Page 378 - Arabia the Gulf and the West

The Masquerade 375

agreement about the provision of capital for new investment in the oilfields,
which was another ominous omission in view of the shah’s commitment of
every penny of Persia’s oil revenues to the realization of his over-ambitious
schemes of industrial expansion and armed might. Instead, the companies
were placed under an obligation to participate (up to as much as a 40 per cent
share) in new projects of unspecified extent and duration for the development
of Persia’s oil resources under the overall direction of the National Iranian Oil
Company. In other words, they would be dragged ever deeper into investments
over which they had no control and from which they could only expect to reap
continually mounting losses.

By the early weeks of 1973 the great deterioration which had taken place in the
Western oil companies’ position in the Middle East over the previous two years
was plain for all to see. Since the Tehran and Tripoli agreements the companies
had given up, or were to give up before 1973 was out, a whole succession of
valid rights - among them the right to fix crude-oil prices in response to market

demand; the right to share profits with the governments of the host countries
on an equitable basis; the right to determine for themselves the shareholding of
their operating companies and the disposition of their assets in the host
countries; the right to sell crude oil or refined oil products in markets and to
customers of their own choosing; the right to fulfil their contracts of sale to
governments, commercial enterprises and individuals; the right to prospect for
and extract oil under the terms of their original concessions; and the right to
expect those concessions to be honoured by the governments which had
awarded them. None of these rights was surrendered as a consequence of fair
and orderly negotiation, or as a voluntary act on the part of the companies. On
the contrary, every single right was given up under duress, or abandoned in

response to threats of shut-downs or expropriation from governments which
were animated as much by their detestation of Western values and enterprise as
they were by their unassuageable appetite for more and more revenue. Increas­
ingly the companies had fallen into a situation of economic thrall to the
governments of the oil states, becoming, as the chairman of BP, Sir Eric
Drake, acidly put it, mere ‘tax-collecting agencies’. Wholly dependent upon
the goodwill of these governments for access to the oil reserves upon which the
industrial world relied so heavily, the companies felt themselves obliged to
pander increasingly to their whims, however ludicrous or extortionate these
might be. The cost of the companies’ submissiveness and the host
governments’ avarice, needless to say, was paid by the oil-consuming countries
of the world.
All these melancholy consequences flowed from the failure of the Western
powers to back the oil companies to the hilt from the early months of 1970

onwards, to stop Qaddafi in his tracks in the summer of that year, to prick the
bubble of the shah’s insensate illusions about his own power and consequence,