Conflicted S3 E15 - Petrostates of the World, Unite!
Thomas I'm really disappointed. Aimen.
Aimen And why is that?
Thomas We're not talking about the Bronze Age this episode. We're starting in the 20th century. That hasn't happened this whole season.
Aimen [laughs]
Thomas What's happening to us?
Aimen What are we talking about, actually?
Thomas Oh, we're talking about OPEC. We're talking about oil.
Aimen Ah, but oil is not 20th century, Thomas. This is the Jurassic Age.
Thomas [laughs]
Aimen We're going further back into history.
Thomas The Jurassic Age. Oh, I wish we could tell the whole of history from the Jurassic Age to the present, but no, dear listener, we're starting in the 20th century this episode talking about OPEC. Let's get right into it.
[music]
Thomas OPEC, Aimen. OPEC, the Organization of Petroleum Exporting Countries.
Aimen Ah, that's what it stands for. Actually, like, when I was debating with my daughter, what OPEC stands for? I told her it was the Organization for the Penguins Emancipation Country.
Both [laughter]
Thomas Goodness gracious, Aimen. Really, your jokes these days. They're– there's– they're dad jokes. You are the master of dad jokes.
Both [laughter]
Thomas OPEC. It's one of the great institutions of governance in the world and its influence, Aimen—and you've got to say, right—it's– it's big.
Aimen Well, some people even describe it as a cartel.
Thomas A cartel. It is a cartel.
Aimen Well, of some sort, come on, but "cartel" is still negative connotation to it.
Thomas Well, some people feel OPEC has had a negative influence on the world
Aimen In what sense?
Thomas Well, you know, supporting the pumping of oil, the selling of oil, increasing production, keeping the oil price high—which has this big influence on the global economy—making things more expensive, you know, all sorts of— Environmentalists, of course, they have lots of bones to pick with OPEC.
Aimen Eh, well, excuse me, Thomas, come on. This is typical Western hypocrisy. If it wasn't for the fact that there is demand for oil, the oil will stay in the ground. And where was the demand generated from? The West. So if it wasn't for the West's insatiable... [laughs] ...you know, appetite for oil, the oil would have stayed beneath the ground where it belongs.
Thomas You say that, but it's not like Easterners, haven't had an equally insatiable demand for oil, especially these days. I mean, the Easterners weren't going to keep it in the ground if they knew what they could do with it.
Aimen Exactly. But the Industrial Revolution and the invention of many of the new modes of transportation which uses the, you know, internal combustion engines led to the fact that there is so much demand for this dinosaur juice that people can't get enough of it.
The building of suburbia in America, globalisation in terms of trade, these big giant container ships—what do you think power these? It's oil, and there is a global demand for it. If there was no demand, there will be no cartel like OPEC in order to regulate—not to influence, but to regulate—you know, the prices.
Thomas So in your view, OPEC is a Good Thing, capital G, capital T.
Aimen I'm not saying it's a purely good thing. Let's put it this way. The world will be not a better place without OPEC. And I tell you why, because without OPEC regulating the price, the prices will fluctuate so much. And instead of the prices being controlled by sovereign nations on behalf of the people, it will be controlled by the evil, giant, capitalist corporations that the environmentalists hate more than anything else. [laughs]
Thomas Aimen, "evil, giant, capitalist corporations". This is a new tune. We're going to get back to this question, Aimen, I promise you, and you can – you can, uh, shake your fist at whoever you like...
Aimen [laughs]
Thomas ...but we've got to move on and get going on the story of OPEC.
Dear listener, for most of the season so far, we've been mired in national psychodramas of collapse. Old imperial and colonial worlds were disappearing, and as we've told the story of the chaos of the '30s, '40s, '50s, '60s, and '70s, it hasn't always been clear. What sort of new world was going to emerge to replace the old one?
Well, today that ends. Today, we're not going to talk about chaos. We're going to talk about order. We're going to talk about one of the many governing institutions that arose out of the wreckage of the old world, one which still underpins the way the world functions today and, importantly, the only great governing institution founded and run by statesmen outside the Western corridors of power.
We're going to talk about OPEC. You excited, Aimen?
Aimen Oh, very much so. Oil runs through my blood, actually.
Both [laughter]
Thomas We've been nibbling around the edges of this topic all season. In Episode 2 on Azerbaijan and Episode 5 on Iran, we discussed how the Caspian Sea was a very early zone of petrol production centred on the city of Baku. Back then, it was a part of the Russian empire. The infamous Rothschild and Nobel families put up the financing, and a little transport company called Shell won the selling rights. Caspian oil rivalled US oil until the Russian Revolution overturned that petrol barrel for a while.
Also in Episode 5, we talked about the establishment of the Anglo-Persian Oil Company in Iran and how the coup that ousted Iran's Prime Minister Mohammad Mosaddegh was directly linked to his attempts to nationalise the Iranian oil industry.
In Episode 4 on Russia, we talked about how vital oil and gas exports are to the Russian economy. And in Episode 9 on Iraq and in Episode 11 on Libya, we talked about the role that oil played in the run-up to those countries' revolutions in 1958 and 1969. And of course, in Episode 3 on Saudi Arabia, we talked at length on the foundation of what is today not only the biggest oil company but in fact the biggest company in the world, Aramco.
Aimen Oh, what a nice summary, Thomas.
Thomas Yes, well, you know, it's been a breathless season, and so a breathless summary is what it deserves, Aimen. Aramco, your neighbour growing up. You grew up next to Aramco.
Aimen Not only I grew up next to Aramco, I grew up as a product of Aramco, I would say. [laughs] You know, my father, my three uncles, all of them. Like, can you imagine four brothers, you know, working for Aramco since the late 1930s, just when it started.
Thomas "Working for Aramco", meaning "living inside Aramco's huge compound" outside Khobar where you grew up.
Aimen Well, when it started, there was no compound to begin with. Like, and I mean, it was really a patchwork of compounds at that time. So it's only later, in the 1950s and '60s, you start to see the copy-paste of American suburbia being dragged all the way...
Thomas [laughs]
Aimen ...from California to the Eastern Province of Saudi Arabia.
Thomas When you went to visit your uncle inside the Aramco compound, describe what it's like. You arrived. There must be some big security gates they open, and then you're – you're just transported through the looking glass into a little sliver of what, Texas in the Saudi desert?
Aimen Exactly. I— As if you are looking at a mini, you know, Dallas, you know, there. These, you know, nice, well-kept lawns and these supermarkets, American families and British families and Dutch families sprawling around going around their business. And you know, of course not wearing the abaya or the hijab or anything. They had their own police force, their own security inside. And for the first time in my life, I saw a female driving there, you know, within the compound.
Thomas [laughs]
Aimen You know that, for me, this was a cultural shock. [laughs] Anyway, for me, Aramco was not just only a company next door where my father and uncles and cousins and many other members of the extended family worked. In fact, no, it was an entire institution that influenced my life. For the nine years I went to school in Saudi Arabia, whether the primary six years or the middle three years, I went to an Aramco-built and Aramco-run School. really. I– I owe my education to Aramco, too. [laughs]
Thomas [laughs] It sounds like Aramco is suspiciously like a state within a state, Aimen. Uh, what did you tell us in, uh, the last episode on Lebanon...
Aimen [laughs]
Thomas ...about states within states? I think you were– rather didn't like them.
Aimen Look, I don't think Aramco is running around with a hundred thousand-strong militia...
Both [laughter]
Aimen ...waving arms and—
Thomas Not yet.
Both [laughter]
Thomas Not yet. That could all change in a nice, uh, edge, really.
Aimen You see, it's not a state within a state, but actually it is the golden goose.
Thomas It's the golden goose. Now, we're going to get to the reasons why it's the golden goose. Well, maybe we'll get there. We've got a big story to relate in this episode.
And that story begins—I mean, the story of the rise of the petrostate, a state that depends for its existence on the production and exporting of oil—the rise of the petrostate begins with South America. Yes, not the deserts of the Middle East, but the rivers and lakes of Venezuela. As early as 1928, Venezuela became the world's largest oil-exporting country, and it remained the world's largest for 40 years.
Private oil companies were granted oil concessions by the government, and my goodness, they pumped like crazy, transforming Venezuela from an extremely poor, very, very backward part of the world into something approaching a modern developed country. And so it became the world's first petrostate, by which I mean, as I said, a state whose fiscal position is almost entirely dependent on oil exports.
The whole country was entirely transformed by the huge influx of oil revenue. It's strange, Aimen, to think of Venezuela as at the cutting edge of technological development and trade policies globally, uh, given what's happened to it in the last 30 years or so.
Aimen Venezuela, in fact, was always seen as the playground for Americans. They were going there for vacations, and they used to compare how lush and lavish the lifestyle of Venezuelans in comparison to Americans. Actually, Americans were at envy of how Venezuela used to be in the 1950s and '60s and '70s.
Thomas And it attracted a lot of immigration to work in the – in the burgeoning industries, especially from the Middle East.
Aimen Indeed. Many Lebanese, Syrians, Palestinians, you know, they just in a flock to Venezuela, and there is a vibrant Lebanese and Levantine community there to this day.
Thomas What I found interesting about reading into the Venezuelan oil boom of the '30s is that as early as 1920, a technocrat in the Venezuelan government who ended up drafting the country's first oil law said that there were three ways that a government could acquire revenue from oil.
These three ways were, he said, quote, "the creation of tax on the monetary profits of the enterprise, a percentage of the commercial value of the material extracted, or a tax that varied on the model of a sliding scale according to oil's value on the markets that regulate its price". So basically, Aimen, he said you can own a share of the commodity or you can tax the profits of its sale. For you, this is key, this distinction.
Aimen Oh yes, because I don't believe in taxing the profits at all. It's a failed model and it's been proven throughout the entire 20th century to rob countries of vital revenues. And this is what the British did.
Thomas Yeah, British Petroleum famously, you know, its North Sea oil, uh, funded a – a kind of economic boom in this country in the 1980s. But you know, there's not a whole lot of oil left, is there.
Aimen Yeah. But it's not about that. It's also the fact that it was taxing the profits. And the problem with this model is that companies like BP and others will find a way to underreport their profits to increase the value of the, uh, cost of business in order to avoid paying taxes altogether or paying the minimal taxes.
This model failed because companies were never going to be honest. However, you should have owned the resource itself. Not grant a license, but own the resource beneath the ground and get a share of the actual commodity coming out of the ground.
Thomas This is the different model. This is the model that you think works better, that the countries say, "We own the commodity and therefore we're not granting you the commodity. We're granting you simply the rights to sell it. We want a share of the – of the value of the commodity."
Aimen Exactly. You don't, like, wait for them to declare how much profit they made, you know, after the cost of their business and operation and everything, which they will inflate anyway, in order to get away with as little tax as they could. No, no, no. You should have owned the commodity coming out, and this way you generate greater share of revenues.
Unfortunately, the British model failed while the model adopted by Venezuela—and then many other countries across the world—that is the model that succeeded in generating decent revenues.
Thomas The British model may have failed for the British state, but the model of taxing profits of the sale of oil worked very well and very tidily for the companies that dominated the oil industry in the first half of the 20th century, which were largely, or at least partially, British in almost every instance.
So these companies, the ones that dominated the global sale of oil, are known as the "Seven Sisters". We can split them into three categories. One, a fully British company, the Anglo-Persian Oil Company—which is today BP—in which the UK government acquired a 51% stake in in 1914. So very early on, BP or the Anglo-Persian Oil Company was essentially a government-run company, but along private lines.
So that's the first big sister, the first of the Seven Sisters, Anglo-Persian. Then there was one half-British half-Dutch company, Royal Dutch Shell—now Shell—and finally, five American companies. Three of them actually used to be one big company, Standard Oil, John D Rockefeller's big beast, the big oil company, which was then split into pieces by the US government in an antitrust drive.
And so the three biggest ones were Standard Oil of California, later called Chevron, Standard Oil of New Jersey, later called Exxon, and Standard Oil of New York, later called Mobile. And Exxon and Mobile, of course, have united subsequently, and that's now Exxon-Mobile. So these three spinoffs from Standard Oil, uh, were three of the big sisters.
And the last two were from Texas: Gulf Oil and Texaco, both of which now are – are owned by Chevron. But at the beginning of the 20th century, these Seven Sisters totally dominated the oil industry, and for that reason had massive power over, you know, the running of the world.
Aimen Exactly. They were setting the prices. You know, they were bullying countries into accepting some sort of a one-sided deal which profited the Seven Sisters on the expense of the sovereign nations that had the oil to begin with.
Thomas Okay. Aimen, describe how the concessions worked—you know, generally speaking—how the concessions worked in countries like Saudi Arabia, like Venezuela, like Iran, uh, before the founding of OPEC.
Aimen There is nothing short of calling the practice, you know, of the Seven Sisters, you know, during the first half of 20th century as predatory. I mean, we can call it predatory, actually.
Let's say like, you know, they will go to Venezuela or to Saudi Arabia, you know, or to Iran, and they would say— Okay, we have what we call the surveyors, you know, and the prospectors, people who would go around and do all the geological mapping. And they will say that we believe that there is significant oil deposits in a certain geographical location.
So they will say to the nation, "Okay, we discovered oil here and we want you to grant us the rights. What we will do is that we will establish a joint venture, you know, a company here in your country, in Iran or in Saudi Arabia or in Venezuela. And that company, we will split it with you, like in some sort of a 10% yours, like a 90% ours" or whatever. Like, I mean, they will, like, you know, come up with a very, you know, lopsided—
And because they have the monopoly, they have the technology, there was no native capability in any of these countries whatsoever. So they will say, "okay". I mean, they have no other choice. It's not like there is a huge market out there where they can go to China or, uh, to Japan or Korea and say, "Hey, can you offer something better than what the British or the Americans do?"
No, there wasn't. They were able to get away with it. And they were able to say that we will extract the oil, and regardless of how much the price of oil, you know, basically in the market right now, we will just give you what we call a royalty.
Thomas The royalty system.
Aimen Yeah. It's like a book sale kind of thing. And so if the barrel of oil is $1, let's say, we will give you a 5 cents, 6 cents, 7 cents, you know, up to 15 cents at the maximum, at the time, as a royalty, and the rest will go to us.
On top of that, they imposed certain conditions that look, you know, in order to make the running of our operations, you know, then this new joint venture company in your land, we need to make sure that we import lots of machineries. We need to make sure that we bring a lot of equipment. So all what we are going to import is going to be tax-free. There should be no duty. There should be no taxation on it. And many countries had no option but to, what, agree.
Thomas That's right. And it all adds up to the erosion of sovereignty. The national sovereignty of these oil-producing countries was eroded.
This caused not only a lot of resentment, but also a big problem. So the companies – the oil companies were not obliged to steward the oil fields conservatively with an eye to the future like, say, a national government might do. They prioritized short-term profits, as capitalism tends to do, and the petrostates couldn't do anything about it. The central governments basically had relinquished any power to determine how much was being produced.
Aimen You know, I have to say something here, Thomas. There is a distinct difference here between how British companies operated and how American companies operated. British companies, unfortunately, they behaved like their colonial governments. They were pursuing short-term profits and gains over the long-term longevity and health of the oil fields and the oil reservoirs they were extracting from. You know, British companies, unfortunately, were known for that.
When it comes to American companies—whether in Venezuela and in Saudi Arabia—the American companies adopted a longer-term view. I mean, they were really more conservative in extracting oil from certain reservoirs in order to actually ensure the longevity and the sustainability of this extraction.
Thomas In fact, Aimen—you'll like this—I came across a quote by a – an early Venezuelan oil minister who was talking to his counterpart in Iran in the 1950s. He says this: "What different souls British and American companies have. There's no comparison between them. The US company in our country is civilized—an open book. The UK company in yours is mean. We can talk to ours without killing each other. The Americans understand the psychology and the interest of Venezuela. The British don't even bother. They're so unchangeable. So enigmatic." [laughs]
Aimen Oh, yes. I mean, any modern day oil engineer will tell you that what the British did to many Iranian oil fields was unforgivable. The way they prioritized short-term gains over long-term sustainability was in complete contrast to how the Americans were doing business.
And in fact, Standard Oil California, when they came to Saudi Arabia, they really, from the beginning had a very long-term view. They started with training many of the Saudi nationals on becoming oil engineers, you know, teaching them about oil extraction. They really went to great length, including inviting thousands upon thousands of young Saudis to travel to America in order to study there and to become oil engineers, helping them with every part of the operations from the extraction to the transportation to the exportation.
However, when Mosaddegh wanted to nationalise the oil company in Iran in 1953, he was hit with the reality. There are not enough well-trained Iranian engineers. The Anglo-Persian Oil Company did not train anyone. I mean, basically, they didn't invite anyone to come to London or, you know, to Aberdeen or anywhere to train, to become oil engineers.
Thomas What was also true in the Iranian oil fields, if you like—well, and really this was true everywhere in these oil-producing countries, even Saudi Arabia in the early decades—the working conditions for local labourers—and I'm not talking about engineers, I'm not talking about the upper management or anything, but the local labourers—suffered really abysmal working conditions, especially in Iran, but everywhere...
Aimen Yeah.
Thomas ...Saudi Arabia included. And this added to a – a general sense of unrest, a general sense of discontent with the way that the global petroleum industry was being run and gave rise to what we can call "petronationalism", a kind of idea that we can't allow private companies to have a monopoly over the extraction and sale of oil.
As early as 1917 in Mexico and continuing throughout the decades, protest movements would break out inside petrostates. First in Latin America, but then, you know, as we saw in Iran and the Middle East as well, they demanded things like national sovereignty over natural resources and were often aligned broadly with communist movements, which of course didn't please either the private companies or the big Western powers like Britain and the United States.
In 1945, there was a military coup in Venezuela. Uh, this brought to power, a left-wing party called Democratic Action, and they were able to negotiate with their private companies on what's known as a 50-50 deal. So for the first time, Venezuela managed to secure for itself a new concession where it would get 50% of the profits. The company would get 50%; it would get 50%.
This was considered to be, you know, very progressive, a great triumph for the Venezuelans at the time. And it spread throughout the world. Two years later in Saudi Arabia, for example, uh, King Abdulaziz signed a 50-50 agreement with Aramco, but it's also important to remind the listener, you know, Aimen, what you were saying about, you know, profit-taxing isn't the right way. And – and the companies weren't so unhappy with this new deal. What they really wanted to avoid was the idea that the commodity itself was owned by the country.
Aimen Exactly. Because at the end of the day, I – I truly believe in the philosophy— Because the Western philosophy, unfortunately, you know, is always reliant on the fact that the only way that government can have revenue is through taxation. And taxation, that's the only way you can, uh, have revenue. Tax the people. Tax, uh, business. And that's it. Not only but in the Middle East but also in Norway in, you know, in later years, the philosophy is that there is another source of revenue that can be tapped, which is the natural resources of the country.
Natural resources of the country should not just be under the ownership of whoever owned the license to extract from that particular land. No. Anything beneath the land belong to the people as a whole, so belong to the country. So this is why I do believe not in the nationalisation of, uh, oil and energy companies, but I do believe in the national ownership of the natural resources beneath the ground. What happened after that is that private companies can come and do whatever they want in terms of extracting it and selling it as long as they give the fair share, 50 to 65%, back to the people, back to the government.
Thomas And the model that you're suggesting is best is very efficient because private companies do tend to run concerns better than nationalised companies.
Aimen Yeah.
Thomas So we – we need to draw a distinction here. You don't want the companies like Aramco to become nationalised—you want them to function still as private corporations—but you want the resource that they're extracting to be nationalised.
Aimen Absolutely. You know, the government owns that resource on behalf of the people—they are the custodian of what the people own—because we are all collectively living in a nation. Whatever natural resources that lies beneath the ground is the property of all those who dwell within that nation, and therefore, the revenue from that should go towards building the infrastructure, the education, you know, the defence and health, everything basically that the nation need.
Unfortunately, this is not a idea that is widespread in the West with the exception – with the noble exception of Norway. However, this is something that is more widespread in the Middle East and the East, where they realized that nationalising not, uh, the private companies, not the extracting companies, but the commodity itself.
Thomas Well, as the petrostates were contemplating these issues, uh, in the '40s and '50s, the idea of OPEC—or the idea of something like OPEC—began to arise. Now it was, in fact, Venezuela that first had the idea of a cartel of oil-exporting nations to help regulate the price and production in negotiation with the Seven Sisters as the Middle Eastern oil industry was growing.
And remember, Venezuela was the big dog. It was the head cheese in terms of the exporting countries and the Middle East was small. It was growing, but as it grew—Venezuelan oil—technocrats and diplomats began to reach out to their Middle Eastern counterparts.
I found another really cool quote, uh, Aimen. This is from 1945. A Venezuelan diplomat went to the first UN conference in San Francisco, and he found himself on a train with the Saudi delegation to the conference. And this is what he wrote. Quote, "My first conversations on oil with Saudi Arabia date from 1945, from the train taking us to San Francisco with some of the younger chaps of the Saudi Arabian delegation. I told them that a lot of oil existed in their country, which they didn't know about. They knew that some of it existed, but they didn't know that it was really very big. We, the Venezuelans, were much more informed on that."
Now, what's interesting about this anecdote, Aimen, is: do you know who is likely to have been on that train with the Venezuelan diplomat, the train to San Francisco to the UN conference?
Aimen I think I have a pretty good idea, but tell me.
Thomas The young Princes Faisal and Fahd—later King Faisal and King Fahd—of Saudi Arabia, because they went to the UN conference in San Francisco. Now, we're going to talk about King Faisal later, uh, but I – I like the idea of introducing him as a young man on this train, chatting about oil with a Venezuelan diplomat and King Faisal being, "yeah, we've got some oil, but you know, I'm not really sure what it's going to amount to".
Aimen [laughs]
Thomas This is the man who would launch the oil embargo later on.
Both [laughter]
Aimen Indeed. [laughs]
Thomas Despite that anecdote showing that, you know, they were making friends, Venezuela actually felt threatened by Middle Eastern oil, because Middle Eastern oil could be produced much more easily and much more cheaply than Venezuelan, and this was undercutting the price.
Aimen Not only that, Thomas, but the Venezuelan oil is what we call the "heavy oil".
Thomas That's right.
Aimen Very difficult oil, even, to refine, while the Middle Eastern oil is what is known as the "sweet oil", the very easy oil to refine and to extract different products from.
Thomas So for these reasons, the introduction of Middle Eastern oil onto the global market was undercutting the price of oil. It was making oil cheaper and this threatened Venezuela very much. So that's why it first came up with the idea of something like a cartel with Middle Eastern producers, so they would cooperate on price and production in order to keep the price up, because Venezuela didn't like the idea that the price was dropping.
Aimen No one was liking it. [laughs]
Thomas In 1950, Venezuelan diplomats went to Iraq, they went to Kuwait, and they went to Iran to meet with oil ministers there. And it's at that time that the first idea of an accord between petrostates was broached. Now, that's at the same time that, in Iran, things were about to kick off, remember? When the British went ballistic. When the Majlis in Tehran nationalised the oil industry in 1951. And two years later, a direct consequence of the nationalisation, Mohammad Mosaddegh was overthrown by operation Ajax, the CIA-backed coup that we talked about earlier this season.
Aimen The irony here is that Mosaddegh wanted to nationalise the oil companies so a greater share of the oil revenue will go to the Iranian treasury and the Iranian people.
Thomas In fact, he was aiming for a 50-50 profit sharing agreement, really. That's what he wanted.
Aimen Yeah. Uh, the irony is that he was overthrown, and the Shah took effective control of the country. And guess what? The Shah himself then later negotiated a deal through which private companies, you know, headed by, uh, BP, would still have a 50-50 share with the Iranian treasury and the Iranian government. So actually, the Shah did exactly what Mohammad Mosaddegh wanted.
Thomas It is ironic. You know, the – the Shah effectively denationalised the oil industry. Mohammad Mosaddegh had nationalised it, the Shah denationalised it, and a consortium of Western companies—you know, headed by British petroleum—was created in 1954 to take over the industry. But yes, they granted the Shah 50% of the profits.
So this is one example of a new era that was opening up in the era of global oil. The decade of the '50s, really, when global oil consumption quadrupled, which again was putting downward pressure on the oil price. So oil is increasing in global demand. Demand is high. So everyone's pumping like crazy. The oil price is going down, and this reignites that original Venezuelan idea for the petrostates to have a cartel of their own.
There's an interesting Saudi figure that rises in this time, and he becomes a very outspoken advocate of the nationalisation of oil as a commodity and even more—in fact, quite a lot—of left-wing ideas. And weirdly, he is a Saudi. Abdullah Tariki.
Aimen Abdullah Tariki is a – is – is an amazing figure. And there is, you know, a positive legacy for him. Like, and I mean, they call him the Red Sheikh. [laughs]
Thomas He was the first oil minister under King Saud, who succeeded his father King Abdulaziz in 1953.
Aimen He was also the head of Aramco. He was the president of Aramco. And then after that, he became the oil minister. And what an oil minister he was. Abdullah Tariki actually lived in Cairo in the 1940s and studied there. And so he was very well educated for a young Saudi, from Al Zulfi of all places, you know, which is a very backward place at the time, you know, a village. And yet he really found himself traveling to many places, from Egypt to Texas, even, to study and to gain understanding of the oil industry.
And that is when he realized that there is no better way, you know, for a nation to get the maximum value out of its natural resources than to nationalise the commodity itself.
Thomas He called for a lot of things—the nationalisation of oil pipelines. He wanted, uh, Arabs to have a share in international shipping, He wanted to create local refining industries. He wanted a share of the marketing of oil.
Aimen Indeed.
Thomas He wanted the direct participation of local governments in the industrial sector. He wanted to raise the levels of employment. He had a whole plan for harnessing oil to modernise countries like Saudi Arabia in a pretty left-wing way.
Aimen Yeah. Regarding the refining, I mean, this is one of the things that it is important to understand, that the Seven Sisters didn't want to give up without fighting. I mean, they really wanted to punish those sovereign nations who wanted to have a greater share of the, uh, oil revenues. Those petrostates that wanted 50-50, we know the Seven Sister said, "okay, you will have it, finally, but don't you ever think that one day you will be able to refine that commodity—you know, the oil".
Because why? If a price of a crude oil barrel is 10 dollars, the price after you refine it is 60 or 70. Because once you extract the petrol, the kerosene, the diesel, aviation fuel, and everything else and the petrochemicals, I mean, you really get the maximum out of it. And for that, you need to have a refinery and a refinery—technology to build it was monopolized by the Seven Sisters. So in other words, they said, "Okay, no problem. Take the 5 dollars of the 10, you know, from the barrel, but we will be making the 55 dollars from refining it and selling it back to you, even, as a refined product."
Thomas Abdullah Tariki was the first person, really, to loudly proclaim this fact of economics that...
Aimen Yeah.
Thomas ...that the real value in pet– in petrol is after its refined. Most people in– including in the oil-exporting nations, hadn't really clued on to this. They were so focused on just selling the crude.
Aimen Absolutely. And this is, I think, where his ideas were revolutionary and visionary, you know, and this is why he is still revered in Saudi Arabia, especially among those, you know, Aramco pioneers, who now realized that the money is not in extracting and selling it as crude, but actually in extracting it and building a whole industry: refining and petrochemicals.
Thomas His revolutionary ideas were part of the stew of revolutionary ideas and political activism that was really electrifying the Middle East in the '50s. This movement is associated, of course, with your best friend, Aimen, Gamal Abdel Nasser.
Both [laughter]
Thomas I mean, even Saudi Arabia was hit by it, you know, uh, the working conditions in the Eastern Province weren't really great for the mainly Shia labourers in the oil fields.
And there were protests. There was attempts to unionize. Nasser electrified these workers, and Abdullah Tariki was also inspired by Nasser, which would throw him in some hot water down the line. We'll get to that. And also, you know, in Iraq—we saw in our episode on the Hashemites—uh, after the 1958 coup, the new dictator Abd al-Karim Qasim started talks with the British- and French-dominated Iraqi oil company.
He needed more revenues to get his modernisation program going. So everywhere, the petrostates were clamouring for a greater share in revenues for an utter transformation of their relationship with the Seven Sisters, with the global oil industry in general. And this period of unrest climaxed on the 9th of April, 1960, when Standard Oil of New Jersey announced a cut to the price of Saudi oil. It just unilaterally said, "We're going to pay less for Saudi oil."
This was a step too far, and the petrostates decided to act. Interestingly and unexpectedly, who was the man who stepped forward to take charge of the movement? The Shah of Iran.
Aimen Ah, yeah, the Shah. Shah Mohammad Reza Pahlavi. I mean, we haven't talked about him for a very long time. [laughs]
Thomas Not for months. Uh, we're going to talk about him a lot in our next episode, which is on the Iranian revolution
Aimen Indeed.
Thomas Oh yeah. We haven't talked about him for a while.
Aimen And even though he was a staunch Western ally and favoured Western interest, the Shah really surprised the world in that press conference he called for.
Thomas Yeah, it was in August of 1960, about six months after Standard Oil decreased the price of Saudi oil. He came out into the press conference and shocked everyone.
He said, quote, "The question facing us was whether the oil companies could take such a unilateral action, even if justified, without consulting the real owners of the oil."
Aimen Interesting. "Real owners".
Thomas Ah, you see, he made it very clear what he felt – what he thought needed to happen. And he instructed his oil minister to set aside whatever regional rivalries were happening at the time and to reach a common solution with the Arabs.
Aimen Indeed. Because if Standard Oil of New Jersey can do this to Saudi Arabia, then BP and others can do this, you know, to Iran. So he realized that safety in numbers.
Thomas That's right. So, uh, in early September 1960, five countries representing 90% of crude exports globally met in Baghdad: Iran, Iraq, Venezuela, Saudi Arabia, and Kuwait. They met in Baghdad, and on the 14th of September, 1960, announced the founding of OPEC.
Other countries would join over the next few years: Libya, Indonesia, Algeria, the Emirates, and Nigeria. Now, it's important to stress what OPEC was not. It was not a mass movement towards nationalisation. The Seven Sisters remained in control, but now the leaders of the petrostates were able to meet behind closed doors and coordinate their negotiating positions with the big companies.
Aimen Oh yes. It's like creating a union in a way.
Thomas A union – a labour union of petrostates.
Aimen [laughs] Indeed.
Thomas Petrostates of the world unite.
Aimen And – and so they did. [laughs]
Thomas Now, this inaugurated a – a fab– fabulous decade, the famous 1960s, you know, they– they've become a byword for the sexual revolution, for hippies, for rock and roll. But all that was really a sideshow. What the '60s really were about was development. In fact, the UN actually declared the 1960s the Development Decade.
Aimen Oh, yes. I mean, there is no question. I mean, Brezhnev came to power, you know, in the Soviet Union, and he just wanted to push this huge drive towards, you know, building infrastructure. Kennedy came to power, you know, in the US with his brain trust in order to outrace, you know, and outpace the Soviet Union when it come to the space development and space race.
And in Europe, of course, finally, the spectre of the, uh, Second World War was over, and Europe was fully developed again, you know, rebuilt, uh, from the ashes, and all of this was funded by what?
Thomas Middle Eastern oil. Yes, it– it's true. And, you know, imagine in the 1960s, that was the decade when the automobile became truly global, you know. That's when millions and millions of cars were on the streets and on the highways in Europe, in America, in – in the rest of the world, you know, it – it became a world dominated by the car.
Aimen Indeed. And the German car industry, this is their decade, when the Volkswagen, the little Beetle, was produced in the millions, you know, and it was all over the world.
Thomas All of this, of course, powered by petrol. Now, you mentioned John F. Kennedy and his brain trust of American technocrats. Now, they prioritized development goals above all else, And in fact, popularized what was called modernisation theory, a, quote "non-communist route out of poverty", and OPEC, in a lot of ways, symbolized this theory. It was the third way, halfway between capitalism and communism.
Aimen Absolutely. Because this is what I said. You know, OPEC is about the sovereignty over the natural resources on behalf of the people, unlike in the West, where just give, you know, the license, uh, holder, you know, the prospector, the land, they will extract, they will do whatever they want, and you just tax them on the meagre, meagre, uh, announced profits.
Thomas Ironically, however, despite joining together to keep the oil price high, the members of OPEC actually individually rushed to meet the explosive demand by increasing production. And so the oil price actually went down. [laughs] Which is funny. I mean, OPEC—it's debatable, how useful or how – what's – effective OPEC has been over the years In really achieving its aims. The problem is that the member states of OPEC are quite undisciplined and – and they're not really unified.
Aimen The OPEC resolutions were not exactly binding, you know, they were not really like, you know, laws. They were, what we call them, guidelines. You remember that quote—
Thomas "More what you call guidelines than actual rules." Who said that? I'm thinking of that other pirate, you know, Barbarosa, in Pirates of the Caribbean. [laughs]
Aimen Yeah. Yeah. [laughs] Yeah, you know. "They aren't really rules. They are just guidelines." [laughs]
Thomas So despite, you know, having come together individually, the petrostates—and when they smelled an opportunity, they wouldn't mind flooding a – a market with a lot of oil and getting a lot of money, even if it was sold at a lower price.
Aimen And you know, there is another factor here you should take into account, which many people do understand. It's not about how much oil you pump and how much you do. Like, it's not like, you know, basically, "oh, I'm going to produce today a million, and my neighbour is producing 1.1; I'm going to produce 1.2". It's not like that. Actually, it was all about what they call in the market "market share". Your market share.
In other words, sometime what happened is that it's not the oil-producing countries that increase out of a whim. Sometime it is the oil-importing countries, depending how big they are, like India, the time— Like Japan in particular. Japan used to be naughty.
You know, what they used to do is that they go to the oil-producing countries and they say, "Ah, Iraq is, uh, selling me at a 15% discount. However, I can give you their market share, you know, if you give me a 20% discount." And the new country will say, "okay, fine, Kuwait will sell, you know, for 20% discount to Japan" to take that market share for the next five years. It was always about market share and they were fighting between each other, like vultures over market share.
Thomas You know, so it is debatable, especially in that first decade of OPEC's existence, how effective it really was. Certainly the price of oil went down and this caused problems, because that was also the Decade of Development. And I would like to just briefly talk about two countries within OPEC that launched development drives, you know, which would resulted down the line with problems for them.
The first, Iran and the Shah's so-called White Revolution. So America, uh, was a very close ally of Iran, and JFK's White House was putting a lot of pressure on the Shah to reform, both socially and economically. So the Shah crafted what he called the "Revolution of the Shah and the People," which the Iranian people approved in a referendum in January 1963.
Aimen The Shah's White Revolution. To summarize it in few sentences: it was all about combating literacy, education for women, participation of women in the, uh, work force and in politics, as well as building new schools, building new hospitals, like, I mean, and focusing on the infrastructure, and getting the country on its feet to join the host of modern nations.
Thomas Yes, the Shah was committed to transforming Iran and turning it into a modern, you know, country that could punch above its weight and then stand shoulder to shoulder with the rest of the world.
But this caused a backlash, especially amongst the clerics, especially a certain cleric in the city of Qom.
Aimen Ah, yeah. That, you know, Indian origin Iranian cleric. Ah, yeah, yeah, yeah. Khomeini.
Both [laughter]
Thomas The Ayatollah, as he would go on to become—the Ayatollah Khomeini. He in 1963, in 1964, got really angry with the Shah and led a protest movement by the clerics and by conservatives in Iran against his, uh, White Revolution.
The Shah didn't quite like that. And he – he and his police force cracked down hard, and Khomeini was sent into exile from where he would build a certain movement that would have certain huge consequences down the line.
Aimen [laughs] To put it mildly. [laughs]
Thomas So that's Iran and the Shah's White Revolution. So Iran had doubled down hard on development.
In Saudi Arabia, the same thing happened. In 1964, the young Prince Faisal—who was on that train in San Francisco with the Venezuelan diplomat—he comes to power, uh, and becomes king after a long struggle with his older brother King Saud, who was sent into, uh, quote-unquote "voluntary exile".
Aimen [laughs]
Thomas Now, this struggle, in fact, involved Abdullah Tariki, uh, the man that we talked about earlier, who was one of the ideologues behind the formation of OPEC and who very much drove the process towards Saudi Arabia joining OPEC. But in the struggle between Faisal and Saud over power and Saudi Arabia, Abdullah Tariki was on Saud's side.
He was identified more with Nasserist elements, and he fell out of favour with king Faisal and his group of princes. So in 1962, uh, Tariki was dismissed. He went into exile outside of Saudi Arabia. We'll come back to him. He pops up again a bit later. Then, two years later, as I said, King Faisal becomes king and he launches a big development drive.
Aimen Oh, yes. I mean, it was, among them, basically, not only the introduction of television into the country—which was banned prior to that—but also the spreading of education, including women—that was one of the most important reforms that he introduced—as well as the improvement in terms of the introduction of the highways, the introduction of greater participation of the young men in the workforce, especially in the civil service. The civil service was relying a lot on non-Saudis, so he wanted to Saudize the civil service.
Thomas You mentioned the introduction of state TV in the Kingdom in 1966, Aimen. Now that was a really momentous event for many reasons. One of which is the riot that resulted after, uh, after it started broadcasting,
Aimen There are some sections of the Salafist school who forbade images. I mean, and for them, images is haram and, you know, and they viewed, you know, live images, you know, on TV, as haram and that, you know, the TV coming into the country is going to open the – pave the road to, you know, corruption of the faith. So a riot broke out, and among the leaders of the rioters was Prince Khaled bin Musaid, the nephew of the King, and during the shootout between the rioters and the police, Prince Khaled bin Musaid, unfortunately, was killed.
Thomas The consequences of which would be huge as we'll talk about a little bit later. So yeah. Development in Iran. Development in Saudi Arabia. Change was in the air. Revolutionary politics was growing in the 1960s, and it would catch up with OPEC in the end, along with renewed drives toward oil nationalisation. In 1968, the Ba'ath Party takes power in a military coup in Iraq.
Their principle aim is, quote, "to create one pan-Arab state and to establish the socialist system". A man called Saddam Hussein becomes the Iraqi government's representative to the Iraqi petroleum company, and by 1972, the Iraqi oil industry was nationalised.
In 1969, Gaddafi launches his revolution in Libya, and by the following year, the Libyan oil industry was nationalised. Also in 1969, Algeria joined OPEC. And by 1971, its oil industry had been nationalised.
Interestingly, Aimen, who was the oil advisor to the Algerian government at the time?
Aimen Abdullah Tariki. Because he—
Thomas Abdullah Tariki.
Aimen Because he found a kindred spirit, you know, and a soulmate in Houari Boumédiène, you know, the Algerian president.
Thomas Algeria was a very, uh, you know, revolutionary place at the time. The whole of North Africa was, you know, Libya, all these crazies. This is the time of the crazies,
Aimen [laughs]
Thomas The right— The crazies that we talked about in Episode 11. Now, less spectacularly, in the same time, the gulf states, including Saudi Arabia were beginning their phased process of oil nationalisation. And in 1971, you know, the Emirates gets its independence from Britain, and it begins, uh, this process along with Saudi, along with Qatar, along with Bahrain, towards nationalising their oil industries as well.
Aimen But the nationalisation of the gulf countries of the oil industry refers mostly to the nationalisation of the assets rather than nationalisation of the companies.
Thomas As you were saying before.
Aimen Yeah. They had joint ventures with the foreign companies, with the Seven Sisters, mostly
Thomas That's right. You know, it's also during this period—1970, 1971, 1972—not only are various forms of nationalisation on the agenda, but this is the period when Saudi Arabia finally becomes the petrol superpower that we know it to be. By 1973, it cornered nearly one quarter of the global export market, a huge thing.
And – and this is all associated with the minister of petroleum that replaced Abdullah Tariki, Ahmed Zaki Yamani. Tell us about Ahmed Zaki Yamani—or Zaki Yamani as he was known in the West, Aimen. He's a really colourful character.
Aimen Oh, yeah. One of the Hejaz prominent families, a man, like, who, at the age of 32, 33, actually became a minister. And, uh, he was someone that King Faisal had a great deal of respect for. King Faisal, and especially, like, and the King Faisal's brother-in-law Kamal Adham, you know, who was the head of the intelligence, I mean, all of them basically had a great deal of confidence that this man will know how to make good deals for the, uh, Saudi oil industry.
Thomas So where are we now? We've – we've talked about the 1960s. It was the Decade of Development, and all these petrostates had gone big on developing their countries. They'd earmarked a lot of government revenue towards that end—revenue which all came from the sale of oil—and yet the price of oil was continuing to go down.
And this sort of climaxed in 1971, when president Nixon of the United States unilaterally withdrew from what's called the Bretton Woods system. Aimen, You're a banker. Describe the Bretton Woods system.
Aimen [laughs] Well, the Bretton Woods system is a system that—since 1944, like in about 45 countries around the world adopted this—which is that the US is the custodian of the world's gold reserves. And because of the fact that the US also possesses of its own, like in a considerable gold assets, that the dollar is already tied to the gold. I think it was about maybe, um, 35 dollars per ounce of gold—or 20, it depends on the convertibility—but basically the dollar was worth its weight in gold
So as a gold backed currency, the rest of the world will adopt it as the reserve currency. So the dollar was strong and was stable generally throughout the Bretton Woods Agreement life from 1944 all the way until 1971. However, as you said, Thomas, in 1971, with the pressures of the Vietnam War and the huge expenditure of the American treasury, President Nixon instructed the treasury secretary to suspend—according to him at that time temporarily, nothing temporary about what they do with money, so...
Thomas [laughs]
Aimen ...but temporarily—suspend the convertibility of dollar, you know, into gold. And that's it. Suddenly we moved from the asset backed currency to the era of the fiat currency.
Thomas And the immediate consequence of this was that the dollar collapsed in value in terms of its international convertibility. Now, the petrostates were really thrown into hot water here.
They were paid in dollars for their oil. So you— The oil was bought and sold in dollars. So suddenly, the value of their national income also collapsed. They were developing. They were spending a lot of money, but suddenly they couldn't buy as much with the money that they had. So they freaked out, and OPEC began a number of high-stakes meetings, by now covered extensively in the media, with the goal of increasing the dollar price of oil.
So this is what they had initially hoped to do in 1960 when they founded the organization. But now they really, really need to increase the oil price. And the date where this really comes to a head is the 16th of October, 1973. OPEC convened in Kuwait to announce its first unilateral increase in the oil price.
But what is interesting, Aimen, about that date? What else was happening on the 16th of October, 1973?
Aimen Ah, yeah. 16th of October, 1973 was the 10th day of the Yom Kippur War.
Thomas That's right. The previous week, the Yom Kippur War had broken out. Now, King Faisal, he was very anti-Zionist. He was very pro-Palestinian.
And even before the war, King Faisal had been using oil for diplomatic leverage, trying to convince the US to end its support for Israel.
Aimen In fact, Thomas, in August of 1973, both President Sadat and King Faisal met in order to discuss that, should war break out between Israel and Egypt, that Saudi Arabia would actually come to the aid of Egypt using oil as a diplomatic weapon.
Thomas As you can see, there were these two goals. OPEC wanted a higher price, but most of OPEC also supported Palestine. And these two goals became mixed in October of that year. And three days after announcing the price increase, on the 19th of October, OPEC launched an oil embargo on the United States and a few other countries. This caused what's known as the "oil shock".
Aimen Oh, yes, of course. You see, the development that we talked about in the 1960s caused, especially in America, the emergence of the sprawling suburbs, which means that American families depend on what, on the automobile, to get to their work. And of course, the global trade and the globalisation meant that, you know, the need for oil and the dependence on oil was so much that this shock caused the three days working week in the UK, supermarket shelves to be empty, for the long lines of cars trying to get petrol to fill up their cars so that people can go to their work and their businesses. It was a shock that never been seen before in the West.
Thomas The price of oil—especially in the United States, but Europe and elsewhere—went up. Over the next few months, it tripled. The numbers involved are low compared to modern standards, but at the time, people really felt this in the pocketbook. It was creating political backlash, and the Americans were forced to respond, especially Henry Kissinger, the United States Secretary of State. And he embarked on what's known as shuttle diplomacy. He was constantly flying between the Arab countries and America and Israel, trying to find a solution to the problem. In that shuttle diplomacy. Zaki Yamani was a key player.
Aimen Zaki Yamani was actually acting as both, uh, Oil Minister and Foreign Minister during the Kissinger, you know, shuttle diplomacy. Talking of Kissinger, actually, like, it reminds me of a joke. [laughs]
Thomas No— Oh, no.
Aimen [laughs] I know, I know. You know, we mentioned Nixon. They say, "What are the similarities between Nixon and Bill Clinton?" And it's here: that Nixon couldn't stop Kissinger, while Clinton couldn't stop kissing her. Although the—
Thomas [laughs] Oh, what—
Aimen [laughs] could refer to hundreds of polit—
Thomas Aimen, that was another dad joke, man.
Both [laughter]
Thomas Right. I mean— [laughs] So kissing her – I'm sorry – Kissinger's shuttle diplomacy—
Aimen [laughs]
Thomas Kissinger's shuttle diplomacy, in the end, worked, and on the 17th of March, 1974, the oil embargo was lifted, but the – the damage was done from the point of view of the oil price. It never really went back down to as low as it had been in the '60s.
And so the era of – of more expensive oil began, and we live in that era to this day.
Aimen This is what happened. I mean, and yet, despite the fact that since the prophecy of the 1970s, "oh, renewable energy will kill oil; oh, there will be peak oil", we've been achieving this peak every decade since the 1980s.
Both [laughter]
Thomas King Faisal emerged from the oil embargo a hero across the worlds of Islam, even across the worlds of left-wing politics. His reputation as a Palestinian supporter, as a supporter of the cause of Muslims, was at a real all-time high. He – he became an iconic figure in the Arab world.
Aimen Indeed. And of course, like, I mean, he was regarded as the man who took the necessary action. He put the Palestinian calls ahead that of the Saudi treasury revenue, basically.
Thomas And his ability to do this was empowered by the existence of OPEC. This organization, where the – the leaders of petrostates could come together and adopt a common position on things like oil production levels and the oil price.
So without OPEC, there wouldn't have been any oil embargo, and without any oil embargo, we might be living in a very different world today. King Faisal's reputation, very high in March '74. Which is why the world was shocked one year later when he was brutally assassinated in cold blood by his nephew—another nephew, in fact, the brother of the young man who was killed while protesting the introduction of TV into Saudi Arabia, his brother—Prince Faisal bin Musaid shot King Faisal dead during a majlis, during a session where he was greeting people including, in fact, the Kuwaiti minister of oil at the time. Prince Faisal bin Musaid killed King Faisal, uh, really bringing to end an illustrious reign.
Aimen Absolutely. You know, the country went into a shock. The whole world went into a shock when that happened, and what even makes it more shocking is that Prince Faisal bin Musaid was not exactly like, you know, the assassins type. Yes, he was the brother of the prince who was killed during the TV riots, and he harboured, you know, traditional tribal vengeance, but he was a happy—smoking hashish like, no, I mean, I'm—
Thomas Yeah. That's – that's the interesting thing. The difference between the two brothers, you know. Prince Khaled bin Musaid who was very archtraditional, very Muslim, very much, uh, animated against the introduction of TV. His brother, prince Faisal travelled to America where he studied. He lived in San Francisco for a time. He was arrested in Colorado for selling LSD. you couldn't be more hippie. You know, he lived in Beirut for a while, and they say that he there came under the influence of Gaddafi's ideas and maybe have been radicalized a bit. You know, in fact, you look him up—much is said about prince Faisal bin Musaid about his motives for killing his, uh, uncle, the King. Perhaps we'll never know, because he know— he was arrested, and he was executed. We may never know.
Aimen For me, I don't believe any conspiracy theories, like, and I mean, I believe that it was pure in a desire for vengeance, uh, for his brother, because, you know, he was his full brother. Khaled was his full brother. And in fact, their mother was from a Rashid family. Rashid family were the clients of the Ottomans who the House of Saud toppled. So the sense of vengeance, and it was there, because his mother told him, "I will never talk to you until you take the vengeance of your brother." It's a very Bedouin drama, unfortunately, and you know, King Faisal paid for it with his life, although he never deserved it.
Thomas Yeah. The story of King Faisal's assassination at the hand of his – of his nephew in vengeance for the killing of the other nephew by the police, I mean, it's a kind of swirling, symbolic matrix of, you know, modernisation versus tradition, Islam versus left-wing politics, tribal justice versus Islamic justice. It's great drama. It would make a great, uh, HBO series.
Aimen Indeed.
Thomas So so long, King Faisal. You know, standing next to the king was Zaki Yamani himself. You know, when Faisal was shot, Zaki Yamani was standing next to him, along with the Kuwaiti oil minister. And, you know, in fact, uh, they must have been born under an unlucky star, these two, because only what, like eight months later in December of '75, the 21st of December, while Zaki Yamani, the Kuwaiti and all the oil ministers of OPEC were convened in Vienna at OPEC headquarters, a commando squad led by the infamous terrorist Carlos the Jackal stormed the meeting and took them all hostage.
In fact, Carlos the Jackal, a Venezuelan, and a foot soldier in the cause of the international revolutionary movement, burst in on the meeting, took the OPEC members hostage. You know, it – it was a big story. It – it made the front pages of every newspaper.
Aimen Indeed. I mean, it was very funny, the whole thing, how it happened, like, and I mean the— Carlos and his five accomplices, you know, they went into the building and they went to the reception. They said, "Is the meeting still going on?" They said, "yes", like in the reception. "Where is it?" "Oh, the third floor." "Okay. Thank you so much." They went ahead...
Both [laughter]
Aimen ...with all their bags full of [laughs] machine guns. They were actually waved, you know, nicely, like in– by the reception to go up.
Thomas Yeah. We're laughing about it. Aimen, but I don't think that the – that the OPEC ministers were laughing about it.
The terrorists split them into three groups, and I think it's really revealing. So the terrorists split the OPEC delegates into three groups: progressives, reactionaries, and neutrals.
Let's start with the neutrals. The neutrals were the Indonesians, the Nigerians, the Gabonians, the Ecuadorians, and the Venezuelans. So they were neutral. You know, a lot of Africans, a lot of Southeast Asians, a lot of – a lot of South Americans.
The progressives were Iraqis, Algerians, Libyans, and Kuwaitis. So these were, you know, pro-Palestinian, unimpeachable, you know, left-wing supporters of the cause of revolutionary socialism globally.
But the reactionaries. Can you guess, Aimen?
Both Saudi Arabians, Iranians, Iraqis.
Thomas And Qataris. So they were separated out. Zaki Yamani was among them, and Carlos the Jackal informed him and the others that they'd been sentenced to death. What was their crime? Being Washington puppets and traitors to the Palestinian cause. It's like that – that mentality that we talked about in the Gaddafi episode is there—landed right in the room.
And the Arab world is split between progressives and reactionaries, and the progressives they want to kill. [laughs]
Aimen Exactly. In fact, the Kuwaiti oil minister who was there—you know, present at King Faisal's assassination and now at, you know, this hijacking, you know, and the kidnapping of the, uh, oil ministers of OPEC—he said that Carlos came to him and asked him, "Hey, where you from?" "Kuwait."
He looked him in the eyes and he said, "Kuwait. 50-50. 50 neutral, 50, you know, uh, friendly. Mm. What am I going to do with you. Go with, uh, you know, progressive. It's okay. It's Fine. You go with them."
So it was really nerve-wracking. Carlos and his accomplices—some of them belonged to the, uh, Popular Front for the Liberation of Palestine, or the PFLP—took the hostages to an airfield in Austria where a DC-10 airplane was waiting for them, you know, based on the negotiations they had with the Austrian authorities, and they crammed all the hostages there.
Uh, they released some of them, of course, the – especially the friendlies, and they took the neutral and the hostiles—you know, the traitors—and they flew all the way to Algeria there to release the Algerian delegation. In Algeria, they changed airplanes, and they went all the way to Libya where they released Libyan delegation. And most likely got their money because who actually, you know, paid them?
Both [laughter]
Thomas Oh, of course it was our favourite president ever...
Aimen Yeah.
Thomas ...Colonel Gaddafi.
Aimen Oh, remember he was never a president or...
Thomas Sorry, sorry.
Aimen ...or anything.
Thomas Brother Leader.
Aimen Brother— The Brother Leader. Like, I mean the King of Kings of Africa— Anyway. So, you know, Gaddafi paid them about $50 million. They flew back to Algeria, because they wanted to fly all the way to Yemen, you know, and from there, you know, they wanted to fly to Iraq, you know, but their plans never materialized. They went back to Algeria, and there in Algeria, the negotiations between them and president Houari Boumédiène, as well as al-Tariki, who was there by the way, our friend Abdullah Tariki
Thomas Abdullah Tariki, the old Saudi oil minister, yeah.
Aimen Yeah. So it's like, "Okay, you know, my successor is a hostage in that airplane, you know? So—"
Thomas [laughs] Zaki Yamani. That is funny. Isn't it? He's there—
Aimen Yeah.
Thomas He's there under death sentence by Carlos the Jackal, and the guy he overthrew is standing there negotiating for his life.
Aimen Indeed. So there were two principal negotiators. I mean, the main one is the foreign minister of Algeria at the time, Abdelaziz Bouteflika, who would later become the president of Algeria, you know, after his death—
Thomas We're going to talk all about this in our episode on Algeria later on the season.
Aimen Indeed. So Abdelaziz Bouteflika, you know, and with the help of al-Tariki, they started negotiating with Carlos and they said, if you kill anyone— because they heard them, you know, on the listening devices, that they were going to kill the, um, Iranian and the Saudi oil ministers, because these two in particular Gaddafi wanted dead. So Houari Boumédiène and Bouteflika and al-Tariki told Carlos, "If you kill anyone, it's going to result in a bloodbath."
Thomas You say that Gaddafi wanted them dead. And it's important, I think, to point out that, uh, when the oil embargo was lifted in '74, only one country opposed the lifting of the embargo: Libya.
Aimen Absolutely. So this is, I think, when Carlos realized that, you know what, I have the money I have, like— I achieved what I wanted, you know, notoriety and everything and all of that, So how about like, and I just leave with the money. And so he, and the rest of the accomplices accepted, you know, the terms, which were very generous by the Algerians. They will be left alone, No– nothing will happen. No repercussions. And everyone was released. And this is how the 46-hour drama of the, uh, OPEC hostage crisis ended.
But it really, again, shook the world.
Thomas It did shake the world. It sort of, I think, represents the high-water mark of OPEC, the hostage crisis they'd seen through the oil embargo. They had finally managed to inaugurate the era of a high oil price. And they were—
Aimen I wouldn't call it high oil price. I would say reasonable oil price, Thomas. I truly believe it was reasonable.
Thomas Reasonable oil price, perhaps, Aimen, yes, but of course that's subjective .
Aimen [laughs]
Thomas But so, you know, but OPEC had sort of succeeded, at least briefly, in its ultimate aim, and there it was on the front pages. It was being held to ransom—quite literally—for massive geopolitical facts, for the fact of the world not embracing international socialism, for the fact of the Palestinians being mired in oppression, uh, all sorts of things OPEC is being held responsible for, and that's the high-water mark of OPEC.
And it, it really brings to a close our journey about, you know, what OPEC is, where it came from, who started it, And for what reason. it also leaves us in a really good position to move on to what we're going to talk about next week, the Iranian Revolution, because the '70s in Iran, uh, fuelled— The '70s in Iran were a period of great boom and bust fuelled to some large extent by the fortunes of the oil price.
So that'll be, uh, in our next episode. For now, Aimen, I want to talk about oil, and I want to talk about modernisation and modernity. I came across— Well, many years ago, I came across the famous Hadith of Najd and it says, "Oh, Allah, bestow your blessings on our Syria. Oh, Allah, bestow your blessings on our Yemen. The people then said, 'Oh, messenger of Allah, and our Najd.' And the third time, the Prophet said, 'In Najd will occur earthquakes, trials, and tribulations, and from there will appear the horn of Satan.'" [laughs]
A lot of Muslims today who are opposed to the – the development that has occurred across the 20th century in the worlds of Islam think that that "horn of Satan" is the black gold from underneath the Arabian sands, which, uh, uh, have – have enriched the Saudis, empowered them in the ideas of these critics, pervert Islam, uh, debase it, vulgarize it, all the sort of things that the Saudis are accused of doing. You're going to say, "That's all rubbish, uh, Thomas. These people don't know what they're talking about", but there is something to be said about the tremendously transformative effect that oil has had on countries like Saudi Arabia and, you know, not all of them good.
Aimen Yes, Thomas. It was all rubbish
Both [laughter]
Aimen And I tell you why, first of all, that Hadith you quoted, you know, is incredibly disputed in its authenticity because neither Syria nor Yemen actually were part of the Prophet's domain at that time.
And there were not many Najdis, you know, basically around the Prophet to say, "oh, what about our Najd”, like I mean, basically like, and I mean, Najd, you know, was highly like, you know, featuring in The Prophet's narration or talks or statements. The second thing is that it says that Najd will have tribulations and earthquakes. Najd is never basically on a tectonic fault plate, so there are no earthquakes in Najd whatsoever.
Thomas You could have a miraculous earthquake. Aimen..
Aimen [laughs] Yeah But then there is other thing is that some even scholars of Hadith said, well, I mean, there was the Wars of Apostasy, which happened in Najd immediately after the death of the Prophet Muhammad. So this could have been like, you know, the fulfilment, and that's it. It's done.
Thomas Anyway. So, okay. The Hadith isn't valid.
Aimen Yeah.
Thomas Uh, the horn of Satan, isn't the – the oil wealth of Saudi Arabia. But what about the main contention? Oil in general. Is it, in fact, a work of the Devil? I mean, look. It's black. It stinks. It comes from deep under the earth. It burns. And it has empowered consumer culture. It has empowered environmental degradation. It has empowered the superficiality that sort of pollutes all of life today as we just think about how to improve our material situation, our— increase our pleasure, all those things. Isn't that all the domain of Satan, and it – isn't he fed on that black, stinky pitch from underneath the ground?
Aimen [laughs] Ah, goodness. Okay. Your puritanical streak never cease to amaze me, Thomas.
Both [laughter]
Aimen Look, I would go as far as saying that oil and the discovery of oil in the Middle East and Latin America and all of that basically have caused the greatest transfer and redistribution of wealth and knowledge from the West and from the Global North to the Global South and to the East. No commodity has ever caused that evening of the playing field between the nations of the Earth, because if the oil remained or if the oil was only the domain of the West, you know, Arabs will still be living tents and Latin Americans will still be pastoral, and there will be no development whatsoever and no transfer of wealth or knowledge.
Therefore, I always tell, you know, Westerners in particular who talk about the corrupting influence of oil, I will say, "The problem is you Westerners. You always look down on the Arabs and want them to be always these odd curiosities, living in tents, like, just for your amusement and pleasure. No, our time has come."
Thomas Ooh, well, that's very ominous, Aimen
Both [laughter]
Thomas But – but you know, also I'm not saying that, you know, I want the West to be living high on the hog and the rest of the world to be down in the dumps. You know, I – I'm just suggesting that this ceaseless drive for industrial modernity has caused us to throw out some things that were valuable, maybe more valuable than ease and material plenty. Maybe. It's not puritanism. It's not puritanism. It's just, uh, you know, a slightly religiously inflected nostalgia, let's call it.
Aimen Yes. I – I was going to say the word "nostalgia", actually, here. I mean, and I – I don't fault you for it. I mean, there is no question that your years as a monk more or less influenced your [laughs] desire.
Thomas I wasn't a monk. I was a novice monk.
Aimen Okay. [laughs]
Thomas I didn't take the plunge
Aimen Yeah. But, you know, influence your desire for ascetic and authentic, you know, uh, life, and I admire you for it. The problem is the world is not made of Thomas Smalls and Aimen Deans, unfortunately. The world is made of people who are always—from the dawn to the dusk—they are in pursuit of material gain in order to better their lives, you know, and the lives of their offspring. So what do we do with a world that is more or less trying their best in order to achieve what is good for their, um, you know, livelihood.
Thomas I mean, put a divinely elected leader over them to keep them down in the – in the – in the gutter, surely. [laughs]
Aimen Yeah, but you know, the – the second coming of Jesus is not due for a while, man.
Thomas Are you suggesting that Jesus is going to put his boot on the necks of the poor?
Aimen [laughs]
Thomas You need to read a book, my friend.
Anyway, that's it for this episode of Conflicted, dear listener. I hope you enjoyed it. I hope you understand a little bit more about the world that we live in, uh, and, uh, the role that oil and OPEC has played in it. We'll be back with you in two weeks' time for, uh, our next episode. This one, a big one: 1979, the Iranian Revolution. Stay tuned.
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Conflicted is a Message Heard production. This episode was produced and edited by Bea Duncan. Sandra Ferrari is our executive producer. Production support and fact checking by Talia Augustidis. Our theme music is by Matt Huxley.