged. King Faisal was prepared to face that prospect, so long as the other Arab oil- producing countries went along with the total closure. "By 1975 we will have money enough to pay all expenses, stay prosperous, and wait until the Western democracies come begging for oil. We will be like the camel and live on our fat." "Yes, your Majesty," said Yamani, "but perhaps it might not be wise to wait too long." Otherwise, certain "eventualities" might face the Arabian Gulf countries, he went on. "Do I need to remind your Majesty," Yamani explained, "that, quite apart from the revenue side, states like Kuwait and ourselves cannot survive without the oil-or rather, the gas produced in association with oil-from which is generated the power to pro- CPYRGHT 1mgtMYX - y - 11 Mm - He went on to point out, as Aramco's anyone who had seen it), the Gulf oil report made clear, that without the sur- states have taken some steps to remedy plus gas which the company channels the situation. Kuwait nowadays not only from its fields into the Saudi cities takes gas directly from the oil fields along the Gulf, the whole of the East- and imposes heavy penalties on com- ern Province would grind to a much panies which are caught flaring off any more critical halt than any facing tl~e surplus, but is also building up a stock Western world. Not only would there of L.N.G. (liquid natural gas) which be no power to run factories, lighting is easier to store. But even so it is un- systems, oil-field-maintenance plants, likely that they will be able to squirrel and domestic supplies, but the desalina- away enough to keep them going over tion plants would have to close down a shutdown of more than a week or and Dammam, Dhahran, Al Khubar, two. Yamani has signed a contract with Oqair, and parts of Riyadh, the capital, the Japanese, who now send back fresh would be out of water. water in the empty tankers returning Yamani did not have to point out to from Yokohama. But the Saudis can the king that Kuwait would be in even store only enough for a limited supply worse straits, for literally every lamp and would have to abandon most of is lit, every wheel turned, every air their irrigation schemes-perhaps even conditioner powered, and every drop care and maintenance of the oil fields. of water produced by gas channeled So forget about a total embargo. It's from her oil fields. another bluff, and this one will never Since that report was written (the happen. King Faisal knows that the State Department should ask for a copy, chaos produced by a loss of electric by the way; when I was in Wash- power and water would give the mili- tants inside and around his country just the opportunity they are waiting for to move in and unseat him. His vast wealth and his arrogant domination of the West have helped him paper over the cracks in his country. But the cracks are there, and there are dissi- dents in the woodwork. Faisal allows no votes in his kingdom, never con- sults the people, and swiftly sup- presses the slightest hint of opposition. But the opposition is there. It seethes beneath the surface of life in Jiddah, Riyadh, and the Gulf towns, where young men fret under a rigidly theo- cratic regime that is authoritarian, compartmentalized, and privileged. And not far away is an even more dangerous threat to the stability of the regime. Just across the Saudi Arabian frontier in the Dhofar area of south- ern Oman, P.F.L.O.A.G. is knocking CPYRGHT ore you cringe, rinse out of your minds this brain ash about a total Arab oil boycott. It isn't going to happen ... at the door of all the sheikdoms of the Persian Gulf, but loudest on Faisal's door. P.F.L.O.A.G. stands for the Pop- ular Front for the Liberation of the Oc- cupied Arabian Gulf, and the "occu- piers" these Arab militants are fighting are not Europeans, Japanese, or Amer- ican oilmen but the kings, sheiks, and emirs who rule in the Gulf. They are fighting for a Maoist-Communist Gulf and they are backed by Russian arma- ments and trained by veteran Chinese guerrillas. For the moment they are con- tained, but they are by no means beaten. It would be tempting fate, and P.F.L.O.A.G., if Faisal let the lights go out and the faucets run dry. There is, of course, nothing to stop the Arabian oil producers from once more lowering rather than stopping oil production in order to force the West- ern world to toe the Arab line. But will it work this time? It needn't do so, and there are ways and means of mak- ing sure that it doesn't. When oil was desperately short dur- ing World War II, the United States kept its plants operating and its multi- million civilian and military wheels rolling by a system of energy control never equaled before or since. In December, 1942, at one of the grim- mest moments of the war, an authority was organized in Washington called the Petroleum Administration for War (P.A.W.), and together with another organization called the Petroleum In- dustry War Council (P.I.W.C.) it con- trolled not only all domestic oil sup- plies inside the United States but also all military supplies. At the same time, it worked in the closest liaison with its allies abroad. "it worked so well and made such good and economic use of what oil supplies we had available," said How- ard Page, a former vice-president of Standard Oil of New Jersey, "that there were plenty of far-seeing characters in the industry who wanted to keep it going once the war was over." P.A.W. and P.I.W.C. were manned by energy experts from both government and the petroleum industry, and they worked together with great success to increase the mileage the West got out of every gallon of gas that was going. Some energy experts believe that if that wartime authority were revived today it would cut out so much waste, find so many new sources of energy, and provide for so many possible con- tingencies that the United States, Japan, and Western Europe could not only face up to any future Arab cutback in oil production, but could bring pres- sure themselves on the Gulf producers. Industry experts estimate that a prop- erly coordinated body with full co- operation from the major oil com- panies, plus Britain, Germany, and Holland, could cut the West's consump- tion within eighteen months by 6.5 mil- lion barrels a day, which would exert enough pressure to break the united front of O.A.P.E.C. and force the re- duction in barrel prices that the world needs if it is to get back to normal. It couldn't be a better time for bring- ing P.A.W. back to life. Thanks to a serious world-wide recession caused mainly by high oil prices, demand for crude has already diminished so much that tank farms along the Gulf are brimming with unsold oil, tanker own- ers are going bankrupt because they can't charter out their ships, and oil countries are already contemplating cutbacks without waiting for an Israeli war and an embargo. A year from now, the O.A.P.E.C. countries will have garnered so much money into their accounts, even though barrel sales are down, and that money could be earning so much revenue overseas, that there won't be a hope in hell of bringing prices down. The oil countries will be rich enough, all of them, to say: "Take it or leave it." But for the moment only some of them are yet rich enough to be invul- nerable. Saudi Arabia is all right, and so are Abu Dhabi and Kuwait, because they have only about .9 million people between them and they control a large slice of all the money in the world. But Iran needs all the cash it can lay its hands on. Even more so do Iraq, Al- geria, Nigeria, and Indonesia. They all have large populations and develop- ment programs that are swallowing up every dime they collect. If a combined government-petroleum industry peacetime version of P.A.W. were to get down to work immediately and organize the Western world's en- ergy resources and the way to use them without waste, happy days would be here again. Because several of the oil countries, confronted by a serious drop in oil purchases, would have to go out and actually sell their oil. Once we are back to a buyers' market, the crisis would be over. For this time, anyway. There's a snag, though. It has to be admitted that government control of energy in World War II brought gas rationing with it and a widespread black market in fuel, and who the hell wants to see that again? Yes, but during World War Ii the United States and its allies were fight- ing a physical war during which they had not only to keep facto ies and wheels turning at home, but also to find fuel for thousands of plane , tanks, trucks, and other transport=much of it overseas, which meant that ships had to` be used to take it there and protect it on the way. Experts estimate that in peacetime this shouldn't be necessary. I don't believe that a tight, a tciently run scheme would need rationing to keep it going, though if that di become necessary, I still think it would be pref- erable'to putting the United St tes and the Western world in perman nt hock to the oil producers and under c ntinual threat of boycott and blackma 1. To my mind, a worse snag is the position of the oil companies. How are you going to persuade the it corn- panies, especially the major companies, to join a reconstituted P.A.W.. During World War II you could appeal to the patriotism of Standard Oil of New Jersey, Mobil, Texaco, and Standard Oil of California, and if that didn't work you could tell 'em. But times have changed arid com- panies like Aramco have divided loyal- ties, and you can't tell 'em because other influences closer to their center of operations are telling 'em louder. On whose side would the major U.S. oil interests overseas be in the vent of America's being involved in a Middle East war? Wartime aside, the majors have been accustomed to maki g their own way, and their own policie , in the Middle East-except when Arab po- tentates give them orders. And the U.S. government remains the only top nation in the world that doesn't have an interest in its own it com- panies. Even so, it's still wit in the province of Congress and the p esident to persuade the majors to fol ow na- tional guidance inside the Unite States, and to pressure its top direct rs into joining some sort of revived P.A.W. that would coordinate and con rot the nation's energy resources. The sooner they do so, the better. The time has never been riper for a unified Western showdown with the Arabs. With the West's oil resources under its control and immediate tactics and future strategy laid out with its allies-the braver ones, anyway- America has a more than even chance of calling the next Arab blu . And even of ensuring that there is a just settlement in the Middle East without resort to another Israeli-Arab ar. s Approved For Release 1999/09/02 - CIA-RDP79-01194A000100420001-9 Approved For Release 1999/09/02 : CIA-RDP79-01 194A000100420001-9 T Swiss Review of World Affairs flcuc hurdjcr 3eituug February 1975 Vol. XXIV No.11 Editor in Chief, Neue Zurcher Zeitung and Swiss Review of World Affairs: Fred Luchsinger Executive Editor, Swiss Review of World Affairs: Myron B. Gubitz Editorial Office: 11 Falkenstrasse, 8001 Zurich Subscriptions and Advertising: P.O. Box 660, 8021 Zurich, Switzerland No Change Through Trade Editorial by Fred Luchsinger 2 The Price of Oil: A Political Time Bomb Willy Linder 4 Senkaku or Tiao Yu Tai? Christian Muller . . . . . 7 Dialogue in Southern Africa Peter Hess 10 Diamonds from the Sea Jean-Pierre Blancpain . . . . . 12 Australia's New Gold Seekers Mindszenty: A Losing Battle Alfred Cattani 16 18 Institut Lichtenberg: Education Family-Style R. Bertschinger 21 Subscription Agencies and Annual Rates: U red Stares: 514.50. Swiss Credit Bank, 100 Wall Street, New York, N. Y. 10005. Australia: H. Subak, 218 Tucker Road, Bentleigh, Victoria 3204. .lc