On October 19, President Nixon asked Congress for $2.2 billion in aid to Israel. The next day, Saudi Arabia and other Arab producers imposed a total embargo on oil shipments to the United States.1
The oil embargo ended on March 18, 1974. Its duration was short, its impact immense. The selling price of Saudi oil leaped from $1.39 a barrel on January 1, 1970, to $8.32 on January 1, 1974.2 Politicians and future administrations would never forget the lessons learned during the early- to mid-1970s. In the long run, the trauma of those few months served to strengthen the corporatocracy; its three pillars — big corporations, international banks, and government — bonded as never before. That bond would endure.
The embargo also resulted in significant attitude and policy changes. It convinced Wall Street and Washington that such an embargo could never again be tolerated. Protecting our oil supplies had always been a priority; after 1973, it became an obsession. The embargo elevated Saudi Arabia’s status as a player in world politics and forced Washington to recognize the kingdom’s strategic importance to our own economy. Furthermore, it encouraged U.S. corporatocracy leaders to search desperately for methods to funnel petrodollars back to America, and to ponder the fact that the Saudi government lacked the administrative and institutional frameworks to properly manage its mushrooming wealth.
For Saudi Arabia, the additional oil income resulting from the price hikes was a mixed blessing. It filled the national coffers with billions of dollars; however, it also served to undermine some of the strict religious beliefs of the Wahhabis. Wealthy Saudis traveled around the world. They attended schools and universities in Europe and the United States. They bought fancy cars and furnished their houses with Western-style goods. Conservative religious beliefs were replaced by a new form of materialism — and it was this materialism that presented a solution to fears of future oil crises.
Almost immediately after the embargo ended, Washington began negotiating with the Saudis, offering them technical support, military hardware and training, and an opportunity to bring their nation into the twentieth century, in exchange for petrodollars and, most importantly, assurances that there would never again be another oil embargo. The negotiations resulted in the creation of a most extraordinary organization, the United States — Saudi Arabian Joint Economic Commission. Known as JECOR, it embodied an innovative concept that was the opposite of traditional foreign aid programs: it relied on Saudi money to hire American firms to build up Saudi Arabia.
Although overall management and fiscal responsibility were delegated to the U.S. Department of the Treasury, this commission was independent to the extreme. Ultimately, it would spend billions of dollars over a period of more than twenty-five years, with virtually no congressional oversight. Because no U.S. funding was involved, Congress had no authority in the matter, despite Treasury’s role. After studying JECOR extensively, David Holden and Richard Johns conclude, “It was the most far-reaching agreement of its kind ever concluded by the U.S. with a developing country. It had the potential to entrench the U.S. deeply in the Kingdom, fortifying the concept of mutual interdependence.”3
The Department of the Treasury brought MAIN in at an early stage to serve as an adviser. I was summoned and told that my job would be critical, and that everything I did and learned should be considered highly confidential. From my vantage point, it seemed like a clandestine operation. At the time, I was led to believe that MAIN was the lead consultant in that process; I subsequently came to realize that we were one of several consultants whose expertise was sought.
Since everything was done in the greatest secrecy, I was not privy to Treasury’s discussions with other consultants, and I therefore cannot be certain about the importance of my role in this precedent-setting deal. I do know that the arrangement established new standards for EHMs and that it launched innovative alternatives to the traditional approaches for advancing the interests of empire. I also know that most of the scenarios that evolved from my studies were ultimately implemented, that MAIN was rewarded with one of the first major — and extremely profitable — contracts in Saudi Arabia, and that I received a large bonus that year.
My job was to develop forecasts of what might happen in Saudi Arabia if vast amounts of money were invested in its infrastructure, and to map out scenarios for spending that money. In short, I was asked to apply as much creativity as I could to justifying the infusion of hundreds of millions of dollars into the Saudi Arabian economy, under conditions that would include U.S. engineering and construction companies. I was told to do this on my own, not to rely on my staff, and I was sequestered in a small conference room several floors above the one where my department was located. I was warned that my job was both a matter of national security and potentially very lucrative for MAIN.
I understood, of course, that the primary objective here was not the usual — to burden this country with debts it could never repay — but rather to find ways that would assure that a large portion of petrodollars found their way back to the United States. In the process, Saudi Arabia would be drawn in, its economy would become increasingly intertwined with and dependent upon ours, and presumably it would grow more Westernized and therefore more sympathetic with and integrated into our system.
Once I got started, I realized that the goats wandering the streets of Riyadh were the symbolic key; they were a sore point among Saudis jet-setting around the world. Those goats begged to be replaced by something more appropriate for this desert kingdom that craved entry into the modern world. I also knew that OPEC economists were stressing the need for oil-rich countries to obtain more value-added products from their petroleum. Rather than simply exporting crude oil, the economists were urging these countries to develop industries of their own, to use this oil to produce petroleum-based products they could sell to the rest of the world at a higher price than that brought by the crude itself.
This twin realization opened the door to a strategy I felt certain would be a win-win situation for everyone. The goats, of course, were merely an entry point. Oil revenues could be employed to hire U.S. companies to replace the goats with the world’s most modern garbage collection and disposal system, and the Saudis could take great pride in this state-of-the-art technology.
I came to think of the goats as one side of an equation that could be applied to most of the kingdom’s economic sectors, a formula for success in the eyes of the royal family, the U.S. Department of the Treasury, and my bosses at MAIN. Under this formula, money would be earmarked to create an industrial sector focused on transforming raw petroleum into finished products for export. Large petrochemical complexes would rise from the desert, and around them, huge industrial parks. Naturally, such a plan would also require the construction of thousands of megawatts of electrical generating capacity, transmission and distribution lines, highways, pipelines, communications networks, and transportation systems, including new airports, improved seaports, a vast array of service industries, and the infrastructure essential to keep all these cogs turning.
We all had high expectations that this plan would evolve into a model of how things should be done in the rest of the world. Globe-trotting Saudis would sing our praises; they would invite leaders from many countries to come to Saudi Arabia and witness the miracles we had accomplished; those leaders would then call on us to help them devise similar plans for their countries and — in most cases, for countries outside the ring of OPEC — would arrange World Bank or other debt-ridden methods for financing them. The global empire would be well served.