Postwar Petroleum Order Rise and Fall Analytical Essay

Post-1945, there emerged an international oil establishment named the postwar petroleum order. Before 1939, the output of petroleum in the Middle Eastern countries was not high and the region contributed only a marginal share to the world petroleum production.

Before the postwar years, British Petroleum (BP) was the dominant player in the petroleum market however, after the war, five American companies broke BP’s monopoly.

This postwar order was characterized by a corporate consolidation of the major oil companies in the Middle East. The primary aim of the order was to maximize the production of petroleum in the Persian Gulf and supply the increased postwar energy requirement of the Europe (Citino 137).

By 1948, United States had become one of the major importers of petroleum from the Middle Eastern countries. The era of Cold War diplomacy saw a rise in the energy requirement of the country, which made the rich oil resources of the Gulf indispensable to the endeavor (Painter “Oil, Resources, and the Cold War” 489).

The oil from the gulf was important as this provided a cheap source to help reconstructing the damage World War II had done on Europe. Further, defending the tattered Europe after the war was essential to guarantee development in the US.

The postwar petroleum order consisted of a tangible infrastructure resource to deliver oil to the European countries. The only infrastructure that supported the petroleum order then was the Suez Canal, and two other pipelines in the Middle East (Citino 137).

The political volatility of the Middle East in the postwar years only created greater problems for the petroleum order. Further, the creation of Israel in 1948 only added to the problems of the order as the Arab League members were skeptical of the Jewish nation and created a state embargo on supplying petroleum to the Western countries.

Thus, the postwar petroleum order, marred by volatility in oil supply due to regional conflict and political condition of the Gulf, was annihilated. Thus, post 1970s the United States under the administration of President Bush started diversifying the oil sources. This ended the postwar petroleum order to bring forth a new order.

This paper probes into the postwar petroleum order. Initially the paper will concentrate on delineating the reasons behind rise of the post petroleum order and the reasons that contributed to their downfall.

The paper will then discuss what the new petroleum order was and the reasons why this order came into being. Then drawing from the reasons of rise and demise of postwar petroleum order, the paper will try to intuitively understand the probable fate of the new order.

Rise and Fall of the Postwar Petroleum Order

One of the key outcomes of the World War II was postwar control over natural resources (Painter, “Oil, Resources, and the Cold War” 486). The prewar and postwar petroleum order saw a marked coalition between the United States and Great Britain to control the production and supply of oil in the market in order maintain stability in the oil market.

In 1944, the two countries were signatories of the Petroleum Agreement, which formally established the joint control over the oil resources of the Gulf. Thus, the emergence of an Anglo-American collaboration created a postwar oil order (Citino 139).

As early as 1933, Standard Oil of California had signed agreement with the King of Saudi Arabia, as the US oil companies were skeptical of the influence of the United Kingdom over the Saudi oil reserves due to the financial constraints of the Arab king.

In 1943, the US government survey pointed out that the Middle East had become the “center of gravity” and the “world oil production” was “shifting from the Gulf-Caribbean region to the Middle East” (Painter, “Oil, Resources, and the Cold War” 493).

Before World War II, the US government provided diplomatic support to the private US companies like Standard Oil Company of California and Texas Company, to receive concession in foreign countries. However, with the end of the war, the US government entered into an agreement with Britain to collaborate and not compete in pursuing the oil resources in Middle East.

However, this Anglo-American oil agreement was opposed by private US companies, who feared would reduce oil prices, due to cheap imports from Gulf due to government intervention (Painter, “Oil, Resources, and the Cold War” 493).

These issues were believed to be strong by a few members of the Congress, which resulted in a return to the Open Door diplomacy where private companies would operate in security, and profitably as government, initiative was limited to indirect involvement with oil matters in the Gulf. However, the US government had to take an active interest in the volatile political situation in the Middle East due to rise in Islamic nations.

During the World War II, Iran was occupied by the erstwhile USSR and the UK. Strategic analysts believed Iran to be vital for both the US and the USSR due to the critical geopolitical location of the country and its abundant oil resources. Right after the war, in the early forties, Iran too wanted to attract US oil companies in order ease the influence of the USSR and Britain.

US on the other hand, wanted to remove foreign influence and military occupancy in Iran, sought to influence the Iranian government to recover the natural resources.

The Truman Doctrine helped the US established its control over the northern region of Iran, Turkey, and Greece, therefore, establishing control over the eastern parts of the Mediterranean and Middle East (Painter, “Oil, Resources, and the Cold War” 495). This helped the country to retain control over the oil resources in the Middle East and prevented the entry of the USSR in the region.

The reason for this political move of the US was vested with two intent – first was to ease off the balance of payment problems of the country through increasing business of oil through US companies in the US, and second, keeping the Soviet out of Middle East thus, establishing control, in order to establish a military base, which can launch an attack on Soviet Russia in the event of a war (Citino 140).

This was the time when there occurred all the “great oil deals” in order to secure the expansion of the oil supply in Middle and Near East.

The result of this was the formation of the private system of an international production management that helped in oil production in Middle East and its incorporation with the global market. The US government strategically gained control over half of the oil share in Middle East by coordinating with the large private oil companies and the oil rich Arab nations.

The postwar petroleum order was a profitable venture for the US oil companies and a political and strategic success for the US until the formation of Palestine in 1947. President Truman supported the UN plan to partition Palestine into two parts and recognize the state of Israel was the first step to offend the Arab partners.

This created an opening for the USSR to enter the Middle Eastern oil industry in 1950 and 1960s. This helped in the expansion of the automobile industry in Western Europe and Japan in between 1950 and 1970 (Painter, “Oil, Resources, and the Cold War” 498).

The main issue with the arrangement of the west with the Middle East arose with the rise of the question of limiting western military capability in the Middle East and the declining power of Britain. The main issue that the US faced strategically was not military threat from the USSR, rather the growth of anti-Western feeling and Islamic nationalism in the Middle East.

This instilled a fear among the US policymakers that this rise of Arab nationalism could facilitate the expansion of the Soviet in the region. Both Britain and the US wanted retain control over the Middle Eastern oil resources for strategic reasons, but disagreed on the nature of diplomacy to be used to counter the rise of nationalism in the region (Painter, “Oil, Resources, and the Cold War” 499).

The US was in favor of meeting the demand of the nationalists of higher share in profits from the oil industry as long as they did not post a threat to the US strategic control and the operations of the private corporate in the Middle East. On the other hand, Britain’s balance of payment was more dependent on the oil revenues from the Gulf and therefore, was reluctant to give into the demand of the nationalists.

The Anglo-Iranian oil venture was critical for Britain as this was its most important overseas investment and the country’s balance of payment was largely dependent on it (Painter, “Oil, Resources, and the Cold War” 499).

United States too shared similar apprehensions regarding the rising Arab nationalism but it was more concerned with the effect the forceful reverse-nationalization in Gulf by Britain would have on the emerging turmoil in Iran (Painter, “Oil, Resources, and the Cold War” 499).

The US believed any adverse move by the British would undermine the position of the Iranian shah enhancing the position of the pro-Soviet Tudeh party, and may result in an intervention from within the region. The nationalization of the Suez Canal by the Egyptian nationalist leader, Gamal Abdel Nasser, created problems for the passage of oil from the Gulf to the West, as the canal was the chief passage for the western companies.

To worsen the situation, Britain along with France and Israel developed a plan to gain control over the canal and avenge Nasser’s action through military retaliation. Due to this, Syria and Saudi Arabia stopped their supply of oil to these countries.

Britain and France believed that the US would help them by supplying oil during the war torn years. However, President Eisenhower refused to provide petroleum to Britain and France and threatened to cut away all aid to Israel if they did not refrain from the attack. This strong pressure from the US government helped to stop the impending war, and major oil companies supplied Europe with oil as long as the canal did not open.

The Suez crisis was a burning example to the western world the rising Arab nationalism posed to the western world. Thus, it altogether was a threat to US plans to rebuild Western Europe with the oil from the Gulf. Nasser pushed the cause of Arab nationalism to gain control of their oil resources and use to further political agenda of the Middle East.

The main aim was to reduce western dominance in their oil resources, economic development of the Arab nations who were not rich in natural resources, and annihilation of Israel (Painter, “Oil, Resources, and the Cold War” 501). The fear was surmounted due the mutual distrust between the USSR and the US.

The latter constantly feared that turmoil in the Middle East would open the doors for the Soviet and their allies to take control over the oil rich region, adding to their military and economic position.

The US was always skeptical of the Soviet influence in the region, and therefore, Eisenhower helped the rise of the conservative Islamists in the region to drive away communism and nationalism from the region (Painter, “Oil, Resources, and the Cold War” 500).

The key rout through which oil was marketed to the Western Europe was through Egypt, Syria, Lebanon, and Jordan (Painter, “Oil, Resources, and the Cold War” 501). For formation of the United Arab Republic through the joining of Syria and Egypt in 1958 only created additional problem to the oil route.

Further, a coup on the pro-west monarchy of Iraq through a nationalist revolution in July 1958 created additional problems. US assumed Nasser’s interference in the coup but refrained from any military retaliation, as it would have destabilized the situation further.

However, the leaders of the nationalist party who helped the coup, agreed to respect the agreement with US and Britain regarding oil supply from the country (Painter, “Oil, Resources, and the Cold War” 502).

Both the western countries sent army to Lebanon and Jordan, to reestablish control over the region (Painter, “Oil, Resources, and the Cold War” 502). However, the possibility of communist control of Iraq and other Middle Eastern countries posed a special problem, especially during the Cold War era.

Iraq posed a threat to the Arab nationalism and garnered support from Britain who viewed Nasser of Egypt as a greater threat. However, the US believed that communist inclination of the Iraqis could pose a greater threat to the volatile condition of the Middle East and by extension to the oil issue of the west.

With the disassociation of General Abd aI-Karim Qasim from the Baghdad Pact and his increasing association with the Iraqi Communist Party created further drift between Nasser and Qasim (Painter, “Oil, Resources, and the Cold War” 502). In 1961, after Kuwait gained sovereignty, Qasim declared that Kuwait was a part of Iraq.

Kuwait being the fourth largest oil producing country was the largest supplier to Britain (Painter, “Oil, Resources, and the Cold War” 503). If Kuwait was to become a part of Iraq, it would be an unprofitable situation for Britain and US, and so they sent troops to Kuwait to safeguard the country from Iraqi attack (Painter, “Oil, Resources, and the Cold War” 503).

The Arab League quickly followed suit with troops from Saudi Arabia, Jordan, and United Arab Emirates, thus helping in successful evacuation of troops from Kuwait, yet maintain control over their stakes in Kuwait’s oil resoruces (Painter, “Oil, Resources, and the Cold War” 503). The US along with Britain aimed to annihilate the rising power of Qasim and the communist party in Iraq, and therefore brought forth the Bath Party in 1963.

With the formation of the Organization of Petroleum Producing Countries (OPEC) consisting of the major oil producing and exporting countries like Saudi Arabia, Iran, Iraq, Kuwait, and Venezuela in Baghdad in 1960 (Painter “Oil, Resources, and the Cold War” 504).

OPEC gained power over the prices of oil in the international market, reducing the dominance of the western oil companies to control the international oil prices; it was greatly detrimental to the goals of Arab nationalism.

Further, the breaking up of the United Arab Republic and the building of super tanks that could bypass the Suez Canal created further impediment on the nationalist agenda. Thus, it was in the 1960s that the fears of any further soviet take over of the Middle Eastern oil, almost subsided.

The New Oil Order

The postwar petroleum order thus, emerged through a continuous process of political diplomacy in the Middle East which primarily aimed at gaining control over the oil resources by the US and Britain. The US employed soft diplomacy to control the oil resources of the Middle East and their desire to keep communism away from the region led to various event, which eventually led to the demise of the order.

The aim of the US and Britain was simply to establish themselves as the leaders in oil production in the world during the postwar era (Painter, “Oil and the American Century” 24-26).

Some critics of American policy believe that the soft political approach of America to intervene in the Middle Eastern issues and the creation of the postwar oil order was simply a vehicle to establish American hegemony in the world (Kubursi and Mansur 8).

Britain was completely out of the political scenario by 1979, when after the gradual fall of the appeal of the Arab nationalists, there arose a wave of Islamist allegiance in the Middle East.

The Suez crisis in 1957 clearly demonstrated that the US would not deter from using force on Middle East if there was a need for it, as was pointed out by President Eisenhower in 1957: “I think you have, in the analysis presented in the letter, proved that should a crisis arise threatening to cut the Western world off from the Mid East oil, we would have to use force.” (Kubursi and Mansur 8).

This point of view came into effect almost two decades later in the conflict between the USSR and US on Afghan soil, after the fall of the shah of Iran to the rising Islamic forces. Many believe that hegemonic control over the Middle Eastern oil remains the source of global power for the US (Kubursi and Mansur 9).

Thus, the picture became clearer in 1973 when OPEC quadrupled the prices of oil in the wake of Israel-Arab conflict (Kubursi and Mansur 9).

Critics of American hegemony in Middle East have pointed out that the Gulf War orchestrated against Iraq in the nineties was aimed at establishing democracy in an authoritarian rule of Saddam Hussein and the western intervention aimed to safeguard Kuwait from the autocratic, illegal, invasion but the a means to control over the Kuwaiti oil resources (Frank 268).

Had the intentions of the western allies and champions of democracy been pure they would have waged similar war against South Africa for continued apartheid policy, or Iraq’s invasion of Iran, or the USSR’s invasion in Afghanistan (Frank 268).

Thus, evidently the reason was oil and managing some other domestic economic problems (Frank 271). Iraq was also trying to handle the economic pressure that oil industry had posed on its economy due to the recession (Billion 691).

The oil politics shaped the foreign policy of the US in the postwar era. The petroleum order then created was through soft politics, which established the private, oil companies from the US to have control over petroleum from the world’s oil rich regions.

However, with the Gulf War, political and military volatility, and increasing dependence of the US on the oil resources of the Middle East created major economic problems for US. Further, the rise of OPEC as a monopolistic controller of the oil supplies globally also posed a major problem to the hegemonic control of the US over the oil resources.

This led to the establishment of the new oil order by the Bush administration to maintain their supremacy and continue the flow of oil to the western hemisphere. The aim of the US was to look for new oil rich regions that would become sources of cheap oil.

However, the lessons from the past history of the control over oil has led to believe that even if initial control can be established over the poor, but oil rich regions, eventually they emerge as a force in the world politics undermining the hegemony of the west.

Works Cited

Billion, Phhillipe Le. “Corruption, Reconstruction and Oil Governance in Iraq.” Third World Quarterly 26.4-5 (2005): 685 – 703. Print.

Citino, Nathan J. “Defending the ‘postwar petroleum order’: The US, Britain and the 1954 Saudi‐Onassis Tanker deal.” Diplomacy and Statecraft 11.2 (2000): 137-160. Print.

Frank, Andre Gunder. “Third World War: A political economy of the Gulf War and the new world order.” Third World Quarterly 13.2 (1992): 267-282. Print.

Kubursi, Atif A. and Salim Mansur. “Oil and the Gulf War: An” American Century” or A” New World Order”.” Arab Studies Quarterly 15.4 (1993): 1-17. Print.

Painter, David S. “”Oil, Resources, and the Cold War.” T (2010):.” Leffler, Melvyn P. and Odd Arne Westad. The Cambridge History of the Cold War 1. Cambridge: Cambridge University Press, 2010. 486-506. Print.

—. “Oil and the American Century.” The Journal of American History 99.1 (2012): 24-39. Print.