1869, Ep. 108 with David Wight, author of Oil Money

7:37PM Aug 11, 2021

Speakers:

Keywords:

united states

middle east

petrodollar

saudi

saudis

arab

1970s

arab world

money

oil

saudi arabia

book

rumsfeld

iranian revolution

petro dollars

iran

oil prices

donald rumsfeld

projects

iranian

Welcome to 1869, The Cornell University Press podcast. I'm Jonathan Hall. This episode we speak with David Wight, author of Oil Money: Middle East Petrodollars in the Transformation of US Empire 1967-1988. David Wight is Visiting Assistant Professor of History at the University of North Carolina at Greensboro. We spoke to David about how the sheer number of Arab and Iranian petrodollars in the 1970s and 80s inspired the interest and even the awe of many Americans; what new and interesting information he uncovered from declassified governmental records and popular Arab and Iranian media; and the radical proposal that then White House Chief of Staff Donald Rumsfeld made in 1974 for a truly unique collaboration between the United States and the oil exporting countries of the Middle East. Hello, David, welcome to the podcast. Thank you for having me. We want to give you a hearty congratulations on your new book, Oil Money: Middle East Petrodollars in the Transformation of US Empire 1967-1988. I was thinking of your book actually, just a couple months ago, because I saw that Donald Rumsfeld had just passed away back in June. And he actually is featured in the beginning of your book. Tell us the story that's featured in the beginning of your book.

Sure, yeah. I mean, many of the people in this book are at least some of them are still alive or recently passed like Donald Rumsfeld. And I should just foreground that petrodollars dollars. What I mean by or what is meant by petrodollars, is the wealth that is generated the revenues that is generated from the sale of oil. So the book is looking at what do countries like Saudi Arabia or Iran or Iraq? Do when they start getting a lot more money in the 1970s? When the price of oil skyrockets? And how does the United States respond to that, and Donald Rumsfeld in 1974, was Chief of Staff for President Gerald Ford. And he proposed to the National Security Council, his idea of how the United States could try to steer the flow of these petrodollars in the Arab world in a way that would be beneficial to the United States. And what he came up with was to propose or offer to the Arab countries, the opportunity to spend tens of billions of their Petro dollars on a joint us Arab space program to develop a space shuttle that would be jointly manned by American and Arab astronauts. And you have to remember that this is in the 1970s. A billion dollars was a lot of money back then. But Rumsfeld in the memo where he proposes this to the NSC, he's like, well, they're just trying to find some use for this money, they have so much money coming in, that they're just looking for ways to spend it. And Rumsfeld was convinced that this joint project would not just get money back into the United States, but that it would have all these sort of beneficial side effects in US Arab relations, that this would steer Arab energies in ways that would get them closer to the United States rather than being opponents of the United States. Through this cooperation in launching a space program, you would get person to person ties, governments would be able to sort of champion the idea of national pride by going into space rather than confronting Israel. He thought that it would modernize Arab societies. And he assumed and he states this in the document, he argued that it would be much harder to make reactionaries of a educated technician than it would be of a, as he put it a quote unquote, camel herder. And so he had all these assumptions of how modernization by using the money it would bring a lot of money back into the US economy and to the US government, but it would also make the Arab world a better, more stable partner for the United States. Now, this project never got taken up by anyone. As far as I can tell, Rumsfeld was the only one who was excited about this idea. But in many ways, it is in keeping with the spirit of many Americans, both in government and in business of what they wanted to see the Arab world as well as Iran do with their Petro dollars. They wanted to find joint projects that would bring these petrodollars back into the American economy, and have the Arab world in Iran use that money for projects that the United States or Americans assumed would be beneficial for American political and economic interests. Fascinating.

It's an amazing story and illustrates so well, the the central premise of your book, and you were mentioning petrodollars - I'm looking at in your book here, you're saying that the projected Arab balance of payment surplus, just in 1974, alone, was $50 billion, nearly nearly $200 million a day was going over to the Middle East or North African countries. So seriously a lot of money that that was very dazzling to the west. So tell us in more depth, how did petrodollars transform Middle East us relations during this time?

Yeah. So what I argue in the book is that petrodollars, the rise in wealth in the Arab world in Iran, basically causes a transformation or shift in how us power operates in the Middle East, and the role of the Middle East and us Empire globally. And what I mean by that is before the 1970s, say, the the 1950s 1960s, the primary purpose of the Middle East, as far as the United States was concerned, was providing cheap oil for the global capitalist economic system. And in 1973 1974, oil prices quadruple. And the Middle East is no longer serving that purpose, all of a sudden, they are providing oil, but it's very expensive oil. And so instead, you see the shift where the Middle East is now you key allies in the of the United States in the Middle East, particularly Saudi Arabia and Iran under the Shah. before the revolution. Those two countries become key to the United States, not by providing cheap oil, but by using their petrodollars in ways that both the United States and their middle east allies think will be beneficial to each other. So for example, Saudi Arabia becomes a major lender to the US government, a major investor and depositor to Western financial institutions, US banks, and in 1974, the Arab countries are the single largest source of new international bank deposits. So they're critical for keeping global liquidity for keeping global capitalism running. This is something that the Middle East had not served before. But now all of a sudden, they're key to the international financial system, not just international oil supply. And so there's a lot of examples where the use of these petrodollars becomes key to different us businesses or to the US government. And they're often these very grand, you know, the largest of the largest. So you have the world's biggest engineering project get underway building a giant industrial city in Saudi Arabia in Jubail. You have just one record after another broken by first Iran, and then Saudi Arabia for arms purchases for some of the most advanced weapons that the United States has just developed things like a wax spy planes. And you also have the Saudis using their petrodollars to fund the largest ever CIA operation, which was arming the Mujahideen in Afghanistan against the Soviets in the 1980s. The Saudi government matched dollar for dollar whatever the United States government would give to the Mujahideen. And they gave even more in sort of private donations from Saudi Royals and wealthy citizens. And so in a variety of different ways for both global capitalism for fighting the Soviet Union and its allies in the Cold War. Middle East allies with lots of petrodollars become a key source of financing for these us projects.

Interesting, interesting. Tell us how you got interested in this topic and what type of research you did.

Sure, so initially, I knew I wanted to look at the period of the 1970s and us Middle East relations, but I wasn't entirely sure where to go beyond that. I was interested in the 1970s both because there were so many Clearly so many important changes going on in the relationships between the United States and the Middle East. And there was also a lot of archives opening up so new records to look at. But I wasn't sure where to go there, I wasn't entirely sure how to explain many of the shifts or changes that were happening. And as I started to do more research, one of the things that I noticed was there seem to be a lack of study on on how economic changes were impacting the US Middle East relationship, not to say that there hadn't been any work, but that much of the more recent scholarship was focused on diplomacy of a traditional nature. And I was curious to see more about how economic factors, how groups that sometimes get left out is the story like the US Treasury Department, what was their role in many of these shifts. And as I started digging into the archives, what I found is that it wasn't just the Treasury Department, if you look at the State Department, if you look at the NSC in the United States, or if you're looking at the IMF, the World Bank, or if you're looking at the government's in the Middle East, everyone was very concerned about how these petrodollars were going to get used. You could see it in the public media at the time as well, both in the Arab and Iranian presses and the American presses. In films and television series, this was a major not just economic phenomenon, or events, the rise of petrodollars to the Middle East. But it was also really important in geopolitics, and it was very important in popular culture in both the West and in the Middle East, of how each other's each society was understanding each other are coming to think of each other, as you have this emerging globalization that is making these two regions far more interdependent, far more in contact. And so I became very interested in exploring this on both the economic, geopolitical and cultural level. And one of the things that I particularly liked about this topic as well is that it lent itself to looking at Arab and Iranian media sources. So that meant, you know, many of the archives, official archives, governmental archives for the Middle East are not open to scholars, but the public media, the newspapers, the speeches, the film's those things are available. And so in that way I could incorporate Arab and Iranian perspectives and voices into this history.

That's great. Yeah, yeah. I saw that your research tapped into these new sources, popular Arab Iranian and US media, but also declassified governmental records, what were some of the highlights of your research and with these new sources?

Well, probably the most exciting document official record that I found was when I stumbled upon the Rumsfeld memo, proposing the Arab space program, I had a very, very large smile on my face at the Ford Presidential Library when I came across that one. But another set of records that I was really excited to find actually turned out to be political cartoons in the various Arab presses. And some of the ones from Saudi Arabia or from Saudi newspapers, were particularly fascinating to me, and kind of captured both the sense of excitement, but also anxiety that much of the Arab world felt about their newfound wealth. And to give you an example of each and both of these come from late 1978, early 1979. So right about the time that the Iranian Revolution is occurring, and oil prices are going even higher. So the Saudis are just getting even more money than even just a few years earlier for after the first shock and 7374 and 7879. Prices are even doubling or more over that. So just unprecedented amounts of money for the Saudis. And in one Saudi newspaper. There is a cartoon where there's two Saudis in men in very traditional dress and they're looking at another man who is dressed in like very stereotypical disco garb, and he's standing next to a Rolls Royce. And the two Saudis who are traditionally dressed one is saying to the other, truly believe me, that guy, the guy in the disco outfit, he is the Saudi citizen. He is he's a management specialist of major national companies. And that kind of spoke to this idea of like, are the Saudis or the Saudi people, and especially the younger generation, are they being changed by all these Western influences, and is there's kind of a hint of fear of maybe they're being corrupted or maybe they're becoming something we don't recognize that they're, they're not really Saudi, or we don't recognize them as Saudi anymore. And so that kind of spoke to the the cultural anxiety, which I think is notable in the context of the Iranian Revolution, where many people in Iran at that moment, are very angry about the sense that petrodollars are being used to kind of CO OPT or buy out their culture or take away the national sovereignty. But then there's another cartoon just a couple months later in a different Saudi paper that depicts two families, and one is the Saudi family, and one is a British family, and the Saudi family. There's a husband, a wife, who is pregnant, and the wife is holding a baby. And then they have like seven more kids behind them. So they have a very large family. And then the British family is looking very dour and this just kind of the sad looking husband and wife and a sad little kid, they only have one kid. And the Saudi husband says to his wife, rather cheekily, and I'm quoting here, he says they have an energy problem. So they're making this reproductive pun that, you know, the West, they have an energy problem, they don't have energy, they don't have oil, their economy is stagnating. And so they're not producing anymore. So they just have one little kid. Whereas the Saudis, you know, they have all this energy, they have the oil, they have the money. And so they're growing. They're growing their family, they're growing their country. And that kind of shows the the sort of pride and sense of optimism for many Saudis, that they're getting all this unprecedented wealth, they can use this to maybe even, you know, surpass the West. So there's this interesting dichotomy there of both fear and hope from petrodollars, what I titled one chapter, visions of petrodollar promise and peril. And you see this also in the United States, both big hopes that Petro dollars can be used to do great things for both the United States and the Arab world. But also many Americans and other Westerners voicing great fear that maybe the Arabs or Iranians will use this money to harm American interests or values. So it's interesting that both sides kind of mirror this dichotomy.

Wow, thanks for sharing those stories. Yeah, this is a history that I love of just seeing different cultural perspectives on the same type of issue. So seeing what the Americans reaction, as well as the Saudi and Iranians reaction, and how different they are. And also, as you were saying, how they mirror one another, but particularly, you know, fear of change, I can't even imagine the amount that again, the amount of money that we're talking about here in just a very, very short period of time, and how that can create serious conflicts within a society that's not used to such radical change in your this history of yours is, is, you know, on the cutting edge of when this when petrodollar has suddenly become, you know, a really big thing. And it goes up to just about the beginning of the end of the Cold War. What are some of the historical ramifications of this time period that you see in the news today, when you're looking at headlines or looking at the region?

That's a great question. And I think there's two ways I look at it. One is the legacies of this period in the 70s and 80s, that we can see carrying forward or impacting to the present. And I kind of outline in the conclusion how many of the issues that the world faces, the both the United States in the Middle East and the larger world faces after 1988. Many of them stem from these new structures that get created in a period of high petrodollar wealth because oil revenues dropped significantly in the late 80s. And so the petrodollar is kind of dry up in many ways, but many of the structures carry forward and those range from the Mujahideen And individuals like some of Bin Ladin, who, in many ways, got their training and experience in Afghanistan because of petrodollars. They're still around, and they, Osama Bin Ladin talks quite a bit in his speeches about how he's angry about how the Saudis are using their wealth in ways that are, in his view, corrupting Arab culture, that they have banks that use interest that he believes, you know, this is against Islamic law. And so many of the sort of unexpected or inadvertent outcomes of the use of petrodollars, this was not something that the the Saudi government or the US government wanted or anticipated, but it helped to contribute to the anger of individuals, like Osama Bin Ladin. And is one of the thing that spurs Islam of his Islamist opposition to the United States, in in the Middle East, and sometimes in very violent forms. But it also is something that and we see that also, particularly in the Iranian Revolution, as well. And so the poor relationship between the United States and Iran, since 1979, is in many ways rooted in petrodollar legacies, but also, alliances, particularly between, say the Saudi government and the United States have persisted in large degree because of the petrodollar ties that were forged in the 1970s 1980s. There were a lot of different issues that brought the United States and Saudi Arabia into conflict, whether it was the Arab Israeli conflict, whether it was oil prices, there were a lot of things where they disagreed fiercely and potentially you could have had the Saudi us Alliance rupture during this period, I argue, but petrodollar projects was one of the ways that help keep that Alliance together and going through the 70s and 80s, up to the present. So in many ways, we see the legacies of this period carrying forward to the present. But we can also see many analogies between things that are happening in the present, and the period of the 70s. And so, in recent years, we've had ups and downs in oil prices, but some of them are big ups, big rises in oil prices, where you have a lot more petrodollars, once again, going to countries like Saudi Arabia, and the Saudis once again, purchasing some of the largest amounts of arms in history from the United States. So you can see a lot of analogies between what was happening in recent years and the slightly more distant past of the 1970s and 1980s.

Excellent, excellent. That all makes sense. Well, thank you so much for sharing. You know, again, this is the tip of the iceberg for what's in your book, but you've shared some very fascinating stories and fascinating history of this time period. So again, the book we're discussing David Wight's new book,Oil Money: Middle East Petrodollars in the Transformation of US Empire 1967-1988. Thank you so much, David, for joining us and discussing your new book. Thank you. Take care. That was David Wight, author of Oil Money: Middle East Petrodollars in the Transformation of US Empire 1967-1988. If you'd like to read his new book, visit our website at Cornell press.cornell.edu and use the promo code 09POD to save 30%. if you live in the UK, use the discount code CSANNOUNCE and visit the website combinedacademic.co.uk Thank you for listening to 1869, The Cornell University Press podcast.