The Age of Energy
The war in Europe had only been over for a few months when first President Roosevelt traveled to meet a world leader he might not have given the time of day to just a few years before - Saudi King Ibn Saud. There is no official record of what Roosevelt and the Saudi king discussed, but a number of accounts assert the US president promised to guarantee Saudi national security (not least from Great Britain whose imperial traits Ibn Saud had a particular dislike for) in return for continued and preferential access to Saudi oil. The potential prize was huge – in 1939, Standard Oil of California along with Texaco had struck Saudi oil. The companies had agreed a 60 year concession with Ibn Saud covering 440,000 miles, one sixth of the continental US. Now, geologists at the newly formed Saudi-American Oil Compnay, Aramco, confirmed there was more oil underneath the Saudi sands than in the whole of the United States.
The US and Saudi Arabia had good reason to be concerned. The world was divided into two camps and Middle East oil was caught in a superpower struggle between the US and the Soviet Union. As Daniel Yergin describes in The Prize, his sweeping history of the oil industry, the US believed that “The Middle Eastern oil fields had to be preserved and protected on the Western side of the Iron Curtain to assure the economic survival of the entire Western world.”
In 1940, America had accounted for two thirds of all global oil production. But the immediate post-war years saw an enormous growth in world oil demand and, while the US could still meet most of its own domestic demand, Saudi oil soon became an important part of the Marshall Plan to bail out Western Europe. US president Harry S. Truman wrote to the Ibn Saud in 1948, “No threat to your Kingdom could occur that would not be a matter of immediate concern to the United States.”
Socal and Texaco had won the right to develop Saudi Arabia’s oil industry but they quickly realized that the task was so immense that they needed outside help. The companies that Socal and Texaco reached out to were Exxon and Mobil.
The entry of Exxon and Mobil into Saudi Aramco signaled the end of the Red Line Agreement but it also allowed all the US and European majors to put aside their rivalries and protect their mutual interests in the Middle East. United, they could shut out other oil companies from lucrative contracts and also control Middle East oil output. So successful were they in this strategy that they earned themselves the enmity of other independent companies. They also picked up a sardonic nickname to describe their cozy realtionship, the Seven Sisters. Through the multi-decade sweetheart deals signed in Iraq, Iran and Saudi Arabia the Sisters (Exxon, Mobil, Shell, BP, Texaco, Socal and Gulf) would transform themselves into the greatest multinationals in the world. For a time, they would be more powerful than the countries whose oil fields they were drilling.
The US government let the four Aramco members act as de facto US ambassadors to Saudi Arabia, not least because the US government was a strong supporter of the new state of Israel, a position the anti-Zionist Saudi King abhorred. Despite their disagreements over Israel, both the US and Saudi found common cause in a greater concern: the Soviet Union’s own territorial ambitions in the region. And this wedded US foreign policy even more closely to the business needs of the major oil companies. So while back in the states, the companies were fighting tooth and nail against the government over new antitrust and price fixing charges, abroad they were America’s eyes and ears in what was becoming the most influential region of the world. This blurring of business and diplomacy suited both parties: the oil companies had been negotiating deals in the Middle East since the 1920s and they understood the workings of the region better than the US state department. The companies’ close ties to the US government also enhanced their standing with Middle East governments. Before long though, the perception that the majors were doing Washington’s bidding would come back to haunt them.