The price of oil

This is a paper I wrote for a history class I took at Augsburg College “The Modern Middle East”. The italicized text is the question to be answered, or topic. It’s an excellent class led by an exceptionally knowledgeable professor, Dr. Maheen Zaman (

To what extent did the Cold War in the Middle East involve the superpowers imposing their will on regional powers, and to what extent did it involve regional powers manipulating the superpowers? Discuss with special reference to different phases of the Arab-Israeli conflict.

According to Khalidi, both the US and USSR had strategic interests in the Middle East for its location in proximity to the USSR, its shipping lanes, and its vital natural resources such as oil and gas. Also, both viewed the other gaining access to these resources as a direct threat to regional economic stability and would pave the way to global military dominance. To the states and countries of the Middle East, the US and USSR were sources of vast wealth and technology, highly advanced weaponry, a means for bringing about a new Arab Nationalism through multilateral control of oil output and pricing, and a means to wage war with Israel.

The extent to which the superpowers used and abused the regional powers of the Middle East to meet their foreign policy objectives was vast and had long lasting negative ramifications for the people of the Middle East. The extent that the regional powers, such as the oil producing states (Saudi Arabia, Iraq and Iran) and the militaristic Syria and Egypt, manipulated the superpowers ultimately got them back to where they started after WWII, except they had more money and weapons which they could use against each other.

According to Gelvin, the US had six objectives of their Middle Eastern policy. The first was containment of the Soviet Union and communist influence. The second was continued access to Middle Eastern oil for domestic use and to aid in the rebuilding of the European and Japanese economies after WWII had decimated them. The third objective was to maintain peace amongst the region and a balance of power, as upsetting this balance would create instability that may result in greater US involvement in regional conflicts, and may effectively cut America out of the picture. The fourth objective was to support economic development, contributing foreign assistance and advocating for support from the World Bank, which at first was meant to separate regional powers from their colonial relationships by nationalizing public works, but later switched to privatizing institutions so American companies could invest in them. (Gelvin, pg 270-272)

The fifth objective was the preservation of Israel. Unlike it’s Arab neighbors, Israel didn’t have access to oil and it’s massive return on investment, and so the US was indirectly responsible for maintaining pace in the arms race Israel had with Egypt and Syria – backed by the advanced weaponry granted to them by the Soviet Union. Finally, the sixth was maintaining the shipping lanes between Europe and Asia, which were so precious to the efforts of rebuilding their fragile economies. (Gelvin, pg 273)

The foreign policy objectives of the Soviet Union were mainly preventing the US from obtaining new territorial power within their sphere of influence. Tactically, the Soviet Union had to worry about the US placing ICBM (intercontinental ballistic missiles) just outside their southern borders in countries like Turkey and Iran. (Kahlidi, pg.109) But they also had to maintain their position globally, for an America with unlimited access to Middle Eastern territories and oil – right in their backyard, would not only worry the people of the USSR, it would make the Soviets appear weak in a time when appearances were everything.

In the “classic” phase of the Arab-Israeli conflict the regional powers, Egypt, Syria and Israel, incessantly requested arms from the US and USSR in an ongoing arms race, that at times was a “hot war” (War of Attrition in 1967) within the Cold War between the superpowers. The Soviets were reluctant to continue giving arms to Egypt and Syria after they had been destroyed in a surprise attack by Israel in 1967 – but they also didn’t want the world to see their military equipment as being inferior and capable of being destroyed so easily by Western military technology, so they continued supplying arms to essentially save face. In Washington, there was concern this transfer of military power from the Soviets and America to Egypt, Syria and Israel was in the words of President Nixon “like the Balkans before WWI” because the superpowers may be eventually forced to directly intervene and square off against one another. (Khalidi, pg. 121) Even when both superpowers were weary of sending arms to their respective allies, they were practically forced to continue or risk the other side gaining a political and territorial foothold.

The Arab-Israeli War of 1967 ended with a “win” for the West by proxy, and a fortuitous one at that, as tensions in Communist Vietnam were mounting. This only served to strengthen the resolve of both sides, and heighten the importance of the conflict to the superpowers. America wasn’t looking to defend Israel solely for domestic political reasons, or to simply keep the Soviet military at bay, America needed Israel to win so the world couldn’t solely judge America’s global power by an unsuccessful conflict in Vietnam and give Soviet Communism more credibility.

In 1972, Egyptian successor to Nasser, Anwar Sadat, needed America to re-engage with the Israeli conflict or risk the world becoming too comfortable with Israel’s occupation of the Sinai Peninsula. America had grown tired of international conflict after the result of the War in Vietnam, and had waned on its commitments to Israel, and Israel had no immediate need for their support. He also he needed the Soviets to supply him with military equipment to start a limited war with Israel, and make Egypt look like a credible threat.

Sadat cut 21,000 Soviet military advisors from his military to make America think he was opening up Egypt to the possibility of Western influence and alliance and effectively re-engaged them into the conflict, which in turn re-engaged the Soviets “from their complacency toward their Egyptian client” (Rogan, pg. 366), and he maintained a relationship good enough to secure weapons from them. War planners then asked Syria to invade Israel from the north so they would have to fight on two fronts, to which Syria agreed.

Sadat’s next move was to ask the Saudis to cut oil production to any country supporting Israel and deploy the “oil weapon” by forcing them to pay higher prices or search for oil elsewhere – an expensive and lengthy process considering 28% of US oil imports came from Saudi Arabia.

After a mostly unsuccessful war for Egypt and Syria, the US maintained its allegiance to Israel, continued to back it financially and militarily, and found other sources of oil. When oil production resumed in Saudi Arabia, prices dropped significantly as demand fell with so much globally available. But, the Arab-Israeli War of 1972 showed the superpowers that the Middle Eastern regional powers could come together and impact their objectives – at the very least appear as a credible threat. It showed the superpowers they were vulnerable to manipulation, and had to recognize the regional powers as the beginnings of Arab Nationalism.

In the end the manipulation from superpowers to regional powers, and from regional powers to superpowers resulted in continued bloodshed, instability, poverty, and a massive gulf between rich and poor in the Middle East. There would be no unified Arab state, and Israel continues to be a threat to peace in Palestine, Egypt and Syria.


How has the production of oil in the Middle East transformed both the domestic politics and the foreign relations of states of the region since World War II?

The discovery of oil in the Middle Eastern states in the early 20th century initiated a series of events that would foreshadow an eventual end to Arab Nationalism. While it provided the “oil rich” states massive revenues and enabled the “oil poor” states to export labor to those countries creating a strong interdependence in the region and brought unity unseen in the Arab world, these states were eventually forced to comply with the will of foreign powers when oil could no longer be used as a political weapon.

Foreign oil companies and the oil producing states of the Middle East were not adversaries; they were business partners mutually benefiting from the production and sale of oil. The dependency foreign oil companies (and subsequently the super power nations to whom they provided the refined product) had on oil flowing from oil producing states in the Middle East meant they had to pay the prices and accept the output controlled by these states. But these states also depended on the massive revenues gained from the agreements. When Arab oil producers cut production in 1973 to countries backing Israel in the “1967 War” the United States worked with the global market to get oil in other ways and continued sending military weaponry to Israel. When production resumed the global prices dropped significantly as the market adjusted for the global increase of available oil, severely cutting the expected income of all oil producing states and leading to a domino effect on many domestic economies depending on the oil producing states for the export of labor.

The Arabs did not see the events of 1973 as an abysmal failure however, even though some analysts like Mohamed Heikal believed the embargo was lifted before it was able to get them real political benefits. There was unity and purpose amongst the region, impressing the international community and “forced the superpowers to take the Arab world more seriously” (Rogan, pg 372)

Oil producing states in the Middle East such as Libya gained significant international political leverage as the superpowers dependency on oil increased over time. King Idris went about selling his countries resources in a slightly different way than did Iran or Iraq. Instead of giving a few foreign oil companies access to explore and drill, he demanded that all oil companies be independent and essentially smaller than the giants drilling in the Persian Gulf. In doing so, these independent companies were much more dependent on oil discovered in Libya as they had less money to invest in discovery and production. Because of this, Libya was able to control output and prices much more effectively and turned the standard “50:50” profit sharing ratio between oil producing state government and oil company to a “55:45” ratio. The result was an increase in prices globally as demand increased due to the shortage to which other Arab states then benefitted.

This arrangement worked so well it inspired Iran and the other oil producing states to create the Tehran Agreement in 1971, calling for regular price increases and “regular decreases in the oil companies’ share in profits”. (Rogan, pg 361) It was a show of unity amongst the Arab states and when Qadhafi overthrew King Idris in a bloodless coup claiming the King had too many Western influences in September of 1969, he instructed Mohamed Heikal to “tell President Nasser (of Egypt) we made this revolution for him”.

However, the influx of wealth from the West due to the oil boom had some negative consequences. It provided some countries in the Middle East access to advanced military technology they could not produce on their own, effectively instantiating an arms race amongst the political adversaries of the region. In the Lebanese Civil War of 1975, militias sought expensive weaponry from their neighbors that were “awash in weapons” (Rogan, pg 383) which they then used as leverage and influence over the country.

The exchange of labor for the public works and oil production between oil rich states and oil poor countries created a “new Arab social order”, and a new interdependence arose able to survive the war between Libya and Egypt in 1977 as none of the 400,000 Egyptian workers were expelled in retaliation. “Oil had made the Arab world more closely linked socioeconomically by the end of the 1970s than at any other time in its modern history” (Rogan, pg. 394)

But of course just as the oil market could be used as a weapon by oil producing countries to politically manipulate foreign countries, the appropriation of labor by these same countries could as well. Remittances became an important source of income for labor-exporting states and as a result labor-importing countries had leverage to pay them less or eject them altogether. In the Gulf War of 1991, Iraq threw out over one million Egyptian workers, as Egypt was a member of the Gulf War coalition. (Gelvin, pg.263)

Labor migration had other consequences as well. As many men are sent away to work in the oil rich states, women are left behind to care for and support their families alone. Also, local cultures changed significantly due to the enormous numbers of noncitizens working and living in the oil rich countries.

The discovery of oil in the Middle East forced the West to recognize the region as an area of strategic importance. No longer would it be considered “backwater” when it came to global politics and the international system. Saudi Arabia, Iran and Iraq contain vast resources the West needs. Beginning during WWII and throughout the Cold War, the United States, Britain, and the Soviet Union had to concede that not only did they need this oil for their own war machines and national economy, but they also had to keep it from each other. In this way, the Middle East had leverage reminiscent of Ottoman Empire’s glory days from Middle Ages until the 18th century (Gelvin, pg.261). But they would have to contend and eventually comply with these superpowers aspirations for global domination, and with their own internal conflicts for a national identity, which in the end were only partially achieved.


Gelvin, James L. The Modern Middle East. New York , NY: Oxford, 2011.

Khaldi, Rashid. Sowing Crisis. Boston, MA: Beacon Press, 2009.

Rogan, Eugene. The Arabs. New York, NY: Basic Books, 2011.