4. The Rising Power of OPEC

4.
The Rising Power of OPEC

U.S. Embassy, Saudi Arabia, Saudi Ban on Oil Shipments to the United States (October 23, 1973)

In a show of pan-Arabian unity and nationalism, military forces from Egypt and Syria invaded Israel on October 6, 1973. The United States quickly offered extensive financial aid to Israel. As punishment for U.S. support of Israel, the Organization of the Petroleum Exporting Countries (OPEC) banned its members from exporting oil to the United States and raised the price of oil for the U.S. allies in western Europe. Overnight, the price of a barrel rose from $3 to $5.11, and by January 1974, it had risen to $11.65, resulting in widespread fuel shortages across the West. Infused with Arab nationalism, the actions of OPEC shocked citizens in Europe and the United States, who were not accustomed to being at the mercy of nations they once dominated. In this confidential cable, which was only declassified in September 2003, an unidentified writer from the U.S. Embassy in Saudi Arabia offers an inside view of the Saudis’ strategy in their decision to participate in the OPEC ban on exporting oil to the United States.

From U.S. Embassy in Saudi Arabia, Cable 4663 to U.S. State Department, “Saudi Ban on Oil Shipments to U.S.,” October 23, 1973 (Washington, D.C.: National Security Archive).

23 OCTOBER 1973

FROM: AMERICAN EMBASSY IN SAUDI ARABIA

TO: THE SECRETARY OF STATE, WASHINGTON D.C.

SUBJECT: SAUDI BAN ON OIL SHIPMENTS TO U.S.

SUMMARY: SAUDI DECISION TO CUT OFF OIL SHIPMENTS TO U.S. ATTRIBUTABLE TO KING’S OWN DECISION: KING ANGRY AT ANNOUNCEMENT OF LARGE U.S. MILITARY GRANT PROGRAMS TO ISRAEL AND PROBABLY FELT THAT ANY LESSER RESPONSE WOULD LEAVE SAUDI ARABIA UNCOMFORTABLY ISOLATED IN ARAB WORLD. U.S. MISSION CONTACTS WITH HIGH-LEVEL SAG [the Government of Saudi Arabia] OFFICIALS, HOWEVER, INDICATE SAG WISHES TO MINIMIZE DAMAGE THAT PRESENT CRISIS MAY DO TO U.S.-SAG RELATIONS. JOINT U.S.-USSR RESOLUTION IN SECURITY COUNCIL, POTENTIALLY A RADICALLY POSITIVE STEP, BUT IF IT DOES NOT SUCCEED, SAG MAY FEEL COMPELLED TO INCREASE PRESSURE ON U.S. INTERESTS IN MILITARY, COMMERCIAL, ENERGY AND FINANCIAL AREAS. EMBASSY IS STRESSING WITH SAG NEED THAT CHANNELS OF COMMUNICATION REMAIN OPEN, AND THAT EACH SIDE GIVE [each] OTHER MAXIMUM ADVANCE NOTICE OF ANY MEASURES IT IS CONTEMPLATING. END SUMMARY.

  1. THERE IS LITTLE DOUBT THAT SAG DECISION TO BAN PETROLEUM EXPORTS TO U.S. STEMMED FROM KING FAISAL HIMSELF. DISCUSSION BETWEEN HIGH-RANKING SAG OFFICIALS AND AMBASSADOR IN 24 HOURS PREVIOUS HAD NOT INDICATED SAG ON VERGE OF TAKING SUCH BIG STEP.
  2. SOURCES IN ROYAL DIWAN OCT 21 HAVE CONFIRMED TO EMBASSY THAT DECISION [was] TAKEN BY KING, AND WAS PRINCIPALLY MOTIVATED BY U.S. PROPOSAL TO PROVIDE ISRAEL WITH 2.2 MILLION DOLLARS OF GRANT [money for] MILITARY AID. WAS TOLD BY CHIEF OF ROYAL DIWAN, AHMAD ABDUL WAHAB (A WELL-ADJUSTED PRO-AMERICAN FIGURE) THAT KING WAS AS FURIOUS AS HE HAD EVER SEEN HIM AND THAT HE TOOK PARTICULAR UMBRAGE AT WHAT HE CONSIDERED TO BE DIFFERENCE BETWEEN REASSURING TONE OF VARIOUS COMMUNICATIONS HE HAD RECEIVED FROM USG [the United States Government] AND U.S. ANNOUNCEMENT OF “INCREDIBLE” AMOUNT OF AID TO GOI [the Government of Israel]. KING’S SUBSEQUENT CALL FOR JIHAD CAN ALSO BE ASCRIBED TO KING’S DISPLEASURE. KING’S MOOD EMPHATICALLY REFLECTED ALSO BY ABLE, NATIONALIST MINISTER HISHAM NAZER, HEAD OF CENTRAL PLANNING ORGANIZATION.
  3. WE SHOULD NOT, HOWEVER, OVERSTRESS THE CAUSATIVE EFFECT OF PURE EMOTION IN KING’S DECISION TO CUT BACK OIL SHIPMENTS TO U.S. A NUMBER OF ARAB COUNTRIES HAD ALREADY TAKEN STEP OF BANNING SUCH SHIPMENTS, AND [Sheikh Zaki] YAMANI [the official in charge of Saudi oil policy in 1973] HAD INFORMED AMBASSADOR THAT OTHERS WOULD PROBABLY FOLLOW. AS IMPACT OF U.S. AID DECISION MADE ITSELF FELT IN ARAB WORLD, KING MAY HAVE FELT THAT SAG WOULD OCCUPY EXPOSED SALIENT IF IT—ALONE AMONG ARAB OIL PRODUCERS—CONTINUED TO PROVIDE OIL TO U.S.
  4. EMBASSY CONTACTS ELSEWHERE IN SAG, MOREOVER, TEND TO CONFIRM OUR ASSESSMENT THAT SAG WISHES [to] MINIMIZE DAMAGE THAT PRESENT CRISIS COULD CAUSE TO U.S.-SAUDI RELATIONS. . . . DURING MEETING OCT 21 BETWEEN CHIEF OF U.S. MILITARY TRAINING MISSION (USMTM), GENERAL HILL, DEPUTY MUDA, AND KING’S BROTHER PRINCE TURKI, PRINCE STATED “WE HAVE HAD TO TAKE CERTAIN POLITICAL DECISIONS DURING THE WAR JUST AS YOU HAVE, BUT THAT MUST BE KEPT ENTIRELY SEPARATE FROM RELATIONSHIPS BETWEEN MUDA AND USMTM.” PRINCE IN SOMBER MOOD, BUT WAS AT ALL TIMES COURTEOUS AND FRIENDLY TO GENERAL HILL AND HIS STAFF. . . .
  5. SAG ACTION COULD ALSO DELIVER A SETBACK TO IMPORTANT U.S. COMMERCIAL AND MILITARY SALES: SAG HAS GROWN TO BE ONE OF LARGEST MARKETS FOR AMERICAN PRODUCTS . . . WITH SALES RUNNING AT MORE THAN A THIRD OF A BILLION DOLLARS THIS YEAR. OUR MILITARY SALES PROGRAMS MOREOVER HAVE . . . IN THE PAST THREE YEARS EXCEEDED 500 MILLION DOLLARS, AND THERE ARE GOOD PROSPECTS FOR CASH SALES OF A SIMILAR ORDER TO BE CONCLUDED WITHIN THE NEXT TWO YEARS. WE SHOULD REMEMBER THAT EUROPE, PARTICULARLY FRENCH AND BRITISH SOURCES, ARE MORE THAN PREPARED TO PICK UP THE FALLOUT FROM THE AMERICAN DILEMMA IN THE MIDDLE EAST CONFLICT.
  6. IN THE MEANTIME, AMBASSADOR HAS PASSED WORD TO CHIEF OF ROYAL DIWAN THAT IT IS ESSENTIAL FOR CHANNELS OF COMMUNICATION BETWEEN HIM AND SAG TO REMAIN OPEN AT ALL TIMES. . . .
  7. FINALLY, WITH REGARD TO SAUDI ACTIONS AGAINST U.S. OIL AND OTHER INTERESTS, WE SHOULD AVOID ACRIMONIOUS COMMENTS, SINCE THESE TEND TO KEEP AN UNHELPFUL DIALOGUE GOING.

DISCUSSION QUESTIONS

  1. What do you think the writer’s main concern was in sending this cable to the U.S. State Department?

    Question

    31k+9iOkJW40MUW/c0HqHep+6PKpRdBexayFigzlSZY6uagisjrHJ4hJBH34JDhTZA3Z3YJP+o7olUZZb4cVc13h/fltUSfpPIfm4+Iv0hvqEgsDqvMoW+mcflmoUFKYe5E8ADSd6KQX6LZPA/Suddhnb3MIjSp9efT9py59zibwjxVkCWAPRrQmiEH4SEwu
    What do you think the writer’s main concern was in sending this cable to the U.S. State Department?
  2. How would you characterize the writer’s attitude toward Saudi Arabian government officials?

    Question

    J4sn8lDePqpqLsyG2lp6KPSUuERk+uvtXfdEssxYYAyEb7P87eFmb34IR59twXSihE34FYBiiVxeYQ5pK8vuf4BFXNIswZ2GpI6p9AhRztHszQgFrXXeNX2RpZWsgHt9PwIIR+G824nON7RVCgEMFY1TlxMGnhF587siafQRm0m6Y3Q8JhzTIA==
    How would you characterize the writer’s attitude toward Saudi Arabian government officials?
  3. How were European countries directly affected by U.S. policies toward Saudi Arabia and other OPEC countries? Where do you see direct references to this in the telegram?

    Question

    k0kduo4nIp8whBghhnzTH2WJKyia7Ta4SJMtK71TIcNxYpQlYohpmgNz8/uPXwlpUyKW5UBSHft3YybhvZ9D4Y3V+GQnsmEAv+A34ZgeXREWlBQgt8b7h1RtQgNGUwTV/BiWkb+4L1B0YwzEckmSKtT+JbQtJx/XoCm3r34VutLtAyivrydWowskO7TUXDky5XB0ZKelb29LHVHbvHmERJ4r1cEpeRzlKs+bn4BM20AilrHkrg9h0gdyV39hDlDsZGANWCTDr19+H3o1m2UcYU6gcQI=
    How were European countries directly affected by U.S. policies toward Saudi Arabia and other OPEC countries? Where do you see direct references to this in the telegram?