Page 381 - Arabia the Gulf and the West

378 Arabia, the Gulf and the West

were to equip their armed forces with expensive weaponry, to the incidental
benefit of the American aircraft and armaments industries. Mounting oil

revenues, bolstered by rising oil prices, would ensure that these financial
resources were plentiful.
While European oil companies followed the same practice as American
companies in passing on price increases in crude oil to their customers, they
had to take into account that their principal market was Europe itself, and to
consider, therefore, the impact of higher prices upon the European economy,
of which they themselves were an important part. The higher the prices
Europe paid for oil and petro-chemicals, the more European manufacturers
would be placed at a disadvantage in competing with American manufacturers

in the markets of the world. Europe’s appetite for oil, though sizable, was not
as great as that of the United States. Nor could Europe as a whole afford to pay
the prices that the United States could pay. There was, in sum, a fundamental
divergence of interests between the United States and Europe over Middle-
Eastern oil. The United States was primarily concerned with the volume of
supply, Europe with the level of prices. At the outset of 1973 it was uncertain
which of these two interests - which were far from being incompatible - would

prevail. What was certain was that the outcome would largely be determined
by what happened in Saudi Arabia over the twin issues of participation and
prices. Saudi Arabia had the largest resources of oil in the Middle East and in
the world. ARAMCO’s four parent companies were amongst the biggest oil
companies in existence, and one of them, Esso, was the biggest of all. What
ARAMCO and the Saudis did in concert would set the terms upon which
negotiations between OPEC and the Western oil companies would be con­
ducted - and ARAMCO had already indicated that it reckoned the volume of

oil supplied to be of greater moment than the price paid for it.