Oil Is Big Business
Of the major international oil companies — called the Seven Sisters — five are American owned. The largest is Standard Oil of New Jersey which trades through most of the world under its "tiger in the tank" Esso name. As one oil expert pointed out, ironically in the U.S., the national trading subsidiary is called humble oil — a most amusing name in the light of its strength and size!
The two remaining majors are British Petroleum and Shell. Shell is Dutch-British owned. Its operational and commercial headquarters are in London. The U.S. Shell Enterprise contributes one third to the total worldwide Shell group's revenues and one third of its profits. Technically and organizationally Shell is American oriented.
As a result, the U.S.A. is the world's largest producer, refiner and consumer of oil. Assets of some 5,000 million pounds are invested in oil abroad, by U.S. companies, accounting for one third of total U.S. foreign investments.
U.S. companies produce 100 percent of Saudi Arabian oil, 75 percent of Libyan oil, 59 percent of Kuwait's oil, 40 percent of Iran's and 25 percent of Iraq's.
A sagging U.S. balance of payments is bolstered by more than one billion dollars in profits remitted annually by oil companies from operations in the region.
With the economic importance of oil to the United States and the strategic importance of oil to Britain and Western Europe, the spreading influence of the Soviet Union in Egypt and the Middle East, Persian Gulf and Indian Ocean is traumatic.
In the light of the advances being made by the Soviet Union today it is quite possible that the Russian bear will someday also be able to carry out its part of the scenario depicted at the beginning of this article.
The Soviet Union is the dominant power in the Arab nations that border the Mediterranean. A new 15-year pact with Egypt puts the Soviet Union squarely in the driver's seat in that crucial nation. Also, the Russian Navy already has a string of bases — some still unconfirmed — throughout the Indian Ocean area. Controlled from the Indian Ocean is the access route to the Persian Gulf. From that area ships carry the incredible oil output of ten Persian Gulf States — they include Iran (3.3 million barrels per day), Saudi Arabia (2.9 million barrels per day), Kuwait (2.5 million barrels per day), Iraq (1.5 million barrels per day).
Whoever controls the Indian Ocean and sits astride the Strait of Hormuz "chokepoint" controls the Persian Gulf. The Kremlin is out for that control.
Consider also that the Soviet Union has gotten into the Middle East oil business.
Soviet Union in the Oil Business
An agreement signed in Moscow, July 4, 1969 between Iraq and the Soviet Union obliges the latter to "prepare and put into operation" the oil fields of North Rumaila. The immediate production will be 100,000 barrels of oil daily. This is to increase to 365,000 barrels daily.
The North Rumaila field is to be ready for operating by the first quarter of 1972. "The Soviet-Iraqi agreement," according to oil expert George Stocking, "constitutes the most significant development in the recent history of the Middle East oil industry . . . It marks Russia's first foothold in an important Middle East oil-producing country" (Middle East Oil, Vanderbilt University Press, 1970, p. 315).
Interestingly enough on June 25, 1961 Iraqi Prime Minister Abdul Karim el-Kassem announced that his nation had a claim to Kuwait. Could future Russian backing impel Iraq to make good on such a claim?
Also, Iraq and Iran are still conducting a virulent propaganda war with each other. Iranians fear that Iraq may be pushed into a more extremist attitude by Russia.
Skipping across the Middle East to the other chokepoint — Egypt and the Suez Canal — we find the Russians have also had a long and sustained interest in this area. They are also, as mentioned, well ensconced there today.
Europe's New Interest
Europe is waking up to the fact that the Soviets are out for control in the Middle East. Although its presence is still limited, Europe will no doubt be forced to take the bull by the horns and make itself felt economically and in other ways, if necessary.
One method involves economic assistance. Egypt is planning a large 42-inch pipeline from Suez to Alexandria capable of transporting 50 million tons of oil per year. This will increase to 75 million tons. There will be facilities for loading and unloading the largest tankers now anticipated.
Mannesmann AG, Europe's biggest pipe producer has been given Bonn's blessing to participate in the Egyptian pipeline project.
Bonn officials argue that Western involvement in Egypt's economic development is necessary to prevent a repetition of the Aswan Dam "mistake." The West's refusal to participate resulted in the subsequent entrenchment of the Soviet Union in Egypt.
Germany will join a consortium of nations, including Great Britain, France, Italy, and Spain which will build the pipeline. European money will be partially responsible for development of the 207-mile pipeline.
Since 1967 West Europeans have been reassessing their junior role in the Mediterranean and Middle East. As reported in the "Advance News" section of this issue (see page 17) the Common Market's official monthly journal, European Community, expressed concern over the Middle East crisis.
"The European Community [Common Market] has a vital interest in the maintenance of peace in the Mediterranean . . ." the European Community article stated.
"If the Community had been a political power early enough," this official magazine continued, "it might have been able to prevent the establishment of enemy positions by the two superpowers in the Mediterranean with its attendant danger of provoking a world conflict."
Our report in this month's "Advance News" section continued with these observations:
"The Common Market countries are expected to draw up newer, more concrete policies toward the Middle East. It was less than a year ago that foreign ministers of 'The Six' started regular meetings on developing common foreign policy.
"Former Common Market president Jean Rey recently noted with satisfaction that Common Market members now are making efforts to harmonize their foreign policies. But he was 'ashamed' that Europe has not spoken out with a single voice on the crisis in the Middle East, which so deeply affects European interests."
In accepting the proposals of one French-sponsored peace treaty, the Europeans clearly have given priority to keeping and making friends among Arab states — the holders and transmitters of vital oil.
Japan in the Middle East
Japan is also in the move, having committed herself to large exploration expenditures by successful competitive bids for onshore and offshore acreage in the very promising oil-bearing zone of Abu Dhabi. These concessions were won by a group of Japanese companies in the face of international competition from established oil producers.
There is bound to be increased competition between Russians, Japanese and Europeans for Middle East oil. At present, the situation is only mildly threatening. Overall, there is often remarkable cooperation.
For example, Japan and Russia — traditional rivals — have agreed to build a pipeline from Siberian oil fields to the USSR Pacific coast to supply Japanese oil needs.
But cooperation has gone further than this. A short-term problem of transporting Soviet oil to Japan arose from the closure of the Suez Canal. The dilemma was solved in a most happy manner. Iraq and British Petroleum joined Japan and the USSR in solving it. Soviet oil to Japan was replaced by British Petroleum oil from Iraq. In turn, British Petroleum took an equivalent amount of Soviet Crude oil out of Black Sea ports for use in its Western European markets, whose normal supply from east of Suez had been disrupted.
Everybody profited from the cooperation and a problem was solved in the highest form of international statesmanship and business.
It is hoped that all peoples involved — Europeans, Soviets, Arabs, Japanese, oil companies, others — will continually cooperate 100 percent to solve their disputes and problems.
The record of history is, however, not reassuring. Nations are bound together only as their national interests coincide. The fear is that Soviet, Arab, European and Japanese national interests will end up in great conflict — with the real possibility that the struggle for oil, the political mineral, could spark a Mideast war dwarfing the current Jew-Arab conflict.